Reference no: EM133217250

Assignment:

Imagine the following situation: at a board meeting of a large financial service organization the poor performance of the company is discussed - for the fourth year in a row the company performs below the average for its sector and none of the interventions to improve this situation has worked. The HR director of the firm points out to his colleagues - all white, 50 to 60-year-old men with MBAs - that companies with a more diverse workforce tend to perform better. To substantiate his claim, he refers to a report by McKinsey & Company - the United States' largest and most prestigious consulting firm - entitled Why Diversity Matters. This report examines the data of 366 public companies across a range of industries in Canada, Latin America, the United Kingdom and the United States. The findings of the report are clear: companies in the top quartile for ethnic diversity are 30 per cent more likely to have above-average financial returns for their respective industries.

Taking an evidence-based approach, the board asks 10 experienced professionals within the company whether they support the claim that investing in an ethnically diverse workforce will lead to substantially better financial performance, with an increase of at least 10 per cent. Most professionals state that, based on their experience at work, they strongly believe that this claim is likely to be true.

Next, the scientific literature is consulted. A comprehensive search of the scientific literature yields five meta-analyses that all demonstrate very small (and sometimes even negative) correlations between ethnic diversity and financial performance. The organizational evidence shows a similar picture. There seems to be no difference in financial performance between the teams and departments with ethnically diverse workforces and those that have a more homogeneous makeup.

However, a sample of eight of the most important stakeholders, including regulators and institutional clients, indicates that they too believe increased ethnic diversity will have a substantial impact on the company's financial performance. In addition, they point out that the McKinsey report was based on the data of 366 companies, and that this evidence should count heavily in the board's decision.

The company's CEO now sees himself faced with a difficult problem. He and his colleagues have taken an evidence-based approach, but now the evidence seems to be far from equivocal and even contradictory in some ways. So, what should he decide?