Diversity drives better decisions

23 Oct 2017 By PM Editorial

A study has found a direct link between inclusive decision-making and better business performance

It’s no secret that greater organisational diversity improves productivity and wellbeing. Now, a white paper from online decision-making platform Cloverpop has found a direct link between inclusive decision-making and better business performance.

The study analysed around 600 business decisions made by 200 teams, across a range of companies. Researchers found that when diverse teams (of three or more people) made a business decision, they outperformed individual decision-makers up to 87 per cent of the time. Diverse teams were also shown to make decisions faster than individual workers, and benefited from a 60 per cent improvement on decision-making.

“Unfortunately, non-inclusive decision-making is all-too common,” says author Erik Larson. “All-male teams make about 38 per cent of the decisions in a typical large company, and the gap is even worse among less diverse firms like those in Silicon Valley’s technology industry.”                  

Effective decision-making also increases with greater diversity in a team. All-male teams were shown to make better business decisions than individuals 58 per cent of the time, while gender-diverse teams outperformed individuals 73 per cent of the time. Teams that were geographically diverse, and included members with different genders and at least one age gap of more than 20 years, were the most successful – making better business decisions than individuals 87 per cent of the time.

“This research aligns with behavioural economics theory, which has clear implications for results-focused companies,” says David Daniels, assistant professor in the department of management at Stanford University. “Business strategy should revolve around a decision-making process.”

Research: 'White Paper: Hacking Diversity with Inclusive Decision Making'

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