Juliet Bourke previews insights from her new book “Which two heads are better than one? How diverse teams create breakthrough ideas and make smarter decisions” The discovery of DNA, the breaking of the German Enigma Code, the development of the Black-Scholes Options Pricing and Charles Darwin’s theory of natural selection. Seemingly disparate moments in science, war and economics – but there’s a unifying theme. The DNA scientists came from the diverse disciplines of chemistry, biology and physics. The Enigma Code breakers comprised linguists, mathematicians and scientists. The Black-Scholes model blended economics, mathematics and heat transfer physics. Darwin, a geologist, relied heavily on Gould, an ornithologist, to understand the significance of the birds he had collected from the Galapagos Islands. These all exemplify the insight Frans Johansson explored in his best- selling book, The Medici Effect: Breakthrough insights at the intersection of ideas, concepts and cultures. Each of these innovations sits at one, or more, of Johansson’s intersections and created a step change in our modern world. Applying the picture puzzle metaphor to Johansson’s insights, diversity and team performance, the picture’s central image emerges. But the boundaries and background need to be filled in. We can complete the picture if we can incorporate more of what we now know about the effects of gender and racial diversity on team dynamics, and the value of integrating individual’s different thinking models. And if we can see the diversity picture more clearly, we can more confidently answer leadership questions such as: What mix of people enhances the performance of boards and executive teams, once capability has been established? Smart teams: What makes them smart? Consider this: In one corner, a small team easily completes a set of simple cognitive tasks set by researchers from Carnegie Mellon University and Massachusetts Institute of Technology. The tasks involve “visual puzzles, brainstorming, making collective judgements and negotiating over limited resources”. As soon as the simple tasks are completed the teams move onto solving other more complex tasks. In another corner, a different small team is still struggling with the same simple cognitive tasks. The researchers repeatedly saw this scenario confirmed during their observations of 699 people working in groups of two to five people. What differentiated the groups? Why was one group ‘smarter’ than another? It wasn’t so much the individual intelligence of each of the group members, although that was important. Professor Woolley and her colleagues found that the smarter teams possessed collective intelligence, and it could be predicted by three factors. The first factor was, the degree to which team members were socially sensitive, i.e their ability to read social cues such as when someone was perplexed. The second factor was the degree to which the group practiced speaking in turns or was dominated by a few loud voices. Lastly the third factor was whether the group included women. The inclusion of women was important not because the women were extra smart, or had access to gender specific knowledge, but because women scored slightly better on the social sensitivity test. This is an intriguing result, and one which helps to complete the picture by putting into place another of the diversity puzzle pieces. Gender diversity makes a difference to team performance, but not simply because it ensures a team is accessing a broad pool of talent. Woolley’s research alludes to a more subtle value: gender diversity helps improves team dynamics. This conclusion is supported by the work of other academics. London Business School Professor Gratton and her colleagues found that feelings of psychological safety and experimentation were optimal in a group with 50:50 gender ratios. They found that the self-confidence of team members was optimal when the gender ratio was 60% women to 40% men. University of Illinois Professor Fairburn found that small groups of men and women were 9% more likely to transfer smiles between each other than all male groups. This is significant because mutual smiling promotes feelings of social bonding. And quite obviously, positive feelings of social connectedness are conducive to people sharing information, which in turn enables more thoughtful decision making. Racial diversity: another piece of the puzzle In small clusters of six, stock market traders in Singapore and Texas are deciding whether to buy or sell shares. Their task is to “calculate accurate prices for simulated stocks” over ten trading periods that each last two minutes. After 2,022 market transactions, Columbia University Professor Levine and his colleagues observed that some of the clusters only made a few pricing errors and traded accurately about 65% of the time. However, other clusters regularly overpriced, created pricing bubbles and traded accurately only 40% of the time. What was the difference between the clusters of traders? Once again there’s a diversity connection: the successful Singaporean and Texan traders featured multi-ethnic/racial groups, not