The Psychology of Diversity in Teams

The practice or quality of including or involving people from a range of different social and ethnic backgrounds, different genders and sexual orientations pays big dividends.

Diversity within a workplace encompasses race, gender, ethnic groups, age, religion, sexual orientation, citizenship status, military service, and mental and physical conditions, as well as other distinct differences between people. Diversity in the workplace is all about creating an inclusive environment, accepting every individual’s differences, enabling all employees to achieve their full potential and as a result, allowing your business to reach its fullest potential.

The goal of a diverse and inclusive workplace is to create the right environment where people feel comfortable working together both collaboratively and effectively in an environment without judgment; all staff can reach their full potential while working as a team.

There are a few caveats about greater diversity-supporting higher performance. First, diversity will only be beneficial if it is enabled and reinforced by Effective Practices throughout a team’s life cycle, uniting the diverse team rather than allowing the team’s differences to tear it apart. Second, a team’s role diversity must also be complementary. Consider the problems likely to arise on a cycling team consisting of only climbers, a soccer team composed of eleven goalies, a ship crewed only by captains, or an executive board consisting only of financial experts. Finally, the benefits of the role, identity, and cognitive diversity need to be balanced with the feasibly of team size and any fixed composition requirements.

Major Benefits of Diversity in Teams

#1: Variety of different perspectives.

#2: Increased creativity.

#3: Higher innovation.

#4: Faster problem-solving.

#5: Better decision making.

#6: Increased profits.

#7: Higher employee engagement.

#8: Reduced employee turnover.

#9: Recruit from a larger pool of talent.

#10: Understand your customers better.

The best performing teams embrace demographic differences and cultural diversity among the team members, understanding that the team benefits, grows, and increases its long-term performance as a result. When workplace diversity is properly managed, a workplace setting in which individual team members of all backgrounds feel both valued and accepted, and when team members are challenged and surrounded by those who are different to them, then significant productivity, creativity, innovation, and job satisfaction result.

Teams have long consisted of a range of different roles, but in addition to diversity of roles, identity diversity and cognitive diversity (or diversity of thinking) and valued diversity (or diversity of experience and background), contribute to a diversity of viewpoints, leading to better decision making and solutions. These Diversity characteristics are now emerging as clear differentiators between ordinary teams and those that are highly effective.

Teams also need the right mix and number of members, optimally designed tasks and processes, and norms that discourage destructive behaviour and promote positive dynamics. High-performing teams include members with a balance of skills. Every individual doesn’t have to possess superlative technical and social skills, but the team overall needs a healthy dose of both. Diversity in knowledge, views, and perspectives, as well as in age, gender, and race, can help teams be more creative and avoid groupthink. Martine Haas. The Secrets of Great Teamwork.

This boils down further to the point where you have to consider the personalities of each individual. For example, you can’t create a team full of leaders. They’ll often have conflicting views and will try to pull the team in different directions. However, you also can’t fill a team with people who focus on the little things. That team will lose sight of the bigger picture. Instead, you need a variety of personality types that complement each other. A detail-oriented person will help a leader to see the little things they may have missed. But the leader will also ensure the detail-oriented person’s work keeps pace with the team.

Simply put, it’s important to remember that great teams are about personalities, not just skills. Don’t make the mistake of thinking that Diversity is some sort of quota that you need to meet. It’s all about finding people who can influence the direction that your team takes. Diversity means finding people of different backgrounds who also have different workplace experiences. It could be as simple as combining some experienced older heads with new ones who offer a fresh take on today’s society and issues. The key point is that Diversity equips your team with the ability to take on more challenges. That makes it one of the key attributes of high-performing teams.

Research consistently shows that diverse groups of problem solvers consistently outperform homogenous groups — even when those homogeneous groups are made up of the best and brightest individuals.

“As individuals, we can accomplish only so much. We’re limited in our abilities. Our heads contain only so many neurons and axons. Collectively we face no such constraint. We possess an incredible capacity to think differently. These differences can provide the seeds of innovation progress and understanding.”

Benefits to adopting Diversity in the Workplace

Diversity in the workplace means employing people of different ages, genders, ethnicities, sexual orientations, cultural backgrounds, and education levels. Not only is diversity crucial for creativity and social justice, but also research shows that a diverse workplace is good for the bottom line. In fact, companies with a diverse workforce are 35% more likely to experience greater financial returns than their respective non-diverse counterparts.

