Diversity is good, goes the conventional wisdom of the business world: companies that look and think more like the spectrum of their customers serve their clientele better. With a greater number of perspectives brought to a problem, diversity opens up new opportunities for synergistic information sharing, lifting a team's creativity and work quality, proponents say. Successes such as inventing cosmetics for women with various skin tones, employing Spanish-speaking sales representatives, and marketing vacations to locations of historical importance to African-Americans readily come to mind.

Yet the diversity picture is not all rosy, reveals our analysis of 50 years of research. How a company chooses to diversify is a critical yet overlooked aspect of why it does so. Diversity can be a powerful tool--but it is one that can cut both ways. Without proper management or worker training, diversity can actually dampen group performance. And the very ways that managers typically judge differences when they are staffing teams--in particular, surface attributes such as ethnicity, gender and age--may be more likely to have negative effects on the ability of these groups to collaborate.

Why hasnt the reality of diversity always matched up with the ideal? In many cases, it is because corporations have implemented policies and practices that emphasize diversity without a sufficient grasp of the factors that help such individuals come together in effective teams. Lacking a proper understanding of the complex social-psychological mechanisms, managers risk leaving their employees prone to disruptive divisions. Nevertheless, the research offers encouraging news, too: although leading or working with a set of dissimilar people can be difficult, remedies for managing, and capitalizing on, that diversity exist.

A Changing Workplace
We define diversity as "any personal attribute that someone else may use to detect individual differences." We realize the scope of that description is broad; thus, it may be useful to review the categorization schemes that social scientists have developed to explore the effects of diversity in teams.

In general, scholars have relied on two paradigms to define and understand diversity. The first is an approach based on factors, in which types of diversity are identified and measured. Factor approaches tend to fall into two categories themselves: bi-factor approaches, in which diversity is coded into two major types (such as visible and nonvisible), and multifactor, in which attempts are made to create exhaustive categories (such as demographic, education, values and personality factors). The second paradigm is an approach based on proportions, or ratios, of minority to majority members. This more generic approach tends to treat the types of diversity as interchangeable and focuses on proportion size (token members versus more balanced groups) as the variable of interest.

By any measure, the North American workplace has become increasingly diverse in recent decades. Changing population demographics and the welcome advancement of women and racial and ethnic minorities have literally changed the face of corporations. At the same time, many businesses have flattened organizational structures, using work groups to get tasks done-- and making effective collaboration across disciplines and functions more critical than ever.

Half a century of research on diversity, however, reveals that its overall benefits are not clear-cut. Indeed, the business case (in terms of demonstrable financial results) for diversity remains hard to support, as reported a recent study by Thomas A. Kochan of the Massachusetts Institute of Technology and researchers from institutions that included the Harvard Business School, the Wharton School at the University of Pennsylvania and Rutgers University.

First, the type of diversity may affect the group. Though the findings are not uniform in every study, differences based on surface-level, or superficial, social categories--such as race, ethnicity, gender and age--are more likely to affect group performance, commitment and satisfaction negatively; one possible explanation is that such differences trigger preconceived stereotypes and biases. In their five-year study, for instance, and consistent with most of the research on this topic, Kochan and his colleagues found that racial diversity tends to hurt team processes. In contrast, underlying differences, such as functional background, education or personality, tend to improve collective performance--but only when the group process was managed appropriately. (More on that later.)

In a field study of 92 work groups published in 1999, researchers Karen A. Jehn of Leiden University in the Netherlands, Gregory B. Northcraft of the University of Illinois and one of us (Neale) distinguished among three types of diversity: social category, informational and values. Social-category diversity, as measured by heterogeneity in sex and age, positively influenced group-member morale. Informational diversity, or differences in education and functional area (or role) in the firm, increased task conflict (that is, conflict over ideas, opinions or ways of approaching the group task), which enhanced group performance. And finally, value diversity, as measured by perceptions of differences in goals and values among group members, decreased individual satisfaction and commitment to the group.