homogenous ones. With this the researchers concluded that visible racial diversity triggered stimulated uncertainty, bringing “cognitive friction that enhanced deliberation”. With this yet another part of the puzzle falls into place, this one relating to racial diversity. Other researchers support this connection between racial diversity and behaviours such as curiosity and listening. Conversely, those studies also show that visible similarity stimulates feelings of comfort, confidence and assumptions of like-mindedness. Feelings which lead to faster, but ultimately sub-optimal, decision making. Mental Models Our own leadership and diversity research reveals a final puzzle piece: Namely individuals tend to over-emphasise one or two ways of solving problems, and to under-weight other relevant approaches. More disturbingly, we found that collectively 75% of senior leaders tend to spend much more time defining the outcomes they want to achieve and debating options (classified as the two dimensions of “outcomes” and “options”), and comparatively less time discussing risks, the implications for staff and customers, the process of implementation, and the evidence to justify and measure a solution (classified as the four dimensions of “risk”, “people”, “process” and “evidence”). Why? Because as individuals they were more likely to think that those two approaches were more important than the other four. And when the group was dominated by leaders with that bias, they formed a voting block which quietened the voices of leaders who approached problem solving in a different way. Why does it matter? University of Michigan Professors Hong and Page calculated a 30% error rate when problems are solved via the application of one dominant approach – and conversely a 100% accuracy rate when five different approaches are applied. This is not to suggest that collecting a widely diverse set of approaches is optimal; there is a ceiling. Too many approaches and a group will lose productivity as they spend time understanding another team member’s point of view. Indeed, Hong and Page calculated that when nine approaches are considered, value starts to erode and the accuracy rating drops to 90%. In sum, Hong and Page defined the optimal number of problem solving approaches as between five and eight. Our research confirms that of Hong and Page. When we have worked with leadership teams to deliberately attend to six more balanced approaches to problem solving (outcomes, options, people, process, risk and evidence), groups report that by reducing blind spots they were able to develop more robust solutions. Moreover, followers report greater faith in the ultimate solution. The final word So where do these puzzle pieces leave us in relation to the bigger picture? Johansson had already given us clarity about the importance of disciplined diversity to team performance. A central image. With these other studies we can lock in more of the indistinct background of racial and gender diversity, and even some of the smaller pieces about individual mental models. Together they form an interesting and realistic picture of how diverse teams deliver superior performance. A picture that is more nuanced than much of what is said about the nature of diversity and the inter-relationship between various elements. Armed with this knowledge, diversity is no longer a puzzle. It is something leaders can pursue with great clarity, assurance and vigour. And with that, the likelihood that boards and executives will make smart and innovative decisions more consistently. Of course there’s more to be said about how inclusive leaders lead diverse groups to maximise their potential, but getting the who right is foundational. Juliet Bourke is the author of “Which two heads are better than one? How diverse teams create breakthrough ideas and make smarter decisions” forthcoming February 2016 (Australian Institute of Company Directors). Footnotes:  Johansson, F., (2004) The Medici Effect: Breakthrough insights at the intersection of ideas, concepts and cultures Harvard Business School Press, Boston.  Woolley, A. W., Chabris, C. F., Pentland, A., Hashmi, N., and Malone, T, W., (2010) Evidence for a collective intelligence factor in the performance of human groups, Science, Vol 330, pp. 686-688.  Gratton, L., Kelan, E., Voigt, A., and Wolfram H.J., (2007) Innovative potential: Men and women in teams The Lehman Brothers Centre for Women in Business, London Business School.  Levine, S. S., and Stark, D., (2015) Diversity makes you brighter. Op Ed. New York Times, December 9.  Levine, S. S., Apfelbaum, E. P., Bernard, M., Bartelt, V. L., Zajac, E. J. and Stark, D., (2014) Ethnic diversity deflates price bubbles PNAS Early edition, http://www.pnas.org/content/111/52/18524 retrieved 19 November 2014.  Hong, L, Page, S. E., and Riolo, M., (2012) Incentives, Information and Emergent Collective Accuracy, Managerial and Decision Economics, Vol 33, pp. 323-332.  Bourke, J., and Dillon, B., (2015) Fast forward: Leading in a Brave New World of Diversity (Customers, Ideas and Talent) Future Inc, Chartered Accountants Australia and New Zealand.