First and foremost, we must understand that diversity is challenging. In the U.S., where the language of inclusion is relatively advanced, even the word 'diversity' can sometimes cause a heated argument. Disagreement reigns even within the Supreme Court on whether the facts of diversity are an asset and how this should be achieved. Ninety percent of corporations take action either to recruit diversity or to reinforce it, but still, discrimination lawsuits are common, and business structures headship is more male and white.
The question is, how does diversity benefit us? Place diversity of expertise at a high rank among your management capabilities, and it would be pretty straightforward – one would not chase the idea of inventing a new motor vehicle without the help of engineers, designers, and quality control specialists – but what of social diversity? Are there any benefits to having people of different races/ethnicities/genders/ sexual orientations? Research has shown that in a social group, social diversity can lead to risks such as discomfort, rougher than usual interactions, a lack of trust, increased perception of interpersonal conflicts, lowered levels of communication, divided cohesive forces, increased sensitivity to being disrespected, and a host of other issues. So, Anyway, what's the benefit?
If you wish to create teams or whole organisations that can create, you need to have diversity. The creative process is dependent on diversity. The need for creativity prompts a search for alternative information, consistently improving the process's quality and outcome and assessing risks. Diversity can enhance corporate performance and stimulate boundless exploration and radical innovation. Even just having an interaction with diversity can reshape your way of reasoning. That's not just daydreaming: that is the bottom line from several years of research performed by organisational scientists, psychologists, sociologists, economists, and demographers.
The idea of informational diversity is central to explaining the positive aspects of diversity, which some call its advantages. When people come together in problem-solving groups, they possess varying information, opinions, and perspectives. This makes sense when discussing diversity of disciplinary backgrounds, such as an interdisciplinary team constructing a car. The same logic applies to social diversity. People who differ in race, gender, and other characteristics have valuable information and experiences regarding the task. A male and female engineer may be as different as an engineer and a physicist. That is fine.
Studies of prominent, creative firms have repeatedly demonstrated this reality. For instance, business professors Cristian Dezsö of the University of Maryland and David Gaddis Ross of the University of Florida analysed the gender diversity impact on the most prominent firms in the S & P Composite 1500 list, compiled to represent the U.S. equity market. First, they surveyed the size and gender composition of firms' top management teams from 1992 through 2006. Next, they studied the financial performance of the firms. They found that "for every 10% increase in female representation in top management, the firm's value creation increases by $42 million." They also assess the extent of "innovation intensity" based on investment in research and development as a fraction of total assets. Companies focusing on innovation gained additional benefits from including women in top management.
Hierarchical and functional diversity in the national singular banks can provide similar advantages. For instance, in a 2003 study, Orlando Richard, one of the authors and currently working at the University of Massachusetts Amherst, and his coauthors worked with the U.S. national banks top executive's survey of 177 banks in the U.S., then created a renovation, racial and financial data to the American as shown in the databases. Out of these banks, those more focused on innovation experienced improvements in social capital-related financial performance with increases in diversity.
Diversity also fosters organisational benefits in regions of the world that are outside the USA. In August 2012, a group of scientists from Credit Suisse Research Institute presented a paper in which they studied 2360 companies worldwide from 2005 to 2011, attempting to explore the relationship between the gender composition of management boards and business outputs. Of course, it is evident that firms with boards having one or the other female member had relatively higher returns on equity and expansion and relatively lesser net debt-equity ratio.
The studies based on data sets have a very significant shortcoming: it is possible to demonstrate merely that diversity is associated with better performance, and performance does not improve due to such diversity. However, research on race in small-group settings enables some level of causal inference. Again, the conclusions are obvious: this is beneficial for groups open to creativity and new ideas.
In 2006, Margaret Neale from Stanford, Gregory Northcraft, who was serving the University of Illinois, and I took keen interest less in other cultures and more on the effect of racial diversity among small decision‐making groups in an experiment that required coordination primarily through information. Most of our subjects were business students at the University of Illinois. They formed three-member groups of two whites and a nonwhite in all-white and white-nonwhite dyads and performed murder mystery role plays. We ensured that all group members were provided with and received identical information without individual members receiving any new knowledge. To resolve the issue, one would have to use the gathered material that was still dispersed among group members and add the information obtained from conversations. With racial diversity, the groups outperformed the patterns with no racial diversity quite remarkably. There is a tendency, however, when with similar others, to conclude that all the information is held and like-minded individuals share perspectives. This perspective, which kept the all-white groups from actively engaging in information synthesis, is why there are barriers to creativity and innovation.
Other scholars have cited similar outcomes. In 2004, Anthony Lising Antonio, a scholar at Stanford Graduate School of Education, partnered with five colleagues from both the University of California, Los Angeles, and other institutions and examined the role of race and opinion composition in small group dynamics. Over 350 students from three different universities participated in the investigation. Group members were requested to deliberate on a prevalent socio-political issue (child labor practices/death penalty) for 15 minutes. The researchers had differing opinions on slogans. Black and white members of the group were charged with presenting their views to the respective groups. Racial positioning within international relations was perceived differently by different racial groups, in this case, a black person presenting dissenting arguments to a white group. Dissenting opinions, when responded to by various groups of people, provoked different levels of responses. In this case, dissent amongst the other people is more provoking than dissent between similar people.
Diversity is not only about putting up a balanced view at the table. Simply adding social diversity to a group is unimportant since it creates a perception of critical mental differences. That perception makes people try to adapt to the situation.
People in the same group feel safe knowing they will agree, comprehend each other's beliefs & views, and quickly reach an agreement; however, when the individuals in a group realise that there are social differences, their orientation changes. They expect to find different views and perspectives. They expect more significant effort to be necessary to achieve an agreement. This logic helps to explain both the upside and the downside of social diversity: people work harder in diverse environments both cognitively and socially. They may not wish it, but there is a reward for the exertion filled with frustration.
In a 2006 study, social psychologist Samuel Sommers of Tufts University studied the decision-making by juries and found that the racially mixed groups exchanged more information during jury deliberation in a sexual assault case as compared to racially homogeneous groups. Working with judges and the jury administration office of a Michigan courtroom, Sommers organised mock jury trials with actual selected jurors. Though the participants understood the mock jury to be a sponsored court-related experiment, they did not know that the exact aim of the study was to investigate jury decision-making under racial diversity.
The six-person juries designed by Sommers had them all white or had four whites and two blacks. As you would imagine, the diverse juries were better at assessing the case's facts, less prone to errors in retrieving pertinent information, and more willing to engage in conversations concerning race issues. These benefits did not mainly occur because the black jurors added information to the discussion—rather, they happened. After all, white jurors changed their behaviors in the presence of black jurors. In the context of diversity, they were more active and more reasonable.
This is how diversity works: It fosters hard work and creative thought; it justifies the search for options even before engaging in any social interaction. Dissimilarity, or diversity, can be likened to the aches caused by physical activity. It is essential to exert oneself to build the muscles. As the refrain has it, no pain, no gain. In the same way, we need diversity – in teams, organisations, and society as a whole – to change, grow and innovate.
This article was originally published with the title "How Diversity Works" in Scientific American 311, 4, 42-47 (October 2014)