Diversity and Corporate Resilience: A Business Lesson Taught By Abandoned Farmland

From gurus to case studies, the promise of transformative business advice is everywhere, but perhaps nowhere as unexpected as plots of abandoned farmland in rural Minnesota.  Here, insight to boost your company’s resilience and dynamic competitiveness has been 3.8 billion years in the making, and its success has been empirically documented in the dog-eat-dog environment of one of the world’s the most competitive fields–literally. It’s hard to find more vetted advice, so bear with me as we talk a bit of biology before dispensing the time-tested strategy to boost your businesses’ bottomline.

The Cedar Creek Ecosystem Science Reserve is a 9 square-mile parcel of land 30 miles north of the bustle of the twin cities. What makes this place so remarkable is that it is uniquely positioned at the intersection of three major North American biomes. Owing to its prime location you can find oak savannah, hardwood forest, dense stands of pine, expansive tall-grass prairie, and soggy lowlands all within its tiny perimeter.

In addition to this natural diversity, Cedar Creek consists of parcels of land largely untouched by human activity that stand side-by-side with nearly 100 agricultural fields whose chain of custody, use, and subsequent abandonment in the early- to mid-20th century is well documented.

Taken together, Cedar Creek is an ecological kaleidoscope that offers its scientist-stewards at the University of Minnesota an unparalleled opportunity to study how different circumstances affect each plot’s functioning, resilience, and overall health. In addition to revealing critical principles of ecosystem operation, Cedar Creek also sheds light on practices and principles of governance that will boost your company’s bottom-line.

Specifically, one major research line at Cedar Creek explores the relationship between biodiversity and ecosystem stability and resilience. While there is a natural ebb and flow to ecological processes (e.g. populations inevitably grow and shrink over time), ecosystem stability is often measured by the size of those fluctuations. Ecosystems are considered stable when the population fluxes are predictable and controlled–so-called ‘dynamic equilibrium.’ Conversely, populations that swing wildly from overpopulation to near-extinction to overpopulation are quintessentially unstable.

Superimpose an ill-timed crisis, like a disease or drought, on top of a wild population oscillation, and it is easy to see how unstable populations are also susceptible to hitting that irrecoverable floor called ‘extinction.’ Not surprisingly, unstable populations have little resilience to recover from environmental shocks.

So what role does diversity play in all of this, and how does Cedar Creek help scientists understand it?

It turns out that fields cleared for agricultural use and later abandoned have predictably poor biodiversity when compared to adjacent plots of land left in their natural state. By comparing how the populations of plants on these adjacent parcels of land change over time, scientists discovered that the plots with the greatest diversity were also the most stable.[1] [2] [3] [4]

Additionally, periodic wildfires or other human manipulations across these plots provided researchers further insight into how biodiversity affects an ecosystem’s response to a disturbance. Once again, the value of diversity was reinforced when it was revealed that the plots with greater diversity suffered less initial disruption and recovered more quickly from ecological shocks than their less diverse counterparts. Additionally, those disruptions that hit biodiversity the hardest also triggered the greatest ecosystem instability.[5] Given these bidirectional effects, biodiversity clearly yields protection against instability and vulnerability, prompting scientists to refer to this linkage as the “insurance hypothesis.”[6]

But what does the relationship between biodiversity and ecosystem stability and resilience have to do with business success? Simply substitute “business operations” for “ecological functioning” in the above findings, and it is plausible to imagine that businesses which embrace diversity are more likely to be stable, resilient, and high-functioning than their less-diverse peers.

Given the importance of the hypothesized relationship between diversity and stability, it’s important to determine the appropriate corporate correlate for biological diversity.

While businesses can be operationally diverse by producing multiple products, servicing multiple industries, sourcing raw materials from multiple suppliers, and having distributed production centers, that approach to diversity often necessitates larger research and development investment, increases overhead, and can overstretch businesses.  On the other hand, businesses can be organizationally diverse by developing a heterogeneous workforce, soliciting and genuinely considering myriad perspectives, widening the net of key decision-makers, and, in general, spreading power and control across a larger cast of characters. This approach to diversity is less cost intensive, and can often be brought to fruition with modest management adjustments.

Actively promoting diversity to improve corporate stability and to guard against inevitable market perturbations isn’t just theoretical. A 2016 study published in the journal Group and Organization Management examined the volatility of a company’s stock price in times of crisis in comparison to the amount of decision-making power concentrated in the CEO[7]. Akin to the ecological research at Cedar Creek, the researchers in this study were asking whether business environments which lacked diverse decision-making mechanisms performed better or worse than their more diverse peers when faced with an industry downturn.

To answer this question, the researchers examined the stock price performance of 2,097 firms in Standard and Poor’s Execucomp database from 1992 to 2009. After extensive statistical analysis, the researchers concluded that innovative firms with more powerful CEO’s suffered greater devaluation during periods of industry shocks when compared to less powerful CEOs. Or, in the words of the authors, “our results highlight the benefits that accrue to firms from having a more dispersed decision-making structure (e.g., receiving independent advice from the board or an independent chairman), especially during industry-wide downturns.”

The parallels between ecosystems and businesses are uncanny. Each is a multi-faceted and complex system with a goal of survival and growth. Both face stochastic internal and external factors which makes static, perfectly predictable performances impossible. Both are at the greatest risk when they erratically and energetically swing from boom to bust and back again, and they are both especially susceptible to failure when an unexpected shock strikes during a natural downturn.

Given these similarities, the finding across independent ecological and organizational research that diversity provides critical ‘insurance’ against perturbations and promotes security and stability is especially important.

While abandoned farmland seems an unlikely place to look for guiding principles of corporate governance, the findings from the Cedar Creek Ecosystem Reserve go a long way toward identifying a universal principle that simultaneously holds true in natural and corporate environments. Ultimately, take a lesson from nature’s time-tested playbook and promote diversity to ensure your company’s longevity and continued competitiveness.

Kurt MacDonald, a former teacher and administrator, is currently the Director of NatureSays, a consulting firm specializing in biomimetic strategies to help organizations and institutions thrive in the 21st century (NatureSays.org), and his most recent nature-inspired TEDx Talk can be viewed here.

[1] Tilman, D. & Downing, J. A. Biodiversity and stability in grasslands. Nature 367, 363– 365 (1994). | Article |

[2] Tilman, D., Wedin, D. & Knops, J. Productivity and sustainability influenced by biodiversity in grassland ecosystems. Nature 379, 718 –720 (1996). | Article |

[3] Tilman, D. Biodiversity: population versus ecosystem stability. Ecology 77, 350–363 (1996). | Article |

[4] Schapfer, F. & Schmid, B. Ecosystem effects of biodiversity: a classification of hypotheses and exploration of empirical results. Ecol. Applic. 9, 893–912 (1999).

[5] Hautier, Y et.al. Anthropogenic environmental changes affect ecosystem stability via biodiversity. Science 348, 336-340 (2015)  | Article |

[6] McCain, K. S. The diversity-stability debate. Nature 405, 228-233 (2000). | Article |

[7] Gupta, V.K., et al. When crisis knocks, call a powerful CEO (or not): Investigating the contingent link between CEO power and firm performance during industry turmoil. Group and Organization Management 1-28 (October 2016) | Article |