Investing in Diversity & Inclusion

Diversity in Leadership Positions: Why It’s Important at All Levels of an Organization


What is a “diverse” company? The answer may seem obvious, but without appropriate benchmarks, comparing companies is difficult. For example, a retail company may seem diverse if the majority of its employees are people of color. However, what if people of color are mostly consigned to low-wage positions, with few in management?

For many, a company can be considered diverse when it passes the “breadth and depth” test, meaning it hires, includes, and promotes a diverse workforce at all levels of leadership.

The Problem with a Lack of Diversity in Leadership Positions

A lack of diversity in leadership positions can hinder innovation and an organization’s ability to form connections with customers and other companies.

A study by McKinsey indicated that there is a statistically significant relationship between a diverse leadership team and better financial performance. Companies in the top quartile for gender diversity are 21% more likely to outperform the industry average compared to companies in the bottom quartile. For ethnic diversity, that number jumps to 33%. While McKinsey makes it clear that this is a correlation and not a causal link, it certainly provides food for thought when choosing which companies to invest in.

The Need for Diversity on All Rungs of the Corporate Ladder

In 2044, America is projected to become a majority-minority country, according to Brookings. Companies will need to understand their increasingly diverse consumer base, and having a diverse workforce is key to that. Otherwise, an organization may struggle to meet the needs and desires of the people it hopes to court.

Diversity of thought, opinion, and experience are most effective when represented throughout the entire company—from part-time workers to full-time employees to executive positions. Plus, all leaders were once entry-level employees. For them to reach their potential, and for companies to have a diverse leadership pipeline, employees must be mentored and appropriately promoted from the beginning of their careers.

How Brands Can Encourage More Diversity

What can companies do to remedy or prevent such problems? The Stanford Social Innovation Review (SSIR) advises companies to proactively work to improve diversity from both within and outside of the organization.

SSIR suggests engaging in activities such as:

  • Investing in leadership development in order to retain top talent—and avoid losing executives with different backgrounds or experiences to organizations that value diverse leadership more highly.
  • Measuring how diverse the company actually is, rather than just putting out a mission statement about the importance of diversity. In other words, businesses should talk the talk and walk the walk by tracking data and setting specific metrics to help evaluate the success of diversity initiatives.
  • Developing a pipeline of diverse talent through active recruiting. Companies can accomplish this by conducting trainings on interviewing practices and partnering with existing programs that aim to help organizations hire more diverse workers and leaders.

Organizations that fail to encourage diversity risk losing top talent—or never enjoying the benefit of those leaders in the first place. Companies that actively work to bring more diversity into every level of the business, however, often perform better financially and better meet the needs of their customer base.

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