Diversity: The road to success | Business| Economy and finance news from a German perspective | DW | 04.03.2021
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Business

Diversity: The road to success

Diversity is a good thing and necessary for companies. Several studies on the subject show that diversity is a prerequisite for larger economic success, but it can also trigger new conflicts.

Young people with a migrant background attending a training course in Leipzig, Germany

Young people with a migrant background attending a training course in Leipzig, Germany

It's not a new revelation that diversity is good for companies. "Germany is a diverse country, and a big deal of its productivity is based on this diversity," German Chancellor Angela Merkel said in a recent statement. "We need to view diversity as an opportunity to harness its potential."

And the potential seems to be big. Companies with high gender diversity stand a 25% higher chance of securing above-average profits, according to a 2020 study by the consultancy McKinsey.

When the boardroom also shows ethnic diversity, that percentage climbs to 36%. The study was based on data from over 1,000 companies in 15 nations.

Considering demographic developments, companies are bound to put an ever-greater emphasis on diversity. Germany's population is expected to shrink to 65 million by 2060, despite forecasts of some 100,000 to be added yearly through migration. In 25 years from now, roughly one-third of the population will be 65 years or older, Germany's Federal Statistics Office predicts.

Infographic on women in boardrooms across the EU

Thomas rules the roost

But changes in society have been slow in coming. Some three years ago, the Swedish-German AllBright Foundation looked into the composition of boardrooms in the 30 largest listed German companies. It found that back in March 2017 executive boards were 93% made up of men, with 5% of the CEOs having Thomas as their first name. There were in fact more Thomases and Michaels among the board members (49) than women (46).

And this despite the fact that German companies voluntarily agreed as early as 2001 to seek a higher percentage of women in leadership positions.

So, what's the state of affairs today? Right now, only under 12% of all 681 board members of all DAX-, MDax- and SDax-listed companies are female, according to the consultancy EY. If everything goes according to plan, then the first woman to head a DAX company on her own will start work in early May.

The Diversity Charter is a German corporate initiative to promote diversity in companies and institutions. Its chair, Ana-Christina Grohnert, told DW she doesn't accept the argument that there are simply not enough women around to qualify for leading positions.The debate is not just about gender equality. It's also about preventing people from being discriminated against because of their physical or mental disabilities, age, skin color, sexuality, religion, or ethnic background.

Just lip service?

Businesses increasingly understand that diversity has to be actively supported. Some 3,800 organizations with a total of about 14 million employees have already signed the Diversity Charter as a self-commitment. Among them are 25 of the 30 DAX-listed enterprises, but also smaller companies and authorities. The charter was called into being in 2006 by four companies. The nonprofit association by the same name has been around since 2010.

On paper, this looks like widespread support for the cause, but in 2020, two-thirds of all companies in Germany still failed to implement diversity management measures. A study by the Diversity Charter adds that only 19% are planning concrete steps in the near future.

Diverse business team laughing

Businesses tend to thrive when they support diversity and view it as an enrichment, several studies show

Table manners and cake

More diversity can also trigger conflicts, according to sociologist Aladin El-Mafaalani, a professor at Osnabrück University. He says society in Germany used to be like a table at which some old white men called the shots. Increasingly, there are now people at the same table who have disabilities, who're not heterosexual, who are female or who have a migrant and nonChristian background.

All these groups now want a slice of the cake and question traditional table manners. "People at the table who are fully integrated want to have an equal say in all matters," El-Mafaalani wrote in an article for Germany's Federal Agency for Civic Education. He concluded that multiple inputs could lead to multiple outputs, but also cause conflicts. He warned against viewing such conflicts as something completely negative, though.

"Diversity doesn't create harmony but requires energy," confirms McKinsey's Julia Sperling. "It's far easier to arrive at decisions in a homogeneous group of people where everyone's of the same opinion anyway," she argues. "But our study is proof that seeking more diversity is an effort worth taking."

Watch video 02:56

German boardrooms still mainly white and male?