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How a Diversity of Views Can Pay Off

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Behind the scenes at Goldman Sachs, thought-provoking insights are bubbling up each day. This space is for a few nuggets we think are worth sharing. From macroeconomics to the genome medicine revolution to the rise of digital gaming, these stories from around 200 West show you how top-level views can impact your life (and maybe even shape the way you think about money). 

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People and organizations have been pushing hard for more racial and gender diversity. And equity in the workplace matters, for many reasons. In this Daily Check-In, Kate Koch, co-head of the Fundamental Equity business within Goldman Sachs Asset Management, discusses how a more diverse workforce can positively impact a company’s performance, reputation and relationship with customers.

Diverse organizations perform better. “The evidence is very clear that companies that score highly on ESG [Environmental, Social and Governance] characteristics of diversity and inclusion and high in terms of workplace quality outperform, and that’s true across most sectors. And it’s really very true across the last decade,” she said.

Koch said diverse and inclusive teams amp up competition by bringing a wide range of perspectives to the table. And, ultimately she says “that plurality of perspective can help create a competitive advantage.” 

Goldman Sachs is not the only company to see this link between diversity and business outcomes. This Wall Street Journal study from 2019, for example, found that the 20 most diverse companies in the S&P 500 have better operating results than less diverse firms. The more diverse organizations had a 12% profit margin (the profit a company generates before interest and tax) versus just 8%, respectively. 

Lack of diversity also puts companies at a long-term disadvantage. Koch says an emerging alignment of diversity and brands is critical because millennials, a groups she says is one of the “most sought after demographic … is very focused on looking for companies that are aligned with their own values.” And if an organization is aligned with a customer’s values, that creates a connection. 

A diverse workforce can positively impact a company’s performance, reputation and relationship with customers.

In doing that, companies are “going to be able to come up with the right product, they’re going to have the right marketing message that is authentic and they’ll be able to maintain the very critical tie between brand and trust” she said. 

Companies without diverse and inclusive environments may find it harder to attract talent. Koch said that if people see themselves reflected in a company’s workforce, it will be a lot easier to attract and recruit a deeper pool of diverse talent. As an example, she noted that there have only been 18 black CEOs of Fortune 500 companies in the US and “in all of those instances, there was black representation on the board.” 

So how do companies become more diverse? Data and demands. Koch said companies aren’t required to report racial demographics but that her team will be working with organizations to disclose this information. “We believe that if we can measure [demographics] we can hold those companies accountable for the progress we want to see them make,” she said. 

Koch also noted that her group has “really pushed” for gender diversity on boards, by adopting practices such as voting against nominating chairs of any US publicly listed company that we owned with no women on the board. She believes this has led to more gender diversity at about 40% of the companies where these practices were applied in 2019. 

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.