Creating a diverse leadership team is no longer a checkbox exercise but a critical strategic undertaking for forward-thinking CEOs and Chief People Officers. This is a welcome departure from the long-standing tradition of selecting similar or like-minded individuals for top leadership roles. This stems from our innate comfort with the familiar and our propensity to spot excellence in those who mirror our own journey, and has often resulted in leadership teams that are “pale, male, and stale.”
Harnessing the Power of Diverse Leadership Teams
Societal shifts, the changing dynamics of the global market, and ever more diverse customer bases demand a corresponding shift in leadership representation. Homogeneous leadership teams are less equipped to handle these evolving demands. Cumulative evidence from research suggests that diverse leadership teams yield superior performance, particularly within multinational organizations. Such teams can be potent antidotes to the crippling effects of groupthink and myopia. They lead to comprehensive discussion, resulting in better justified decisions that take into account a wider range of viewpoints. Diversity also serves as an incubator for innovation and entrepreneurial behavior due to the convergence of different ideas and approaches. Thierry Delaporte, CEO and Managing Director of Wipro, emphasizes, “Diversity is not merely a token statement or a concern of optics. It’s a business imperative. Without diversity, the understanding of your clients remains incomplete, and innovation gets stifled.”
Decoding Diversity: Beyond the Usual Suspects
Despite the mounting evidence underscoring the advantages of diversity, assembling a diverse leadership team remains a challenge for any leader. A significant part of this challenge lies in clearly defining what diversity should encompass. The public conversation around diversity often gets reduced to easily quantifiable attributes such as gender or ethnic representation. However, true diversity is a multifaceted concept, going beyond these demographic indicators to include differences in backgrounds, personalities, life experiences, and belief systems that are the foundations for diverse perspectives. It also involves recognizing and valuing less visible aspects of diversity such as sexual orientation, gender identity, and neurodiversity.
Diversity also needs to be contextually understood in relation to the specific dynamics of each organization. For instance, in an organization where leadership is predominantly female, diversity could mean bringing in male perspectives. In a predominantly white leadership team, racial diversity could provide much-needed balance. In a company heavily skewed towards engineers, hiring individuals from different professional backgrounds like law, psychology, or humanities could enrich the overall organizational perspective.
Central to any concept of diversity is to look beyond the surface. Jacqueline Hunt, a former member of the management board at Allianz, highlighted this idea in an example she shared with us: “When I met the leadership team of a business, I worked with for the first time, I asked to see the CVs of the senior people I was about to meet. They looked good in some ways because there was some diversity. There was gender diversity. And there were a couple of different ethnicities. But in every single CV I read, they had come from an East Coast or West Coast background in the US. And had gone to one particular university to do an MBA and then had come from the MBA directly into the business and had spent most of their working lives with that business. And I thought it was really fascinating that on the face of it, you could have said they had a very diverse team whereas in practice, their life experience was all the same.” An organization can thus appear on paper to be driving change and diversity when, in fact, the people are just too similar in terms of background, how they view the world, and the training they’ve had.
The Other Side of Diversity: Hidden Costs and Challenges
While building diverse teams, leaders must also consider the potential costs and challenges associated with this endeavor. Homogeneity can offer the advantage of quicker consensus and faster decision-making. Building a diverse team will require additional time for team-building before its potential can be realized since team members need to reconcile differences, build trust and learn to function effectively together. There could be potential setbacks such as slower decision-making due to the extended discussions required to accommodate a multitude of perspectives.
Diverse teams can also be more challenging to manage because differences, while enriching discussions, can also be a breeding ground for misunderstandings, tensions, or conflicts. Leading a diverse team thus demands a unique set of skills and a higher level of understanding and empathy. Leaders who haven’t experienced diversity in their personal or professional lives often find this difficult to cope with, at least initially. Furthermore, teams comprised of individuals from disparate backgrounds could fragment into subgroups, leading to fractured communication and political infighting. Therefore, it is the leader’s task to act as a unifying force, bridging differences, and integrating the team.
Bringing Diversity to the Decision-Making Table
As this mixture of costs and benefits suggests, simply hiring a diverse team is unlikely to automatically generate the benefits of diversity. The environment must foster appreciation for diverse perspectives and the willingness to integrate them. All too often, diverse candidates are welcomed until they challenge the status quo or display strength and assertiveness, particularly in hierarchical organizations where higher-ranking leaders use their power to silence dissent. If diverse leadership is only skin-deep, it risks eroding the benefits of diversity.
Especially when companies treat diversity simply as a checklist – having a certain percentage of women, different ethnicities, or LGBTQ+ representatives without appreciating the complexity that comes with it – it often leads to diverse team members being sidelined for not conforming to the dominant culture. Jacqueline Hunt shared her observation: “Organizations often claim to want diversity, but in reality, they are content with ticking off diversity checkboxes. They don’t see the true value of it. So, they bring in people who are different… And then they expect them to behave like everybody else. And the discussion around the boardroom table becomes, ‘Well, he’s too disruptive.’ ‘He’s too blunt.’ ‘He’s not like us.’”
Successful integration requires not only hiring diverse team members but creating practices that systematically include them. Otherwise, the truly diverse will leave the organization if they have not already been dismissed for being disruptive. Inclusion requires creating an environment that values different perspectives, requires learning for all team members, and ensures every team member feels valued in the organization. Morten Wierod, president of the electrification business area in ABB, says, inclusion, is arguably even more important than diversity as it ensures individuals feel at home, respected, and are free to express themselves.
In Conclusion
In an ideal world, leadership teams would naturally reflect the diverse communities they serve. However, many organizations are still far from reaching this ideal. For those embarking on this transformative journey, the trade-offs must be addressed and the benefits and costs thoughtfully balanced. Leaders need to develop an approach that aligns with the unique context and aspirations of their organization to unlock the true value of diverse leadership.
Marianna Zangrillo and Thomas Keil are partners at The Next Advisors and co-authors of new book: The Next Leadership Team: How to Select, Build, and Optimize Your Top Team published by Routledge
