Diversity wins: How

inclusion matters
North America
June 2021

Copyright © 2020 McKinsey & Company. All Right Reserved.

Diversity is about who is represented;
Equity refers to equality of opportunity;
Inclusion addresses what people experience

McKinsey & Company 2

Addressing and responding to Diversity, Equity, and Inclusion
requires an understanding of all three dimensions

What it is How it’s measured

The composition of employees across Measured in statistics and
various elements of difference (e.g., metrics on representation and
gender, race/ethnicity, age, sexual advancement
Diversity orientation, disability), measured at each
level of the organization
Who is represented in
the workforce

The norms, practices, & policies in place Measured through

that ensure identity is not predictive of understanding and accounting
Equity opportunities or workplace outcomes for the differences in
How we ensure opportunities, burdens, and
equality of opportunity needs that occur on the basis
of identity

Inclusion
How the workforce The degree to which organizations Measured through employees’
experiences the workplace embrace all employees and enable them perception of the organization
to make meaningful contributions as a whole and their personal
experiences in it

Source: McKinsey Organization Practice McKinsey & Company 3

There is a stronger likelihood of financial outperformance for
companies who are at the top quartile for diversity
Likelihood of financial outperformance1 by diversity in leadership teams in 2019, %
Quartile 4 Quartile 1 Q1 Q4 No. of companies in each quartile

Gender2 Gender2 Ethnic3

Executives Board Executives
+38% +80% +48%
54 58

40 61

33 41

2019 2019 2019

81 68 80 77 98 76
1. Likelihood of financial outperformance vs the national industry median. P < 0.05.
2. N = 319 for female executives, N = 311 for female board members; 2017 North American companies with gender data available in 2019; EBIT 2014-2018
3. N = 314; North American companies with ethnicity data available in 2019; EBIT margin 2014-2018. Board was excluded as results were statistically insignificant (P > 0.05)

McKinsey & Company 4

The pre-COVID-19 talent pipeline shows continued
progress at the top, but the broken rung remains
% of employees by level
Pre-COVID-19
Entry level Manager Sr. Manager VP SVP C-suite

35 This year’s talent pipeline

White men 44 51 57 provides a pre-COVID-19
18 59 66
Men of color baseline, but the pipeline is
18
15 13 13 12 likely to have changed during
White women 29 25 24 23 19 the pandemic
26
Women of color 5 3
9 6
12
18 Since 2015, there have bright
% of women1
spots at the top but less
progress at the entry and
2020 47 38 33 29 28 21 manager levels

2015 45 37 32 27 23 17

’15 to ’20
change, % 5% 3% 5% 4% 18% 22%

1. Sum of % White women and % women of color may not sum to overall % women because overall figure includes employees with race not reported

Source: 2020 Women in the Workplace research McKinsey & Company 5

Due to COVID-19, senior women have been placed under additional
pressure due to caregiving and at-home demands

Senior women are more likely to be in multiple groups facing Since COVID-19,
distinct challenges senior women have felt…
Senior men Senior women All women

Onlys of their gender1 In dual-career couples2 Mothers

54% Exhausted

6%

19%
39% Burned out

54%
41%
36% 58% 39%
54% 36% Pressured to
work more

1. Often or almost always finds themselves to be the only, or one of the only, people in the room of their gender
2. Lives with a partner/spouse that works full-time or is self-employed

Source: 2020 Women in the Workplace research McKinsey & Company 6

Many women are considering leaving the workforce or
downshifting their careers due to the pandemic

1 in 4 What drives women to consider this …

women are Feeling worried their performance is judged negatively due to caregiving

considering Feeling they can’t bring their whole selves to work

leaving the Feeling like they need to be “always on”

workforce or Discomfort sharing their challenges with co-workers

downshifting Feeling blindsided by decisions that impact their work

their careers Spending additional hours on housework

Their company not providing the flexibility they need

Source: 2020 Women in the Workplace research McKinsey & Company 7

Black women face distinct challenges overall due to COVID-19

Black women have been particularly challenged … … and they may be more likely to leave the workforce
% of employees who considered taking a leave of absence or
leaving the workforce altogether

18
Overall Black

13 13

10

2.5x 1.5x Black women make up less than

more likely than women more likely than women 10% of the corporate workforce.
overall to report the death of overall to feel uncomfortable If companies don’t take action,
a loved one was a big sharing their experience of we could lose Black women
challenge grief or loss Women Men disproportionately

