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 / Fall 2004 / Issue 36(originally published by Booz & Company)


Recent Studies

On diversity’s payoff, e-pricing strategy, marketing and growth, and other topics of interest.

Diversity and the Bottom Line
Robin J. Ely ([email protected]) and David A. Thomas ([email protected]), “Learning from Diversity: The Effects of Learning on Performance in Racially Diverse Teams,” Harvard Business School Working Paper #04-017. Click here.

Photograph by Bruce Weller
A legal firm specializing in cases involving low-income women had an all-white staff. The firm then hired some black attorneys, who brought a new perspective to the firm’s business. It began to pursue cases its all-white staff would have considered irrelevant or inappropriate. The firm’s business grew, as did its commitment to diversity.

Harvard Business School’s Robin J. Ely, an associate professor of organizational behavior, and David A. Thomas, the Naylor Fitzhugh Professor of Business Administration, use this and other examples to examine the conditions under which racial diversity in a work group enhances or detracts from performance. Their conclusion: Racially diverse teams with a “learning perspective” — a willingness to learn and an openness to learning — perform better than similar teams with a nonlearning perspective. Therefore, the authors conclude, a racially diverse team can use its diversity to improve performance.

To explore these issues, the professors studied people employed in more than 450 branches of three retail banks. The research was based on responses to four items in annual employee attitude/satisfaction surveys covering the extent to which employees believed their opinions were sought by their employers and regarded as valuable.

Professors Ely and Thomas found that the most open organizations — that is, those that encourage constructive conflict and the exploration of diverse views — maximized the performance benefits of their open-mindedness. These organizations regard diversity as a resource for learning about how best to do the group’s work. The emphasis is on productive learning behaviors and use of knowledge, including the sharing of information and insights, the receiving and giving of feedback, requests for help, and discussion of mistakes.

By contrast, the authors found when racially diverse groups suppress their differences, the sharing of different perspectives and cultural experiences cannot be mobilized when they would be useful.

Professor Bart Nooteboom of the Rotterdam School of Management, Erasmus University, echoes some of the Harvard researchers’ findings. His paper “Organisational Learning and Multinational Strategy” (in the Erasmus Research Institute of Management Report Series and available at examines the premise that internationalization makes for better learning organizations. Like Professors Ely and Thomas, Professor Nooteboom found that openness to differences is the key to productive learning for organizations; it is a primary way to discover new insights and overcome inertia.

Professor Nooteboom suggests there is a cycle of discovery as companies internationalize. This cycle has three elements: generalization, the application of competencies across a wide variety of contexts; differentiation, the application and adaptation of competencies to local contexts; and reciprocation, the ability and willingness to interact with others in new working situations and, as a result, to adopt alternative ways of thinking and acting.

Price Rigidity in the E-World
Robert J. Kauffman ([email protected]) and Dongwon Lee ([email protected]), “Should We Expect Less Price Rigidity in the Digital Economy?” Proceedings of the 37th Hawaii International Conference on System Sciences, 2004. Click here.

Most people think the digital economy makes for highly flexible, transparent, and responsive pricing. Online experience buying airline tickets, renting cars, and booking hotels, with prices changing by the hour, suggests that less price rigidity is one of the happy side effects of the digital economy.

But, according to Robert J. Kauffman, a professor and director of the Management Information Systems Research Center at the University of Minnesota’s Carlson School of Management, and Dongwon Lee, a doctoral student at the school, our first instincts may be wrong. In their view, prices in the digital economy are frequently as inflexible as they are in the “real world.”

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