What is it about diversity that improves decision-making and performance, and how can leaders harness diversity in their organisations?
We should care deeply about diversity in the workplace for reasons of equity, because diversity can bring meaning and richness to our lives, and because bias against individuals from minority (and even majority) groups has produced profound and entrenched injustices in society.
However, the research on a positive link between organisational diversity and performance is also rapidly accumulating. Organisations who lead in gender and ethnic diversity on executive teams and boards are likely to financially outperform their less diverse competitors. [i] In Venture Capital, ethnically mixed teams of investors score a 26.4% higher success rate than their homogeneous competitors.[ii] When teams are comprised of people from different backgrounds (demographic, functional disciplines, etc.), this appears to increase creativity and problem solving performance.[iii]
Yet intriguingly diversity does not invariably translate into greater performance. Many studies[iv] find no clear relationship between team diversity (in terms of demography or experience) and team performance.[v]
This raises two linked questions. First, what is it about diversity that can improve performance and specifically decision-making? And second, why are some organisations failing to capture these benefits?
More diversity = more information
There is now a wealth of research which shows that building diversity in groups can enhance the knowledge at our fingertips when it comes to making well-informed decisions.
Unfortunately but predictably, the people we spend time with, and the people we trust, tend to share our background (generational, ethnic, socioeconomic, attitudinal, or otherwise).[vi] And yet, novel information is most likely to reach us not through people close to us, but through people on the periphery of our social circles.[vii]
Leaders can increase the likelihood that their decisions are based on rich information when they involve a diverse team with connections that span different parts of their organisation, and even different sections of society. Social network research[viii] has shown that employees who establish connections with people in other functions in their organisation have more access to novel information and resources. In line with this finding, there is evidence[ix] to suggest that the most successful expert teams collaborate with a wide range of colleagues and don’t over-rely on well-established partnerships.
To arrive at the best decisions for their organisations, leaders need to continuously diversify their network of collaborators and of escape knowledge and experience echo-chambers. Diversity within teams help them to do so.
More diversity = less formulaic decision-making and ‘groupthink’
Zero-ing in on a preferred option before considering alternatives is a common and sometimes fatal decision-making trap. It accounts for disasters like the failed invasion of Cuba at the Bay of Pigs by CIA-trained and financed Cuban refugees in 1961. [x] Then, the CIA advocated for the invasion plans as the only viable response to the perceived threat posed by the newly Communist country which would not provoke global conflict with Russia – and they did this so strongly that other advisers to President Kennedy stifled their misgivings.
In contrast, good decisions come about when leaders resist the temptation to revert to familiar, well-rehearsed approaches and adopt a decision-making mindset that is characterised by cognitive agility in the face of ambiguity and uncertainty. Diversity can foster such a mindset. Positive experiences with people from other social (ethnic, religious, socioeconomic) groups reliably reduce[xi] our reliance on prejudices and stereotypes when we encounter people from diverse backgrounds. What’s more, diversity can affect how strongly we rely on ingrained assumptions when it comes to generating ideas, solving problems, and making decisions.
A number of psychological experiments[xii] have shown that engaging with people in roles in which they are usually under-represented (e.g. female CEOs, male midwives, etc.) prompts people to approach problems with greater originality and flexibility. Similar experiences with people who defy stereotypes – experiences that are more likely in diverse teams – also encourage us to rely less heavily on heuristics, or rules of thumb, when solving problems. Illustrating this point, a recent study[xiii] showed that it was 73% more likely that participants would avoid heuristics-driven errors of judgement in a problem-solving tasks when they had been exposed to stereotype-defying (vs. stereotype-confirming) individuals. When decision-makers operate within diverse teams, there is a good chance decisions can be reached in more sober and less prejudiced ways.
Exposure to different cultural settings[xiv] can bring about a degree of cognitive flexibility that could translate into an ability to generate more unconventional problem-solving strategies and greater openness to these approaches. A number of studies have shown that people who frequently frame-switch – bilingual and bicultural people,[xv] for example, or people who have immersed themselves in foreign cultures[xvi] – are already more adept at finding innovative solutions to complex problems. But taking on different perspectives throughout a decision-making process, for example by involving a diverse team and engaging with the plurality of experiences and views, might give a similar boost to the cognitive agility of decision-makers.
