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When thinking about the advantages and drawbacks of diversity in senior management and board positions, we can learn a great deal from Mother Nature.
We can increase yields dramatically by cloning oil palms. Yet the more we reduce the plant gene pool in our attempts to raise yields, the more plantations become vulnerable to pests because all the oil palms have the same genetic makeup. So although too much cloning is fruitful in the short term it can lead to long term catastrophe. Equally, too much diversity in a plantation leads to low yields. Consequently we need to reconcile the short term benefits of cloning – increased productivity – with the long term benefits of diversity – increased resilience and resistance to catastrophe.
The same applies to senior management and boards. There are great advantages in everyone coming from the same background, sharing the same culture and the same history, even in belonging to the same age group. They think in the same way, share the same assumptions and find it easy to trust each other. They share the same values and “way of doing things”. This reduces the frictional costs doing business dramatically: people don’t need legally binding contracts to perform as required; they don’t need enormous manuals codifying how to do things. They know what to do and what is expected of them. They may even have a common “language” – special words and associated ideas – expediting communication and reinforcing a sense of team.
Armed forces everywhere have long understood these benefits and foster regimental “esprit de corps” based on shared history, common myths and well-defined expectations of behaviour. They make belonging to the regiment special – literally worth dying for.
This works well as long as the world does not change dramatically – the managerial equivalent of new pest attacks on cloned oil plantations. In business this peril is known as “groupthink”. “Groupthink” suffers from two serious problems. First, it is the tendency for people to converge on a consensus without sufficient thought, even if the consensus is wrong. Even more serious is the fact that members of a like-minded group are more likely to be wrong than members of a diverse group – 46% versus 25%. Worse still, the like-minded groups “perceived themselves as having more confidence, consensus, and effective interaction.” The second reason is that ‘groupthinkers’ have great difficulty challenging received wisdom – the so-called “sacred cows” all businesses have to a greater or lesser degree. This is made even harder if the company has a great track record of success. It becomes almost impossible for ‘groupthinkers’ to think the unthinkable: that the formula for success may have gone stale or that the outside world has changed so much that the context invalidates the assumptions on which the business was built. It often takes outsiders with a different perspective to appreciate this, because they have no stake in preserving the status quo.
So we need diversity to protect us from the perils of “groupthink”. The question is what kind of diversity and how much? This is a particularly difficult question for boards where leading practice suggests optimum board size ranges between 7 and 11 members.
Do we need people of different ages to represent the values and aspirations of their respective cohorts so that companies can serve the different target groups better? Do we need people of different education and income levels as these often determine what people want to buy and whether they are prepared to join the company? What experience and skills do we need: lawyers, accountants, production engineers, financiers? Are people with public service experience an asset? If yes, do we want civil servants, police chiefs, soldiers, judges or diplomats? If we are going abroad do we need people from the countries where we intend to operate because they can give us insight into their cultures?
As if answering these questions were not difficult enough, we also need to consider interpersonal dynamics and whether the diverse candidates we decide we want to recruit can in fact work well together. Do they share the same assumptions about their role and the purpose of business? Do they have the same understanding of what is meant by performance management? Do they have the same values, ethical foundations and respect for the law? Do they agree about what confers status, the impact of power distance on behaviour, the value of individuality and being part of a team? If they don’t, how do we go about helping them work together as a united team where each contributes to the success of all by bringing his or her unique perspective to bear without undermining mutual respect and trust?
It helps greatly if there is a well thought through induction program exposing newcomers to the business fundamentals, the drivers of value creation and the foundation myths and company history. It also helps if there is a clear statement of values: behaviours that are rewarded and behaviours that are punished; and a code of conduct everybody understands to minimise the grey areas where misunderstandings flourish.
Even though it is difficult to reconcile diversity with shared values, companies that succeed, create unique cultures incorporating the best of both worlds, making it impossible for their competitors to copy them. Perhaps an analogy from football will help make the point more forcefully.
Take the case of Arsenal. Everybody thought with the departures of Cesc Fabregas and Samir Nasri they were finished in 2011. Indeed, at first it looked as though Arsene Wenger’s critics were right, except Arsenal ended up in third place by the end of the year, largely thanks to Robin Van Persie. When Van Persie left for Manchester United and Alex Song left for Spain this year, again Arsene Wenger’s critics said Arsenal was finished and Wenger had “lost the plot”. And yet it now seems Arsenal is playing better than ever. Why? Maybe it is because Arsene Wenger knows what he is doing after all – he has created such a strong culture that newcomers like Podolski, Cazorla and hopefully Giroud – players from three different countries, with different styles and skills – are moulded quickly to fit with the others, creating not just a more balanced team, but a more self-reliant set of players because they cannot opt out and pass the ball to Fabregas or Van Persie. They have to do the work themselves, playing Arsenal’s style of beautiful football successfully.
The lesson may be that creating a strong enough culture is the only way to reconcile diverse talents and mould them into a winning team.
 Phillips, K. et al., “Is the Pain Worth the Gain? The Advantages and Liabilities of Agreeing With Socially Distinct Newcomers,” Personality and Social Psychology Bulletin