Why diverse teams perform better?
Diversity and Inclusion (D&I) are interrelated words that most of us have heard of by now. If you are a recruiter or “simply” a manager, you probably are well aware of the benefits that diversity brings to the workplace.
To recap them quickly, here are some of the D&I advantages:
Better decision-making up to 87% of the time
Outperforming results with female board members
35% higher EBIT (earnings before investment and taxation)
2 times faster decision-making and execution by diverse teams
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Challenges with Diversity
What you do not get told so often is that there are downsides to bringing more diverse mindsets to the team.
Naturally, inviting more employees from various demographical, intellectual, racial, and ethnic backgrounds brings lots of different views to the table. More significant conflicts, misunderstandings, increased discomfort, lower communication, more sensitivity about respect quickly occur and clash.
The truth is, diversity can be challenging to leverage, and many companies fail to do so. Research indicates that in some countries (for instance, the US), simply mentioning the term “diversity” can raise anxiety and conflict in recruiters. That should come with no surprise since there is no agreement or clear guidelines for achieving higher D&I. The result of that?
Companies pouring money on diversity programs to avoid lawsuits, among other things, and yet failing to improve in that area regardless and are still being accused of discrimination. If we look closely and try to troubleshoot, one reason is the methods applied to achieve it. Most of the companies use the same ones invented in the 60es, which do not do better. On the contrarily, they make things worse.
Organizations and perspectives have begun to shift since then, and a lot more research has undergone about D&I. So why haven’t diversity programs changed?
3 reasons why diverse workforce outperforms:
01 They use more facts
Numerous experiments have been conducted to test this hypothesis. Are homogeneous teams more objective and factual? Results are positive. In a study where participants had financial backgrounds and were given to estimate the stock prices in simulated scenarios, 58% of the nonhomogeneous teams predicted correctly. The homogeneous groups were more prone to errors.
One plausible explanation is that employees involved in a diverse team reexamine facts to stay objective since they become more aware of their own biases.
02 They process facts with more caution
Because members of diverse teams are exposed to different ways of thinking, they are more cautious with how they think and process information, leading to better decision-making.
03 They are more innovative
When dealing with homogeneous teams, how do you find new solutions and ideas when all of you have been brought with similar (if not the same) demographics? Gaining the perspective of people with different demographic upbringing or cultural thinking is at the heart of creating something new and innovative. Research showcases that just adding female members to the top leadership “leads to an increase of $42 million in firm value.” After all, how a male and female engineer thinks could be as different from each other as a chemist and a physicist.
Business case: Alibaba Group
Let us give you an example of a company that is succeeding with its D&I efforts: Alibaba Group. The second-biggest e-commerce company serves 758 million active users as of June 2020 – and it is growing by this day. All of its global users are from various backgrounds. Alibaba Group seems to be managing its needs, leading to outperforming other e-commerce leaders like eBay and racing with Amazon.
Clearly, there is something that Alibaba Group is doing right. Firstly, the e-commerce giant has a different business model comprising 3 different core businesses: Alibaba, Taobao, and Tmall. Secondly, unlike Amazon, the company owns no wirehouses and holds no physical inventory – it relies on its own-developed software programs to help with the exchange of products.
However, according to the leadership, the “secret sauce” that drives the company’s success is the women they hire for the company. 1/3 of the company’s founders are women, and similarly, 34% are in senior roles. According to Jack Ma, the company’s former executive, women bring attention to detail among perseverance that puts weight on the outperforming results. He adds that: “Women balance the logic and the instinct”. Besides the women’s empowerment and early inclusion in different roles down the company’s hierarchy, leadership strives for unique corporate culture with open communication that welcomes various ideas. The former leader, Jack Ma, was committed to creating a family feeling of the organization and glass-alike transparency, and the company still acts upon those goals. For instance, as an employee, you will have employee evaluations (transparency) and family-oriented benefits (family culture), and so forth.
The results speak for themselves: Alibaba Group is in the top 5% of US companies with 10 000+ with a high diversity score.
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