The case for diversity, equity, and inclusion
Our success depends on the prosperity of members and the communities we serve.
Embracing diversity, equity, and inclusion (DEI) is the right thing to do and brings undeniable value to credit unions.
DEI work is happening within the context of an increasing awareness of social and economic disparities faced by Black, brown, and Indigenous people; the LGBTQ+ community; women; and other traditionally underserved groups. There’s also structural racism; a history of racial injustice and violence against Black, brown, and Indigenous people; and significant demographic changes in the U.S.
DEI, while vital, is just one part of the work needed to bring about transformational and structural change in our nation. It’s in this environment that the credit union movement has committed to advance DEI.
The CUNA Board added DEI as a shared cooperative principle for America’s credit unions, recognizing that it deserves separate recognition and a distinct commitment on the part of the credit union movement to advance this priority.
At its most simplistic level, think of DEI as a three-legged stool that includes the values case, the business case, and the policy/regulatory case.
The values case
As cooperatives, credit unions are uniquely positioned within the financial services industry because we have a values case for DEI anchored in our cooperative principles and values of people helping people and serving all communities, including those traditionally underserved.
Plus, our structure—member-owned, democratically controlled, and not-for-profit—ensures credit unions’ success depends on the success of their members and communities.
In 2018, U.S. median household income reached an all-time high of $63,179, according to the U.S. Census Bureau. But not all groups did equally well.
The median household income was $70,642 for white households, $51,450 for Hispanic/Latinx households, $41,361 for Black households, and $87,194 for Asian households. The sizable disparity in median income for Black and Hispanic/Latinx households compared to white households has persisted since the late 1960s, the Census Bureau reports.
These same groups also face significant wealth disparities. For example, the typical net worth of a white family ($171,000) is 10 times greater than that of a typical Black family ($17,150), according to the Federal Reserve. Similarly, women and LGBTQ+ people experience significant income and wealth disparities, and these disparities increase the likelihood of financial exclusion.
Credit unions were established to provide opportunities for financial inclusion to those excluded from the traditional financial system. Remaining true to our values in the context of a changing marketplace characterized by inequities in income, wealth, and access to quality financial services means being intentional about deepening DEI in our organizations.
This way, we can uncover barriers to financial inclusion and create more equitable financial services that help all members prosper.
NEXT: The business case
The business case
There’s an undeniable business case for DEI with two related parts:
1. Market access. Advancing DEI promises access to a growing market for credit unions. Within the next two decades, the U.S. Census Bureau projects people of color will become the majority in the U.S.
We know that people of color often are underserved, face additional barriers, and may have different preferences and needs for financial services.
A DEI approach to market expansion calls on credit unions to understand the changing marketplace and create more equitable financial products and services by using a DEI lens to consider who benefits from and who bears the cost of earnings and growth strategies.
A DEI approach also means credit unions need to become more diverse, more equitable, and more inclusive at all levels of the organization to show members they are valued and that they will receive equitable service.
In turn, this helps build the trusting relationships and loyalty needed to better understand and meet the needs of these groups to achieve their financial goals.
The bottom line: Advancing DEI promises access to a growing market for credit unions. But to do it right we need to understand and be responsive to these groups.
2. Business performance. This focuses on how DEI in the workplace is good for business. There is abundant evidence DEI is good for organizations and their employees.
CUNA research finds credit unions that expand their Hispanic/Latinx outreach with tailored products and services and increased staff diversity perform better than those without such efforts. Specifically, credit unions that joined Coopera’s Hispanic Outreach Program had higher growth in membership (33%), loans (44%), and assets (31%) as well as greater earnings (0.32%) and lower delinquencies and charge-offs.
CUNA conducted similar research on credit unions with the Juntos Avanzamos designation—a classification indicating a commitment to serving and empowering Hispanic and immigrant consumers—and the results were similar.
According to a study by Deloitte, 69% of executives rate DEI as an important issue and 78% of executives report it increases competitive advantage. At the same time, 85% of CEOs whose organizations have a diversity and inclusion strategy say it has enhanced their organization’s performance.
