The Diversity Dividend: How Balancing Your Leadership Team Can Pay Off

The call for greater diversity at senior leadership levels is not new, although it has itself become more inclusive, extending beyond gender, race and ethnicity, to encompass age, education, socioeconomic background and sexual orientation, as well as experience, skills and talent.

It is also not news that diversifying leadership teams can pay financial dividends for corporations. As early as 2004, research by Catalyst, Inc. showed a significant positive correlation between financial performance and female representation at the executive leveli with female Board representation having an even stronger effect.

Most recently, a new international study by McKinsey & Co.ii showed that companies with gender diverse leadership are 15% more likely to report financial returns above their national industry median, while those with ethnically diverse leadership were 35% more likely to have financial returns that outpace their industry. Sadly, none of the 366 public companies surveyed stood out as leaders on both gender and ethnic diversity axis together.

In spite of the long-established case for balancing executive teams, the C-Suite has remained stubbornly homogeneous. Only 4.6% of chief executives of S&P 500 companies are women, and there are just six black CEOs of Fortune 500 companies currently.iii Progress has been made, but slowly and inconsistently. In their recent study mentioned above, for example, McKinsey & Co. notes that women now represent about 16% of executive teams in U.S. companies overall, calling that “measurable progress” but acknowledging that women remain underrepresented at senior levels globally.

[wcm_restrict]Picking up the pace

Is this glacial pace of change in senior leadership team composition due to entrenched discrimination? Not necessarily, according to a diversity discussion panel at this year’s World Economic Forum in Davos.iv Their consensus is that a lack of diversity in executive teams is less about overt discrimination than it is about unconscious biases toward affinity: people tend to hire people like themselves. If an executive team has traditionally been composed of a particular demographic, shifting the team’s composition will require a conscious effort by all members to acknowledge and challenge assumptions about gender, race, nationality, background or age so as to embrace a different profile.

Successfully challenging unconscious biases may require the independent perspective of a third party, such as an executive coach, who can observe and call attention to them in a constructive manner, while supporting subsequent behavioral change.

As leadership teams become more diverse their networks will naturally expand, however access to broader networks in order to identify and recruit top caliber diverse candidates will be a challenge initially. Partnering with an executive search team that has a track record of success in securing high quality, diverse candidates can provide much-needed traction in this area, while collaborative leadership consulting can be an effective tool to help develop synergy and effectively integrate the new executive into the team.

Moving the needle: Strategies for success

Here are four steps to accelerate the diversification of your executive team:

  1. Intentionally diversify your team through succession planning and targeted search
  2. Address unconscious bias in the search and selection process through coaching and dialogue
  3. Look for a track record of building inclusive cultures when evaluating executives you’d like to attract to your organization
  4. Create synergy with incumbent team members prior to, and through, effective onboarding of new hires who represent different perspectives

McKinsey & Co. note that the positive financial impact of gender diversity for American businesses only kicks in after “women constitute at least 22% of a senior executive team.” It can be safely assumed, then, that there is also a critical mass for ethnic and other underrepresented populations with regard to financial impact. The companies who are first to achieve that critical mass may reap the rewards in the form of significantly accelerated competitive advantage. Diversity in the C-Suite is no longer a business requirement – it is an imperative.[/wcm_restrict][wcm_nonmember]

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About the Author

Kim VilleneuveDr. Kim Villeneuve is CEO of Centerstone Executive Search and Consulting, a nationally retained firm serving the consumer sector. Centerstone specializes in executive search and leadership consulting concentrated at the Board Director and Executive Officer level. Kim is also a coach for elite executives, an adjunct professor at American University’s Kogod School of Business, and guest lecturer at The George Washington University, from which she holds a doctorate in Human and Organizational Learning. Contact Kim at [email protected] or at 425-836-8445.


i. “The Bottom Line: Connecting Corporate Performance and Gender Diversity” January 15, 2004 Catalyst, Inc.
ii. “Why Diversity Matters” By Vivian Hunt, Dennis Layton, and Sara Prince McKinsey, & Co. January 2015
iii. “Is there a diversity dividend?” Linda Yueh, Chief Business Correspondent, BBC News January 25, 2015
iv. World Economic Forum Annual Meeting, January 2015