Two experiments examined the psychological and biological antecedents of hierarchical differentiation and the resulting consequences for productivity and conflict within small groups. In Experiment 1, which used a priming manipulation, hierarchically differentiated groups (i.e., groups comprising 1 high-power-primed, 1 low-power-primed, and 1 baseline individual) performed better on a procedurally interdependent task than did groups comprising exclusively either all high-power-primed or all low-power-primed individuals. There were no effects of hierarchical differentiation on performance on a procedurally independent task. Experiment 2 used a biological marker of dominance motivation (prenatal testosterone exposure as measured by a digit-length ratio) to manipulate hierarchical differentiation. The pattern of results from Experiment 1 was replicated; mixed-testosterone groups achieved greater productivity than did groups comprising all high-testosterone or all low-testosterone individuals. Furthermore, intragroup conflict mediated the productivity decrements for the high-testosterone but not the low-testosterone groups. This research suggests possible directions for future research and the need to further delineate the conditions and types of hierarchy under which hierarchical differentiation enhances rather than undermines group effectiveness. © The Author(s) 2012.