In an article published in The Spectator, London Business School Professor Alex Edmans considers whether the truism that "diversity is good for business" is actually true at all.
"It is a sacred mantra of the business circuit that diverse boards improve company performance," he writes. “But does the evidence really show that diversity is the key to business success, or is this a case of confirmation bias — accepting a claim uncritically just because we want it to be true? When you take off your blinkers and look at the evidence with a clear head, you can see the glaring errors in these widely touted diversity studies.”
Edmans analyzes several of the widely-touted studies that ostensibly proved a connection between diversity and investment performance. In many cases, there are severe problems in their methodologies. In others, simple correlation is taken to imply causation. However, Edmans does not believe that companies should abandon the worthy goal of improving diversity altogether. Instead, they should be clear that this is a social goal, not a business-driven one.
"When I brought in black and LGBT entrepreneurs as guest speakers in my class at the London Business School, I did not do so based on evidence that it would boost my teaching ratings, but because I wanted to show business role models to my students," he concludes. “Companies should consider making similar social arguments if they want to boost diversity. This would be much better than telling people to ‘increase diversity because you’ll make more money’ – particular when this is based on flimsy evidence.”
For more from Alex Edmans, read his contribution to Starling Insights' 2023 Compendium.
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