Addressing the “Business Case” Against Diversity

By Tina Vasquez (Los Angeles)

The business case for diversity has become a popularly held belief and it’s something we’ve discussed at length here at The Glass Hammer. The reasoning behind it is very simple: When board directors and top level executives are too much alike, they think too much alike and in turn, look at both problems and solutions the same way. By contrast, having a diverse group of people in the upper ranks of a corporation leads to diversity of solutions, innovations, better governance, and the type of outside-of-the-box thinking so desperately needed in the corporate world. Many studies have also found that diversity increases sales revenue, customer numbers, and profitability. What’s not to love?

Unfortunately, there is a growing body of evidence that seems to suggest diversity does not deliver, at least in the short run. Many companies have reported little to no change in their performance. This is even true for Norway, where a 2002 law requiring 40 percent of all company board members to be women has – in some cases – been detrimental to companies forced to comply. A recent study by the University of Michigan has found that a drastic increase in women to Norway’s boardrooms has done very little to improve corporate performance or enhance the professional caliber of the country’s boards. Even more unsettling is the idea that making efforts to diversity corporate boards and executive suites is actually creating conflict and other unforeseen problems. Here’s our take on a few of the problems companies have run into while implementing diversity initiatives – and how to fix them!

Where Diversity Goes Wrong

According to the authors of the recent Wall Street Journal article “Why Diversity can Backfire on Company Boards,” Dr. John-Francoise Manzoni, professor of leadership and organizational development, Dr. Paul Strebel, Sandoz Family Foundation professor of governance, strategy, and change, and Dr. Jean-Louis Barsoux, senior research fellow at IMD, diversity is something we prize … in theory. “The truth is that people often feel baffled, threatened, or even annoyed by persons with views and backgrounds very different from their own,” they wrote. “The result is that when directors are appointed because their views or backgrounds are different, they often are isolated and ignored. Constructive disagreements spill over into personal battles.”

Professor Katherine Phillips of Northwestern University’s Kellogg School of Management echoed these sentiments in her recent piece in Forbes. She discusses how companies bring socially distinct newcomers into their organizational groups in hopes of introducing new perspectives and that these people are “tolerated” by outsiders because it’s assumed that people with different cultural, gender, and ethnic backgrounds will, with contrasting experiences behind them, offer differing perspectives and opinions about any given problem.

“We’re likely to assume that a black manager and a white manager working together on a problem will come up with divergent ways to solve the problem,” Phillips said. “But such assumptions have implications that we tend not to think deeply about. The first is that when individuals work together in a group, any unexpected perspectives will come from the people who are different. The black person in a group of whites, or the marketing person in a group of engineers, will bring forward a different point of view that the group can benefit from. A second and even more important implication is that people who appear to be similar to each other, such as two middle-aged white men, will share the same views. But is it really sensible to assume that all superficially alike people think alike?”

According to the research conducted by Drs. Manzoni, Strebel, and Barsoux, the answer is no. Conflict abounds in places where those of incredibly diverse backgrounds are asked to work together in close quarters and if you believe the researchers, “diversity goes awry” in seven distinct areas.

The Seven Diversity Sins

The research conducted by the three doctors found that the following seven areas are where the most potential for conflict exists in corporate environments where diversity is stressed:

1. Initial Encounters: The first day directors meet each other is where the most judgment takes place; each will scrutinize the words and behavior of new and atypical colleagues for signals about their competence and personality. According to the researchers, “Depending on why they were appointed to the board, the newcomers run the risk of being saddled with all sorts of stereotypes, such as ‘typical minority,’ and so on.”

2. Impressions Last: According to the researchers, these initial encounters – or first impressions – are basically set in stone. From then on, those who immediately took a dim view of a colleague will subsequently process all information pertaining to them in a way that supports their initial opinion; even going as far as blocking information that doesn’t fit.

3. Cultural Differences: Where major cultural differences exist, signals are bound to get crossed. “Directors with broadly different experiences will behave in unexpected ways that may be misinterpreted—as disruptive or aggressive, for example. Behaviors like interrupting or excitability may have been the norm in a director’s previous surroundings, but they can raise eyebrows where they aren’t generally accepted,” the researchers wrote.

4. Confirmation from Others: It is not unlikely that board members will compare notes about the newcomer in an attempt to define their character. Though it makes sense, it should be pointed out that they usually turn to like-minded colleagues who not only confirm the view, but reinforce it with observations of their own that support the bias.

5. Reinforcing Behavior: When people are regarded as difficult, some colleagues may interact with them in a brusque or forced manner. Once judged unfavorably, these people are usually excluded from informal interactions that take place before and after meetings, which only further limits their involvement. Also, the reactions of the new members themselves can be a source of friction. They may be defensive or overly sensitive to stereotyping – seeing slights where none were meant – and they may succumb to stereotyping themselves.

6. Groupthink: Conflicts that at first affect only a few members usually spread to and impair the performance of the entire board – inhibiting discussion, innovation and decision-making. In the worst scenarios, the situation turns into a vicious circle that can’t self-correct. It becomes even more problematic for boards, who gather infrequently and in formal settings, leaving few opportunities to correct false impressions and iron out the tensions.

7. A War between Factions: The researchers say that sometimes boards become polarized into factions determined by how the different members perceive the new director and their contributions and over time, a feeling of “us vs. them” develops.

Conflict Resolution

Many studies on the business case against diversity take a more black and white stance on the issue and supposedly illustrate how pushing diversity is detrimental to a corporation. But with so much research being published by organizations such as ION that says otherwise, it would be unwise to dismiss a relatively new concept that has the potential to eventually deliver promising results.

Drs. Manzoni, Strebel, and Barsoux also believe this to be true and have outlined a number of steps corporations can take in order to avoid the seven most common conflicts as outlined by their research. Aside from making sure board members choose diverse candidates wisely, focusing on those who are savvy and aware of how they come across to others, the researchers also recommend that newcomers are assisted. “The chairman or chairwoman should pay close attention to the way new directors are introduced, especially if they have divergent profiles,” the researchers wrote. “Newcomers must have a chance to make a favorable first impression and to connect with others in a benign setting before their first official board meeting.” Other conflict resolution strategies include not giving in to get along, meaning that directors shouldn’t hold their tongues so as not to trigger hostilities between warring factions. “Diverse boards must not be afraid of conflict, as long as it is constructive and civil,” the researchers wrote.

These are just some of strategies that can help alleviate the tensions that may arise in corporate settings, but according to Professor Phillips, naysayers get lost in conflict resolution without appreciating the real benefit of diversity; something that often isn’t discussed in research on either side of the debate.

“Of course not all people who look alike think alike and not all people who look different disagree and the benefit of diversity does not principally come from people who are ‘different’ offering ‘different’ perspectives. In fact, there is a more compelling and realistic benefit of diversity that we should all be aware of,” Phillips said.

She continued, “I recently published research in Personality and Social Psychology Bulletin with co-authors Katie Liljenquist and Margaret Neale that found that members of a social majority are more likely to voice unique perspectives and critically review task-relevant information when there is more social diversity present than when there is not. Moreover, this is true even when the people who are ‘different’ don’t express any unique perspectives themselves. Our research suggests that the mere presence of social diversity makes people with independent points of view more willing to voice those points of view and others more willing to listen.”

So is the solution to diversity issues, then, more diversity? This actually echos the critical mass theory we’ve discussed in The Glass Hammer before. The issues outlined here certainly don’t make it any easier during the initial push to build a more diverse workplace, but by considering them, we can make a better, more diverse workforce for everyone.