True Diversity Means More Than Just Putting Women in the Boardroom Beyond race and gender, entrepreneurs need to consider cognitive diversity.
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The topic of diversity isn't new. In fact, I'd guess many of you have well-formed ideas or beliefs about diversity and its impact on business. But, is it time to challenge your assumptions about what diversity is -- and isn't? Or, perhaps there's room to broaden your personal definition of diversity.
To that end, I want to talk about a type of diversity that is less visible, not as widely understood and not talked about as often. And yet, it is powerful -- particularly in business. I'm referring to cognitive diversity. You may be familiar with this concept, but have you explored how much it can impact business -- and why that matters?
Cognitive diversity is about much more than race or gender, and its impact extends well beyond meeting quotas. It encompasses differences in perspective or information processing styles -- differences that are not predicated on factors such as gender, ethnicity or age, because diversity isn't bound by such traditional labels. Instead, cognitive diversity considers the entire individual, which might include a person's gender or race -- but it certainly doesn't end there.
Exploring the business impact of cognitive diversity
So, why is cognitive diversity important? Turns out, it's crucial for innovation, complex problem-solving and high performance. Conceptually, this connection is based on the fact that when people with diverse knowledge are brought together, they have the power to overcome social blockers. These are the blockers that are inherent to any given situation -- the ones we're blind to.
Cognitively diverse teams also tend to adapt to change more readily, and they demonstrate a greater propensity to collaborate when faced with new challenges or situations. And according to a recent study published in Harvard Business Review, they learn faster, because they're open to exploring new ideas and knowledge rather than relying solely on existing knowledge. But, cognitive diversity isn't always easy to achieve.
Overcoming barriers to diversity
When we look at diversity in relation to demographics, it's easier to identify when an imbalance may exist. Cognitive diversity, on the other hand, is easy to overlook. For starters, it's less visible. It's not easy to detect from the outside, and bringing it to the surface takes work.
Bias is another barrier to cognitive diversity. And whether we want to admit it or not, we all have biases. Some simply go unrealized. That's because bias can play out in more covert ways -- such as gravitating toward individuals who think or act in a similar manner.
When bias infiltrates the recruiting process, you often end up with more homogeneous teams. That's why it's imperative to make a conscious effort to remove bias from decisions and actions. Otherwise, it creates barriers that restrict cognitive diversity -- even when it's unintentional.
And while race and gender are not technically part of the cognitive diversity equation, when diversity in those areas is lacking, it does tend to inhibit cognitive diversity.
For example, gender bias is still a very real issue in our society. Just look at any one of the near endless supply of recent headlines on the inappropriate behavior that runs rampant in the workplace, or the countless studies showing that successful women are less liked than their male counterparts. And if that's not convincing enough, consider this: female entrepreneurs receive only about 2 percent of all venture funding, though they own 38 percent of the businesses in the U.S. This has been attributed to VCs asking men promotion-oriented questions (focusing on the potential for gains) and women prevention-oriented questions (focusing on the potential for losses).
Leading the diversity charge
Clearly, diversity encompasses more than gender, but lack of gender diversity tends to be one of the more prevalent issues in business -- much to an organization's detriment. In fact, multiple research studies show women are as effective -- perhaps even more effective -- in business leadership roles than their male counterparts.
A 2012 Dow Jones study revealed business startups are more likely to succeed if they have women on their executive teams. Another study showed that women-led businesses are also growing at a higher rate than those led by men. In fact, over the past 10 years, women-led firms with $10 million or more in revenue have increased by 56.6 percent -- 47 percent faster than the rate of growth of all firms of similar revenues.
Boards with high female representation experience a 53 percent higher return on equity, a 66 percent higher return on invested capital and a 42 percent higher return on sales. And another study showed that having just one female director on the board cuts the risk of bankruptcy by 20 percent.
As it turns out, the way in which women approach leadership tends to foster an environment more conducive to creating cognitively diverse teams. For instance, a study published in the International Journal of Business Governance and Ethics illustrated that women were perceived as not being afraid to go against traditional norms and valuing opinions from a variety of stakeholders. It also showed women are more likely to consider the rights of others and take a cooperative approach to decision-making. This approach, which is crucial to cognitive diversity, translates into better performance for their companies.
Male directors, on the other hand, prefer to make decisions using rules, regulations and traditional ways of doing business or getting along -- an approach that is not exactly conducive to leveraging the benefits of cognitive diversity.
Of course, as I mentioned before, diversity is not just about having a balanced gender mix. It's about leadership being accepting of all backgrounds.
Creating cognitive diversity in your business
Now, fostering cognitive diversity in your company is easier said than done. To ensure people from diverse backgrounds -- and with diverse personalities and work styles -- feel comfortable at work, you have to create an environment of inclusivity. You have to make an effort to encourage employees to voice their ideas and opinions -- even if those ideas go "against the grain" or divert from the status quo.
Cognitive diversity really goes hand-in-hand with the concepts of conscious leadership, because it's all about inclusivity -- leading with purpose, incorporating the whole community and considering all stakeholders.
While these are more high-level concepts, there are some concrete steps you can take to encourage diversity in your organization. First, create a culture that champions the idea of letting people be who they are. This, in turn, will foster a comfortable work environment for people who come from a variety of backgrounds, have a variety of beliefs and interests and hold a variety of different values.
Don't try to assimilate people; instead, embrace differences. Focus on recruiting people who are genuine, honest and hard-working.
With that in mind, diversity in your business -- especially at the board level -- might not happen overnight. You have to make intentional steps toward cultivating an inclusive environment. That means not overlooking individuals some people might see as unlikely candidates for leadership. After all, the missing key player for your "dream team" might not look, think or act anything like you. But, isn't that the point?