Another study, also published in 1999, found complex links between diversity, conflict and work-group performance, depending on whether the diversity was relevant to the job. Lisa Hope Pelled and Katherine R. Xin of the University of Southern California and Kathleen M. Eisenhardt of Stanford University defined job-relatedness as the extent to which the variable directly shapes the perspectives and skills related to cognitive tasks. Functional-background diversity, which is job-relevant, beneficially intensified task conflict; greater task conflict improved cognitive performance. Racial diversity, high in visibility but low in job-relatedness, boosted affective conflict (that is, interpersonal tension and emotion-based conflict); affective conflict depressed group performance. Age diversity, another highly visible type, lowered affective conflict. Gender diversity did not appear to sway group performance one way or the other. Interestingly, both group longevity and task routineness (that is, more similarity in the day-to-day demands of the job) moderated these effects. In groups that had worked together longer, the association between diversity and conflict was lessened. If the task was routine, the positive association between diversity and emotional conflict dropped. And routineness increased the positive relation between diversity and task conflict.

As we noted, an alternative approach to understanding diversity includes theories that focus on the proportions of minority/majority membership. Some theorists hold that as minority groups grow in proportionate size, majority groups may perceive them as a threat to their own power and claim on scarce resources. Perceptions of competition and power threats lead to rising hostility and discrimination, which explains why so-called balanced groups may be particularly dysfunctional. A 1995 study by Pamela S. Tolbert of Cornell University and others found that university departments with a high proportion of women faculty were significantly less likely to further augment the number of females. These researchers ultimately concluded that "women's growing representation in a group leads to an increasingly negative environment for them."

Similarly, Amy S. Wharton, now at Washington State University, and James N. Baron of Stanford looked at the ramifications of gender segregation on men at work in studies in the late 1980s and early 1990s. They found that whereas women tend to prefer gender balance or even male dominance at work, men in mixed-gender settings reported experiencing significantly lower job satisfaction and self-esteem and more job-related depression than men in either male- or female-dominated settings.

In 1998 Dora C. Lau of the University of British Columbia and J. Keith Murnighan of Northwestern University suggested a way to reconcile the proportion and factor approaches with their theory of group fault lines. These hypothetical dividing lines may split a group into subgroups, usually based on multiple attributes. According to these theorists, the strength of fault lines depends on three compositional factors: the number of separate attributes apparent to group members, the alignment of sets of individuals as a consequence, and the number of potentially homogeneous subgroups.

Lau and Murnighan have proposed that group fault lines would become more pronounced as more attributes are highly correlated, thus reducing the number and making the subgroups more homogeneous. Think of a group that includes five young white male shipping clerks who have worked for a company for less than a year and five middle-aged black female vice presidents who have been with the company for 20 years or more; the group's fault line would be particularly strong because all the listed characteristics are highly correlated. In this example, both the type of diversity and the proportions of minority and majority members are important. Little research has been done on this theory, however, and more work is needed to clarify how fault lines may form and affect groups.

Harnessing Diversity
Scholars still have much to learn about the nuanced behavior of diverse people working in groups, but one thing is already clear: unless diverse teams overcome the disruptive effects of their differences or avoid the tendencies to drive out the distinctiveness of minority members, they will be unable to engage in effective and creative problem solving. It is vital for managers to bring a method of social integration to the teams and their organizations as a whole. The strategy must bridge the chasms formed by diverse characteristics but not eradicate the distinctiveness and uniqueness of individuals and the value that they bring to the team.

We have several suggestions. First, managers should establish clearly the context and purpose of the team and then pick the appropriate members based on that goal. A diverse team with a purely fact-gathering mission might be likely to have very different success than a diverse team with a short-term, goal-directed project. Second, managers must provide ways to bridge the interaction of the diverse team members through connections such as common social ties, values, identity and superordinate (overarching) goals; organizational culture and training are also important. Third, they should keep the useful exchange of information flowing by focusing on enhancing the influence of the minority team member. Here is how the three elements can play out.

