In a recent FCA webinar, Sheldon Mills (FCA), Gareth Truran (PRA), and other expert panellists discussed their proposals for a more diverse and inclusive financial services industry.
Throughout the discussion, it was suggested that better diversity and inclusion could improve a range of areas for business, including:
- Company culture
- Innovation of products and services
- Understanding the diverse needs of customers
- Ability to attract and retain skilled talent
- Internal governance and decision making
A common theme which could impact all the above to varying extents is the reduction of groupthink.
What is groupthink?
Groupthink is a psychological phenomenon that occurs within a group when the desire for harmony or conformity results in decision-making without critical thought or analysis. Individuals reinforce each other’s beliefs, resulting in overconfidence in their decisions, and a dismissal of others. Those who do oppose the group may feel pressure to agree or remain silent, with the lack of opposition only reinforcing the idea of a wider consensus.
In an organisational context, groupthink may present serious issues if the decision makers – particularly those at Board level – share the same opinions and do not challenge one another. They may overlook important considerations and suppress dissenting viewpoints. Ultimately, it can stifle creativity, inhibit innovation, and lead to poor decision-making.
As Trunan stated, “Groupthink has frequently been highlighted as a factor in a number of previous failures, most notably in the Walker review following the 2008 financial crisis”.
How can diversity and inclusion combat groupthink?
Provides diverse perspectives
When businesses embrace diversity, it brings together individuals with varied backgrounds, cultures, genders, ages, and experiences. This introduces a multitude of perspectives and viewpoints that challenge the homogeneity often associated with groupthink, and question consensus-driven decision-making.
Encourages dissenting views
In an inclusive environment, employees feel comfortable expressing opposing opinions without fear of backlash. Additionally, when an individual feels valued and respected for their contributions, they are more likely to continue to voice their perspective and challenge the prevailing viewpoint.
Improves decisions making
An environment where employees feel empowered to challenge assumptions and propose alternative ideas helps in critically evaluating options, reducing the chances of overlooking potential risks or flaws in strategies. A diverse collection of knowledge and experiences can uncover blind spots and promote the consideration of a wider range of potential solutions.
Helps to mitigate bias
With a lack of differing perspectives, groupthink can lead to the reinforcement of stereotypes and bias. By encouraging diverse interactions and understanding, businesses can naturally challenge the negative impact of unconscious biases that hinder open-mindedness and limit effective decision-making.
Actively promoting a diverse and inclusive environment can effectively counteract the negative effects of groupthink. By leveraging the richness of varied experiences businesses can encourage open dialogue, enhance decision-making, and create a culture where innovation thrives, ultimately contributing to the success and resilience of the organisation.