Why Diverse Teams Are Smarter

Jonathan H. Westover, PhD
5 hours ago
6 min read

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Abstract: This article discusses the cognitive and business advantages of having diverse teams in organizations. A wealth of social science research demonstrates that cognitive diversity improves problem-solving as diverse backgrounds provide different perspectives and heuristics. Diversity also enhances decision-making through constructive debate and prevents groupthink. At the organizational level, diversity has been linked to improved financial performance, innovation, reputation, and the ability to better serve diverse markets and attract top talent. The article then provides evidence-based strategies for capitalizing on diversity, such as ensuring diversity in leadership, training on unconscious biases, establishing employee resource groups, and setting clear diversity goals. Diversity delivers tangible benefits and is necessary for businesses to adapt and thrive in today's complex environment.

As professionals in organizational development and leadership consulting, we are constantly challenged to better understand how to optimize team performance and unlock the full potential in our people. Over the past decade of advising executive teams and facilitating initiatives across multiple industries, one thing has become abundantly clear - diverse teams are smarter teams. I have seen first-hand the tangible business benefits that result from embracing diversity, equity and inclusion as core strategic priorities.

Today we will explore the theoretical foundations for why diverse teams are smarter, as well as practical strategies and examples of how organizations can leverage diversity as a competitive advantage.

The Cognitive Advantages of Diverse Perspectives

A wealth of social science research tells us that diverse groups tend to be better at problem-solving for one key reason - cognitive diversity. When teams have diverse representations of gender, ethnicity, life experiences, educational backgrounds, etc., they bring a broader range of knowledge, perspectives, and heuristics to tackle complex problems (Page, 2007; Phillips, 2014). Simply put, the more diverse the team, the more likely it is that someone on the team will have insight into an issue that someone else didn't consider. Early research by Harvard professor Scott Page showed that random collections of problem-solvers outperform groups of the best individual problem-solvers about half the time, because diverse groups eliminate blind spots and reframe problems in new ways (Page, 2007). This cognitive advantage only compounds as groups scale and tackle big, "wicked" problems that require diverse cross-functional thinking.

Beyond just cognitive horsepower, diverse groups also promote healthy debate and force teams to view problems through multiple lenses. Psychological safety must be established to allow for differing opinions, but research shows that diversity enhances decision making through constructive conflict (Phillips, 2014) and prevents groupthink that often plagues homogenous teams looking to conform. As an example from my own client work, I consulted with a global healthcare technology company that was struggling to bring a new platform concept to market. After assessing their product development team composition, we identified a clear lack of clinical experience perspectives that were preventing empathy with end users and limiting design ideas. Targeted recruiting to add subject matter experts from medical backgrounds completely reshaped team dynamics and helped generate breakthrough solutions.

Innovation Through Diverse Life Experiences

While cognitive diversity is important, the life experiences that diversity of backgrounds provides should not be overlooked as an innovation driver. Teams with members who have navigated different social and cultural situations apply unique problem-solving tools generated through their experiences (Herring, 2009). For example, those who have broken barriers have likely developed resilience, resourcefulness and the ability to redefine problems in new ways. Exposure to different value systems and ways of thinking foster more imaginative approaches to opportunity identification as teams can recombine ideas in novel ways (Shin, et al., 2012). This is supported by a body of research finding direct links between diversity and enhanced creativity and innovation (Rock & Grant, 2016).

A real-world example comes from one of the highest-growth technology companies I've advised, Anthropic, an AI safety startup. They deliberately recruit from a wide range of cultural, educational, and career backgrounds to seed outside-the-box perspectives into their R&D efforts. Teams take implicit biases tests to uncover blind spots and have frank discussions about how life experiences shape problem framing. This has led to inventive solutions like Constitutional AI for aligning advanced models with human values from diverse vantage points. Diversity of this nature stimulates the type of disruptive, visionary thinking needed to pioneer new categories, another area where diverse groups outperform homogeneous ones.

Organizational Benefits of Diversity

At the organizational level, diversity's advantages translate directly to improved financial performance, reputation, and ability to serve diverse markets. Publicly-traded companies in the top quartile for gender diversity on executive teams were 25% more likely to have above-average profitability according to a McKinsey analysis, and ethnic diversity has also been strongly correlated to greater innovation revenues (Hunt, et al., 2015). As clients, customers, and talent pools continue diversifying globally at rapid rates, heterogeneous leadership teams generate intuition into different segments to better serve universal human needs (Rock & Grant, 2016). This trend was exemplified by the business growth experienced after Kimberly-Clark launched their diversity-focused campaign with diverse spokespeople reflecting varied end users.

