The Value of Team Diversity

January 26, 2018 By Wendy

Question: what is the not-so-secret sauce that makes companies more innovative, creative and profitable? The answer is diversity, having a mix of genders, ages, races, cultural perspectives, expertise and ethnic backgrounds. Diversity should not be seen as a box-ticking exercise, as something to comply with because it is the right thing to do and looks good in the marketing photos. It is a valuable business asset that can accomplish short, mid and long-term goals and give companies a competitive edge.

Sure, we know this intuitively, but the proof is there with the results enjoyed by enterprises that get diversity and in the decades’ worth of academic research. For example, a study conducted by the Boston Consulting Group and the Technical University of Munich surveyed 171 German, Swiss, and Austrian companies to look at the link between diversity and innovation levels. Essentially, respondents were asked two questions about how innovative they are (measured by innovation revenue, the share of revenue made from new products and services in the previous three years) and how diverse they are (measured by six different factors such as country of origin, gender and age). They found that diversity and innovation are correlated and move together and that this relationship is statistically significant.

Diverse Teams are Smarter

One of the reasons is that diverse teams are simply smarter than homogenous teams. Working with people who are different from you sharpens the intellect and improves ways of thinking. In experiments conducted in Texas and Singapore, scientists put financially savvy people in simulated markets and asked them to price stocks. Those individuals who were part of ethnically diverse teams were 58% more likely to price stocks correctly than those in homogenous teams who were likely to make pricing errors. Researchers believe the reasons for this is that diverse teams are more likely to remain objective and reexamine facts. They may also encourage greater scrutiny of each other’s actions which helps the group to stay sharp and focused. Underlying this is the thought that breaking up homogeneity allows people to become more aware of their own entrenched opinions and biases, blind spots that can be responsible for missing key information and committing errors.

“As evidence begins to accumulate, it’s becoming clear that you want smart people who think differently, who have been trained differently, went to different schools, have different knowledge bases. The talent of the team depends on having diverse people on that team,” said Scott Page, a professor of complex systems at the University of Michigan, in an interview to promote his book The Diversity Bonus: How Great Teams Pay off in the Knowledge Economy.   “This has become something that everyone has started to recognize as more and more data rolls in showing that to be true. You end up with firms recognizing that cognitive diversity is a strategic asset.”

His book presents a mountain of evidence that teams of different kinds of thinkers outperform teams that are made up of similar types of people. Page has also run an experiment to demonstrate the success of diverse terms compared to high-ability teams. Both worked on solving complex equations with the diverse team regularly outperforming the high-ability team.

More diverse teams are simply more innovative. They are made up of a broader range of people with a broader range of backgrounds, interests and experiences. They look at things differently and employ different methods when searching for information. Additionally, interaction with people of different backgrounds and being exposed to diversity changes the way individuals think.

Age Diversity

Age diversity can also deliver huge benefits. Chemoxy International, a British manufacturer of chemical products believes it has hit on a winning formula with regards to diversity by employing people from a range of ages and pairing older employees with younger ones which helps foster creativity. In an interview with the Daily Telegraph, Paula Tinkler the commercial director at Chemoxy International said: “Innovation and creativity are incubated wherever you have the right combination of experience, enthusiasm and curiosity, and an intergenerational team is the perfect way to foster the perfect mix.”

To that end, senior research scientists with many years’ experience are paired with undergraduates in the laboratory. Old and young are also paired together in other departments throughout the plant such as quality control and operations. “This intergenerational approach to hiring has been an incredibly effective catalyst for innovation and, in my opinion, it’s the driving force behind our most creative work,” Tinkler added.

Another reason why diverse teams perform better is that they’re not shackled by one of the big problems of homogeneous teams. Research by MIT business professor Evan Apfelbaum revealed that diverse teams spend more time deliberating important decisions while homogenous teams are more likely to be hamstrung by groupthink. Namely, a situation where the desire for consensus overrides a rigorous examination of alternatives and the focus is on what is known.

Power of Diversity

The bottom line is that we need diversity. Scott Page believes there is going to be an increased reliance on diverse teams in the coming years. The combination of different skills, ages, perspectives, backgrounds and other areas of diversity is truly powerful. So, if you want to build teams capable of innovating, you need diversity.



Share on      
Next Post »