Why do we care about diversity in our companies?

In 2004, I had the pleasure of meeting Frans Johansson, the author of The Medici Effect: Breakthrough Insights at the Intersection of Ideas, Concepts and Cultures. The book, which was listed as Top 10 Business Books by amazon.com and translated into numerous languages, had a profound effect on me. Frans convinced me that history was the best teacher and I no longer believed the best team of people to solve a problem was a group of like-minded, similarly training people. By bringing together people of different backgrounds, education, life experience and talents, the outcome would always be vastly superior than by bringing together a team of people who all thought the same way.

 

The Medici Effect

The main premise of his book was that the House of Medici. This Florentine family rose to power in the 15th century and had significant influence in Italy and throughout Europe through the 16th and 17th century, obtained their money and power by embracing the concept of diversity. The Medici’s brought together (and financially supported) artists, scientists, architects, engineers, poets, philosophers and others. These diverse groups were able to produce innovative solutions to whatever problems they were facing. By the 17th century, the Medici family had more influence and impact on the Renaissance period than any other person or group of people. No family has been as influential or powerful for such a long period of time as the Medici’s.

Mr. Johansson coined the term “Medici Effect”. The Medici Effect is when you bring a set of findings or a problem to a person (or group of people) who have no expertise or background and ask for their input. Evidence of this working well dates back to Charles Darwin and some of the scientific breakthroughs he was able to make by consulting people not trained in science who made observations he had missed.

 

The time global equity plan launch for 100,000+ people didn't go exactly according to the plan

I recall a similar situation. We were about to launch a large, global equity plan to 100,000+ people worldwide. The brochures were being printed and would be mailed the next morning to all of the HR departments around the world, in anticipation of the launch the following week. We were quite proud of the plan we had designed and were patting each other on the back. Late in the day, I received a call from the foreman at the print warehouse. He told me that he and his fellow workers were reading the brochure while it was being printed (since the same company that was printing the brochure was the recipient of the plan) and they had a very negative reaction and said they would never participate in this plan.

As this was a broad-based plan, we were extremely concerned – what was not to like about this plan? As we dug in deeper and spoke with the people on the printing floor, we realized that our deep knowledge of stock plans kept us from understanding how the rank-and-file at this company would respond. That was an extremely valuable lesson – I never designed and implemented an employee plan again without ensuring that I brought together a focus group of employees from various departments, geographies and skill sets to ensure the design would be supported.

 

It's not only about women-to-men ratio

These days, one can’t attend a conference or read a professional journal without diversity being a prominent topic. For many organizations, looking at the mix of women in traditionally male-oriented professions is the extent of their focus. I believe that organizations that truly thrive and innovate benefit most from a completely diverse workforce. This includes ensuring there are men and women working together to solve problems, but it also requires that companies are sensitive to the make-up of teams that include employees from various geographies, cultures, ages, education levels, disabilities and training. I am particularly impressed with companies who have “millennial mentors” – younger workers spending time with older, senior management to share their perspectives.

 

What if your company is not looking for innovative solutions, but rather better financial results?

There are many surveys and reports that have found that regardless of sector or location, diverse organizations outperform homogeneous companies. A 2015 McKinsey report on 366 public companies found that those in the top quartile for ethnic and racial diversity in management were 35% more likely to have financial returns above their industry mean, and those in the top quartile for gender diversity were 15% more likely to have returns above the industry mean.

 

How to build a diverse company

Building and maintaining a diverse company takes effort and discipline. Psychologists have proven that we tend to hire and socialize with those who are most “like us”. It’s comfortable, requires less energy and reduces friction. It’s hard to understand someone who doesn’t think like you or respond to problems in a similar fashion. I always hear, “we want to hire a diverse team but we just can’t find (fill in the blank) person with the skills we need.”

There are a number of ways to find diverse candidates – it just requires thinking differently. Just by examining your hiring process, you will find implicit bias. Researchers at the University of Waterloo and Duke University created a list of popular job descriptors as masculine or feminine and then scanned a popular job site to look for those words. They found that job ads in male-dominated fields (like software programming) tended to use masculine-coded words such as “competitive” and “dominate” much more than job ads in female-dominated fields. For example, the use of the word “ninja” in high tech job listings increased nearly 400% between January 2012 and October 2016, according to the company’s Job Trends database tool.  Society tends to perceive the word “ninja” as a masculine trait. If you are looking for more women to apply, removing words such as this from the job description should increase the candidate pool.

Organizations who truly believe that a diverse workforce will yield better results and produce innovation products and services need to look at making changes that will take time. Taking the first step is easy; remaining committed to diversity takes focus and discipline. The impact will be far-reaching and beneficial, whether you are looking for stronger financial results or producing innovative products and solutions.

 

About the author

Carine Schneider was a Partner at Nua Group. She brings deep management and consulting experience in compensation, the private market and financial services to Nua Group. Carine is active in various women’s organizations including WorldWideWomen and Upward.