Diversity at the Core of the Network

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Michael Arena

Diversity at the Core of the Network_adult females-business-people

As a self-proclaimed social scientist one of my favorite words is “homophily”. It comes from the Ancient Greek “homou”, meaning together. In a more direct manner, homophily can be describe as the natural tendency for individuals to connect or bond with people who are similar to themselves, or as the proverb proclaims, "birds of a feather flock together". It turns out that homophily is a scientific fact, hundreds of studies have been conducted to demonstrate that people of similar ages, economic status, and ethnicity tend to gather with one another. Within organizations, this is especially true with gender. In fact, gender clustering in the organizational network is one of the most predictive variables within a social system. If you don’t believe me, just observe the next workplace social gathering. I would be willing to bet you that you will quickly notice that women are naturally gathering with women and men collecting with men. Such homogeneity is not healthy for an organization’s adaptive capacity and long-term performance.

Diversity at the Core

Diversity is critical to the development of resilience in organizations and bottom-line results across time. For example, Gartner found that gender-diverse teams outperformed gender-homogeneous teams by 50%, on average. In another study, McKinsey determined that diversity on the executive leadership team drives performance. They found that organizations that are in the top quartile for gender consistently produce financial returns above the industry medians. Conversely, firms in the bottom quartile in gender diversity are statistically less likely to perform. To be more specific, organizations with top-quartile gender diversity on executive teams were 21% more likely to outperform on profitability and 27% more likely to have superior value creation. Furthermore, the highest-performing organizations had more women in revenue-generating or line roles.

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One way to think about this is to consider Ashby’s “law of requisite variety”. We can all appreciate that the world around us is becoming far more complex and dynamic. For example, consumers are demanding more options than ever before, they want variety. Just consider, for example, if you are a soda drinker (or a pop drinker, if you are in the Midwest), you use to be able to select either a Pepsi or a Coke. Today, there are hundreds of choices from colas, to vitamin waters, to power drinks. For an individual consumer it can be overwhelming, but this is what the broader market is demanding. For organizations to be able to respond to the variety of external interests, they need to offer many options. Ashby’s law suggests that the internal variety of an organization, needs to at least match the variety of the external world for the organization to be successful over the long-haul. Or, as Ashby put it, “only variety can absorb variety”. Of course, this variety goes far beyond product and service offerings. Organizations need to understand community issues, policy concerns and investor interests. This is one of the many reasons why diversity is so critical. The diversity of our employees needs to at least match the diversity of our external environment to ensure that an organization can be adaptive and perform across time.  

The bottom line is that diversity is essential to organizational resilience. However, the network structure of diversity is equally important. The science of homophily suggests that similarity breeds connections even when an organization looks diverse from a representation perspective. In other words, homophily can limit the variety of social connections and reduce the number of internal options available to respond to external issues. One study found that homophily can greatly disadvantage diverse groups, making them less visible and influential. This means that organizations need to first get diverse people into the organization and then quickly ensure that they have diversity in the core of the organizational network. This is one of the reasons that diverse line leaders are so critical. They tend to be more visible and have greater influence, or they operate at the center of the network.

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In the case below, within this organization we mapped out a network of nearly 500 individuals within a large service-based organization that needed to be highly adaptive. Nearly 44 percent of individuals in the network were women (as represented by the purple nodes in Figure 1). For many organizations this feels like a healthy gender mix. However, it is actually the network position of these women that is most critical to driving adaptive capacity and performance. While there is clearly homophily in the network, with women clustering with other women and men clustering with other men (as represented by the green nodes in Figure 1), there is also diversity at the core. That is, the center of the network has a solid mixture of gender diversity, ensuring that more diverse perspectives (at least from a gender perspective) are being shared, or requisite variety is present. Diversity at the core is critical. Within organizational networks, the people in the center have greater influence. As a result, they are able to disproportionally contribute. This ensures that the power of diversity is realized throughout the network.

Figure 1. large service-based organization

With today’s advancements in organizational network analysis we are able to extend beyond the first frontier of diversity, which is ensuring diverse representation within an organization, and move towards a point where we have diversity in the core. Today, we are able to empirically measure the effectiveness of our diversity strategies by leveraging network analysis to focus on contribution levels and influence. Without focusing on driving diversity into the center of the network, our well-intended strategies are at risk of deepening the effects of homophily. To be effective, organizations need to ensure diversity at the core.



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