1. Diverse Teams Boost Creativity and Innovation

Diversity has been shown to boost creativity and it’s no secret that companies are always looking for the next big thing. In my experience, that dynamite idea usually comes from thinking outside the box. When people come from different backgrounds, have a variety of life experiences, and see the world in unique ways, multiple perspectives are brought to the table. The great part about that is, that creativity comes naturally when you have diversity. In fact, most CEOs, when asked, “What is the skill you value most in employees?” answered “creativity”. That’s because CEOs see the positive correlation between creativity and innovation. People from a variety of backgrounds offer a handful of solutions, rather than one uninspired solution which is based on the same cultural voice. Diverse teams naturally eliminate the standard approach to problem-solving.

2. Workplace Diversity Creates Greater Opportunities for Professional Growth

According to Gallup’s report, “How Millennials Want to Work and Live,”87% of participants said career and professional growth were important to them. Companies that embrace ideas and practices from different perspectives create an inclusive culture where the employees become ambassadors for the company. Internal company advocacy attracts talented, ambitious, and diverse professionals.

Diverse teams can be professionally enriching as teammates are exposed to new skills and approaches to work. Naturally, teammates will learn about each other’s cultures. This leads to a broader understanding of the world on a much deeper level, which in turn, filters different perspectives into their own thinking, creating new thoughts and ideas. Unique ways of thinking and ideologies aid in decision-making, brainstorming, and boosting workplace etiquette.

3. Better Decision-Making

Research showed that diverse teams are better at making decisions 87% of the time than non-diverse teams. Diverse teams offer broader perspectives and bring more information to the table. Teams outperform individuals when making decisions and that improves as Diversity increases. Our hardwired biases are mitigated by voices from diverse teams. Companies with diverse teams are better able to meet the needs of a diverse customer base. Understanding the difference between which decisions are the big ones that may need a more creative approach and the ones that we can decide on autopilot, can set a team apart from its competitors.

According to the research, teams outperform individual decision-makers 66% of the time, and decision making improves as team diversity increases. Compared to individual decision-makers, all-male teams make better business decisions 58% of the time, while gender diverse teams do so 73% of the time. Teams that also include a wide range of ages and different geographic locations make better business decisions 87% of the time.

Inclusive teams make better business decisions up to 87% of the time.

• Teams that follow an inclusive process make decisions 2X faster with 1/2 the meetings.

• Decisions made and executed by diverse teams delivered 60% better results.

McKinsey Research

McKinsey has been examining diversity in the workplace for several years. There Diversity Matters research examined proprietary data sets for 366 public companies across a range of industries in Canada, Latin America, the United Kingdom, and the United States. In this research, they looked at metrics such as financial results and the composition of top management and boards. The findings were clear:

  • Companies in the top quartile for racial and ethnic diversity are 35 per cent more likely to have financial returns above their respective national industry medians.
  • Companies in the top quartile for gender diversity are 15 per cent more likely to have financial returns above their respective national industry medians (exhibit).
  • Companies in the bottom quartile both for gender and ethnicity and race are statistically less likely to achieve above-average financial returns than the average companies in the data set (that is, bottom-quartile companies are lagging rather than merely not leading).

Racial and ethnic diversity has a stronger impact on financial performance in the United States than gender diversity, perhaps because earlier efforts to increase women’s representation in the top levels of business have already yielded positive results.

In the United Kingdom, greater gender diversity on the senior-executive team corresponded to the highest performance uplift in our data set: for every 10 per cent increase in gender diversity, EBIT rose by 3.5 per cent. While certain industries perform better on gender diversity and other industries on ethnic and racial diversity, no industry or company is in the top quartile on both dimensions.

The unequal performance of companies in the same industry and the same country implies that diversity is a competitive differentiator shifting market share toward more diverse companies.

DIVERSE MANAGEMENT BOOSTS REVENUE BY 19 PERCENT

o A Boston Consulting Group study looked at companies with diverse management teams and found that, on average, they enjoyed a19% increase in revenue compared to their less diverse counterparts.

COMPANIES WITH GENDER DIVERSITY PERFORM BETTER FINANCIALLY

o McKinsey found that companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians.

RACIALLY AND ETHNICALLY DIVERSE COMPANIES PERFORM BETTER FINANCIALLY

o Companies in the top quartile for racial and ethnic diversity are 35% more likely to outperform their respective national industry medians’ financial returns.

SALES REVENUE INCREASES 15-FOLD AMONG COMPANIES WITH HIGH RACIAL DIVERSITY

o One study in 2009 found companies reporting the highest levels of racial diversity saw 15 times the sales revenue compared to companies with the least racial diversity among their employees.

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Russell Futcher

Russell Futcher

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IT Change Management, High-Performance Management and Teams Specialist, Leadership Development, Team Building, Author