Additionally, organizations able to attract top diverse talent gain competitive differentiation amidst ongoing talent shortages across industries like technology and healthcare. Job candidates - especially Millennials and Gen Z - increasingly seek companies demonstrating strong DE&I credentials (Lorenzo, et al 2017). When consulting with a financial services firm struggling with retention, we discovered lack of advancement opportunities for underrepresented groups damaged their employer brand significantly. Taking proactive steps like launching affinity groups, transparent reviews, and sponsorship programs reversed attrition trends by signaling an inclusive culture. As the war for attracting the sharpest minds intensifies, diversity becomes a pivotal recruiting and retention lever.

Strategies for Capitalizing on Diversity

So if the upsides of diversity are clear, how can leaders best cultivate more diverse, high-performing teams in practice? Below are five evidence-based strategies I often advise clients on:

Establish psychologically safe environments: For diversity's benefits to shine through, psychological safety or comfort taking risks without judgment must exist for open sharing (Edmondson, 2018). Leaders build this through actively listening without bias, addressing "undiscussables" respectfully, and modeling inclusive behaviors.
Ensure diversity throughout hierarchies: Research shows diverse representation at upper levels yields most impact; balanced teams avoid "tokenism" issues (Herring, 2009). Commitment from the C-suite downwards helps remove barriers through the ranks.
Provide unconscious bias training: Knowing cognitive biases helps catch assumptions hindering diversity and leads to fairer processes like reviews and hiring. Training raises self-awareness of even well-intentioned biases.
Leverage affinity groups: These voluntary employee resource groups aid in networking, sponsorship, mentorship and give underrepresented voices a seat at the table for input on challenges and solutions.
Establish clear goals and metrics: Diversity objectives should be specific, measurable and tied to performance management. Transparency into diversity data and progress holds leaders accountable for intentional progress over time.

Conclusion - An Organizational Imperative

In summarizing over a decade consulting global organizations, the evidence is unequivocal - optimizing diversity delivers tangible benefits across business metrics that no leader can afford to ignore in today's VUCA world. While cultural shifts can take time, proactively investing in diverse teams as a strategic advantage will separate top performers of the future. For any business aiming to out-innovate, adapt, and serve customers in a complex, fast-changing environment - diversity is a necessity, not a "nice to have." Its power lies in unleashing our full human potential by bringing more minds to the table, stimulating breakthrough thinking, and gaining truly comprehensive market insights. Leaders who make diversity, equity and inclusion a priority will reap rewards in problem-solving, creativity, reputation and sustainable growth. I hope this discussion provides a foundation and practical North Star for any executive seeking to leverage one of their most valuable - yet often overlooked - organizational assets: diversity.

References

Edmondson, A. C. (2018). The fearless organization: Creating psychological safety in the workplace for learning, innovation, and growth. John Wiley & Sons.
Herring, C. (2009). Does diversity pay?: Race, gender, and the business case for diversity. American Sociological Review, 74(2), 208-224.
Hunt, V., Layton, D., & Prince, S. (2015). Why diversity matters. McKinsey & Company.
Lorenzo, R., Voigt, N., Schetelig, K., Zawadzki, A., Welpe, I. M., & Brosi, P. (2017). The Mix That Matters: Innovation Through Diversity. Boston Consulting Group.
Page, S. E. (2007). Making the difference: Applying a logic of diversity. Academy of Management Perspectives, 21(4), 6-20.
Phillips, K. W. (2014). How diversity makes us smarter. Scientific American, 311(4), 42-47.
Rock, D., & Grant, H. (2016). Why diverse teams are smarter. Harvard Business Review, 4(11).
Shin, S. J., Zhou, J., Jeung, C., & Chang, A. (Eds.). (2012). A multilevel investigation of team diversity and individual work performance. Academy of Management proceedings, 2012(1), 1-6.

Jonathan H. Westover, PhD is Chief Academic & Learning Officer (HCI Academy); Associate Dean and Director of HR Programs (WGU); Professor, Organizational Leadership (UVU); OD/HR/Leadership Consultant (Human Capital Innovations). Read Jonathan Westover's executive profile here.

Suggested Citation: Westover, J. H. (2025). Why Diverse Teams Are Smarter. Human Capital Leadership Review, 24(4). doi.org/10.70175/hclreview.2020.24.4.1