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Taking the Lead
on Leadership Diversity

Leadership Practices:
What’s Proven. What’s “Worth Less.”

Title: Taking the Lead on Leadership Diversity

Establishing diversity in an organization’s leadership pool can produce a broader variety of thought, which, in turn, leads to improved problem-solving and greater business benefits. Our research has shown that employee diversity in various forms is linked to an organization’s rate and intensity of innovation, group identification, and team effectiveness. We’ve also confirmed and extended the business benefits of diversity amongst leaders—and the costs of ignoring it.

While all forms of diversity are important, the research in DDI’s Leadership Databank provides the most insight on two forms of diversity. These include diversity in age: the degree to which organizations are bringing members of the Millennial generation (those born between 1982 and 2000) into leader roles. And, also, diversity in gender: representation of women among a company’s leaders.

Best PracticeProven Practice: Promoting More Gender and Generational Diversity

For generational diversity, we found that aggressive-growth organizations, such as those in the high-tech industry, have a significantly higher proportion of Millennials (30 percent) in leadership positions than organizations with cautious growth (25 percent) or no to low growth (21 percent). This 30 percent figure is linked to stronger business benefits as well: Companies with Millennials making up more than 30 percent of their leadership ranks are 1.8 times more likely to have high-caliber leaders in place and are 2.3 times more likely to be in the top 20 percent of financial performers.

Higher Growth, Higher Percentage of Millennials

Faster-Growing Organizations have More Millennial Leaders
 

As strong as these links are between generational diversity and company-level outcomes for leadership and growth, the effects of gender diversity are even more consequential. While there’s no magic number for gender diversity, our research shows that the benefits escalate beyond the point at which 30 percent of leadership positions are filled by women. Companies exceeding this threshold are 2.5 times more likely to have high-caliber leaders in place and a staggering 12 times more likely to be in the top 20 percent of financial performers.

Though gender balance among current leaders is vital, our evidence points to the additional positive effects of a greater representation of women in high-potential pools—that is, up-and-coming leaders who have been hand-picked for accelerated advancement and outsized development investment.

The graphic below shows the links between gender balance in leadership overall and for high potentials, and to financial performance (a composite of a company’s profitability, earnings per share, five-year rate of investor return, and stockholder equity).

Organizations with Better Financial Performance Have More Women in Leadership Roles

Promoting More Gender and Generational Diversity
 

Worth Less PracticeWorth Less Practice: Committing to Diversity, But Lacking the Right Talent Practices

Women and Millennial leaders can’t produce this impact if they can’t reach leader roles. Too often, structural limiters inhibit their opportunities and access, and potential enablers of growth are lacking. The route to solving these problems runs directly through HR and the leadership-focused practices it implements. We’ve included these factors in our research to differentiate the talent practices that matter for diversity in various forms. Interestingly, there was heavy commonality between the practices that advanced gender diversity and those that corresponded to higher rates of Millennials as leaders. Our research reveals six overarching characteristics of talent practices that precede and reinforce leader diversity, which in turn unlocks the business benefits described above. These practices are:

  1. Personal—individualized development plans and tailored conversations about what’s needed and what’s next.
  2. Transparent—visible, clear identification processes for global assignments and high-potential pools.
  3. Vigilant—active measurement and monitoring for up-to-date knowledge of leadership capability.
  4. Unrelenting—continual development challenges and rapid feedback from managers and mentors.
  5. Objective—well-validated simulations and assessments in place to inform hiring and promotions.
  6. Planful—smooth transitions throughout the entire leadership pipeline, from frontline to C-suite.

These practices provide a roadmap for tangible, actionable, and attainable steps to get diverse individuals in place in leader roles across levels, and should be included within acceleration pools designed to foster the advancement of high-potential employees into increasingly senior and strategic positions. And any commitment to diversity that’s not accompanied by these practices is far less likely to be accompanied by the more diverse leadership ranks organizations must have for the future.

Learn more about DDI’s Women in Leadership solutions for accelerating and advancing women leaders to ignite impact.

Talk to an Expert: Taking the Lead on Leadership Diversity

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