Sunday, April 9, 2017

No correlation between this type of diversity and performance

I have argued in recent years that all the hoopla about team diversity, workforce diversity and board diversity, as traditionally defined, is misplaced. While now encompassing gender, race, age and religion, diversity is really just the old affirmative action strategy dressed up in new clothes. The sociology studies seeking to justify workforce diversity on the basis of improved innovation and productivity are usually dreadfully flawed. The more rigorous the study, the less effect there is shown to be.

Traditionally defined diversity is not completely useless as gender, race (really, culture), age and religion can correlate with other aspects of diversity which do actually make a difference. I discuss some of the issues attendant to defining effective diversity in this piece, Diversity chicken and egg question from a year or so ago. Related, We don't know what we are talking about for a long time before we are in a position to make good decisions.

This article is consistent with the above approach. Want to Build The Best Teams? Science Says You Need These 2 Types of Diversity by Marissa Levin.
When we think of diversity, the first aspects that come to mind are age, gender, race, and other visible characteristics. Over the years, many people have believed that this type of diversity in business teams would increase outcomes such as creativity and performance.

Harvard researchers, however, have discovered that diversity in thought is more important. In fact, teams which are more cognitively diverse - in perspective and knowledge processing - are able to solve problems more efficiently.
The verbiage is a little unclear. What the Harvard researchers found (Teams Solve Problems Faster When They’re More Cognitively Diverse by Alison Reynolds and David Lewis) was that traditional affirmative action diversity doesn't make a difference in outcomes. From Reynolds and Lewis:
Received wisdom is that the more diverse the teams in terms of age, ethnicity, and gender, the more creative and productive they are likely to be. But having run the execution exercise around the world more than 100 times over the last 12 years, we have found no correlation between this type of diversity and performance. With an average group size of 16, comprising senior executives, MBA students, general managers, scientists, teachers, and teenagers, our observations have been consistent. Some groups have fared exceptionally well and others incredibly badly, irrespective of diversity in gender, ethnicity, and age.
What they have found is what I have been arguing - diversity of achievement, diversity of experience, etc. are the real elements of diversity which lead to beneficial outcomes.
Our analysis across six teams who recently undertook the exercise shows a significant correlation between high cognitive diversity and high performance, as shown in the table below:

The three teams that completed the challenge in a good time (teams A, B, and C) all had diversity of both knowledge processes and perspective, as indicated by a larger standard deviation. The three that took longer or failed to complete (D, E, and F) all had less diversity, as indicated by a lower standard deviation.
The Harvard researchers are confirming that teams that have diversity of experience, knowledge, and approach (while having a threshold level of achievement) demonstrate higher levels of performance over teams that simply have diversity of race, gender, etc.

Back to the Levin article. She mentions a second form of diversity which I have discussed in the context of economic development but which she argues, I suspect correctly, also is an aspect of diversity - time discounting.
Dr. Susan Mohammed, a professor of psychology at Penn State University, is the leading researcher on "temporal diversity" and has spent years researching time-based factors in teams. She and her colleagues have identified four distinct ways in which individual members of teams can differ temporally.
I might argue with the four categories that Mohammed identifies but I do agree with the observation that time discounting is an important aspect of diversity. Time discounting as a trait is usually strongly influenced by culture but can also be influenced by life experience as well as by learned experience. Someone out of the oil industry (project cycles in the decades) will have a different instinctive time discount preference than someone from the consumer goods industry (project cycles in single digit years).

The key point, from my perspective, is that pursuit of affirmative action diversity (age, gender, race, religion) is pretty much a mugs game. It is virtue signaling but has no measured impact on actual real world outcomes. The real pursuit of diversity is diversity of experience (with a minimum floor of demonstrable achievements), diversity of knowledge, and diversity of time discounting. All important factors in rounding out a board, or workforce so that problems are dealt with on a more informed basis and with greater robustness.

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