Why diversity is more than just being different, and what CEOs can do about it?

09 May 2017

Why diversity is more than just being different, and what CEOs can do about it? image

 Research undertaken by Dr Peder Greve from Henley Business School, in a joint project with researchers from the University of St. Gallen and Texas A&M University, shows how entrenched knowledge bases in management teams have a damaging impact on firm performance, and how CEOs by virtue of their integrative characteristics may be able to reconcile the differences.

 

 Even though the diversity of knowledge and experience is widely seen as a desirable feature of corporate leadership teams, people with distinct knowledge bases may often find it difficult to work together.

The authors of the study show that this problem is compounded if team members’ individual knowledge backgrounds are strongly entrenched. Knowledge entrenchment in leadership teams may give rise to subgroup formation and indecisiveness that negatively impact performance. Crucially, the study shows that CEOs can mitigate and even reverse these potentially negative effects of knowledge diversity. To do so, CEOs need to possess integrative characteristics such as shared team experience, diverse career backgrounds, and demographic similarity with the average team member.The study is based on a large sample of European multinational enterprises studied over a period of five years. There are important implications for multinational enterprises and other firms that wish to reap the benefits of knowledge diversity in teams. Diversity needs to be carefully managed to avoid that the challenges and costs of entrenchment and subgroup formation do not outweigh the benefits of gaining access to diverse knowledge, experience, and resources.

The study is based on a large sample of European multinational enterprises studied over a period of five years. There are important implications for multinational enterprises and other firms that wish to reap the benefits of knowledge diversity in teams. Diversity needs to be carefully managed to avoid that the challenges and costs of entrenchment and subgroup formation do not outweigh the benefits of gaining access to diverse knowledge, experience, and resources.

The study also emphasises the importance of selecting the right team leaders, who are able to effectively reconcile the individual knowledge backgrounds of team members and take advantage of the potential value in such differences.

The full article can be downloaded from The Leadership Quarterly.
Alternatively, please contact Dr Peder Greve for further information.