The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy

So, keep listening to discover the essential ingredients for building successful diverse teams; the areas where diversity bonuses can show up; and why diversity for diversity's sake isn't always the best strategy.

The book is broken down into seven chapters. Topics covered include the logic behind the diversity bonus, the empirical evidence for the idea, and the business case for it.

At the end of the book, Page includes a commentary from Katherine W. Phillips, a diversity researcher and professor at Columbia Business School. She shares her experiences and views on the subject, as well as some real-life examples, to supplement Page's work.

One of the first things Page explores is the types of diversity that can affect an organization. He mainly focuses on two types, which are identity diversity and cognitive diversity.

Identity diversity involves factors like gender, race, religion, background, and age. Cognitive diversity is about how people think and the knowledge they have, and it's often this type of diversity that can benefit teams and organizations.

Page divides cognitive diversity into five categories, which are: information, knowledge, heuristics, representations, and mental models or frameworks.

Information is the facts that someone knows about the world. An example would be knowing the height of Mount Everest, or the state capital of Maine.

Knowledge describes someone's practical understanding of a concept or topic. So someone with knowledge about Mount Everest might know the best and safest way to climb it.

Heuristics are tools, models or strategies that a person uses to solve a problem or generate new ideas. Page gives examples of mathematical techniques and an opening move in a game of chess.

Representations explores how people look at the world. It's all about the different points of views people have.

The final category, mental models, describes the way we simplify complex ideas. They provide a quick way to assess a situation and they're not always completely accurate. For example, there's a common saying: "Red sky at night, sailor's (or shepherd's) delight." This model links the color of the sky to the likelihood of rain the next day. It saves our brains from having to perform a complicated assessment about the chance of rain, but it may not always correctly predict the weather.

Naturally, the information, knowledge, heuristics, representations, and models that someone relies on will be influenced by their background and upbringing. Identity and cognitive diversity are, therefore, very closely related.

Page says that, of the two types, cognitive diversity will have the greatest impact when leaders are looking for a diversity bonus. If you're trying to solve complex problems, it helps to have a lot of different brains in the room, with diverse approaches to a challenge.

The author uses obesity as an example. There are so many factors that influence a person's weight, including nutrition, economics, healthcare, and even the media. No one person, or a single group, could ever have all the knowledge required to solve the problem of obesity.

The best way to address such a complex issue is to bring together a team that's made up of diverse perspectives, knowledge and skills. And this is the crux of Page's message – diversity will likely have the biggest impact when you're trying to address complex problems. These might be predicting future events, creating a new product, or strategizing.

Typically, simple, routine tasks don't need the same level of diverse input. Let's say you're trying to maximize productivity on an assembly line. Your focus should be on hiring the fastest and most competent workers. It doesn't matter who they are, or whether they're diverse, in terms of gender, race, or any other category. You just need a team of the best people, and you'll get the best results.

In fact, in these scenarios, Page argues that adding diversity for diversity's sake would likely reduce output. If you've tested all the candidates and you know that the best team is made up of a group of very similar people, then adding in someone with a different background might make you look diverse, but productivity will fall if they're not as qualified or skilled as their co-workers.

That said, these days there are fewer people doing simple, routine tasks. Most of these have been outsourced to technology or machines. Instead, the majority of workers today are expected to get involved in complex tasks, and to help solve problems the world has never faced before. And this is where diversity bonuses come into play.

The author argues that there are certain activities that commonly see diversity bonuses emerge. These are predictive tasks, creative tasks, problem-solving, scientific research, innovation, knowledge integration, and strategy.

Let's look at some of these in more detail. Most organizations would give most weight to creativity, problem solving, and strategy, as success often depends on getting those things right. So, what type of cognitive diversity will bring the most benefit to each of those areas?

For creativity, Page argues that you want a team that's cognitively diverse in all five categories. As a reminder, these are information, knowledge, heuristics, representations, and mental models. To develop a creative solution, you need a lot of different ideas. So, the less alike team members are, the more variety you will get.

For problem-solving, the most important types of cognitive diversity are models and heuristics, because you're typically working to improve something that already exists. So you need to have an idea of how the current solution already works, and how other models could influence it.

And then for effective strategizing, you need to plan your next move, but you also need to be able to predict your opponent's next move. So, the most useful type of cognitive diversity in this scenario is mental models – you need someone who has a model of how other people work, in order to predict their behavior. Diversity in information and knowledge can be useful here too.

Some of the concepts Page discusses are quite abstract, but we like how Page includes scenarios to bring to life his ideas about how diversity bonuses can emerge. It helps the reader connect to these ideas in a more concrete way.

