Diversity key for business innovation, better revenues: BCG

In both developing and developed economies, companies with above-average diversity on their leadership teams report a greater payoff from innovation and higher EBIT margins

The study said companies can start generating gains with relatively small changes in the makeup of their senior teams. Image source: Pixabay

The companies that have more heterogeneous leadership teams enjoy a wide range of benefits in terms of innovations and financial performance more heterogeneous leadership teams, according to a study.

In both developing and developed economies, companies with above-average diversity on their leadership teams report a greater payoff from innovation and higher EBIT margins, according to the Boston Consulting Group (BCG) study 'How Diverse Leadership Teams Boost Innovation'.

It said companies can start generating gains with relatively small changes in the makeup of their senior teams.

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The study was result of a survey among more than 1,700 companies in eight countries, including Austria, Brazil, China, France, Germany, India, Switzerland and the US, across a variety of industries and companies.

"Diversity offers organisations a wide range of benefits, and our analysis shows that having a more heterogeneous team can deliver measurable gains in innovation and financial performance," BCG partner and co-author of the study Rocio Lorenzo said.

She said multifaceted teams offer a robust range of perspectives and this allows organisations to formulate strategic solutions that can help them efficiently accomplish their goals and bring new ideas to the table.

Employees at companies in emerging markets (China, Brazil and India) reported greater progress over the past several years than companies in developed markets, it said.

The study also found that implementing small changes in the makeup of the management team can make a lasting impact and boost business innovation revenues.

Looking at the effect of digitisation on overall innovation, BCG found that companies that invest heavily in digital technology show an even stronger relationship between diversity and innovation.

Those companies reported even higher percentages of revenue from new products and services.

"Our study indicates that companies that strongly invest in digital technology show the biggest benefits from diverse leadership teams. They're able to capitalise on the wealth of new ideas those teams can generate," BCG partner and co-author of the study Miki Tsusaka said.

In addition to building more diverse leadership teams, companies need a solid foundation, including maintaining fair employment practices, implementing leadership that is receptive to diversity and fostering an open-minded culture.

The study revealed that only 40 per cent respondents in the study said these factors exist at their company, indicating that more work needs to be done.

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