Ishani Aggarwal, research affiliate at MIT Sloan School of Management, and assistant professor, Brazilian School of Public and Business Administration, has been researching collective intelligence and cognitive diversity in teams for 10 years.
Aggarwal highlights that while there is surface-level diversity – like race or gender – the information processing attributes like education, beliefs, way of thinking, and experience provide a deeper level. She has been investigating what this deeper level cognitive thinking – knowing and processing information – brings to a team. There are three cognitive styles: spatial visualisation, object visualisation and verbalisation (and some people have cognitive flexibility).
Interestingly, while there are many benefits to cognitive diversity in a team, such as a broader perspective, the differences in processing information also bring complexity and conflict.
She says the biggest contingency factor, as to whether cognitive diversity benefits team performance, is the context of the task being undertaken.
“My research shows that team cognitive-style diversity improves team performance in a creative task, but the opposite is true in an execution task, where the more diversity the worse the performance.”
“Teams with high cognitive diversity have trouble coming to strategic consensus – so this creates difficulty in execution tasks,” she says.
“The task context is of vital importance in assessing collective intelligence, which is defined as the ability of a group to perform consistently across a wide array of tasks.”
Aggarwal hypothesises that there is a U-shaped relationship between cognitive-style diversity and collective intelligence, such that too little, or too much, cognitive diversity hurts collective intelligence.
This leads to the idea that there is a “right” level of cognitive diversity that leads to consistent performance over an array of tasks.
Further, Aggarwal says there is a strong link between intelligence and learning at the individual level and hypothesises there is a positive link between collective intelligence and the rate of team learning.
She says there is a clear relationship that cognitive-style diversity leads to collective intelligence, which leads to team learning.
However, importantly, a moderate amount of cognitive-style diversity helps collective intelligence and team learning but high and low levels of cognitive diversity hurts this.
Investment committees and diversity
Roger Urwin, global head of content at Willis Towers Watson, says Aggarwal’s research regarding the U-shaped relationship between diversity and team performance, reinforces that there is an ultimate board size, a sweet spot.
“The less that one person dominates, and communication in general increases, the higher the collective intelligence,” he says.
And as Urwin points out, these observations are important for the institutional investment industry, which is personality driven.
“The group is a problem,” he says. “No-one ever erected a monument to an investment committee – this is a personality-driven industry.”
Urwin argues that the investment committee head room for improvement is huge.
“A lot of investment committees are representing the constituent of the fund. From that point of view there is already a problem of competency – which could be a bigger problem than diversity.”
Urwin says the investing environment is volatile, uncertain, complex and ambiguous.
“In this context domain experts are critical assets to investment committees. Often this involves an independent associated with the fund, and advanced cognitive competencies are desirable,” he says.
“High-functioning investment committees accept assessment and accountability, engage in personal development, play their part in cognitive and decision-making diversity.”
Urwin believes that the actions and behaviours of the chair are key to improving investment committee accountability and performance.
“How the chair acts and behaves is critical, the performance of the committee is their responsibility, how a chair can manage their team then becomes an opportunity – people don’t use that language,” he says. “The chair has three more roles than a committee member; that needs to be an area of development.”
Urwin believes the industry can measure more than what it already does, and that the input as well as the output could be a focus of more measurement.
“I see many situations where critical questions get blocked in investment committees. Diversity matters because diverse groups see more and have different ways of seeing the problems, and thus faster and better ways of solving them. It is about getting the right people on the bus,” he says.
But whatever an organisation’s beliefs on diversity are, Urwin says effective collaboration cultures and practices are critical to investment committees.
“With complex problems faced by investment committees, if everyone thinks the same way we get stuck in the same place. If we have diversity then we can work through the blocks,” Urwin says. “But lack of homogeneity about what truly matters is a problem, everyone needs to be aligned on values and beliefs.”
Popular across Investment Magazine