The power of diversity

I was at a conference recently where one of the speakers showed a startling chart that showed that Fortune 500 companies that had more diversity on their boards of directors were likely to be more profitable than the rest.

I was curious and skeptical. I started researching the matter.  Here are some of the more interesting studies I found:

• This study by Deloitte suggests a very strong correlation between diversity and performance.
• This one suggests a U shaped relationship between diversity and financial performance.
• While this one in Wiley publications suggests that the relationship is much more complex and depends on circumstances.

The summary seems to be that there is insufficient evidence for a causal link between diversity and financial performance of companies. Overall, it would be hard to make a simple case that more diversity is always good, especially when its just gender or racial diversity and not thought diversity.

On the other hand, there seems to be directional evidence that there is some correlation between diversity and financial performance.  My hunch is that companies having diversity above a certain threshold are likely selecting talent from a larger and more diverse pool and are likely encouraging more thought diversity.  So, higher than a threshold diversity in upper management may be indicative of better human resource management practices in other areas, which in turn may be what is driving financial performance differences.