McKinsey studies claiming DEI is profitable for US firms debunked by professors at Econ Journal Watch

Two business professors have reviewed a series of pro-DEI studies done by McKinsey and Company and found that the analysis done by the top consulting company were not able to be replicated and "should not be relied on to support the view that US publicly traded firms can expect to deliver improved financial performance if they increase the racial/ethnic diversity of their executives." 

The review, published by accounting Professor Jeremiah Green at Texas A&M and accounting Professor John Hand in Econ Journal Watch, concluded that the series of four studies from McKinsey and Company in 2015, 2018, 2020, and 2023 were not credible.  

"We conclude that 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 professors wrote.  

All four papers were co-authored by Dame Vivian Hunt, McKinsey's managing partner in the UK and Ireland at the time of the three earlier studies. The professors wrote that a statement from Hunt in a Bloomberg interview "crystalizes McKinsey’s view that greater racial/ethnic diversity in a firm’s executive team drives better firm financial performance." 

Hunt said in the interivew, "What our data shows is that companies that have more diverse leadership teams are more successful. And so the leading companies in our datasets are pursuing diversity because it’s a business imperative and driving real business results." 

Hunt has claimed before in a separate video with Meta for Business that a "meritocratic" position in business is just "not good enough" to get desired results because of biases and that business should stand for "antiracism."

"I call it the shifting off of neutral," Hunt told an interviewer in 2020 on the topic of COVID in business and social justice. "A neutral position that's meritocratic that is good and treating people evenly isn't good enough." 

Hunt added at the time, "You have to proactively stand for an antiracism environment, an anti-bias environment, to positively include people who've been historically excluded." 

Data published in Mckinsey's 2020 study, titled, "Delivering through Diversity" was a "quasi-replication" by the professors, because they were limited from obtaining the data sets that the consulting firm claimed to use. McKinsey reportedly used data from 186 large public firms in the US and Canada. The professors opted to use data from the S&P 500 list because McKinsey would not disclose its datasets.  

"McKinsey would not provide us with their detailed datasets, nor the names of the firms in their datasets, so we were unable to directly replicate or investigate their analyses," they wrote. 

"In contrast to McKinsey’s results, the key finding of our study is that we observe no statistically significant difference between the likelihood of financial outperformance as measured by the industry-adjusted EBIT margin of S&P 500® firms during the years 2015–2019 in the top vs. bottom quartiles of S&P 500® firms ranked on McKinsey’s executive racial/ethnic diversity metric measured in mid-2020," the professors said. 

The findings from the professors differ from the consulting behemouth and "does not provide empirical support for McKinsey’s interpretation that greater racial/ethnic diversity in a firm’s executives 'is a business imperative that drives real business results.'"