Source: 2020 Women in the Workplace research McKinsey & Company 8

LGBTQ+ employees are as likely as straight ones to aspire to top-
executive positions

Career intentions and reason, % Straight men LGBTQ+ men Straight women LGBTQ+ women

I want to be a top executive 45 45 33 37

Opportunity to impact the success of

70 60 60 49
my company

Opportunity to be a role model for

31 38 43 46
others like me

Opportunity to have a positive impact

31 37 35 43
on the world

Source: Women in the Workplace 2019, LeanIn.Org and McKinsey, 2019, womenintheworkplace.com McKinsey & Company 9
Our research points to five ways that diversity, equity and inclusion
impact performance

1 Win the war for talent

2 Improve the quality of decision making

3 Increase customer insight and innovation

4 Drive employee motivation and satisfaction

5 Improve a company’s global image and license to operate

Source: Diversity Wins 2020; 2019 Women in the Workplace research McKinsey & Company 10
Employees believe companies have a
responsibility to their people and society

39%
of global survey respondents have turned down or decided not to
pursue a job opportunity because of a perceived lack of inclusion

78%
of Millennials believe their companies have a responsibility to
better the world

52%
of respondents of color will not work for a company that fails to
speak out on addressing racial inequality
Source: Aperian Global, Business of Fashion, Edelman Trust Barometer, https://www.mckinsey.com/business-
functions/organization/our-insights/understanding-organizational-barriers-to-a-more-inclusive-workplace
McKinsey & Company 11
Equal opportunity and fairness are vital – together, they are the
biggest predictors
Women of employee
in US continue satisfaction and retention
to be underrepresented at executive levels
Average minority Female Companies with at least one
representation2 workforce minority on executive team
Women1 participation
When employees believe they have equal opportunity and the workplace is fair, they are…
Norway 28 48 100

Australia 27 46 98

Sweden 24 47 94

United States 21 45 90

Singapore 19 44 73

United Kingdom 18 46 76

South Africa 18 44 75

Nigeria 17 46 80

3x 3x 3x
Denmark 13 47 47

France 13 45 64

Brazil 8 42 40
more likely to say8
Germany
more likely45to plan 48
more likely
Mexico
they are happy 8 to stay at36their to recommend
46

India with their career

5 company 23longer 28 their company
Japan 3 42 17

Average 15 65

1. n = 1,039: 2019. Respective weighted averages by country population size: 9% and 45%

Source: Diversity
2019 WomenMatters data
in the set; Worldresearch
Workplace Bank (labor force participation rate, September 2019) McKinsey
McKinsey &
& Company
Company 126
 Internal examples
50-50 gender parity at all levels of
management by 2025
Organizations are Internal: Aspiration-Back Double percentage of Black VP+ leaders
What is our vision for our people and
increasingly our culture?
over next five years
LGBTQ+ inclusion rates on par with
considering their company average by 2023
role on issues of
Diversity, Equity,
and Inclusion, External examples
both internally and Iconic marketing campaign
in society at large External: Capability-Forward repurposed
How can our unique capabilities improve Anti-bias employee training and
our communities and/or society? resources made available to the
public
Commitment on shelf space and
opportunity to donate reward points

McKinsey & Company 13

Example: Addressing racial equity & racial justice internally and
externally
Level of challenge, impact and sustainability

Internal: A diverse An inclusive Equitable access to

Aspiration-Back organization environment opportunities & benefits
Focused on improving the Creating a diversity of racial/ethnic Ensuring employees of varying Ensuring all staff have the
organization identities at each level of the racial/ethnic identities all feel a sense opportunity to grow, contribute, and
organization of belonging and the ability to develop; power is shared in the
contribute to their fullest workplace

Example McKinsey Double our Black leadership and Engage all 32,000 colleagues in anti- Ensure our processes are free from
actions hiring of Black colleagues in the next 4 racism and inclusion programs bias and support retention, attraction of
years Black and diverse colleagues

External: Corporate and social Operational Strategic to create

Capability-Forward responsibility
Focused on improving Using organization’s platform to
community and/or society influence changes in institutional
and structural disparities; take clear
stance on racial equity
impact
Explicitly designing operations &
investment processes to improve
outcomes & minimize downstream
impacts
shared value
Embedding racial equity considerations
at all levels of strategy development

Example McKinsey Commit $200 million over the next Double our spending with diverse Create a Black Economic Institute to
actions 10 years in pro bono work globally to suppliers in the next 3 years help clients with practical tools on
advance racial equity Black economic empowerment

