McKinsey’s Claim That DEI Boosts Company Profitability Doesn’t Hold Water, New Study Finds

Claims made by global consulting firm McKinsey that diversity, equity and inclusion policies (DEI) increase a company’s profitability don’t hold water, according to a Monday report from Econ Journal Watch (EJW).

McKinsey published several studies in 2015, 2018, 2020 and 2023 — often titled along the lines of “Diversity Matters,” or “Diversity Wins” — claiming that there is a statistically significant positive relationship between a company’s financial performance and the percentage of racial and ethnic diversity among its executives, according to EJW. EJW could not produce such findings when conducting its own version of such a study, calling into question the quality of McKinsey’s methods and warning against trusting the firm’s findings, according to the journal’s report released on Monday.

“Caution is warranted in relying on McKinsey’s findings to support the view that US publicly traded firms can deliver improved financial performance if they increase the racial/ethnic diversity of their executives,” the report reads. “We are unable to replicate the same statistically reliable association between firm financial performance and executive race/ethnic diversity as they report.”

EJW’s report notes that the way McKinsey conducted its research would create a “default direction of causality,” in that it would naturally conclude that a given company’s heightened financial performance causes it to expand racial and ethnic diversity among its executives, “not the reverse.” However, McKinsey interprets results in “the opposite direction of casualty” — meaning that it concluded that diversity among executives has a direct positive impact on financial performance — making its interpretations “flawed,” according to EJW.

EJW notes that its own findings in the report were naturally limited because it couldn’t establish correlation between a company’s executives’ racial makeup and improved financial performance, as McKinsey had sought to do.

“Our results do speak to the lack of robustness of McKinsey’s studies vis-àvis large public US firms, [but] they do not speak to the connections between racial/ethnic diversity in employees and/or boards and either firm financial performance or non-financial firm goals, nor to intrafirm activities,” the EJW report reads. “Such research is worthwhile and important, and we hope that it will be undertaken and well so by business scholars.”

McKinsey has previously fallen under scrutiny for some of its consulting claims and advice. A think tank led by McKinsey helped China shape its “Five Year Plan” for 2016-2020 that included military and economic policies. These policies ultimately contributed to a wounded relationship between the U.S. and China. In a separate incident, McKinsey paid a $78 million settlement in 2023 to insurers and health care providers for its role in the opioid crisis, having spearheaded an “aggressive” marketing campaign for Purdue Pharma for drugs like Oxycontin.

Two years prior, McKinsey shelled out $573 million in a settlement with 47 states and Washington, D.C. for its role in the opioid crisis.

McKinsey did not immediately respond to a request for comment.

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