By: Daniel West

 

“Why Diverse Teams Are Smarter,” “How Diverse Teams Produce Better Outcomes,” and “Why You Need Diversity on Your Team” are the top three results when I Google “diversity in teams.”

Many organizations publish the benefits of diversity, but they rarely discuss the challenges. Because of this, we might theorize that diversity should lead to increased team performance. However, multitudes of research, performed and peer-reviewed in business organizational theory, prove that theory wrong. Demographic diversity can benefit teams, but it also presents challenges that have major drawbacks.¹ These benefits and drawbacks cause some teams to experience increased performance while others have the opposite result.

 

 

Demographic diversity includes characteristics such as race, ethnicity, gender, age, education, tenure, and professional background. In this article, I will discuss inconsistency in performance of demographically diverse teams, benefits diverse teams can experience, and inherent challenges for teams with demographic diversity.

 

Inconsistent Performance Results

Research proves that teams with demographic diversity do not experience consistent performance decreases or increases. Ray Reagans, a widely cited expert in business organizational theory, teamed with Ezra Zuckerman, another expert in this field, to perform a data analysis on social networks, organizational tenure, and productivity of 224 corporate research and development (R&D) teams.

 

“Manipulating diversity thus produces a trade-off between [network diversity and network heterogeneity].”²

 

Optimists claim that team diversity leads to increased performance due to high network heterogeneity—the diversity of connections that individuals have outside their teams.³ Pessimists argue that diversity in teams leads to decreased performance due to low network density. Network density is the level of inter-connectedness of members within the team.⁴ Through their research, Reagans and Zuckerman found both views to be correct.⁵ Network density is negatively correlated with team diversity, and network heterogeneity is positively correlated with team diversity. Therefore, as team diversity increases, network density decreases, and network heterogeneity increases. This causes a net-null effect on team performance.⁶ Figure 1 demonstrates how these results influence overall team performance.

 

Network density (top) is driven down when demographic diversity (left) is introduced. Network heterogeneity (bottom) is driven up when demographic diversity is introduced. This has an overall null-effect on team performance (right).

 

 

 

 

 

 

Reagans and Zuckerman’s study is not unique in its findings. Maya Budovitch, Ph.D. at the University of Western Ontario, published a study in which she observed multiple groups of engineering students with differing levels of demographic diversity and the way they solved problems. Budovitch makes the following observation: “Findings from the current study suggest that diversity may not impact team performance positively or negatively.”⁷

 

Bill McEvily is another frequently cited expert in business organizational theory. He joined Reagans and Zuckerman to publish a study where they examined the difference in performance resulting from teams created based on individuals’ social networks versus teams created based on demography. McEvily, Reagans, and Zuckerman studied 1,518 project teams in a contract R&D firm. Their results further supported the claim that demographic diversity leads to mixed

 

performance results. Some of these teams built with high demographic diversity experienced increased results while others’ performance suffered.⁸

 

 

Benefits of Demographic Diversity

The Chartered Management Institute shared a major benefit of demographic diversity in teams: diverse teams can experience increased creativity and innovation in comparison to non-diverse teams.⁹ Increased team creativity can lead to better problem solving and decision making, which may cause a fuller and more varied set of information brought to the team. Therefore, if individuals on that team have high network density, they will make decisions that are more informative than those with low demographic diversity.¹⁰

 

Harvard Business Review conducted a study and found that higher cognitive diversity correlates with better performance, as shown in Figure 2. Cognitive diversity describes the variety of ways individuals think, process, and acquire knowledge. Demographic diversity can lead to cognitive diversity, and cognitive diversity may cause increased performance if teams also have high network density. In support of the need for cognitive and social diversity, Reagans and Zuckerman say, “While homogeneous groups may in fact be more harmonious, the performance of such teams is limited by the relative redundancy of members’ perspectives, information, and resources.”¹¹ Therefore, demographic diversity can be highly beneficial to teams.

 

Teams A, B, and C had a higher standard deviation of knowledge-processing and perspective, meaning these teams had individuals with a more diverse perspective and knowledge processing ability than the people in teams D, E, and F. Teams A, B, and C completed the challenge significantly faster than did teams D, E, and F.¹²

 

Challenges for Diverse Teams

All challenges resulting from demographic diversity in teams come from decreased network density. This decrease poses three severe drawbacks for diverse teams: a decline in social connectedness, reduced communication, and limited choices for managers.

 

Decline in Social Connectedness

A decline in social connectedness is a major issue because team cohesion is likely to be lower when demographic diversity is present in a team. Scholars note this issue is most evident in teams with ethnic diversity.¹³

 

Reduced Communication

A decrease in social connectedness also leads to a decrease in inter-team communication. Multiple scholars have published works on the importance of communication in teams, particularly because it increases team cohesion.¹⁴

 

“Demographic diversity is problematic because it introduces social divisions that hinder effective teamwork.”¹⁵

 

Amy Edmundson is a professor of leadership and management at the Harvard Business School and has over 50,000 citations to her work. She teamed up with Jean-François Harvey to find that “social interaction and communication are negatively related to diverse knowledge attributes. [Aspects of demographic diversity] impair the accuracy of the communication between team members, which tends to hinder team member interactions such as information sharing.”¹⁶ This reduction in team communication is problematic because an increase in information sharing is directly linked to an improvement in team performance.¹⁷

 

Limited Choice for Managers

Reagans, Zuckerman, and McEvily sum up the final drawback that needs to be addressed. They say, “A focus on demographic criteria is problematic because the demographic makeup of an organization can place inherent limits on a manager’s ability to shape the demographic composition of a team.”¹⁸ These authors then recommended against using demographic diversity as the criterion for building teams because of the limits it placed on the manager’s ability to create teams based on social networks, experience, and communication skills.¹⁹ This is detrimental to the team’s performance because managers sometimes choose the most diverse candidate rather than the most qualified one.

