Building Diversity into Your Business Strategy
In this article, Christy Johnson shares the evidence on how diversity can improve performance and provides six steps to build diversity into your business strategy.
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.
Key points include
- Improving team performance
- Human-centered design
- Higher return on equity
Read the full article, Six steps you can take to build diversity into your strategy (and beat the market), on LinkedIn.