The Diversity Bonus

I have been reading “The Diversity Bonus: how great teams pay off in the knowledge economy” by Scott E Page (Princeton University Press, to be published in Sept 2017). I have read some of Page’s earlier work in this area and wanted to see what he had to say about diversity on boards of directors so I requested an advanced readers’ copy of this book from the excellent Netgalley . 

Page delivers a very readable and well constructed argument for the “bonus” to be derived from organisational diversity, which he characterises as identity and cognitive. The proposal that organisations benefit from diversity is intuitively convincing and thus uncontroversial and he supports it clearly with both anecdotal and more rigorous empirical evidence but also makes it clear that the bonus depends very much on context. An afterword by Katherine W Phillips offers further detailed academic evidence from her own research.

The emphasis in the book is on organisational teams but I think that the board of directors is a very particular form of team, partly because of its status in the organisation hierarchy but also because of the way in which its composition is determined and its prescribed accountability. This is not addressed in discussions about the value of diversity in this context and I was hoping for some insights in this book. How, for example, can diversity assist with oversight and monitoring tasks, an important part of the board’s role?

Page only focuses on boards in discussing gender diversity, a form of identity diversity. He examines the case of Norway, frequently cited as a successful example of mandating quotas. As Page correctly notes, the evidence shows that in some firms increasing the number of women on the board has resulted in a decrease in return on equity. He argues that this supports his diversity bonus logic model by demonstrating the importance of context and his analysis suggests that the Norwegian situation was not one in which such a bonus was likely to occur. He also points out that in the longer term the quota imposition may prove effective in promoting diversity.

I would also have liked to see some more detailed discussion  of the costs of diversity, which Page only mentions tangentially. These may be significant: lack of consensus can stifle productive progress and be difficult to manage. Unanimity is not always a signal of lack of diversity and is not necessarily negative: I suppose that in terms of Page’s logic this again shows that context is very important and there is not always going to be a bonus.

This is an interesting book which should provide food for thought for all involved in managing organisations.