Gender, ethnic diversity in company leadership helps decision-making

The internationally known psychologist from Israel's Tel Aviv University presents a wealth of empirical evidence that gender and ethnic diversity improve decision by an average of 58%.

  (photo credit: INGIMAGE)
(photo credit: INGIMAGE)

A business not only gets good publicity by having gender and ethnic diversity in the higher echelons of the company; it also improves the decision-making process, according to a new book by Prof. Thalma Lobel of the School of Psychological Sciences at Tel Aviv University (TAU).

“When you bring people with different opinions into the room, the decision-making process becomes more complex, and the participants take more information into account. The more perspectives and points of view that are heard, the greater the chances of reaching a better solution,” wrote Lobel in her 288-page book called Whatever Works that was published by BenBella in the US.

The internationally known psychologist presents a wealth of empirical evidence that gender and ethnic diversity improve decisions by an average of 58%. She shows how overlooked factors in our work days – our physical environments, unconscious habits and even traits like our faces and voices – have the power to make or break our careers.

Overlooked factors that can make or break your career

One of the leading experts on human behavior, Lobel explores groundbreaking psychological research on job performance, satisfaction and creativity, going beyond obvious considerations like salary, title and company culture. She sheds light on the hidden, often unrecognized, counterintuitive or invisible factors that have profound effects on how well we can do our jobs and how happy we are at work.

Can just doodling in a certain way increase your creativity? Or, will looking at something green for 40 seconds improve your attention? Could it be that crossing your legs similarly to an interviewer gets you the job? Does the mere presence of a smartphone on your desk lessen your performance, even if it’s turned off? Would being in a warmer room make you more likely to want to conform with the group, affecting your decision-making? These are the invisible factors that nudge our behavior on a daily basis, and combined, have a real and significant bearing on our success – or failure – at work, the TAU psychologist writes.

 Prof. Thalma Lobel (credit: Jonathan Blum) Prof. Thalma Lobel (credit: Jonathan Blum)

In today’s competitive market, where even tiny differences can be decisive for both employees and organizations, exploiting such factors can make all the difference, said Lobel. The more you know about the subtle elements that can help or hinder you on the job, the better equipped you can be to take control and navigate the competitive work worl

“Gender and ethnic diversity in the workplace are not just a matter of morality or political correctness. Results from around the globe show that diversity actually contributes to the success of companies and organizations.”

Prof. Thalma Lobel, Tel Aviv University

“Gender and ethnic diversity in the workplace are not just a matter of morality or political correctness,” she continued. “Results from around the globe show that diversity actually contributes to the success of companies and organizations. For example, a 2008 report found that among the companies included in the Fortune 500 list, those whose board of directors included more women achieved better financial results.”

IN ANOTHER example she provides, researchers from the Credit Suisse Research Institute surveyed 2,360 companies and found that the ones whose board of directors included at least one woman performed better than those whose board consisted of only men.

In a McKinsey report that examined the impact of gender and multinational diversity on companies’ financial performance, researchers looked at the composition of the boards of directors of 180 companies in France, Germany, Great Britain and the US from 2008 to 2010. “The results were clear – the financial success of the companies that were characterized by diversity were significantly higher than those that were less diverse,” Lobel commented.

Surprisingly, she found that diversity in the workplace improves performance even if the diverse perspectives are not heard at all. “Researchers examined the effect of diversity in racial origin on decision-making and the performance of traders in the capital market. They invited people with a financial background to participate in the study and trained them to calculate the intrinsic value of stocks. The participants were then divided into groups with either a homogeneous or diverse make-up.” The diverse groups included at least one person of a different origin than the other participants. The researchers conducted their study in two markets – North America and Southeast Asia.

“In North America, the homogeneous group included only white traders, while the diverse group included one trader of African-American origin and one of Latino origin,” she recalled. “In Asia, the homogeneous group was composed of only Chinese traders, and the diverse group also included traders from Malaysia and India. The results were astonishing; the members of the diverse groups demonstrated a significantly higher level of accuracy in stock pricing than the homogeneous groups. Their ability to quote a price that reflected the true value of the assets was 58% higher.”

The members of the homogeneous groups tended to pay unreasonable and exorbitant prices, which were further from the true value of the stocks than those quoted by the diverse groups. “In other words, the chances of a dangerous bubble forming were higher when the trading was carried out by a homogenous group, and lower when the traders belonged to different ethnic groups. This was a surprising finding which may have far-reaching implications: the mere presence of the minorities changed the trend of decision-making,” Lobel stressed.

Going beyond business

The findings she presented in her book extended way beyond the world of work and business. For example, a study conducted by Prof. Richard Freeman and his doctoral student Wei Huang of Harvard University compared 2.5 million articles published in scientific journals and found that articles whose authors came from diverse ethnic backgrounds garnered more mentions and citations in the scientific literature.

“Many studies show that working in a diverse team contributes to better decision-making,” Lobel concluded. “In light of this, you should take a look around the next time you’re working on a joint project. Are all your team members of the same gender and ethnic group as you? If the answer is yes, you should carefully consider all your options and avoid rushing to make any decisions. You will likely benefit from getting an outsider’s opinion. When you form a team, task force or committee, try to include as many people as possible from a variety of ethnic groups, genders and backgrounds.”