Syed Harun’s Post

Interestingly, McKinsey studies about the outperformance of companies with racially and ethnic diverse executives are non-replicable. "Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives." https://lnkd.in/gTPfkSfZ

"In a series of very influential studies, McKinsey (2015; 2018; 2020; 2023) reports finding statistically significant positive relations between the industry-adjusted earnings before interest and taxes margins of global McKinsey-chosen sets of large public firms and the racial/ethnic diversity of their executives. However, when we revisit McKinsey’s tests using data for firms in the publicly observable S&P 500® as of 12/31/2019, we do not find statistically significant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity at mid-2020 and either industry-adjusted earnings before interest and taxes margin or industry-adjusted sales growth, gross margin, return on assets, return on equity, and total shareholder return over the prior five years 2015–2019. Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives." https://lnkd.in/ddSq2DJW

A study on some “influential studies” about racial/ethnic diversity of the executives and the performance of the companies. “McKinsey’s Diversity Matters/Delivers/Wins Results Revisited” by Jeremiah Green and John R. M. Hand “In a series of very influential studies, McKinsey (2015; 2018; 2020; 2023) reports finding statistically significant positive relations between the industry-adjusted earnings before interest and taxes margins of global McKinsey-chosen sets of large public firms and the racial/ethnic diversity of their executives. However, when we revisit McKinsey’s tests using data for firms in the publicly observable S&P 500® as of 12/31/2019, we do not find statistically significant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity at mid-2020 and either industry-adjusted earnings before interest and taxes margin or industry-adjusted sales growth, gross margin, return on assets, return on equity, and total shareholder return over the prior five years 2015–2019. Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives.” Source:

"they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives."  In a series of very influential studies, McKinsey (2015; 2018; 2020; 2023) reports finding statistically significant positive relations between the industry-adjusted earnings before interest and taxes margins of global McKinsey-chosen sets of large public firms and the racial/ethnic diversity of their executives. However, when we revisit McKinsey’s tests using data for firms in the publicly observable S&P 500® as of 12/31/2019, we do not find statistically significant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity at mid-2020 and either industry-adjusted earnings before interest and taxes margin or industry-adjusted sales growth, gross margin, return on assets, return on equity, and total shareholder return over the prior five years 2015–2019. Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives

Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives. https://lnkd.in/ennKCJz3

Talk about a wake up call to how far the mighty consulting firms have fallen. Starting a decade ago McKinsey, one of the richest and most well-connected management consulting companies, produced a whole series of studies claiming dramatic improvements to business success when companies prioritized “diversity” for their executives, rather than just merit. These studies were used to justify sweeping anti-male, anti-Asian, and anti-white discrimination at hundreds of US companies, universities, and government agencies. Now, an updated analysis by two economics professors finds that the studies were totally bogus. There was no link between greater diversity and greater sales, greater growth, or higher stock prices. DEI is a scam. https://lnkd.in/ecN_pWEq

#Diversity is good for many reasons, but the oft-repeated claims that it is "good for business" or that it "leads to excellence" have become #tropes that may relate more to good intentions than based upon current strong evidence. In this paper, Jeremiah Green (Associate Professor of Accounting and Ernst & Young Professorship of Accounting at the Mays Business School - Texas A&M University) and John R. M. Hand (Robert March & Mildred Borden Hanes Distinguished Professor of Accounting at the UNC Kenan-Flagler Business School at University of North Carolina at Chapel Hill–Chapel Hill) re-examine the claims made in a series of studies* from McKinsey & Company. Here's the abstract from their paper: "In a series of very influential studies, McKinsey (2015; 2018; 2020; 2023) reports finding statistically significant positive relations between the industry-adjusted earnings before interest and taxes margins of global McKinsey-chosen sets of large public firms and the racial/ethnic diversity of their executives. However, when we revisit McKinsey’s tests using data for firms in the publicly observable S&P 500® as of 12/31/2019, we do not find statistically significant relations between McKinsey’s inverse normalized Herfindahl-Hirschman measures of executive racial/ethnic diversity at mid-2020 and either industry-adjusted earnings before interest and taxes margin or industry-adjusted sales growth, gross margin, return on assets, return on equity, and total shareholder return over the prior five years 2015–2019. Combined with the erroneous reverse-causality nature of McKinsey’s tests, our inability to quasi-replicate their results suggests that despite the imprimatur given to McKinsey’s studies, they should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives." In their conclusion, the authors stress the complex and challenging nature of the topic, and urge for more robust research: "... there is great value in future research that would seek to empirically test for the presence, sign, magnitude, and direction of any causal relations that exist. Such longitudinal and causality-oriented studies may also help bring into sharper focus the identities and sizes of the costs and benefits, as well as the risks and returns, that are associated with higher or lower racial/ethnic diversity, not only in firms’ executives, but in their Boards of Directors and rank-and-file employees." * 2015 – 2023 “Diversity Matters”, “Delivering through Diversity”, “Diversity Wins: How Inclusion Matters”, and “Diversity Matters".

I've been interested in DEI and the value it brings and so was impressed by McKinsey's published work on why diversity correlates with higher EBITDA. But according this study https://lnkd.in/eTjxbKxJ the study's results are not replicable: diversity does not affect EBITDA.