Diversity and Innovation in Leadership

18th October 2019
Lucy Ramsbottom
Head of Research

Diversity and Innovation in Leadership

We are in the midst of our annual ‘Unlimited’ Inclusion and Diversity festival.  As part of this, I watched a TED talk by Management Consultant Rocío Lorenzo on diversity in leadership.  Rocío Lorenzo and her team set up a study with the Technical University of Munich, surveying 171 companies in Germany, Austria and Switzerland, to see if diversity in leadership had a tangible and positive effect on the innovation of a company and, ultimately, on achieving the organisation’s goals.

They asked about diversity in leadership, and innovation revenue – the share of revenues made from new products and services, seeing how these ideas translate into products and services that make the companies more successful. What they found astonished them.

In the companies with leadership diversity of over 20%, there was a significant increase in innovation compared to those with little or no diversity, demonstrating that having a diverse leadership team leads to an increase in innovation revenue. Whilst they are unable to say whether the diversity in leadership caused an increase in innovation, or whether more innovative companies have diverse leadership teams, they believe it is a bit of both. What is clear is that having a leadership team that is more than 20% diverse leads to more innovation revenue.

Leadership teams with at least one female member may congratulate themselves on their diversity, and so they should, it’s a great start.  But the study showed that there was no increase in innovation revenue where companies had just one woman alone.  In order to see a clear jump in innovation revenue to above-average levels, the company’s leadership needed to have at least 20% diversity.

Women in 2019 are the most educated they have ever been in history, and we would expect this increase in education to correlate with an increase in female leaders. This is not the case. Despite the growth of the number of educated females, the increase of female leaders has not followed the same trend.  Why is this?  Predominantly it boils down to two reasons; who businesses choose to hire, and who they choose to develop and promote.

Rocío Lorenzo and team spoke with German multinational software corporation SAP, who set itself a measurable target in order to achieve and increase its leadership diversity. It went from 19% women in leadership roles in 2011, to 25% in 2017, achieving its target.  It is now aiming for 30% by 2022, which shows how doable diversity in leadership is.

Many firms have said they are listening to the diversity issue, but clearly it is action that pays. Diversity should not just be a tick box exercise, it should be embraced by all companies who want to be successful.  The proof is there.

Lucy Ramsbottom is a Head of Research at Berwick Partners. For more information, please contact Lucy on 0161 498 3418 or drop her an email.