Why Seeking Out Diverse Opinions Has a Positive Impact on the Bottom Line
November 5, 2014 | Business and Careers
Want to create a competitive advantage for your organization? Promote leadership diversity.
For nearly a decade, studies have pointed to a relationship between diversity at the top and corporate performance. In a 2007 study, the research firm Catalyst analyzed the performance of Fortune 500 companies and found that financial measures excel where women serve on corporate boards—with a higher return on equity, sales and invested capital. Researchers at McKinsey & Company found a similar connection; its 2010 study showed companies in the top quartile for women’s representation in executive committees achieved a 41 percent higher average return on equity.
How does diversity in an organization lead to increased performance? Scott Page, professor of complex systems theory at the University of Michigan, suggests in his book The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies that progress and innovation may depend less on lone thinkers with enormous IQs than on diverse people working together and capitalizing on their individuality. In other words, two different minds—or 10 different minds—are better than one. And while the McKinsey study noted that awareness of the benefits of gender diversity is spreading among company leaders and that a majority are now convinced of its positive impact on company performance, there is still a long road to travel.
I’ve witnessed the value of leadership diversity firsthand. Not long ago, in a position at a former company, I was involved in the review of candidates for a senior position. The first candidate, a man, was described by my colleagues as assertive—a characteristic they viewed as an asset. “That’s someone who will get things done,” they said. The second candidate, a woman, was equally assertive, yet in that case, the group viewed assertiveness as a liability. “Too direct. Too pushy. People won’t respond well.” They were describing the two candidates in much the same way, yet it was considered acceptable for the man but not for the woman. I challenged my colleagues on their assessment. As the only woman in the room, I think I brought a unique perspective to our discussion, one that changed the conversation, opened a few eyes and ultimately led to a successful outcome. That’s one example of the value of diversity.
As leaders, we owe it to ourselves to recognize the positive impact that differing opinions and approaches can have on the bottom line—including diversity of age, ethnicity and race. In a 2004 study released by the Harvard Business School, researchers found the benefit of racial diversity pays off not just in a better company, but a more productive one. It found measurable performance benefits when work groups chose to learn from members’ different experiences rather than ignore or suppress them.
Let’s embrace our individuality and celebrate our differences—both in the C-suite and across the organization. Diversity of opinion will lead to more successful business outcomes and allow us to create a competitive business advantage.