There is no doubt that team dynamics drive strategic performance. Properly aligning various competencies to match a current strategic challenge can mean the difference between success and failure. However, what truly makes an effective team extends far beyond skillset. When it comes to team composition, Artemis Connection believes: diversity matters.
When we talk about diversity, we often mean the diversity that people can see—gender and race. However, there are many other forms of diversity that count, such as age, military service, sexual orientation, and cultural fluency. Executives often view the case for diversity as a strictly moral argument, but strong evidence suggests that diverse teams produce superior results.
Let’s examine some of the evidence:
Improved financial performance: According to research from McKinsey, companies in the top quartile for ethnic and cultural diversity are 33% more likely to experience above-average profitability, whereas companies in the top quartile for gender diversity are 21% more likely to outperform.
Higher return on equity, earnings per share: Research from MSCI concludes that companies with at least three women on the board of directors experience median gains in return on equity 11% higher, and earnings per share 45% higher than companies without women directors.
Increased innovation: According to a new study from NC State's Poole College of Management, a causative link exists between diversity and innovation, in terms of product innovations, patents created and citations on patents.
It’s clear that diverse teams drive greater innovation and improved business outcomes. In an increasingly diverse consumer market, where women control trillions of dollars in the U.S. alone, incorporating diversity into your strategy is the new business imperative. It’s not just the right thing to do, it’s the smart thing.
How does diversity lead to better team performance?
Malcom Forbes once described diversity as “the art of thinking independently together.” Diversity enhances teamwork, because diverse perspectives lead to innovative new ideas. How so? The mere presence of diversity can increase our expectations of and capacity to deal with conflict. In fact, the diversity that we can see—like gender and race—is more likely to trigger this, because we don’t expect to disagree with similar others. As a result, the expectation of conflict improves the quality of pre-meeting preparation and changes the kind of information we seek out, which yields a greater variety of ideas.
Overall, diversity increases the likelihood that more than one perspective will be utilized to generate and evaluate alternatives. This increases the quality of decisions, because they must satisfy multiple constituents. While diversity in teams might initially create conflict, experienced managers can harness this conflict productively to improve team performance.
The following approach can bring diversity into your strategy and teams:
Acknowledge that diversity matters, and there is a business reason for focusing on it.
Start with the research to determine what counts most for your organization.
Collect data on diversity in your organization, so that you know where you stand. Model your talent funnel after a product funnel, which examines sales by channel or segment.
Leverage human-centered design to make small, iterative changes and see what works.
Scale best practices based on what you learn.
Constantly monitor the organization and adjust as necessary.
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Diverse workplaces are the undisputed future of work. Diversity, equity and inclusion must be an organizational imperative in order to compete effectively in the 21st century. This is why we are organizing the first annual ASCEND Leadership Summit. Join our team on May 30th for an in-depth and unforgettable day dedicated to discussing inclusion, diversity, equity, and access in American workplaces.
In the meantime, we’ll continue to open source and share our research. Why?
Giving back is built into our business model. The Artemis team has 4.5% of their time set aside for the sole purpose of changing lives, communities, and organizations and our company donates 4.5% of its profits and is consistently engaged in pro bono work. We leverage learnings from our learning lab, people, and resources. We pick a theme and focus our time and resources around it. We call this intentional philanthropic approach our 4.5% promise.