How workplace diversity boosts your bottom line

diverseworkThought diversity is something that I’ve touched on a few times on this blog in recent times.  When diversity is traditionally mentioned in a workplace context, it is usually done along identity based lines.  There is concern that too few women make the boardroom for instance, or that ethnic minorities are not given a fair crack in recruitment scenarios.

A recent paper from MIT set out to explore the role diversity played, both in the performance of the organization and in the engagement levels of employees.  The paper reveals that whilst diversity is great for performance, it isn’t so great for the happiness of the workforce.

The study analyzed an American company in a service industry to explore how much social capital is built up in a traditional office, and how this might impact upon such social characteristics as collaboration, trust and employee engagement.

“The more homogeneous offices have higher levels of social capital,” the researchers observe. “But the interesting twist is that … higher levels of social capital are not important enough to cause those offices to perform better. The employees might be happier, they might be more comfortable, and these might be cooperative places, but they seem to perform less well.”

Which is kinda interesting, isn’t it?  After all, we’ve seen numerous studies recently highlighting how terrible employee engagement levels tend to be.  We’ve also seen a big investment in tools to try and make workplaces more collaborative and cooperative places.  The study suggests however, that it is diversity that impacts most upon revenue rather than any of those characteristics.

The study compiled revenue data across eight years, from 1995 to 2002, in a professional services firm with over 60 offices around the US and overseas.  These offices were a mixed bag.  Some were all male, some were all female, and some were mixed.  The data included employee engagement levels, morale amongst staff and levels of cooperation between employees.

Now, it’s worth pointing out that single sex offices are pretty unusual in the first place, and the researchers suggest that moving from that to a more mixed gender team would increase revenue by over 40%.  To explain how this occurs, the researchers draw an analogy of a baseball team.

“A baseball team entirely composed of catchers could have high esprit de corps,” the researcher says, noting that a band of catchers could share experiences, equipment, or tips for handling knuckleballs. “But it would not perform very well on the field.”

How diversity contributes to revenue

Greater diversity however implies a wider spread of experience, which adds significantly to the collective knowledge of the workplace, thus making that group perform better.  I’ll come back to that a bit later.

The researchers suggest that this impact could occur even if the difference is only perceptual.  They suggest that the mere impression of diversity was enough to provoke heightened satisfaction.

“In offices where people thought the firm was accepting of diversity, they were happier and more cooperative,” the researcher says. “But that didn’t translate into any effect on office performance. People may like the idea of a diverse workplace more than they like actual diversity in the workplace.”

Now, suffice to say, a study of a solitary organization has limits in itself.  The study also neglected to explore what it is about diversity that made the difference.  The likes of Scott Page have long argued that the real differentiator is not identity based diversity but diversity of thought and opinion.  It doesn’t matter so much how you look, but what you think.

Of course, there is nothing to say that the results would not be the same, and the relative unpopularity of innovators is a topic I’ve covered on the blog before, so it’s quite possible that a (thought) diverse workplace would be very effective, whilst making employees somewhat less happy due to the relative uncertainty such creativity could provoke.

Despite the lack of real attribution as to what it was about the diversity that counted, the findings that diversity was a major contributor to the bottom line does however matter.

“There have been a number of studies looking at things like diversity and performance, but they don’t always use the [bottom-line] measures of performance that economists might prefer,” the researchers conclude. At the same time, they add, “Highlighting the workplace setting, as a place for economists to study social capital, is also useful.”

How are you encouraging thought diversity in your own workplace?

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