Leadership. The Effect of Diversity on the Performance of Teams

Research Paper (undergraduate), 2016

16 Pages, Grade: 1,3


Table of Contents

List of Tables

1. Introduction

2. Theoretical Background of Diversity
2.1. Definition of Diversity and Inclusion
2.2. Three Levels of Diversity
2.3. Opportunities of Diversity
2.4. Challenges of Diversity

3. The Effects of Diversity on the Performance of Teams

4. The Example of IBM

5. Conclusion, Critical Review and Outlook

List of Cited Literature

List of Tables

Table 1: Factors influencing the effects of diversity on the performance of teams (own presentation)

1. Introduction

Over the past decades, the population in Germany and other Western European countries as well as North America has become more and more diverse. This is increasingly reflected in the workforce of most organizations. Moreover, the percentage of women entering the labor force has risen substantially. Greater diversity is also inevitable due to enhanced mobility, which is driven by both political developments such as the E.U. expansion and less restricted labor markets as well as by economic developments such as the internationalization of business practices and markets. Furthermore, the numbers of immigrants into the E.U. is not only rising but immigration is also deemed necessary against the decline of populations in the coming decades due to low birth rates.1 Demographic change, increased retirement age, and efforts to shorten the duration of education will lead to a more age-diverse workforce in the future.2 Another aspect are legal changes that require companies to be more accessible to women, minorities and people with disabilities. In Germany, for example, the AGG (Allgemeines Gleichbehandlungsgesetz) has been in effect since 2006.3 In the U.S. the focus on accessible technology increased when in June 2001, the U.S. Congress implemented legislation mandating that all new IT equipment and services purchased by federal agencies must be accessible. This legislation makes accessibility a more important decision criterion than price in many bid situations, thus creating an opportunity for accessibility IT leaders to gain market share or charge a price premium from federal buyers.4 Increasing diversity is a reality that societies and organizations must deal with and attempt to make the most of. Diversity and inclusion have been a part of HR for more than 30 years. Many companies have had directors of diversity, diversity programs, and affirmative action programs that are decades old. Now, driven by high-profile press and the increasingly diverse nature of the global workforce, this topic will rise to become a strategic issue.5 This assignment will determine the effects of diversity on the performance of teams. First, “diversity” and “inclusion” will be defined, with an emphasis on the distinction between tolerance and affirmative action on the one hand and the appreciation of diversity as a potential benefit on the other hand. Afterwards, the opportunities and challenges that diversity brings to teams will be discussed. Since diversity tends to be a “double edged sword”6, this assignment will analyze under which circumstances diversity can improve the success of teams and on which terms it tends to be a hindrance. Afterwards, the example of the IBM will be used to show how diversity can be turned into a value to the company successfully. Finally, this assignment will come to a conclusion in which the effects of diversity will be reviewed critically and an outlook to further questions is given.

2. Theoretical Background of Diversity

2.1. Definition of Diversity and Inclusion

Bersin defines diversity as “the distribution of differences among the members of a unit with respect to a common attribute such as tenure, age, or ethnicity”7. Another definition states that diversity refers to differences between individuals on any attribute that another person is different from oneself.8 Obviously, there are many attributes with respect to which people can differ from one another. Not all of these attributes are equally meaningful to organizations. Most research therefore only addresses differences that directly regard job-related attributes such as educational specialization, educational level, functional background, and tenure, as well as not directly job-related, demographic attributes such as age, gender, nationality and cultural background. Another frequently made distinction is that between surface-level and directly visible characteristics (such as gender and age) on the one hand and deep-level, not directly visible characteristics (such as personality and values) on the other.9 For this assignment, the definition of Cox seems to be appropriate, since it pays respect to both the social and the organizational aspects of diversity: “Diversity is the variation of social and cultural identities among people existing together in a defined employment or market setting.”10 Another term that is relevant in this context is “inclusion”. Bersin defines inclusion as “creating an environment in which people feel involved, respected, valued, and connected—and to which individuals bring their authentic selves to the team and to the business”.11

2.2. Three Levels of Diversity

According to Franken diversity can be differentiated into three levels12. These levels help to differentiate between the mere toleration of diversity and the attitude that diversity actually holds the potential to be beneficial for the success of teams and therefore for business companies. These levels are defined as follows:

Level one: All people are equal. There is no discrimination between different human beings. The German AGG and the U.S. Affirmative Action Programme (APP) are examples of this first level of diversity.

