The Department of Defense did not respond to questions about peer-reviewed research that appeared to debunk key studies used to underline claims of diversity, equity, and inclusion (DEI) efforts across the military. Ta.
The Department of Defense (DOD) and the Navy each cite research conducted by global consulting firm McKinsey & Company to justify their DEI policies and recruitment and retention efforts that favor minorities. Department leaders said the business practices also apply to the military, characterizing the study as further evidence that racially and ethnically diverse teams produce better performance results. .
But a new peer-reviewed paper published in March in Econ Journal Watch, a journal published by the Fraser Institute, argues that McKinsey’s conclusions are flawed. Not only were the researchers unable to replicate McKinsey’s study, but the company’s methodology undermined the final findings.
A Navy spokesperson told DCNF that the new study could not be commented on because it was not conducted by a Navy organization. The Department of Defense did not respond to DCNF’s request for comment in time for publication.
McKinsey & Company is a large U.S.-based management consulting firm serving clients around the world, including international government, military, and defense industries.
The company has demonstrated a “deep and long-term commitment” to advancing DEI initiatives, including social justice and anti-racism in business, and has spent $20 million on DEI research. according to Go to the company’s “Company Profile” page. Its diversity and inclusion research is used to support business talent acquisition practices. quoted In Harvard Business Review.
new paper concluded Be careful when relying on McKinsey findings to justify improved financial performance with increased racial and ethnic diversity.
Authors Jeremiah Green, associate professor at Texas A&M University’s Mays School of Business, and John R.M. He said he tried to reproduce the results. We show that increased racial and ethnic diversity is correlated with improved financial performance.
“McKinsey’s research shows that both conceptually (in terms of the correct direction of causality) and empirically (in terms of a set of large US-listed companies), large US-listed companies are able to increase their growth rates. “Racial/ethnic diversity in executives does not support the contention that, on average, higher levels of financial performance can be expected to improve financial performance,” the authors conclude. (Related: Exclusive: ‘Big hit’: Decline in white recruits fuels worst recruiting crisis in military history, data shows)
in 2015, 2018, 2020 and 2023, the company released a series of research reports celebrating the value of racial, ethnic and gender diversity in business. McKinsey’s central support for his DEI is backed by independent research showing that companies with racially and ethnically diverse senior executives tend to perform better and have higher productivity and profitability. This is an idea that was given to me.
Although they do not claim to prove causation, they do argue that the relationship between ethnic diversity and economic performance has strengthened over different iterations of the study.
“The strong business case for ethnic diversity remains consistent over time,” McKinsey writes. The latest version of the study, published in 2023 and based on a data set through 2022, found that companies in the top quartile of ethnic diversity were 39% more likely to outperform. did.
“DEI Core Competency”
Several Department of Defense publications directly reference questionable diversity research to support claims that companies with higher racial and ethnic diversity outperform those with lower diversity. .
“There’s a Business Case for the Department to Prioritize DEI as a Routine,” Department of Defense Human Resources Newsletter, November 2022 state. McKinsey & Company believes that executive diversity makes executives stronger and that “the most diverse companies are now more likely than ever to outperform their less diverse peers in terms of profitability.” It has been reported that the number of cases is increasing.”
Diversity can lead to increased productivity, creativity and innovation, which can make employees happier and more likely to stay with the company, it adds.
Navy’s 2021 “Force Health” Report References A 2015 McKinsey study suggests that having a larger racially and gender-diverse crew “improves warfighting performance, innovation, and lethality.”
The document goes on to explain how the service has implemented or plans to implement training and policy changes that encourage Navy leaders to develop “DEI core competencies.”
Another Navy publication on the findings of “Task Force 1” quoted A 2015 McKinsey study had a section explaining the importance of knowing the racial and ethnic makeup of a force, but McKinsey only looked at diversity in senior leadership.
According to the report, former Chief of Naval Operations Michael Gilday set out in 2020 to examine issues created by society that “undermine the Navy’s readiness, such as racism, sexism, and other structural and interpersonal biases.” “Task Force 1” was established in 2013.
The U.S. Department of Defense has owed nearly $400 million to McKinsey since 2009 (data from USASpending.gov) show.
The belief that increased diversity contributes to improved performance is reproduced throughout Department of Defense documents and public statements regarding DEI efforts, but they are always explicitly tied to some research or underlying data. It does not mean.
Immediately after President Joe Biden took office, dictated All federal workplaces, including the Department of Defense, should “develop a workforce that takes full advantage of the nation’s diversity.” Department of Defense and military officials have defended the military’s ability to promote diversity and adhere to a merit-based system.
Department of Defense DEIA Strategic Plan To tell DEIA efforts must be data-driven. The plan later states, “A more diverse, fair, inclusive, and accessible force will benefit teams made up of individuals from a wide range of backgrounds and experiences, including improved problem solving and critical thinking.” “We can ensure that the Department of Defense receives the following:”
‘No evidence’
When Green and Hand tried to copy McKinsey’s research, they didn’t get similar results.
“There is no evidence of a statistically significant positive relationship between the financial performance of S&P 500® companies and McKinsey’s measures of racial/ethnic diversity on management teams,” the authors wrote. are writing..
Working backwards from the process described in the original paper, they inferred statistical functions using a sample of S&P 500 companies and racial and ethnic data coded from publicly available data on company executives. The magazine’s “quasi-replication” of the McKinsey study, by definition, looked only at U.S. companies, and Greene and Hunt’s sample of companies differed slightly from McKinsey’s sample.
There was no statistically significant positive correlation between the McKinsey measure measured in 2019 and the likelihood of overperformance in the 2015-2019 period McKinsey examined in the study, the authors said. discovered.
According to the paper, McKinsey uses a definition of diversity in its calculations that assumes a fully diverse company is more diverse than the general U.S. population or has a different racial and ethnic distribution. .
McKinsey also interprets the correlation between diversity and financial performance in the opposite direction, Green and Hand write. The researchers measured the financial performance of the companies in their sample for four to five years before measuring executive diversity. A possible conclusion is that increased profitability is positively correlated with leadership diversity.
The latest research report acknowledges in the section on limitations that “it is theoretically possible that companies can achieve higher levels of diversity if they have better financial performance,” but in practice states that it is unlikely that such a thing will occur.
Diversity is a power multiplier and we value inclusion. See how the Department of Defense is crowdsourcing to identify better ways to promote diversity and inclusion. https://t.co/wot2goEFVu pic.twitter.com/u2a5weh2ku
— Department of Defense🇺🇸 (@Deptof Defense) August 25, 2020
A 2015 study examined a “proprietary” dataset of executives from 366 publicly traded companies across a variety of industries in Canada, Latin America, the United Kingdom, and the United States. They found that companies in the top quartile are 35% more likely to: higher than the median economic returns for their respective industries and countries.
In the United States, McKinsey found that “there is a linear relationship between racial and ethnic diversity and improved financial performance.” For every 10% increase in racial and ethnic diversity in leadership, profits (before interest and taxes) increased by 0.8%.
According to the study, “diversity is likely a competitive differentiator that will shift market share toward more diverse companies over time.”
McKinsey’s 2018 study expanded its dataset to 1,000 companies in 12 countries and found similar results. Companies with the least diversity were also more likely to underperform relative to the median profit margin. The 2020 review expanded the dataset slightly and found similar results. We also looked at how companies have progressed or regressed since the dataset was first constructed.
McKinsey did not immediately respond to DCNF’s request for comment.
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