 

 

Going Forward

Demographically diverse teams face mixed performance results because of the increase in network heterogeneity and decrease in network density. Corporate groups can experience great benefits from diversity, but these benefits come with challenges.

 

All of us share responsibility to generate more ideas to address the challenges demographic diversity introduces so we can maximize team performance. Successful corporations will have teams with high network density and network heterogeneity, giving them a competitive advantage over others in their industries and leading to greater profits.

 

 

 

 

References

1. Reagans, Ray and Ezra W. Zuckerman. “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D Teams.” Organization Science 12, no. 4 (Jul, 2001): 502-517. http://erl.lib.byu.edu/login/?url=https://www-proquest-erl.lib.byu.edu/scholarly-journals/networks- diversity-productivity-social- capital/docview/213826875/se-2?accountid=4488.
2. Reagans and Zuckerman, “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D ”
3. Reagans and Zuckerman, “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D ”
4. Reagans and Zuckerman, “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D ”
5. Reagans and Zuckerman, “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D ”
6. Reagans and Zuckerman, “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D ”
7. Budovitch, Maya. 2016. “Demographic Faultlines and Team Cohesion on Team Performance.” Edited by Natalie Allen. Semantic Scholar. The University of Western 2016. https://www.semanticscholar.org/paper/Demographic- Faultlines-and-Team-Cohesion-on-Team- Budovitch/1b478436d0255a29af7bf62ffee14078935b4a 99.
8. Reagans, Ray, Ezra Zuckerman, and Bill McEvily. “How to make the Team: Social Networks Vs. Demography as Criteria for Designing Effective ” Administrative Science Quarterly 49, no. 1 (03, 2004): 101-133. doi:http://dx.doi.org.erl.lib.byu.edu/10.2307/4131457. http://erl.lib.byu.edu/login/?url=https://www-proquest- com.erl.lib.byu.edu/scholarly-journals/how-make-team- social-networks-vs-demography- as/docview/203966297/se-2?accountid=4488
9. Chartered Management Institute. 2019. “The Five Business Benefits of a Diverse Team.” CMI. July 3, https://www.managers.org.uk/knowledge-and- insights/listicle/the-five-business-benefits-of-a-diverse- team/.
10. Chartered Management Institute, “The Five Business Benefits of a Diverse ”
11. Reagans and Zuckerman, “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D ”
12. Reynolds, Alison, and David Lewis. 2021. “Teams Solve Problems Faster When They’re More Cognitively ” Harvard Business Review. Harvard Business Review. August 27, 2021. https://hbr.org/2017/03/teams-solve-problems-faster- when-theyre-more-cognitively-diverse.
13. Meeussen, Loes, Filip Agneessens, Ellen Delvaux, and Karen Phalet. “Ethnic Diversity and Value Sharing: A Longitudinal Social Network Perspective on Interactive Group Processes.” The British Journal of Social Psychology 57, no. 2 (04, 2018): 428-447. doi:http://dx.doi.org.erl.lib.byu.edu/10.1111/bjso.12237

. http://erl.lib.byu.edu/login/?url=https://www-proquest- com.erl.lib.byu.edu/scholarly-journals/ethnic-diversity- value-sharing-longitudinal/docview/2020475853/se- 2?accountid=4488

14. Dey, Chitra and M. P. Ganesh. “Impact of Team Design and Technical Factors on Team Cohesion.” Team Performance Management 26, no. 7 (2020): 357-374. doi:http://dx.doi.org.erl.lib.byu.edu/10.1108/TPM-03- 2020-0022. http://erl.lib.byu.edu/login/?url=https://www-proquest- erl.lib.byu.edu/scholarly-journals/impact-team- design-technical-factors-on- cohesion/docview/2447467077/se-2?accountid=4488.
15. Reagans and Zuckerman, “Networks, Diversity, and Productivity: The Social Capital of Corporate R&D ”
16. Edmondson, Amy C. and Jean-François Harvey. “Cross-Boundary Teaming for Innovation: Integrating Research on Teams and Knowledge in Organizations.” Human Resource Management Review 28, no. 4 (12, 2018): 347. http://erl.lib.byu.edu/login/?url=https://www-proquest- erl.lib.byu.edu/scholarly-journals/cross-boundary- teaming-innovation-

integrating/docview/2116625258/se-2?accountid=4488.

17. Dey and Ganesh. “Impact of Team Design and Technical Factors on Team ”
18. Reagans, Zuckerman, and McEvily. “How to make the Team: Social Networks Vs. Demography as Criteria for Designing Effective ”
19. Reagans, Zuckerman, and McEvily. “How to make the Team: Social Networks Vs. Demography as Criteria for Designing Effective ”