Here’s Why More Diverse Teams Make Better Decisions

Here’s Why More Diverse Teams Make Better Decisions

In the past few years, numerous studies have indicated that on top of the social good it can do, diversity and inclusion has bottom-line benefits for organizations that invest in it. Research has found that diversity helps teams think better by disrupting conformity, that companies with more women in leadership make more money, and that businesses that engage in racial discrimination are more likely to fail. Our work at CEB, now Gartner, also finds that organizations tend to perform significantly better when they have more inclusive work environments. While some scholars have questioned a few of the links between diversity and performance or argued that this isn’t the right reason to invest in D&I, there is plenty of material out there with which to make the business case for it.

Another way of thinking about the value of diversity is in terms of the costs of homogeneity and exclusivity. MIT business professor Evan Apfelbaum recently dove into the specific ways diverse teams can improve teams’ decision making in an interview at the MIT Sloan Management Review. Apfelbaum’s research found that diverse teams spent more time deliberating important decisions, while more homogenous groups were prone to falling into a groupthink trap, where mistaken opinions are more likely to spread. Indeed, that’s one reason to think twice before recruiting for “culture fit.”

Previous studies on juries and student groups found that being on a racially diverse team changed how people approached legal issues and that people prepared more thoroughly when they knew they would be discussing things with a more diverse group. In both of Apfelbaum’s studies, this led to higher quality outcomes.

One of the studies simulated trading markets in Asia and North America, comparing the results of an exercise between a diverse trading group and a homogenous one. What he found was that the homogenous groups were more likely to copy the mistakes made by peers in the simulation, because they were less likely to challenge the behavior of others. The diverse groups were less trusting, and therefore more skeptical of others’ pricing assessments.

This aligns with some of the key insights from our study on Creating Inclusive Leaders, which found that having a more inclusive environment—one where employees of all backgrounds and levels feel free to share ideas—can improve organizational performance. One attribute of an inclusive environment is productive conflict, meaning that leaders can effectively resolve and leverage conflicts to enhance team performance. (CEB Diversity and Inclusion Leadership Council members, read the full study here.)

However, getting the benefit of this productive conflict requires more than just building a more diverse team (itself not always an easy task); encouraging courageous conversations on the part of employees requires managers to create an atmosphere of psychological safety, while also convincing their superiors that this dialogue is worth the time and effort.

Diverse decision-making also takes time, as Emily Strother, one of our analysts, adds:

Decision makers feel pressure from the organization to make a quick decision rather than the right decision. It is important to recognize that complex decisions often require more time to carefully articulate and resolve the challenge, as well as collaborating to determine an appropriate compromise among varying opinions.

“Diversity is not better or worse—it’s just harder,” Apfelbaum told the Sloan Review. “It’s harder socially, it’s harder cognitively, and it makes us work. And I think that’s a useful framework to think about why diversity can be both advantageous and complicated in the workplace and in decision-making groups.”