More diversity = better structured conversations
A factor that might begin to explain both why diversity boosts decision-making effectiveness and why it doesn’t always do so may lie in the decision-making process itself. Diversity in groups appears to prompt those looking to make (or secure) decisions to pay more attention to the decision-making process. Expecting differences of view (and perhaps even conflict) encourages[xvii] people to focus more on finding the data and evidence that might provide common ground, as well as creating conversations which balance the airtime given to different perspectives.
This resonates with our own experience at Leapwise. We have found that getting a sufficiently diverse group of people in the room certainly facilitates richer conversations. But it is not enough to focus solely on including the right mix of people in the conversation. Attention also needs to be paid to the structure of the conversation itself. For example, we advise decision-makers not to advocate for any particular option until other views are aired. And we suggest that no big decision is made without identifying multiple viable options – paths that are genuinely acceptable but with different merits. And we encourage organisations to create robust feedback and learning cultures and infrastructure. After all, one of the best ways to avoid stereotyping is to build ways of measuring the impact of decisions, and indeed to set up experiments when there is a high degree of uncertainty about the right path.
Diversity doesn’t stop with recruitment. It is a leadership challenge, and one that decision-makers ought to be embrace and own whole-heartedly. Diversity can bring huge benefits in terms of new information, insights and interaction – but only if you are prepared to do the work.
[ii] Gompers, P., & Kovvali, S (2018). The other diversity dividend. Havard Business Review, July-August 2018 issue, 72-77.
[iii] Jackson, S. E., Joshi, A., & Erhardt, N. L. (2003). Recent research on team and organizational diversity: Swot analysis and implications. Journal of Management, 29, 801–830.
[iv] van Dijk, H., van Engen, M. L., & van Knippenberg, D. (2012). Defying conventional wisdom: A meta-analytical examination of the differences between demographic and job-related diversity relationships with performance. Organizational Behavior and Human Decision Processes, 119, 38–53.
[v] And a few studies have found that diverse teams experience more conflict and report lower performance. However, according to a meta-analysis by van Dijk and colleagues from 2012, the studies that find such negative associations between diversity and performance all rely on self-reported measures of effectiveness. While people in diverse groups may perceive their groups to be less effective than their more homogenous comparators, studies with objective performance measures do not find these negative performance effects from diversity.
[vi] McPherson, M., Smith-Lovin, L., & Cook, J. M. (2001). Birds of a feather: Homophily in social networks. Annual Review of Sociology, 27, 415–444.
[vii] Granovetter, M. S. (1973). The strength of weak ties. American Journal of Sociology, 78, 1360–1380.
[viii] Seibert, S. E., Kraimer, M. L., & Liden, R. C. (2001). A social capital theory of career success. Academy of Management Journal, 44, 219–237.
[ix] Guimerà, R., Uzzi, B., Spiro, J., & Amaral, L. A. N. (2005). Team assembly mechanisms determine collaboration network structure and team performance. Science, 308, 697–702.
[xi] Dovidio, J. F., Love, A., Schellhaas, F. M. H., & Hewstone, M. (2017). Reducing intergroup bias through intergroup contact: Twenty years of progress and future directions. Group Processes & Intergroup Relations, 20, 606–620.
[xii] Gocłowska, M. A., Crisp, R. J., & Labuschagne, K. (2013). Can counter-stereotypes boost flexible thinking? Group Processes & Intergroup Relations, 16, 217–231.
[xiii] Prati, F., Vasiljevic, M., Crisp, R. J., & Rubini, M. (2015). Some extended psychological benefits of challenging social stereotypes: Decreased dehumanization and a reduced reliance on heuristic thinking. Group Processes & Intergroup Relations, 18, 801–816.
[xiv] Leung, A. K., & Chiu, C. (2010). Multicultural experience, idea receptiveness, and creativity. Journal of Cross-Cultural Psychology, 41, 723–741.
[xv] Benet-Martínez, V., Lee, F., & Leu, J. (2006). Biculturalism and cognitive complexity: Expertise in cultural representations. Journal of Cross-Cultural Psychology, 37, 386–407.
[xvi] Maddux, W. W., & Galinsky, A. D. (2009). Cultural borders and mental barriers: The relationship between living abroad and creativity. Journal of Personality and Social Psychology, 96, 1047–1061.
[xvii] Loyd, D. L., Wang, C. S., Phillips, K. W., & Lount, R. B. (2012). Social category diversity promotes premeeting elaboration: The role of relationship focus. Organization Science, 24, 757–772.