A Closer Look

Diversity in Management – Innovation rises with it

BCG and the Technical University of Munich conducted an empirical analysis to understand the relationship between diversity in management (defined as all levels of management, not just executive management) and innovation.  Although the research is concentrated in a particular geographic region, we believe that its insights apply globally. The following are the major findings:

  • The positive relationship between management diversity and innovation is statistically significant, meaning that companies with higher levels of diversity get more revenue from new products and services.
  • The innovation boost isn’t limited to a single type of diversity. The presence of managers who are female or from other countries, industries, or companies can cause an increase in innovation.
  • Management diversity seems to have a particularly positive effect on innovation at complex companies—those that have multiple product lines or that operate in multiple industry segments. Diversity’s impact also increases with company size.
  • To reach its potential, gender diversity needs to go beyond tokenism. In our study, innovation performance only increased significantly when the workforce included a nontrivial percentage of women (more than 20%) in management positions. Having a high percentage of female employees doesn’t do anything for innovation, the study shows, if only a small number of women are managers.
  • At companies with diverse management teams, openness to contributions from lower-level workers and an environment in which employees feel free to speak their minds are crucial in fostering innovation.

The companies were first analyzed using the Blau index to aggregate their levels of diversity in six areas. The resulting diversity score was plotted against each company’s innovation level. We found that innovation revenue—which we define as the share of revenues from new products and services in the most recent three-year period—rises with diversity. (See Exhibit 1.)

Chosen excerpts by Job Market Monitor. Read the whole story at The Mix That Matters: Innovation Through Diversity

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