Why diverse companies turn higher profits and reap rewards
Diversity matters to any company worth working for, and it's becoming increasingly clear that it's also important for the profitability and success of a business.
A report in 2015 by McKinsey looked at 366 companies in the US, UK, Canada, and Latin America and found when companies commit themselves to a more diverse leadership, they are more successful. This correlation doesn't necessarily mean higher diversity caused the positives, but the pattern was telling.
Overall, the report concluded that diverse companies were more likely to win over top talent, and thus improve things like employee satisfaction, leading to more positive returns.
In 2012, Credit Suisse performed a similar study on 2,400 companies, and found large-cap companies (those worth over $5 billion) with at least one woman on the board outperformed their rivals who had no women on their boards by 26% over six years.
In a blog post for Psychology Today , human performance coach Dr. David Rock outlines why more diverse teams are often smarter, more efficient, more innovative, and generally prove to be of greater value than non-diverse ones.
1. They are better at focusing on facts
Rock says people from diverse backgrounds can actually alter the behaviour of the group as a whole. For example, in one study of 200 people published in the Journal of Personality and Social Psychology , subjects were split into six-person jury panels of either entirely white people or four white and two black people. When deciding whether the defendant was guilty, the diverse panels raised more facts and made fewer factual errors while discussing the evidence.
According to Rock, diverse teams are more likely to re-examine facts when there is a disagreement. They're also more likely to remain objective, and be less timid about scrutinising others' points of view. He says making sure people in the workplace are socialising and working with different groups allows employees to become aware of their own biases, possibly highlighting errors they wouldn't be aware of before.
2. They think about facts more carefully
Not only are the facts more likely to be considered, but Rock says greater diversity in a team means those facts are probably thought about more carefully.
A study published in the journal Personality and Social Psychology Bulletin sorted sorority or fraternity members into groups of four, and asked them to read interviews in a murder investigation and guess the correct suspect. Three members were from the same sorority or fraternity house, and after five minutes they would be joined by another of their members, or someone new from a different house.
The groups who were joined by a stranger felt less confident about their verdict, but they were correct in guessing the suspect more than the groups joined by someone familiar.
The research team concluded that having someone with a different perspective in a group may make people process information more carefully.
3. They are more innovative
Innovating and adapting are hugely important parts of business, and according to Rock, the best way companies can ensure they do this is by hiring more women and culturally diverse team members.
A study from journal Innovation: Management, Policy & Practice analysed the gender diversity of research and development teams from 4,277 companies in Spain. According to the results, companies with more women came up with more innovative ideas over two years.
Another study from journal Economic Geography gathered data on 7,615 firms from the London Annual Business Survey to show that businesses run by culturally diverse teams were more likely to create new products than homogeneous ones.
Rock says although it can be comforting working with people who share your background, this shouldn't be mistaken for an advantage. Actually, a team of different genders, races, and nationalities boosts a company's potential in many ways. It also helps ensure team members aren't being biased, and makes them question their own viewpoints, which is a valuable skill.
SOURCE: World Economic Forum