Match team to task. Research indicates that exploration (fact finding and learning) requires the creation and emergence of diverse perspectives at the level of knowledge, skills and abilities--and is best achieved by teams of heterogeneous individuals. In contrast, exploitation (applying the learning to accomplishing a task) is easier for homogeneous teams. Recently Michael L. Tushman of Harvard Business School and his colleagues noted the advantages of an alternative form of organizational architecture that includes both kinds of teams--exploration and exploitation--integrated by a top management team. Such an ambidextrous organization has the advantage of being designed to manage the contradictions that many scholars argue are required to create long-term organizational effectiveness.

Build bridges. Perhaps one of the most disappointing findings in recent years about group decision making is that groups working together typically focus on shared, rather than unshared, information. For example, in 1996 Deborah H. Gruenfeld, Katherine Y. Williams and both of us compared the information exchange and decision making of three-person teams. We found that groups composed of socially interconnected individuals outperformed groups of strangers in "hidden profile tasks"--those in which various members have different pieces of the information that would be necessary for the success of the project. But groups composed of strangers outperformed the socially tied groups when all information was common to all members. We believe that teammates who were socially connected felt a greater sense of security that led to their greater readiness to take the social risks involved in sharing their unique information.

A leader can similarly bridge diversity by bringing superordinate goals to the team. Such goals might be task-related, organizationally relevant, or focused on work values. For example, team members at the World Bank from different national, religious and functional backgrounds connect with one another by focusing on their overarching goal of working to end poverty and to improve economic development around the planet. In another case, in 2005 Jennifer Chatman of the University of California, Berkeley, and Sandra Spataro of Cornell University learned that demographically distinct individuals (for example, those who differed from their co-workers by race, nationality or gender) behaved more cooperatively when their business unit emphasized collectivistic rather than personal cultural values.

Create an open environment and forge alliances. Studies have consistently shown that employees exposed to opposing minority views reap the creativity-boosting benefits of diversity: they exert more cognitive effort, attend to more aspects of a situation, think in a divergent way, and are more likely to detect novel solutions or come to new decisions. Key to such achievement is enabling the person who is different to interact with, and influence, the rest of the team. If teams cannot create an environment that is tolerant of divergent opinions and emphasizes interdependence to reach a cooperative goal, then the individuals who carry the burden of having the unique perspectives may be reluctant to pay the social and psychological costs necessary to share their viewpoint.

Ultimately, the team leader has to support the notion that the minority opinion holder must be heard. A coalition, or alliance, with the leader helps to confer status and opens the door to respect for the minority. Setting a group norm of openness and learning also helps to enhance the ability of the minority individuals to make themselves heard. The overall opinion of the group may not move entirely to the minority point of view, of course, but a fully participating minority should facilitate decision making.

Embracing Change
Most important, organizations and their leaders must become part of the solution: they must encourage and reward change. Inertia is powerful, and organizations and their leaders must provide sufficient incentives to overcome it. For example, one company we know asks all its senior managers to mentor junior managers and to prepare at least three individuals to be ready to move up into their jobs. Part of each manager's performance evaluation is based on how well she or he has mentored junior staff. This company also realized a few years ago that more diversity was desirable at the top and that it was not happening naturally. So the firm requires that at least one of the three junior staff being mentored be a woman or underrepresented minority. This strategy fostered diversity throughout the organization and has also, by its very nature, improved the amount of interaction between senior level managers and underrepresented minorities, to the benefit of its operations.

David A. Thomas and Robin J. Ely of Harvard Business School have argued that companies that develop a "learning and effectiveness" culture will create an environment that places high value on people's underlying identities and outlooks. Within such a culture, diversity is connected to work perspectives, and employees differences can contribute to the organization's vision and strategy. In fact, in these organizations, members of minority groups are able to challenge how things are done and the ways in which "reality" is perceived. Thus, learning and change are much more likely.

Naturally, this paradigm shift requires several (perhaps difficult) preconditions. Among them is having corporate leaders who seek a variety of opinions and insights and who recognize the challenges that expressing such opinions can present for an organization. In addition, the culture must value openness and stimulate personal development. These requirements may seem like a tall order, but they set the stage for companies to truly realize the tremendous assets of their members diversity.