Practical analysis for investment professionals
04 October 2016

Collective Intelligence: Three Factors for Building Smarter Teams

Collective Intelligence: Three Factors for Building Smarter Teams
On 18–19 September, CFA Institute will host Alpha and Gender Diversity 2017 in Toronto, the latest in its series of Women in Investment Management events. Attendees will have opportunities to discuss gender diversity, foster professional development, and meet their peers from other regions in North America.

It’s election season in the United States, and voters will soon head to the polls to determine who moves into 1600 Pennsylvania Avenue come 20 January 2017.

On the face of it, people cast their ballot for a particular candidate, but in reality it’s a vote for that person and their team of advisers. After all, what is a president without their cabinet?

Which is why building smart teams is crucial. What matters most is not how smart the individual members of the team are, but how effectively they work together.

“The Best and the Brightest” vs. “Team of Rivals”

Think about these two cabinets and which was the “smarter” team:

President John F. Kennedy famously assembled a group of advisers dubbed “The Best and the Brightest.” According to US presidential historian Robert Dallek, “JFK systematically surrounded himself with exceptionally smart men. As Kennedy told a group of Nobel laureates he had in for a luncheon at the White House: It was the greatest collection of brains ever assembled there except for the time Thomas Jefferson dined alone.”

And how did that work out for him?

“Having the smartest people in the room when he decided to go forward with the Bay of Pigs invasion did not insulate Kennedy from a mortifying, embarrassing failure,” writes Dallek. “True, he publicly took responsibility for the disaster, but the fact remained that he relied on his advisers in going ahead with so faulty a plan. The greatest, most memorable blunder of the Kennedy’s best and the brightest was Vietnam.”

Then there is President Abraham Lincoln’s famous “Team of Rivals,” also the title of Doris Kearns Goodwin’s magisterial account of Lincoln’s leadership during the Civil War, Team of Rivals: The Political Genius of Abraham Lincoln. (The book was subsequently made into the Academy Award-winning film starring Daniel Day-Lewis as Lincoln.)

President Lincoln’s cabinet included all of his major rivals for the Republican presidential nomination in 1860. “No President ever had a Cabinet of which the members were so independent, had so large individual followings, and were so inharmonious,” Chancey Depew, a  New York politician, observed.

Goodwin called Lincoln’s team “the most unusual cabinet in history“.

And yet as students of US history know, it was the team that ended slavery and preserved the Union.

What Leads to Smart Teams?

So what is it that makes one team “smarter” than another — not in the sense of the average of all the IQs, but rather in terms of effectiveness?

Anita Williams Woolley, a professor at Tepper School of Business at Carnegie Mellon University, likes to use these two cabinets to illustrate that we “are really bad at predicting which teams are going to perform well in the future,” in part because we tend to focus on individual attributes, and less on how the team works together. It’s important to ask: Why was Lincoln’s team more successful than Kennedy’s?

Woolley posits that one potential answer is collective intelligence.

“Many of us are very familiar with the concept of general intelligence and the notion that there’s this underlying factor that drives performance across many different domains,” Woolley told delegates at the recent CFA Institute Alpha and Gender Diversity Conference in Boston. “We wanted to know if the same thing might be true for teams. Is there an underlying collective intelligence factor that enables certain teams to perform well consistently across many different scenarios? Is it something that’s really separate from individual ability?”

So Woolley and her colleagues brought teams into the lab to study their behavior. What they found was that collective intelligence was a much stronger predictor of future performance than the average IQ of the individual members of the team.

“This suggested to us that this is a factor that is independent of individual ability and worth exploring more deeply,” she said. “It led us to ask ourselves the question, ‘What leads to smart groups? If it’s not smart people, what is it?'”

Woolley told delegates that there are three factors that consistently lead to collective intelligence, or smart groups: right people, right goals, and good collaboration.

“The first has to do with some attributes of the individuals on the team, but not individual intelligence,” she explained. “The second has to do with the kinds of goals that they’re pursuing. The third has to do with how they’re working together.”

1. Right People

Woolley said that she and her colleagues didn’t set out initially to explore the effect of the group’s gender composition on collective intelligence.

“In fact, there was a graduate student in our research group who initially was saying, ‘You know what? There seems like there’s a relationship with the proportion of women.’ At first I was like, ‘I don’t know. We shouldn’t make too much of that until we see it a few times.’ After the second, and the third, and so on, it’s like, ‘Okay. We need to pay attention to this.'”

This is what she found:

“It’s not until the teams become majority female that they are consistently above average collective intelligence. They peak at the point where there is just one guy. We don’t have an explanation for that one. Then it trails off down to average again when it’s all women. We have some hypotheses about that but no data yet. What it strongly suggests is that gender diversity is a benefit to collective intelligence, gender diversity with a tilt toward women.”

