Diversity in a team – how does it affect a company's potential?

The goal of group work is to build a harmonious and coherent team that carries out tasks well. Research shows that teams of different ages, gender, ethnicities and geographic cultures can make them smarter. And as a result, strengthen the company's intellectual potential and make it more successful, regardless of the goals. Is diversity crucial to better performance and, if so, why? 

Diversity and efficiency

Over the past decades, a great deal of research has been conducted exploring the relationship between team diversity and efficiency. The research study The Effects of Team Diversity on Team Outcomes analysed, among others, the relationship between biodiversity and teamwork, and the impact of demographic diversity on social inclusion.

There is a clear correlation between diversity and quality, performance and innovation

The results show that there is a clear correlation between diversity and quality, efficiency and innovation. The mixture of age, gender and cultural background also offer cognitive variety.

By breaking down the workplace's homogeneity, you can bring together people with different thinking styles, habits and perspectives. A lively exchange of ideas and a diverse brainstorm connect alternative views and lead to the optimal solution. 

If everyone on the team has the same style, efficiency is hampered. Diversity in thoughts can prevent a team from group thinking and allow it to perform better.

Diversity as a business concept 

1. Introducing diversity is effective at a business level

Daniel Sanchez Reina, a senior director analyst at Gartner (a research unit specialising in the strategic use of technology), says that diversity is a solid business concept for everyone in any company and allows the organisation to serve its consumers better.

“The difference in employee performance between nondiverse and diverse organizations is 12%. [...] Creating a diverse workplace can also control the prejudices of team members and make them question each other's assumptions.” And adds: “We know there is a correlation between innovation and diversity.”

2. Diverse teams make better business decisions

In a series of studies (published in the PNAS’s journal) conducted in Texas and Singapore, researchers placed people with financial literacy in simulated markets and asked them to price their stocks. They were set up in ethnically diverse or homogeneous teams.

The researchers found that people from different teams were 58% more likely to value trading shares correctly, while those from homogeneous groups were more susceptible to price errors.

3. Heterogeneous teams are smarter

A global survey of 2,400 companies, conducted by Credit Suisse, found that organisations with at least one woman on board showed a higher return on capital and higher net income growth than those without women on board.

The research also revealed a more complex benefit of workplace diversity: heterogeneous teams are simply smarter. Working with different people can challenge the brain to overcome antiquated ways of thinking and sharpen its functioning.

More detailed analysis showed that diverse teams:

• outperform homogeneous decision making because they process information more accurately; 
• are more likely to re-analyse facts and be objective; 
• encourage a closer examination of the activities of each team member, showing greater vigilance towards shared cognitive resources; 
• can become more aware of their own potential prejudices or ingrained ways of thinking. 

What does “variety” mean?

To whom first comes to mind gender, race or even religion is not mistaken. But, as says Sheryl Sandberg, chief operating officer at Facebook Inc. and founder of LeanIn.Org.:

“I don't just mean racial, national, age, gender – all of that diversity is super important, we need to hire that – I mean, in addition to that, cognitive diversity which you get from all those backgrounds, but also just personality diversity.” 

Greater diversity can change the way entire teams process the information they need to make the best decisions

And Nikoletta Bika, HR and recruitment specialist, writes how often we “overlook other aspects like age, disability, language, personality, and sexual orientation.” And she adds, “These are types of inherent diversity, attributes we are born with. There’s also acquired diversity, ways of thinking acquired by experience. This kind of diversity matters too.”

It may so happen that diversity will lead to a conflict in the team. “Age differences or socioeconomic backgrounds might undermine open discussions and team spirit. Addressing all aspects of diversity will ensure no one is left out and that team members work better together”, emphasises Bika. 

Cognitive diversity – what is it? 

Cognitive diversity is a product of different thinking styles, habits and perspectives. Teams that span different business roles can take advantage of each person's diverse knowledge and experience, for example, to make decisions faster.

According to Gartner's forecasts, by 2022, 75% of companies with decision-making teams reflecting a diverse and inclusive culture will exceed their financial goals. On the other hand, gender-differentiated and more integrating teams will achieve better results than gender-homogeneous and less integrating teams by an average of 50%.

“High-performance teams are needed for project and product design, and engineering activities,” says Bruce Robertson, vice president of the company. “And those that advocate diversity and inclusive behaviours help to scale digital initiatives.”

In his book The Diversity Bonus, Scott Page, a professor and sociologist at the University of Michigan, looks at groups representing cognitive diversity – in the way they reason, interpret, and solve problems. He proved that different ways of thinking could be influenced by identification with a specific group (gender, race, socio-economic status), giving something more – a bonus.

When people with different “tools” to solve complex tasks come together and work together to find solutions, the results are powerful. 

Gender diversity broadens horizons

In 2010, researchers from Carnegie Mellon University, Union College and MIT studied the performance of around 700 people working together for up to five hours in groups of 2-5, solving tasks ranging from puzzles and brainstorming to more complex ones, such as architectural design. 

They found that the best predictor (explanatory variable) of outcomes was not the average intelligence of the group members, but a collective measure of the entire group's intelligence. The experiment showed that groups with or predominantly women are more socially vulnerable. They are better at reading others' social signals and are more willing to build space and take into account different opinions. This type of "fluid change" often leads to more productive results. 

In a 2019 interview with NDP, Christine Lagarde, director of the International Monetary Fund, said that better decisions are made when men and women meet at the table to create what she called “the broader horizon.”

Heterogeneity means innovation 

On the one hand, we work more freely with people who have similar experiences. On the other hand, hiring people who do not look, speak or think as we do can avoid the pitfalls of conformism that shut us off from innovative thinking.

What does data say about this? 

Gender diversity within R&D teams study (published in the scientific journal Innovation: Management, Policy & Practice) analysed the levels of gender diversity in research and development teams from 4,277 companies in Spain. Using statistical models, researchers found that companies with more women are more likely to bring radical, rapid market innovations. 

In another study (Cultural Diversity, Innovation, and Entrepreneurship, published in “Economic Geography”), the authors confirm that increased cultural diversity is a boon to innovation. They collected data on 7,615 companies that participated in the London Annual Business Survey, a management questionnaire.

The results showed that companies led by culturally diverse leadership teams were more likely to develop new products than companies with homogeneous leadership.

“It’s proven that more diverse companies are often more innovative and creative”, explains Joni Davis, director of diversity and inclusion at Duke Energy, and adds: “The main reasons you'll gain productivity and a boost in creativity is that you're bringing together individuals from different walks of life. These people come from varied backgrounds and experiences and will each have unique ways to improve your products and services you’re offering”.

Summary

It has been proven that diversity in the workplace brings more creativity and innovation and better business outcomes. For companies to adopt more inclusive attitudes and long-term visions of diversity, they should be aware of all its aspects.

Building variety is what makes teams smarter. Also, inherent and acquired diversity affects the diverse personalities of employees. Read about different types of employees in this article: 9 types of employees worth having in the company – which one are you.