[Sponsored Article] In many organizations, teams perform complex and knowledge-intensive decision-making and problem-solving tasks. Such tasks commonly require diverse expertise and knowledge, and work teams are often formed with an eye toward harnessing the diverse skills, experience, and knowledge of members to produce high-quality solutions. But it is not always clear how teams can best use the diverse expertise of their members to perform at high levels. My research shows that a key way of capitalizing on the diversity of expertise in work teams is to ensure that each team member understands the skills and abilities of all the other members. That is, they understand “who knows what”. Researchers call this transactive memory. A shared and accurate understanding of what others know and what they can do allows team members to specialize in, remember, and communicate the aspects of knowledge in which they are strongest. This frees up time for creative thought, enabling team members to enrich their individual knowledge and deepen their unique contribution to the team. Team performance increases as a result. Establishing a collective memory Although it sounds simple, it is not always easy to establish this collective memory about “who knows what” in a team. This is because the knowledge flow and understanding can be restricted by other forms of diversity in the team. In one of my recent studies of charter schools in the US, we found that gender and ethnic diversity impeded how well, and how quickly, teams established a shared and accurate understanding of each other’s expertise. When teams were predominantly women or predominately men, expertise diversity among board members helped the boards establish a shared and accurate understanding of who knows what, which in turn led to better fiscal performance in the school—the money was there to keep them operating. Among the mixed-gender teams, there was a less effective uptake or understanding of the knowledge and ability of the other members. My study also showed the same intervening effect with ethnic diversity. Challenges of diversity So, what is the takeaway? My research does not paint a negative picture about diversity in teams, but rather highlights certain challenges that managers face. There is great value in team diversity, especially when differences of opinion, skills, and knowledge are well understood by everyone in the team. My research shows that these diverse teams perform the best, and such diversity can translate into a more effective financial performance. My research suggests that any decision should take into consideration other facets of diversity, keeping in mind that a shared understanding of others’ knowledge sets may take a bit more time to develop when the team is diverse in ways other than knowledge. The impulse may be to create a diverse team and leave the members alone. My findings suggest that efforts should be made to enhance each member’s knowledge of the capabilities and knowledge of the others. Interventions to highlight the diverse expertise of members and the value of that expertise to the task, and to facilitate a good common understanding of the expertise, may be appropriate. It may take a bit more time and effort, but the performance payoffs to diversity will outweigh the slower path to shared understanding in the long run.