Level two: People are diverse. Differences are legitimate. Target groups within the workforce and within the markets are being analyzed and used to gain new customers and to better suit these diverse customer’s needs.

Level three: Differences are appreciated. The benefits of diversity are perceived as an asset to the company. Different people learn from each other and thus hopefully improve the results of teams.13

For this assignment, it is important to view diversity not only in terms of legal compliance and human rights protections, which would equal viewing it as level one.14 The implications of diversity are much deeper, which for example can be seen in the history of diversity at IBM, which will be discussed later.15

2.3. Opportunities of Diversity

The opportunities of diversity can be divided into outbound and inbound effects. The outbound effects refer mostly to the marketing strategy of a company. A company with a diverse workforce is more likely to be successful in the diverse global markets we have today, for it is more likely to understand different cultures and is therefore more able to cater to their needs.16 Companies need to make “[…] diversity a market-based issue. It’s about understanding markets, which are diverse and multicultural.”17 Another outbound aspect is the attraction and recruiting of diverse talent.18 The inbound effects of diversity affect the performance of teams. According to Cox diversity can add value to the company by improving problem solving, increasing creativity and innovation, increasing organizational flexibility and improving the quality of personnel through better recruitment and retention.19 This is backed by Kearney and Voelpel, who claim “that diversity constitutes a potential for enhanced performance because heterogeneity entails a broader range of skills, knowledge, ideas, and networks. Under the right conditions, this enlarged range of resources could yield ideas and solutions that are superior to those obtainable in groups with a more limited scope and more overlapping and redundant resources.”20 Boehm et al. praise the “[…] information richness in diverse surroundings. This richness […] may be based on a variety of demographic attributes like age, gender, and ethnicity, which foster different experiences and knowledge bases. In addition, individuals with different backgrounds may have productive external and internal networks, leading to complementing information.”21

Also, diversity helps to avoid the groupthink effect, thus leading to a better decisionmaking process within the team.22 All researchers cited above come to the conclusion that the opportunities of diversity will not pay off by themselves, but need certain conditions within a company to really add value and to be beneficial for the success of teams. These conditions will be discussed in chapter 3.

2.4. Challenges of Diversity

Diversity can be a “double-edged sword”23: While it holds a potential for enhanced performance as shown in chapter 2.3., it also holds a likelihood for teams to underperform. This downside of diversity is explained by the social categorization perspective, which claims that persons tend to prefer to communicate and work with persons who are similar to themselves. Such “in-group members are subsequently liked better and treated preferentially in comparison to those who are less similar and thus categorized as out-group members.24 Another challenge of diversity is distrust against co-workers due to stereotypes against people who are different.25 Also, the concept of inequality is a model assuming that diversity has negative effects. Inequality means that relevant resources are allocated unequally across group members. The resulting different levels of power or influence can lead to negative outcomes such as communication problems or intra-group conflicts.26 Miscommunication is quite a serious problem when it comes to teamwork, since communication is the core element of any social system.27 Another challenge lies in the perception of the groups seemingly favored by a diversity-promoting-company: Putting a spotlight on certain groups, i.e. blacks, would be perceived as asking for unearned preferences, and, even worse, might even encourage the stereotype that blacks are less capable.28 The consequences of such thinking include stereotyping, unfair performance pressure, and the formation of interpersonal boundaries - which all lead to diversity having negative outcomes.29 The challenge for a company is to minimize the negative effects of diversity and to maximize the positive ones.

3. The Effects of Diversity on the Performance of Teams

As stated before, diversity is not always beneficial for teams - it can be an asset or a liability. The following chapter will show under which circumstances diversity can improve the success of teams and on which terms it tends to be a hindrance. Table 1 gives an overview of the factors influencing the effects of diversity.