One of the reasons for that relates to a trait she calls “social perceptiveness,” which she explained has to do with picking up on subtle nonverbal cues and making inferences about what somebody is thinking or feeling.

“It turns out that teams that are higher on this trait are more collectively intelligent,” Woolley said. “Women, on average, score higher on these tests than men. That’s true in our sample and is also true in the population. That explains a large proportion of the effect of having more women in the team . . . that you raise the average social perceptiveness.”

2. Right Goals

Woolley explained the differences between process‑focused teams that emphasize the schedule, the tasks, and the roles first vs. outcome‑focused teams, which we tend to think of as prototypical entrepreneurial teams, that emphasize the desired result first.

It turns out that these types of teams are best suited for different kinds of situations.

“A process focus is useful when a task requires impartiality, error prevention, comprehensiveness,” said Woolley. “Things like conducting an audit [and] jury trials. By contrast, when a task requires innovation, insight, identifying priorities, that’s when you want more of an outcome focus: crafting a new strategy, developing a new product, things that really require creativity.”

But she emphasized that this doesn’t mean planning isn’t still critical. “Planning is important for both of these. It’s the nature of the planning that tends to change.”

Cognitive diversity, she added, “has an effect on whether the team becomes outcome or process focused.”

3. Good Collaboration

“Where there is a more even distribution of communication, the team is much more collectively intelligent,” Woolley said. “If you have one or a few people dominating the conversation, it really hurts collective intelligence. Relating this back to having the right people on the team, we also find that when you have more women on the team and when you have people with higher social perceptiveness on the team, it’s much more likely the team has an equal distribution of communication. This is another reason why the team composition affects collective intelligence.”

Woolley briefly touched on three ways that teams interact:

  • Pooled Interdependence: To use a sports analogy, think swim teams when each member competes in their own individual event and their scores are added together.
  • Sequential Interdependence: Think American football: A team’s offense affects defense and vice versa, but they don’t play at the same time.
  • Reciprocal Interdependence: Think soccer or basketball, where there is more give and take.

“Pooled interdependence is very good for efficiency, sequential interdependence is good for accuracy, but integration is really fostered by reciprocal interdependence,” Woolley said. “However, many teams, again, fall into favoring efficiency, and so they undermine their ability to really integrate the diverse expertise they’ve brought together and ultimately the collective intelligence of the team.”

The Bottom Line?

“You can’t simply put the right people in the room without thinking about how they’re going to work together,” Woolley said. “What our research strongly suggests is that collectives are characterized by a stable level of collective intelligence that is measurable and that can be used to predict future performance. Cognitive diversity can enhance collective intelligence if it’s managed well.”

Tom Brakke, CFA, summed up the session this way:

“What leads to smart groups? As Woolley outlined, it’s the right people with the right goals, in an atmosphere marked by good collaboration. A group should have cognitive diversity, with a high degree of ‘social perceptiveness’ (the ability to read other people) among the participants. In general, they should balance their attention between a focus on process and one on outcomes, since each provides value, depending on the environment and the nature of the task at hand. And there should be a high level of communication and generally equal input among the participants.”

In other words, in team discussions, everyone should contribute at an equal level, avoid stars or slouchers, and beware “bad apples” who are domineering or very negative.

Oh, and one other thing: Be sure to include more women.

Reading List

If you’re interested in learning more about the research on collective intelligence and building smarter teams, the following resources may be helpful:

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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.

Image credit: Courtesy of Monica Pedynkowski

Video



Key Takeaways

  1. A team’s ability to work together can be more important than the intelligence of individual team members — collective intelligence has been a stronger predictor of future performance than the average IQ of the individual members of a team.
  2. Process‑focused teams emphasize schedules, tasks, and roles, while outcome‑focused teams emphasize the desired result first.These types of teams are best suited for different kinds of situations.
  3. Even distribution of communication helps a team’s collective intelligence, while small numbers of people dominating the conversation hurts a team’s collective intelligence.

Transcript

BUILDING SMARTER TEAMS
Anita Williams Woolley
Associate Professor, Tepper School of Business, Carnegie Mellon University
Scott E. Page
Leonid Hurwicz Collegiate Professor of Complex Systems, Political Science and Economics, University of Michigan
Margaret E. Franklin, CFA (Moderator)
President, BNY Mellon Wealth Management Canada

View the full transcript (PDF).


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About the Author(s)
Lauren Foster

Lauren Foster is managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Previously, she worked as a freelance writer for Barron’s and the Financial Times. Prior to her freelance work, Foster spent nearly a decade on staff at the FT as a reporter and editor based in the New York bureau. Foster holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

5 thoughts on “Collective Intelligence: Three Factors for Building Smarter Teams”

  1. Gaëlle THEVENET says:

    Very smart post. I loved the fun facts about the cabinets of JFK and A. Lincoln: “The Best and the Brightest” vs. “Team of Rivals”!! Thanks toLauren Foster for sharing.

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