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Diversity = Performance

Updated: Nov 4, 2021

A growing body of research makes it increasingly clear that companies with more diverse workforces perform better. Not only are they better at being able to attract top talent and improve decision-making processes, customer orientation, and employee satisfaction, these factors also lead to a cycle of increased financial performance, according to McKinsey research. Another example is that companies that increased their board diversity with more directors from academia have on average a higher performance level.

Diversity comes in many forms. A greater proportion of women in senior management is associated with higher company performance, especially in organizations that focus on innovation. One other study found that a racially diverse workforce was positively associated with more customers, increased sales revenue, greater relative profits, and greater market share. Diversity of expertise provides benefits that are obvious to most people, but what good comes from social diversity: differences in gender, race, or ethnicity?

The main benefit of diversity is often assumed to be the impact of different perspectives and ideas brought to the 'table' but that is only one aspect. Diversity really changes the experience of all in the group. Diverse groups outperform more homogenous groups, not because of an inflow of new ideas, but because the social majority of the group will actually think much more critically about the problems that they are working on. Being with others similar to ourselves leads us to think we all have the same information and share the same perspective while critical information processing is absent. This is what appears to hinder creative problem solving and innovation.

In addition, when we hear a contradicting perspective from someone who is 'different' from us, it provokes more reflection than when it comes from someone who is similar to us. This effect is not limited to race, a difference in political preferences has the same effect. When opposition comes from a socially different person we are prompted to work harder on our rationale and to prepare better by anticipating alternatives than we would have otherwise. Diversity pushes us to use our cognitive abilities in ways that homogeneity simply does not. This also seems to influence a team´s ability to handle conflict. When members of a group notice that they are socially different from one another, they change expectations and anticipate differences of opinion and perspective.

But to reap the benefits of diverse teams, there are some hurdles to overcome first. Since socially diverse teams have greater perceived interpersonal conflict, less cohesion, lower communication, and more discomfort – at least in the initial phase – it is critical that controversy and debate have an intellectual foundation and are not based on a personality conflict. Although diverse groups might initially start off underperforming for these very same reasons, over time, their relative performance will usually exceed that of homogenous groups. An interesting phenomenon is that homogenous groups feel more satisfied with their results and are more confident about their decisions, yet are more often wrong in their conclusions.

On the other hand, members of a diverse group will typically feel less confident about their progress due to the need to assimilate conflicting viewpoints but have a better performance in the end. That is why it is key to get comfortable with the initial lack of consensus and keep the space open for continued sharing of different ideas and solutions. Make sure your team understands why greater cognitive, gender or cultural diversity (in-group versus out-group) creates tension and discomfort. Since we are wired with an Ingroup bias that is motivated by familiarity and comfortability with people who most resemble us, it is key for leaders to create high levels of psychological safety. That also means allowing for healthy conflict about ideological and conceptual themes, but not by "attacking" the person who has the different perspective.

If a team leader has the ability to create an atmosphere in which dissenting views can be freely aired and reassures that the discomfort is part of the journey to high performance, he or she opens the door for maximum team results.

Based on the research we could cautiously state that we work harder in diverse environments, both socially and cognitively. The pain associated with diversity is like the discomfort that goes with growing your muscles, the ability to put continuously more stress on the muscles produces the gain. We need diversity – in teams, organizations, and society as a whole – if we are to change, grow, and innovate. So we had better lean into the initial discomfort and start to stretch ourselves.


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