Table 1: Factors influencing the effects of diversity on the performance of teams (own presentation)

illustration not visible in this excerpt

Task type. A team only seems to benefit from diversity on complex or explorative tasks. On these tasks, it is important to generate new and creative ideas and to identify the best among many different ways of reaching a certain goal. In such cases, a broader range of skills, knowledge and perspectives holds a potential. The information richness of diverse teams is assumed to be especially rewarding when dealing with non-routine problems and when striving for creative solutions.30 In simple and routine tasks where teams are required to simply follow a defined course of action, diversity does not improve the results. Thus, diversity is not always beneficial to teams, but only holds a potential for certain types of teams - those working on complex, explorative tasks.31 For example, age diversity is positively correlated with performance in complex task, but not in routine ones.32

Attitude. A Positive attitude towards diversity help to prevent the negative and foster the positive effects of diversity. Whether diversity turns out to be an asset or a liability depends on how people view diversity and what they expect of it. If diversity is regarded as a nuisance that somehow needs to be accepted and dealt with, it is unlikely that a positive effect of diversity will emerge. It is required that diversity is acknowledged and valued as a means to broaden the range of skills, knowledge bases, and ideas.33 A team that appreciates the positive constructive potential of differences is more likely to make the benefits of those differences attainable.34

Personalities. The extent to which a team benefits from diversity also depends on the personalities of the team members. For example, individuals differ in the extent to which they relish the opportunity to work with dissimilar others and like to view problems from multiple angles. Independent of technical skills and knowledge, it matters what types of personalities are assembled in diverse organizational units. Some persons are simply more open to working with dissimilar others and thus are much more likely to act constructively and strive for synergies in heterogeneous team settings.35


1 See Kearney, Eric; Voelpel, Sven C. (2012), p. 4

2 See Boehm, Stephan A. et al. (2011), p. 121

3 See Kearney, Eric; Voelpel, Sven C. (2012), p. 4

4 See Thomas, David A. (2004), p. 106

5 See Bersin, Josh (2016), p. 30

6 See Cox, Taylor (2001), p. 5

7 See Bersin, Josh (2016), p. 33

8 See Kearney, Eric; Voelpel, Sven C. (2012), p. 6

9 See Kearney, Eric; Voelpel, Sven C. (2012), p. 6

10 See Cox, Taylor (2001), p. 3

11 See Bersin, Josh (2016), p. 33

12 Franken refers these levels to Cox, Taylor (1993)

13 See Franken, Swetlana (2015), pp. 40-42

14 See Cox, Taylor (2001), p.4

15 See chapter 4

16 See Cox, Taylor (2001), p.10

17 See Thomas, David A. (2004), p. 98

18 See A. u. (2015), p.3

19 See Cox, Taylor (2001), pp. 6-9

20 See Kearney, Eric; Voelpel, Sven C. (2012), p. 9

21 See Boehm, Stephan A. et al. (2011), p. 126

22 See Liu, Xiumei (2007), p. 9

23 See Cox, Taylor (2001), p. 5

24 See Kearney, Eric; Voelpel, Sven C. (2012), p. 9

25 See Liu, Xiumei (2007), p. 8

26 See Boehm, Stephan A. et al. (2011), p. 126

27 See Grimm, Reinhard; Krainz, Ewald E. (2011), p. 9

28 See Thomas, David A. (2004), p. 101

29 See Boehm, Stephan A. et al. (2011), p. 126

30 See Boehm, Stephan A. et al. (2011), p. 126

31 See Kearney, Eric; Voelpel, Sven C. (2012), pp. 10-11

32 See Boehm, Stephan A. et al. (2011), p. 132

33 See Kearney, Eric; Voelpel, Sven C. (2012), p. 12

34 See Northcraft et. al. (1999), p. 84

35 See Kearney, Eric; Voelpel, Sven C. (2012), p. 13

Excerpt out of 16 pages


Leadership. The Effect of Diversity on the Performance of Teams
AKAD University of Applied Sciences Stuttgart  (BWL)
FGI03 Leadership
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
437 KB
globalisation, leadership, team-performance
Quote paper
Stefan Dirks (Author), 2016, Leadership. The Effect of Diversity on the Performance of Teams, Munich, GRIN Verlag, https://www.grin.com/document/349800


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