Is Investing in Cultural Diversity Worth It In Business? What Leading Research Tells Us.

One important thing I’ve learned from examining numerous studies and my own experience working with teams and companies is this:

Cultural diversity is worth it and strategically necessary for companies working internationally or with diverse customer groups, entering new markets and those wanting to attract and retain talent. 

So, if you've ever wondered whether companies discuss diversity or DEI just to tick a box on the corporate responsibility list or seem progressive, there is substantial data proving its real, tangible benefits.

To support better decision-making, I’ve compiled research from sources like McKinsey, Boston Consulting Group, Harvard Business Review, and others. Companies that want to succeed should pay attention to these findings.

Before exploring the studies, let’s clarify why cultural diversity is more than a checkbox—it’s a strategic asset that requires investing in an inclusive culture. 

Diversity, especially cultural diversity, brings along challenges, but companies that invest in building inclusive environments can overcome them and unlock strategic advantages.

Hiring diverse talent alone isn’t enough; managers must create spaces where varied perspectives are valued to drive problem-solving, innovation, and results.

In short, achieving the benefits of cultural diversity hinges on cultivating a truly inclusive organisational culture.

Diversity Drives Profitability (McKinsey & Company, 2023)

Let’s start with the bottom line—diversity improves profitability. According to McKinsey & Company’s 2023 study, Diversity Matters Even More, companies in the top quartile for ethnic and cultural diversity on executive teams were 39% more likely to outperform their peers on profitability—up from 33% in the 2020 study.

This wasn’t a small study. McKinsey analysed data from over 1,200 companies across 23 countries, focusing on profitability and long-term value creation. Specifically, they examined diversity metrics in eight of these countries, further solidifying the connection between diversity and financial performance. The 2023 report confirms the earlier findings from 2020 and suggests that this link is growing stronger.

The takeaway? Companies prioritising cultural diversity, especially at the leadership level, tend to gain real financial benefits and improved organisational efficiency. In today’s competitive business environment, every advantage like this matters.

Innovation Is Powered by Diversity (Boston Consulting Group, 2018)

Another critical finding comes from Boston Consulting Group’s 2018 study "How Diverse Leadership Teams Boost Innovation", which discovered that companies with above-average diversity in their leadership teams saw 19 percentage points higher innovation revenue compared to those with less diverse teams.

Nearly 45% of total revenue for companies with diverse leadership came from new products or services launched in the past few years, compared to only 26% for less diverse companies. So, diverse teams aren’t just better at coming up with ideas—they’re better at creating products and services that generate real income.

Diversity becomes a key differentiator in a world where innovation can be the difference between success and failure. It fosters a richer pool of ideas and directly translates into better financial performance across developed and developing economies.

Smarter Teams, Better Decisions (Harvard Business Review, 2016)

Next, let’s talk about decision-making. The Harvard Business Review published a study, “Why Diverse Teams Are Smarter, “ highlighting how diversity enhances decision-making processes. This happens because diverse perspectives lead to more thorough information processing and fewer errors, leading to more innovative and effective solutions.

Diverse teams are also less prone to groupthink—a cognitive bias where everyone agrees with each other to avoid conflict. By having people from different backgrounds in the room, businesses can avoid falling into this trap and increase their overall performance and ability to address complex challenges.

Engagement and Inclusion Go Hand in Hand (Deloitte, 2017)

Diversity also plays a critical role in employee engagement. Deloitte’s "2017 Global Human Capital Trends" report shows that 78% of respondents believe diversity and inclusion are crucial for organisational success.

The study emphasises the significant correlation between diversity, innovation, and employee engagement:

• Diversity practices are positively related to employee engagement levels.
• Strong causal linkages exist between diversity and employee engagement, mediated by trust within the organisation.
• Perceptions of inclusion are critical in leveraging diversity to create trust and drive employee engagement.

The study underscores that effective inclusion strategies are essential for companies to benefit from diversity fully, ensuring all employees feel empowered and engaged in their roles.

Inclusive Decision-Making Pays Off (Cloverpop, 2017)

According to Cloverpop’s research, diverse teams that practise inclusive decision-making make better decisions 87% of the time. These teams make decisions twice as fast and require half as many meetings to get there.

What does this mean for businesses in practice? According to the study, the decisions made by diverse teams resulted in outcomes that were 60% better than those made by less diverse teams. These findings emphasise that leveraging various perspectives enhances efficiency and leads to superior business performance.

So, by building diverse, inclusive teams, companies can outpace the competition regarding outcomes and agility.

Why Cultural Diversity Is Essential for Market Relevance (World Economic Forum, 2020)

Finally, let’s talk a little about market relevance. The World Economic Forum’s 2020 study revealed that diverse teams enhance a company’s ability to understand and meet the needs of a broad customer base. This is particularly important as markets become more globalised and customer demographics grow more diverse.

This research suggests that a diverse workforce is a strategic asset that boosts innovation and market insight, ultimately enhancing a company's relevance in the global market.

Cultural Diversity + Cultural Intelligence = Success

As we move forward in an increasingly interconnected world, the message is clear: investing in cultural diversity is not just the right thing to do—it's a strategic advantage for long-term success and sustainability in the global business landscape.

While the data makes a strong case for the benefits of cultural diversity, it’s not without its challenges. These challenges include potential miscommunications, cultural misunderstandings, and conflicts arising from different cultural perspectives. For companies to fully harness the benefits of a diverse workforce, they must be adept at leading cultural diversity with cultural intelligence.

Cultural intelligence encompasses the ability to relate and work effectively across cultures. Leaders with high cultural intelligence are better equipped to navigate and mediate cultural differences within their teams. They must cultivate an environment of mutual respect and understanding, ensuring that all team members feel valued and heard.

To develop cultural intelligence, companies should invest in training programmes focusing on cross-cultural awareness, communication, empathy, and conflict resolution. By doing so, they can transform potential challenges into opportunities for innovation and growth.

Conclusion: Diversity Isn’t Just About Ticking Boxes for Corporate Social Responsibility, It’s Strategic

The research makes it clear—cultural diversity provides a strategic advantage that fuels profitability, innovation, better decision-making, and market relevance. But diversity on its own isn’t enough. Companies need to pair it with cultural intelligence to truly unlock its potential.

If you want to thrive in today’s global business landscape, investing in both diversity and cultural intelligence is the smart thing to do.

Effective leadership in this area not only mitigates risks but also enhances the inclusive atmosphere where all employees can thrive and contribute their best efforts. This combination of diversity and cultural intelligence ultimately positions companies for greater resilience and competitive advantage in the global market.

Would you like to know where you and your team stand at the moment? 

We have created the Global Team Success Indicator assessment for team leaders and managers working with diverse teams and the Cultural Intelligence Checklist for anyone interested in learning more about developing cultural intelligence.