Turns Out, Most DEI Policies Based On A Lie

For nearly a decade, corporations, media members and politicians have been operating based on the belief and assumption that diversity, equity and inclusion (DEI) hiring practices were sound financial policies. Not just part of a social justice initiative, but a meaningful metric that could portend future fiscal growth. 

READ: DEI Is Undergoing A Rebrand, As Movement Faces Uncertain Future

All thanks to a 2015 “study” released by consulting firm McKinsey that said proudly and definitively, that there was a link between racial and gender diversity among the executive ranks and firm profitability. That study was then repeatedly cited by influential figures throughout the corporate and political worlds to justify and even purposefully pick and choose companies to invest in or promote based on diversity, equity and inclusion.

Well, it turns out that study was nonsense. 

A report from the Wall Street Journal covered the aftermath of McKinsey’s study, including a new study from academics trying to replicate the findings. And instead of duplicating McKinsey’s conclusions, further research has shown the opposite. There’s no link whatsoever between profitability and executive diversity.

Companies have made hiring and promotion decisions for nearly a decade based on faulty research from McKinsey. Sounds about right.

NEW YORK, NY – JULY 26: In this photo illustration, a glass of Bud Light sits on a bar, July 26, 2018 in New York City. Anheuser-Busch InBev, the brewer behind Budweiser and Bud Light, said on Thursday that U.S. revenues fell 3.1% in the second quarter. American consumers continue to shift away from domestic lagers and toward crafts beers and wine and spirits. (Photo by Drew Angerer/Getty Images)

McKinsey Influences DEI Policies Throughout The Corporate World

McKinsey desperately tried to reframe the study, saying that it doesn’t show causation, but correlation. Even after academic criticism forced them to change their methods.

“In light of a recent study criticizing our methodologies, we have reviewed our research and continue to stand by its findings — that diverse leadership teams are associated with a higher likelihood of financial outperformance,” McKinsey said, according to the Wall Street Journal. “We have also been clear and consistent that our research identifies correlation, not causation, and that those two things are not the same.”

Except, according to the Journal, nobody can replicate their results, regardless of what methods they try. There’s no link between profits and diversity either way, positive or negative. One particular study from professors at UNC Chapel Hill and Texas A&M found that there were no statistically significant results when replicating McKinsey’s work on the S&P 500.

“It seemed implausible because companies would have jumped on it and the advantages would be competed away,” said John Hand, an accounting professor from UNC Chapel Hill. 

Yet NASDAQ, BlackRock and other influential organizations have relied on McKinsey’s work when trying to force diversity quotas into their policies. Sounds about right. 

There’s nothing wrong whatsoever with corporate or executive diversity. Or with ensuring that every employee and executive is welcomed and supported. But there is something wrong with misleading the public, leadership and media with faulty research that influences them into believing that any kind of racial or gender diversity is better for financial success. What’s better for financial success is hiring the best people, no matter what their racial or ethnic background.