Dive Brief:

• The 20 most diverse S&P 500 companies generally performed better financially over five- and ten-year periods than non-diverse firms, according to analysts at The Wall Street Journal (WSJ). Led by the financial industry, the top companies had an average operating profit margin of 12%, compared with the 8% average profit margin of the least diverse companies. 
• WSJ’s research analysts said they created a diversity ranking based on the ethnicity and age of the company's employees, whether the company has diversity and inclusion programs, the percentage of women leaders in the firm, and the board of directors’ makeup. The financial sector led, while the materials sector ranked last. Additionally, Progressive Corp. and JPMorgan Chase & Co. earned the highest individual rankings.
• "A diverse team supported by an inclusive environment that values each individual will outperform a homogenous team every time," David Taylor, P&G’s CEO, president and chairman, told WSJ. He said he believes his firm’s diverse teams are one reason for “its strong financial results recently,” which included a 5% growth in organic sales in fiscal year 2019.

Dive Insight:

The research appears to confirm what may other sources have said: Diversity and inclusion will bolster a company's financial performance.

One reason for that is the connection between diversity and innovation. A diverse workforce (in terms of gender, race and sexual orientation) is better at developing innovative products and services, a 2018 study from North Carolina Sate University concluded.

But diversity requires more than a one-time investment: A study in the Harvard Business Review found that the innovation correlation only appears in companies where inclusion is embedded in the culture, illustrating the need for leadership buy-in. While 98% of employers in a Boston Consulting Group report said they invest in D&I programs, only a quarter of the workers that these programs were designed to engage — women, nonwhites, LGBTQ workers and others — said they benefited from D&I efforts. Men age 45 or older were cited as the "main obstacle" to diversity progress as they tended not to prioritize the initiatives diverse groups found effective. Such "hidden gems" include visible role models, parental leave, childcare assistance and structural changes, like nonbinary gender designations and gender-neutral restrooms.