Diversity: A Driver of Innovation and Performance

Great Place to Work

Diversity: A Driver of Innovation and Performance

Diversity: A Driver of Innovation and Performance


Zrinka Lovrencic
Managing Director, Great Place To Work® Australia


"Striving to increase workplace diversity is not an empty slogan — it is a sound business decision"

Striving to increase workplace diversity is not an empty slogan — it is a sound business decision.

To stay competitive, organisations should continually be innovating. One of the best ways to boost their capacity to transform the organisation and its products is to focus on diversity.

Numerous studies[1] provide compelling evidence that 2D diversity — both inherent diversity (based on traits born with such as gender, ethnicity, and sexual orientation) and acquired diversity (based on traits gained from experience such as learning, experience, and exposure) —unlocks innovation and drives market growth—a finding that should intensify efforts to ensure that executive ranks both embody and embrace the power of differences.

A 2015 McKinsey report on 366 public companies found that those in the top quartile for ethnic and racial diversity in management were 35% more likely to have financial returns above their industry mean, and those in the top quartile for gender diversity were 15% more likely to have returns above the industry[2]. In recent years, research has revealed another, more nuanced benefit of workplace diversity: nonhomogeneous teams are simply smarter. Working with people who are different from you may challenge your brain to overcome its stale ways of thinking and sharpen its performance[3].  



Homogenous Teams Feel Easier — But Easy Is Bad For Innovation!

In a homogenous team, people readily understand each other, and collaboration flows smoothly, giving the sensation of progress. Dealing with outsiders causes friction, which feels counterproductive. Working on diverse teams produces better outcomes precisely because it is harder. This idea goes against many people’s intuitions. There is a common bias that psychologists call ‘the fluency heuristic’: we prefer information that is processed more easily, or fluently, judging it to be truer. Opinions you disagree with might not seem like the quickest path to getting things done, however working in groups can be like exercising: no pain, no gain[4].

Diversity drives discussion. This is important within groups as it offers diverse perspectives, interpretations, heuristics, and analysis. Diverse Teams Focus More On FactsBy breaking up workplace homogeneity, you can allow your employees to become more aware of their own potential biases[5] - entrenched ways of thinking that can otherwise blind them to key information and even lead them to make errors in the decision-making processes. Greater diversity may change the way that entire teams digest information needed to make the best decisions[6].

Diversity in teams might alter the behaviour of a group’s social majority in ways that lead to improved and more accurate group thinking.

Diverse teams are more likely to constantly re-examine facts and remain objective. They may also encourage greater scrutiny of each member’s actions, keeping their joint cognitive resources sharp and vigilant. In a study published in the Journal of Personality and Social Psychology[7] scientists assigned 200 people to six-person mock jury panels whose members were either all white or included four white and two black participants. The people were shown a video of a trial of a black defendant and white victims. They then had to decide whether the defendant was guilty. It turned out that the diverse panels raised more facts related to the case than homogenous panels and made fewer factual errors while discussing available evidence. If errors did occur, they were more likely to be corrected during deliberation.


Enabling An Environment Of “Outside The Box” Ideas

Research from the Centre for Talent Innovation[8] indicates that without diverse leadership, women are 20% less likely than straight white men to win endorsement for their ideas; people of colour are 24% less likely; and LGBTs are 21% less likely. This costs their companies crucial market opportunities, because inherently diverse contributors understand the unmet needs in under-leveraged markets. When at least one member of a team has traits in common with the end user, the entire team better understands that user.Inherent diversity, however, is only half of the equation. Leaders also need acquired diversity to establish a culture in which all employees feel free to contribute ideas. Six behaviours unlock innovation across the board:

1. Ensuring that everyone is heard;

2. Making it safe to propose novel ideas;

3. Giving team members decision-making authority;

4. Sharing credit for success;

5. Giving actionable feedback; and

6. Implementing feedback from the team.Leaders who give diverse voices equal airtime are nearly twice as likely as others to unleash value-driving insights, and employees in a “speak up” culture are 3.5 times more likely to contribute their full innovative potential.[9]

Diversity In Teams Offers Super-AdditivityWhen a collection of people work together, and one person makes an improvement, the rest of the team can often improve on this new solution: improvements build on improvements.

What does this imply? Scott Page[10] as several suggestions that bear on the issue of creating high-performance teams:- Bring in outsiders with different, relevant perspectives. When it comes to creative problem-solving in a business setting, the solution often is as simple as looking at things from a different perspective. At times, we can become absorbed in the day-to-day aspect of the task. Allowing a different perspective on the task may help to take a different approach.

- Encourage interdisciplinary efforts: When faced with difficult problems requiring innovation and creativity, the advantages of having cognitively diverse people working on them are positive. Interdisciplinary team work is a complex process in which different types of staff work together to share expertise, knowledge, and skills to impact the project.

- Diverse preferences can be beneficial: If we agree on the goal, then disagreements about different ways to reach the goal can be helpful in expanding the array of solutions. Diversity in terms of fundamental preferences can also help.



Certain characteristics underpinning effective team work include positive leadership and management attributes, communication strategies and structures, a supportive team climate, individual characteristics that support team work, clarity of vision, quality and outcomes, and respecting and understanding roles.Cultivating an environment where team members know they can speak up, ask questions, and express dissent, and training employees to recognize their unconscious biases so that they can better collaborate with others who differ from them are also pillars of successful innovative organisations.Enriching your talent pool with representatives of different genders, races, and nationalities is key for boosting your organisation’s intellectual potential. Creating a more diverse workplace will help to keep your team members’ biases in check and make them question their assumptions. At the same time, we need to make sure that the organisation has inclusive practices so that everyone feels they can be heard. All of this can make your teams smarter and, ultimately, make your organization more successful. 

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