Insider Secret: Diversity makes great business sense.

Diversity makes great, (not just good), business sense.

Numerous studies have found diversity to be connected with business success.

For example,

  • 2009 analysis of 506 companies found firms with more racial or gender diversity had more sales revenue, more customers and greater profits.
  • 2016 analysis of more than 20,000 firms in 91 countries found that companies with more female executives were more profitable.
  • In a 2011 study, management teams exhibiting a wider range of educational and work backgrounds produced more-innovative products.

In short, diversity makes business sense—full stop.

So, if we know these facts to be true; and, we also know that business leaders are surely interested in making money; then why aren’t companies making more headway in diversifying their organizations?

One reason could be that, despite the evidence about results, homogenous teams just feel more effective. Secondly, people believe that diverse teams breed greater conflict than they actually do. Bringing these biases to light may enable ways to combat them.

Studies show that well-managed, diverse groups outperform homogeneous ones. Diverse groups also are more committed, have higher collective intelligence and are better at making decisions and solving problems.

A 2009 study of fraternity and sorority members published in Personality and Social Psychology Bulletin took a look at how diverse and homogenous teams function. As you may be aware, fraternity and sorority membership conveys a powerful group identity, much like political or religious affiliation. They have the secret handshakes, the oaths, the rituals, and all that other secret stuff that if I told you more about, I would have to kill you. (I love spy movies.) These ceremonies and rituals combine to create a strong sense of cohesion and identity amongst the members which highlights why this study chose fraternity and sorority members as ideal participants.   

Researchers gave students 20 minutes to individually study the clues in a murder mystery and pinpoint the likely suspect. Next, individuals were placed into teams of three with fellow members from the same fraternity/sorority. The teams were given 20 minutes to discuss the case together and provide a joint answer. Five minutes into the discussion, however, the teams were assigned a fourth team member, someone from either their own fraternity/sorority or another one.

After collectively naming their suspect, members individually rated aspects of the discussion. More diverse groups, meaning, those teams assigned someone from outside their own fraternity or sorority, judged the team interactions to be less effective than did groups joined by insiders. They were also less confident in their final decisions.

On the surface this makes sense: People from the same fraternity/sorority have been living with each other, studying together, hanging out all the time. It makes sense that they would hit the ground running and things would feel smooth. If the fraternity/sorority had an external member assigned to their team to solve the mystery, they reported more friction and taking much longer to solve the problem.

Here is the aha moment:

The fraternity/sorority members were wrong in their assumptions.  Among teams where the three original members didn’t already know the correct answer, adding an outsider versus an insider actually doubled their chance of arriving at the correct solution. The success rate jumped from 29% to 60%. The work felt harder, but the outcomes were better. The perception of the fraternity/sorority members that the work was not as good and was much harder is an example of a bias known as the fluency heuristic, or what I like to call, ‘Go with the flow.’ What I mean by that is, we prefer information that is processed more easily, or fluently, judging it to be truer or more beautiful.

Many people have a strong belief that it is easier to work with folks who are most like them and have a similar belief system or values alignment. Nobody wants to be assigned to a team they believe will be tougher to work with to do the same job, especially if they think they’re less likely to be successful.

It’s no easy task to make folks understand that the opposite is true: working on diverse teams produces better outcomes precisely because it’s harder.

Many folks deny the existence of biases against racialized or female employees because their actions were not motivated by malice and hatred.

However, racism and discrimination can occur without conscious awareness or malicious intent.


Here are five strategies that you can use to help retain diverse talent in your organization:

  1. Hire in clusters in order to create community for diverse hires.  
    Cluster hiring can help retain diverse individuals because they are now a part of a group with shared experiences: the new folks. This group of new folks support one another and learn the ropes together, naturally spending time together and getting to know one another while onboarding. It’s easier to ask questions, test your perceptions and seek feedback from other new folks when you are getting started.
  2. Support diverse hires by ensuring that the choice assignments are shared across the department.
    Take care to notice this. New diverse members will notice when folks who look most like you are the ones who you speak to the most, sit by, ask the most questions and assign to enticing tasks. By observing your actions, new diverse hires will glean whether they have a real chance in your organization and decide to stay or move on.
  3. Assign a mentor to your new hire. The mentor can be anyone as long as they can help the diverse employee navigate the culture, norms and unwritten values of the organization they are part of. The most important characteristic of a mentor is genuine interest in elevating others. The second is time to be available to the mentee—make sure you create space in a mentor’s schedule and workload for this important new role. The third is believing it matters, so check in with both the mentor and the mentee periodically to ask about the relationship and the process.
  4. There should be some bias training offered before the hiring committee is assigned. Teaching people about unconscious biases, such as affinity bias (people who are more like us), or attribution bias (thinking of others’ success as luck) can help address hiring practices that limit the recruitment of diverse candidates.
  5. Organize your formal and informal meetings in a way that is mindful of location and timing in order to make people feel welcome. For example, how many social meetings might be at the bar after work which may not take in to account diverse employees’ values around alcohol or working parents daycare demands? How many meetings may be on the golf course which tends to favor a certain gender and socio-economic class upbringing?

Making a team more diverse is not enough to see the benefits. Diverse organizations need to find ways to work together. If you are a leader who is trying to diversify your team, recognize that the new ways may seem a little odd at first. They even may stretch you to approach management in a different manner. 

When people with different perspectives are brought together, people may seek to gloss over differences in the interest of group harmony. Social pressure for conformity will negate the work you’ve done to diversify. Differences should actually be taken seriously and highlighted. Adding new perspectives and approaches improves outcomes and products while expanding markets. When teams highlight and celebrate their differences, everyone across the organization benefits.


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