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?
The other causation for the failing Diversity and Inclusion efforts are the training programs and, more specifically, how they are tackled. Firstly, the messages in those training programs are often negative – “If you discriminate, your company will pay costly the consequence of that”. Secondly, in the efforts to train employees to reduce their biases, the positive effects only last a few days. Or worse, numerous studies suggested that it can activate bias or cause resistance.
So why worth risking it? Managed the right way, the outcomes are indeed greater. If you are looking for insights into why you should step your diversity efforts, the next lines will satisfy your curiosity.
Good to know about Diversity
What is diversity?
To get the best out of diversity, let us start by covering the base knowledge of what exactly is it. Diversity is defined as: “the condition of having or being composed of different elements”. In a “human” context, it covers the apparent fact there are different kinds of people out there that are composed of their age, sex, race, language, culture, experience, even the range of differences in people’s brain function. This leads us to the next question.
What types of diversity are there?
What we hear mostly when we read about diversity and inclusion programs is with a focus on improving gender and racial discrimination. But diversity refers to way more components than that. In fact, researches have identified 34 types of diversity characteristics, which means that there are 34 types of diversity in the workplace too. Those types include demographics (such as gender, culture, etc.) as well as behaviors, physical abilities and disabilities, thought style, personality and so forth.
What tools are out there to help?
D&I technologies are on the rise and those technological advancements can help recruiters or managers in their diversity efforts. Some are specifically made to help with that and others, like applicant tracking systems, are products that were built for other recruitment practices but can positively impact the diversity efforts. Currently, RedThread-Mercer’s study points that D&I technologies vendors seek to cover one of the following issues: reduce bias (33%), provide analytics and insights (33%), make sure to include people from different cultures (22%) and diverse communities (13%).
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.
See how Whaii Match can take objective hiring to a whole new level
As we already mentioned, there are tools out there that help you set aside your unconscious biases and review applications “blindly” – with no candidate’s demographics to impact your hiring decision. Only the skills, personality, values and culture that matches to your company’s unique culture.
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