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New Study Challenges the Effectiveness of DEI Initiatives on Corporate Profits

New Study Challenges the Effectiveness of DEI Initiatives on Corporate Profits

Apr 18, 2024

New Study Challenges the Effectiveness of DEI Initiatives on Corporate Profits

A recent study published in Econ Journal Watch has cast doubt on the long-held belief that diversity, equity, and inclusion (DEI) initiatives in the workplace lead to improved financial performance for companies. This challenges the findings of several studies by the consulting firm McKinsey & Company, which, from 2015 through 2023, suggested that DEI initiatives could boost corporate earnings.

The study conducted by professors John R. M. Hand and Jeremiah Green critically examined the results of McKinsey's previous research and concluded that the data did not support the assertion that increasing racial and ethnic diversity among executives would, on average, enhance the financial performance of large U.S. public firms.

Econ Journal Watch

"[O]ur results indicate that despite the imprimatur often given to McKinsey’s 2015, 2018, 2020, and 2023 studies, McKinsey’s studies neither conceptually … nor empirically … support the argument that large US public firms can expect on average to deliver improved financial performance if they increase the racial/ethnic diversity of their executives," stated Hand and Green in their findings.

This skepticism towards the financial benefits of DEI initiatives is echoed by other academics. Robin J. Ely of Harvard Business School and David A. Thomas, president of Morehouse College, have pointed out in the Harvard Business Review that the push for more diversity in companies is not backed by "robust research findings." Ely and Thomas, who have themselves researched the potential benefits of diversity in organizations, suggest that the evidence is not as clear-cut as some claim.

Harvard Business Review

The new study also brings attention to the broader issue known as the "replication crisis" in the scientific community, where many findings across various fields struggle to be replicated by subsequent studies, raising concerns about the reliability of such research.

The current state of this event remains in the realm of academic and corporate discussion, with the potential to influence future DEI strategies and the justification for their implementation in businesses. This recent study is likely to spur further research and debate on the tangible outcomes, or lack thereof, of DEI initiatives.

Econ Journal Watch Study

Washington Examiner Article


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