McKinsey & Company 14

 Additional detail

Our
1 Double our Black leadership and hiring of Black
colleagues in our firm over the next four years
6 Building upon the McKinsey Global Institute and our
related longstanding research on racial inequities, we
will found a Black economic institute to translate

commitment 2 Engage our 32,000 colleagues in an anti-racism

and inclusion program in addition to our existing
insights into practical tools to enable our clients to
advance Black economic empowerment and racial
equity in the U.S. and beyond
training on unconscious bias. We will make these
to racial materials available publicly for others to use in
their own organizations
7 Double our spending with diverse suppliers within

justice and
three years

3 Create a firmwide day of service dedicated to

8 Contribute $2 million in cash to Generation to

equity
understanding racial injustice and giving back to
our communities. On that day, we will recognize
those who exemplify anti-racism and inclusion
launch new programs in the U.S. to train and place
Black learners in small and medium-sized Black-
owned businesses. Globally, we will double our

4
We are committing to an initial
set of 10 actions to anchor
global efforts in favor of racial
justice and inclusion for all.
Bring to bear the best available expertise to
help us ensure our processes are free from bias
and to support the attraction, development,
advancement and retention of Black and
diverse colleagues
support for Generation to train and place 40,000
learners in 14 countries, predominantly from under-
represented groups
9 Commit $200 million over the next 10 years in pro
bono work globally to advance racial equity and
economic empowerment among Black communities

5 Create a dedicated McKinsey Academy virtual

leadership program and make it available at no
10
cost to our clients to support rising Black
executives. We will also broaden and expand
our student internship programs across our firm
to help grow more Black leaders
Donate a total of $5 million in cash this year to
nonprofits working to create educational
opportunities and combat racism. The majority of
this gift will be directed to organizations to be
selected by our McKinsey Black Network
colleagues

McKinsey & Company 15

McKinsey’s Black Leadership Academy
Black Executive
Leadership Program
Audience Black executives, 1-2 levels
below C-suite
Objective Hones executive leadership
capabilities with focus on real-
world challenges and driving
transformative personal and
professional change
Timing 12 weeks, 1.5 hours per
week
Experience Virtual facilitated workshops to
anchor content
Peer connectivity
• Larger cohort connectivity
• Small cohort progression of
concepts and discussion
Fireside chats with notable leader
Virtual exchanges to explore ideas
Management Accelerator
Early- to mid-career Black leaders
Enhances leadership and general
management skills focused on
setting and leading a business
strategy, problem solving for impact
and 9 functional deep dives
24 weeks, 1.5 hours per week
Digital courses to anchor content
Peer connectivity
• Larger cohort connectivity
• Small cohort progression of
concepts and discussion
Fireside chats with notable leader
Virtual exchanges to explore ideas
McKinsey & Company 16
Common pitfalls of DEI…

Aspiration or case for change are generic or “copy-cat” and lack

leader conviction

No clear goals or arbitrary goals set without analytical rigor or

understanding underlying DEI challenges

Letting “one thousand flowers bloom” with no plan to learn and

prune

Thinking training is a “cure-all” vs. part of a broader solution set

DEI becomes a “flavor of the month,” not owned and consistently

advanced by a broad set of leaders

McKinsey & Company 17

There are five stages in a proven journey companies are taking to
transform Diversity, Equity, and Inclusion

Aspire and Assess are often done in parallel Interventions crafted in Architect should directly
or iteratively, as each informs the other tie to Aspire and Assess

Aspire Assess Architect Act Advance

Launch enterprise-
Align on Build the Develop Scale and sustain
wide actions
the vision fact base the plan momentum
and pilots

Define and commit
to D&I aspiration
 Define and commit to a
tangible aspiration
 Communicate aspiration,
starting with senior leader
champions
Diagnose current D&I
practices
 Assess the current state
qualitatively and quantitively
 Build company-specific
business case linked to
strategic priorities
Develop roadmap Launch quick wins and Build on success and
and KPIs longer-term initiatives track progress
 Design portfolio of  Launch enterprise-wide  Scale efforts, tailoring to
interventions linked to specific initiatives and prioritized pilots specific contexts as needed
objectives; prioritize based on with BUs/functions/
ease and impact geographies  Build progress monitoring and
leader accountability into
regular management routines

McKinsey & Company 18

Thank
You
McKinsey & Company 19