The Diversity Bonus

Demographic Economics - Migration
Globalization - Trade
Institutions and Development
Review by: 
Eduardo Lora
Scott E. Page
Princeton University Press
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Working with people who are very different from each other or who do not think alike can be a source of conflict and an additional burden for a firm’s management and staff. The more diverse a team is, the more you have to confront dissimilar opinions, accept uncomfortable behaviors, and put effort into any decision. Then, what can be the payoff for firms to have more personnel diversity (as feminists, activists in the LGBT community, Afro-descendant organizations and many others push them to do)?

An excellent response is found in Microsoft's statement of principles: "We don’t just value differences, we seek them out and invite them in. And as a result, our ideas are better, our products are better and our customers are better served." That is, diversity is not a matter of social justice, but of corporate performance.

As Scott Page shows with abundant examples and research, teams that are diverse dedicate more effort and time to each task because they are more inquisitive, analyze problems from various angles, invent creative solutions and generate new products that no one had previously thought of. This means that diversity has its greatest potential in firms that do complex things and serve varied and demanding audiences, not in firms that produce basic things where there is little room for innovation.

Diversity is a potential that may or may not provide benefits to companies, depending on how it is sought and managed. According to Scott Page, for diversity to yield returns five “Ms” are needed: diversity must be a message from senior management; it must be an integral part of the company's mission; progress in diversity and its impacts must be measured; mentors should be provided to underrepresented staff groups; and inclusive behaviors should be taken into account in merit evaluations.

When talking about diversity, one usually thinks of dimensions of individual identity: gender, sexual orientation, religion, race, region of origin... Although they are desirable aspects of diversity for ethical reasons, these are not the most relevant dimensions for firms’ performance. Diversity can be achieved in all these dimensions and yet have a staff that thinks in a homogeneous way, that works in silos, that is individualistic.

In many companies, the problem begins with staff selection methods: when there is a too precise profile of the type of person you want, when staff decisions are made by a single individual or a committee of people very similar to each other, or when the place on the team to be occupied by the new employee is ignored in the selection process, it is quite possible that the potential of diversity is sacrificed.

A fundamental but counterintuitive principle is that the best team is not the one composed of the best individuals but the one that best mixes talents, even if some of its members are not the best in their fields. A good team achieves not only that each person gives the best of themselves, but that each one thinks and acts differently than when working alone.

The benefits of diversity are proven in many fields: the best academic research, the most innovative patents and the best investment decisions are the result of teams of individuals with different professions and experiences, and usually also diverse in their individual identity.

An attitude open to diversity, promoted by the highest management and appropriated by all levels of business, can produce great economic benefits and, as an indirect result, greater social, ethnic and gender inclusion.

Additional readings:

The book has abundant academic references on the subject. These three hyperlinks are articles of diffusion of some widely quoted research on the impact of diversity on business performance: