diversity alone won’t drive better decisions: what will?
“Increasing diversity does not, by itself, increase effectiveness; what matters is how an organisation harnesses diversity, and whether it’s willing to reshape its power structure” (Harvard Business Review)
Diversity in leadership has been a big conversation this past month, and for good reason. We’ve seen the stats: unsurprisingly, a more balanced proportion of women in leadership leads to stronger business performance. But there’s a bigger picture here, because gender diversity is just one piece of the puzzle. True diversity is about how people think, problem-solve, and challenge the status quo. And at the same time, this conversation has never been more pertinent, as discussions around DEI become increasingly polarised and organisations – particularly in the US – continue to scale back their DEI investments.
So, why do some teams harness diverse perspectives brilliantly while others struggle? It’s easy to assume that ‘more diversity = better decisions,’ but the reality is more complex. Cognitive diversity isn’t just about different backgrounds; it’s about how people receive information, the principles which inform how they digest and respond to it, how they generate ideas, and much more.
And one of the biggest blockers to achieving cognitive diversity is psychological safety. It doesn’t matter how diverse a team is if people don’t feel safe bringing their perspective to the table. Both invisible barriers – like entrenched ways of working or an over-reliance on past success and visible barriers – like dominant voices – often get in the way. Not only that, but prevailing company culture can have a particularly negative effect, with pressure limiting teams’ ability to invest time in working more efficiently together. And, of course, a lack of awareness (and/or understanding) of cognitive diversity can be incredibly limiting.
A few things stand out:
Cognitive friction can be a good thing. When managed well, it leads to stronger outcomes. In other words: Different problems can really benefit from different cognition.
Not all diversity is visible. Cognitive and experiential diversity are just as critical as demographic diversity.
The leader’s role is crucial. How they set the tone, model openness, and handle dissent makes all the difference. A greater awareness of cognitive styles can shift frustration in others to curiosity, thereby enabling them to place higher value on different perspectives and eccentricities.
So, what does this mean for organisations? Simply hiring for diversity isn’t enough: we have to create the conditions where different perspectives can actually shape decisions. That means rethinking everything from meeting structures to how dissent is handled in teams.
The research backs this up:
The Business Case for Diversity
McKinsey Diversity Matters Report (2023): Companies in the top quartile for ethnic diversity have a 39% higher likelihood of outperforming financially. Companies with more than 30% women in leadership are significantly more likely to succeed financially. Lack of diversity is becoming more costly, with companies in the bottom quartile 66% less likely to outperform financially.
Cloverpop Study (2024): Inclusive teams make better business decisions 87% of the time and deliver 60% better results, leading to higher productivity.
At the same time, as evidenced by the Harvard Business Review, solely increasing DEI initiatives due to potential increase in performance or revenue will likely not work, because it’ll be done as a box-ticking exercise, instead of an opportunity to reshape an organisation from the inside out: “business leaders must reject the notion that maximizing shareholder returns is paramount; instead they must embrace a broader vision of success that encompasses learning, innovation, creativity, flexibility, equity, and human dignity.”
Innovation and Problem-Solving
Harvard Business Review Study: Teams with greater thought diversity solve problems up to three times faster than teams of similar thinkers.
McKinsey: Diverse teams bring a wider range of perspectives, accelerating complex problem-solving and fostering innovation.
Forbes: Diverse teams have 19% higher rates of innovation.
Employee Retention and Talent Attraction
Deloitte: 69% of Millennial and Gen Z workers are likely to stay with a company for five or more years if it has a diverse workforce.
Workplace Belonging and Morale
HBR "Getting Serious About Diversity" (2020): Merely increasing demographic diversity does not improve performance. Success depends on fostering psychological safety, dismantling discrimination, and embracing diverse working styles.
Challenges and Misconceptions
HBR "Getting Serious About Diversity" (2020): Organisations must actively reshape power structures to benefit from diversity: To make real progress, people—and the organizational cultures they inhabit—must change. But instead of doing the hard work involved, companies have generally stuck with easier, more limited approaches that don’t alter the status quo.
Arcada: While large corporations prioritise diversity, smaller businesses sometimes see it as optional due to management challenges. Effective diversity management is essential for productivity gains.
The Path Forward: Actions for Companies
Build Trust: Establish environments where employees feel safe expressing themselves.
Combat Discrimination: Take concrete measures to eliminate systemic biases.
Encourage Diverse Perspectives: Promote thought diversity as a resource for learning and growth.
Reshape Power Structures: Ensure that diverse voices influence decision-making, rather than merely being included in discussions.
This research has reinforced something we see in our work all the time: great teams aren’t just diverse; they know how to use that diversity well.
Now, the question is—how can we help more teams do that? Get in touch to find out more.