What gives diverse teams the edge?

The business benefits from diversity

There’s a lot about diversity and it’s benefits in the news, and an ever increasing body of research which never fails to support the concept that diversity is a good thing for business. A 2015 McKinsey report of 366 public companies found those in the top quartile for diversity in management were up to 35% more likely to have earnings above their industry mean, which is astounding.
It’s getting through to everyone and it matters to us personally. In late 2016, we conducted a snapshot survey to get a better picture of how Spotify employees understand diversity and how included they feel at work. Over 80% of participants agreed or strongly agreed that diversity and inclusion really matters to them, and around 90% agreed with the statement that people at Spotify are supportive of each other regardless of their heritage or background. In all company strategies in today’s world, you’d expect to see diversity as an objective and an ambition. Increased diversity, supported by an inclusive environment, can add huge value. And by understanding what makes diverse teams so much more effective we can make better decisions about the teams we build and reap the rewards.

So what is it about diverse teams that makes them so much more successful?

A recent article in the Harvard Business Review (David Rock and Heidi Grant, Ph.D.) suggested that there were certain qualities that diverse teams display which enable them to consistently outperform homogenous teams.
Having diversity can alter the way a group behaves and makes decisions. We’ve all seen the research around bias, and it makes sense. A homogenous team with the same perspective and experience can reinforce entrenched ways of thinking and unconscious biases. The article quoted a study where they simulated a jury scenario and gave groups information related to the case to consider. The diverse groups were shown to have conversations more focused on the facts of the case and to make fewer factual errors. Participants in these groups were also more likely to correct each others factual errors during the deliberation of the decision. Without different lenses to consider information which affect our ability to see all the information available. Otherwise, we miss things and this subsequently affects the quality of the decisions that we come to.
The article also quoted a similar effect in a study which simulated a stock market environment, finding that diverse teams of financially educated participants were 58% more like to make accurate estimates of the price of stocks vs financially educated homogenous groups. The comparative difference in accuracy is huge, and when you think about this applying to business success, the implications are huge. And it makes sense, doesn’t it? When people have different perspectives, their alternative lens highlights different data, and the consideration of all the facts by the group is more complete.
There is another aspect; how we consider and process the available information as individuals. Have you ever had someone share a different perspective with you? I know that there have been many times in my career and personal life where someone else’s questions and perspective have completely reframed a problem for me. This effect is also replicated in studies, one example being one where an out-group member was introduced to a team who were trying to solve a case study. The study found that the diverse team with an out-group member were more likely to be successful in correctly deducing the answer than a homogenous team. Having a diverse group can encourage people to more fully consider issues from the perspective of others, and see the situation in a different light. This more involved processing leads to better decisions.

Diversity at Spotify

At Spotify, we aspire to be innovative and it’s part of our history and values. Spotify came about because of the pioneering ideas of our founders. It’s one of the things, along with personal growth and learning, that we bet on to keep us ahead of the game. Diversity has a role to play here too. When we think about the role of diversity in innovation, research has shown that gender diversity in R&D teams increases the likelihood of the company introducing radical innovations into the market over a two year period. Another study showed that companies with culturally diverse leadership teams were more likely to develop new products than those without. With the success of the company being so reliant upon the ability to innovate, it seems difficult to imaging how we could afford not to focus on the mix of people that we bring into the business and include in our teams.
There are clearly things that we should be keeping in mind when thinking about how we work and bring people together. In times like these, where the political environment is questioning the value of diversity in society, how we treat each other and the value we give to different perspectives means more than ever. Every time we hire, we should be challenging ourselves to leave our comfort zones and be bold enough to hire people that are different to ourselves. When we look at working groups, we should be thinking about the mix of skills, experiences and perspectives that we’re putting together. And when we’re solving problems, we should dare to consider things from someone else’s perspective.
 We all have a role to play and a lot to gain.