A recently published paper casts doubt on the legitimacy of multiple studies from global consulting firm McKinsey & Company that suggested a positive correlation between corporate Diversity, Equity, and Inclusion (DEI) programs and companies’ financial performance. The authors of the Econ Journal Watch study describe McKinsey’s conclusions as ‘junk research.’
The Econ Journal Watch research evaluated several studies conducted by McKinsey, concluding that neither conceptually nor empirically could it be established that large public firms in the U.S. could expect higher financial returns through increasing racial or ethnic diversity within their executive team.
“Our results indicated that despite the imprimatur often given to McKinsey’s 2015, 2018, 2020, and 2023 studies, McKinsey’s studies neither conceptually (in terms of the correct definition of causality) nor empirically (in terms of their set of large US public firms) 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.”
McKinsey’s studies have been referenced by institutions such as the U.S. Navy, being incorporated into the Navy’s 2021 ‘Task Force One’ report, advocating for a diversification of their forces.
Elaine Donnelly, president of The Center for Military Readiness, recently said that the Pentagon’s prioritization of DEI programs has led to an ongoing recruitment crisis. “Race-conscious ‘diversity, equity, and inclusion’ (DEI) policies are making personnel shortages worse,” Donnelly said. “Minority recruitment has remained steady or increased, which is fine, but a steep decline in white recruits almost entirely accounts for the ongoing recruiting crisis.”
The research from Econ Journal Watch is likely to add to growing concerns over the consequences of DEI initiatives. Last month, it was reported that DEI initiatives are costing UK taxpayers at least half a billion pounds a year, or roughly $632.5 million.