By this point in the book, you'll likely be pretty convinced that having a diverse team can, in certain situations, lead to superior outcomes. But Page is clear that diversity is a starting point, not an end in itself. Throwing a group of different people together and letting them "get on with it" won't deliver the goods.

He argues that when diverse teams fail, people tend to blame the failure on the diversity of that team. For example, when Norway decided that boards needed more gender diversity, and set targets to achieve it, most of the companies that complied did not experience diversity bonuses. In fact, some saw their revenue and profit fall. Skeptics claimed this was evidence against the need for diversity at board level. But as Page explains, there's a lot more to it than that.

Long-term, companies that have committed to a diverse board will likely see benefits. They're primed for the change that will soon become inevitable. The reason they may not see benefits in the short term is that, in many cases, diversity on the board was a tick-box exercise. As a result, companies weren't hiring for the right kinds of diversity, or didn't take time to understand the complexity around diversity. That's why it fell flat.

As positive as diversity can be for an organization, it does present its own challenges, and it needs to be implemented with careful thought and consideration. And certain conditions need to be met before you can enjoy the bonuses diversity can produce.

Page calls these conditions the "Six Ms." They are: message, mission, manage, measure, mentor, and merit.

Message refers to the need for leaders at the highest levels of the organization to set the tone for diversity and inclusion. The organization needs to hear the message that diversity is welcome and important.

Related to this is mission, which is where leaders link diversity to the overall mission of the organization.

Next is the need to effectively manage the culture and the people within it, to ensure that diversity is actively embraced.

Following on from this, organizations need to measure performance and the impact that diversity is having across the business. And, of course, to make any changes needed to boost performance.

The term mentor is about making sure that diverse teams and individuals from minority groups have the support they need to perform at their peak.

And finally, merit refers to the need to reward diversity, to encourage more of it. These rewards don't need to be financial. It could be simply saying thank you to teams that embrace diversity, or offering diverse teams more interesting assignments.

Page points out that his Six Ms model will be applied differently by different organizations. There can be no one-size-fits-all solution, he says. Each organization and team will need different types of diversity, depending on their objectives. Equally, some organizations will already have the leadership in place to promote a diverse workforce, while others will need to lay the groundwork before making any big leaps toward diversity.

Another vital point to consider is that during most recruitment processes, candidates are evaluated based on their individual performance or attributes, rather than their potential for teamwork. Yet few people work completely alone. This is significant when it comes to diversity, because it's not the only thing that matters.

Let's say you hire someone who appears to be incredibly creative and brimming with fresh ideas. You might assume they'd be a fantastic addition to a team that needs those skills. But if that person also hates speaking up in groups, or has a tendency to go along with the consensus, then any diversity bonuses they might have brought with them are lost. So, while diversity is important, it shouldn't trump other characteristics, such as cultural fit and experience.

So what's our last word on "The Diversity Bonus"?

Page goes above and beyond to explain why diversity is critical to business success, how it adds value, and the benefits it can bring for individuals, teams and organizations. But it is a heavy read. Page includes a lot of references and analogies that many readers may not connect with. For example, he uses mathematical equations to illustrate some of the concepts he discusses, and unless you're familiar with that field, you might struggle to make the link.

That said, all the lofty examples are followed up with a nice summary of the main point, which always makes a good deal of sense. But we'd argue that a little reordering wouldn't go amiss. Readers might benefit from getting the core message upfront, rather than having to wade through a swamp of complex examples to reach it.

What's more, many of the points Page makes are repeated over and over in different ways. For example, he argues that identity diversity and cognitive diversity are linked, several times per chapter. It's certainly something to highlight, as are his other valuable arguments, but people may tire of reading the same point so often.

But the biggest drawback of the book is the lack of practical advice. This is no guide to achieving diversity bonuses. Page hints at how to do it, briefly (with his Six Ms model), but fails to follow through.

So, while the book is a great argument for diversity bonuses, and gives clear examples of how and when they may come about, it offers little for people looking for practical guidance on the nitty-gritty of making it happen.

Overall though, "The Diversity Bonus" is a thought-provoking read. It will give leaders, in particular, pause for thought about what diversity means in their organizations. And more importantly, it provides indisputable evidence that, under the right conditions, diversity is vitally important.

It can help teams succeed, which helps organizations grow. And, as a wonderful by-product, it gives those in minority groups the opportunity to shine in roles where they're valued for their contribution, rather than being judged for their background or identity.

"The Diversity Bonus: How Great Teams Pay Off in the Knowledge Economy" by Scott E. Page, is published by Princeton University Press.

That's the end of this episode of Book Insights. Thanks for listening.