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Diverse Leadership Teams Are More Productive: Findings from the American Management Association

A mixture of genders, ethnic backgrounds, and ages in senior management consistently correlates to superior corporate performance, according to an American Management Association survey. Echoing findings from within higher education about the impact of diverse classrooms and campuses, the corporate sector also sees diversity as a distinct asset.

The survey of more than 1,000 managers and executives in AMA-member companies also found that open teams, with a significant share of senior managers recruited from outside organizations, outperform insular groups that heavily promote from within. In addition, organizations that include senior managers under the age of 40 show a greater success pattern than those with older top executives. The survey evaluated the impact of diversity on such performance measures as annual sales, gross revenues, market share, shareholder value, net operating profit, worker productivity, and total assets.

While larger companies were more likely to include at least one senior manager who is female, under 40, or of non-European descent, smaller firms had a greater percentage of such individuals at the top table, and a greater likelihood that a majority of senior managers were outside the white, male, over-40 model. Smaller firms were also far more likely to include a high percentage of relative newcomers (i.e. with the organization less than five years) among their senior executives. While small-company growth rates are often higher than those of larger firms, the survey data shows that within organizations of similar size, such factors as heterogeneity, open teams, and a larger cohort of younger managers still correlate strongly with better results.

While there is still a long way to go before senior management in American businesses actually reflects the diversity of American society in terms of gender, race, and ethnicity, the survey did find diversity in senior management teams. Only 11 percent of the 1,087 surveyed organizations have top teams that are entirely made up of over-40 males of European descent. Two-thirds of the senior staffs have at least one woman; 62 percent, at least one person under 40 years of age; and 37 percent, at least one person of non-European heritage.

Women hold a greater percentage of senior management posts in service firms than in manufacturing companies. Women particularly predominate in such sectors as communications and business and professional services and have greater than average representation on senior management teams in finance, insurance, and real estate. These are the same business sectors that outperformed the manufacturing sector in every category of organizational performance listed in the survey. It is important to remember that correlation is not necessarily causation, but women have definitely seized the opportunities for advancement offered in the service sector and seem to be prospering there.

People of color have a higher degree of representation on senior management teams in smaller companies and in the service sector, which again tend to report better organizational outcomes than larger companies and manufacturers.

While managers under age 40 hold an average 21 percent of senior posts among all respondents, they represent an average 33 percent of senior managers in the communications sector. That sector reported particularly strong results in net operating profits and in productivity gains.

In short, the communications industry, which includes telecommunications providers, broadcasters, and publishers, have senior management teams that are particularly hospitable to women and to younger managers. This industry is also far above average in their report of increased sales, operating profits, and worker productivity.

Survey authors note that it is not the predominance of any one set of people, but rather the participation of managers of varying gender, ethnicity, age, and experience that correlates to strong organizational performance. Where subsets are large enough to provide statistical reliability, the presence of "some" such managers on the senior management teams generally correlates to better performance than does an indicated presence of "none." While more research is certainly needed, this study confirms what many who work or teach in diverse settings have long suspected. Diverse groups provide valuable opportunities for learning and for productivity in a variety of settings.

For a copy of the complete study, see www.amanet.org/research

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it is not the predominance of any one set of people, but rather the participation of managers of varying gender, ethnicity, age, and experience that correlates to strong organizational performance