Mounting evidence shows organizations with diverse leaders perform better. A McKinsey study finds companies in the top 25% for gender diversity on their executive teams were 21% more likely to have above-average profits.
Further, companies with more culturally and ethnically diverse executive teams were 33% more likely to see above-average profits.
The McKinsey study also finds there are costs associated with opting out. Companies in the bottom quartile for gender and ethnic/cultural diversity were 29% less likely to see above-average profits.
Another body of research finds that more gender diversity on boards is associated with 20% higher risk-adjusted returns and higher board effectiveness, including fewer regulatory enforcement actions and less fraud.
An important caveat the researchers point to is that simply adding one woman to a board is not sufficient. The positive effect emerges when organizations add a woman to boards that already enjoy some level of diversity.
Other studies find that diverse and inclusive teams are 20% more innovative and better able to detect “blind spots,” and are 30% more effective at avoiding risks. As individuals’ sense of inclusion increases, this translates into an increase in team performance (17%), decision-making quality (20%), and collaboration (29%).
At the same time, diversity and inclusion can be a double-edged sword, generating creativity but possibly creating friction and discomfort because people must consider different perspectives, and the team cannot easily fall back on groupthink.
Diverse and inclusive organizations are more successful at attracting and retaining top talent. According to a survey by Deloitte, 80% of respondents say inclusion is an important factor when choosing an employer, and 39% say they would leave their current employer for a more inclusive employer.
In addition, the Institute for Public Relations finds that 47% of millennials say a diverse and inclusive workplace is an important factor in their job search.
Moreover, research finds that inclusive work environments are associated with enhanced job performance and work engagement. Perhaps this is because inclusion makes employees feel like they belong, are valued, their voices are heard, they are safe, and they can fully contribute to the organization.
Research examining the relationship between staff diversity and customer satisfaction finds that customer satisfaction is higher when the level of staff diversity reflects that of their customer base.
This translates into a healthier bottom line. The study suggests a more representative staff signals to customers the company doesn’t discriminate in hiring, and that customers would receive equitable service.
Perhaps customers who see employees like themselves will be more inclined to view the organization as acting in their best interest and/or in a position to better understand their experiences.
NEXT: The policy and compliance case
The policy and compliance case
Policymakers and regulators have made it clear they care about DEI.
In 2019, the House Financial Services Committee established the first-ever Subcommittee on Diversity and Inclusion. Its mission is to examine and resolve “the systemic economic exclusion of women, people of color, persons with disabilities, LGBTQ+ individuals, veterans, and other members of our society who have to fight for a seat at the table.”
In its inaugural year, the subcommittee held several hearings on DEI in the financial services sector.
The House Financial Services Committee hosted 18 hearings on financial discrimination and on diversity and inclusion initiatives, representing nearly 20% of all hearings to date.
In addition, the House Financial Services Committee solicited diversity data from all bank holding companies with more than $50 billion in assets since 2015.
NCUA’s Office of Minority Women and Inclusion (OMWI), established by the Dodd-Frank Act, is charged with assessing DEI practices at credit unions. OMWI is a prime example of how credit union regulators are focused on DEI.
The agency has encouraged credit unions to complete their voluntary diversity self-assessments to help them gauge “their existing diversity and inclusion practices and identify opportunities for implementing diversity best practices.”
In addition, NCUA has taken several actions over the last year that signal the importance the regulator places on advancing DEI among credit unions.
This includes holding its first annual DEI Summit, attended by more than 150 credit union representatives, and joining the Credit Union DEI Collective, a nascent network of organizations committed to advancing DEI.
NCUA also launched a Culture, Diversity, and Inclusion Council, and NCUA Chairman Rodney Hood has called upon regulators to make financial inclusion a major priority in the financial services industry.
By advancing DEI, credit unions can stay true to our cooperative values and remain competitive and relevant. DEI work is also the right thing to do.
This is especially important in the current context characterized by two intersecting crises (racial injustice and COVID-19) which are magnifying the socioeconomic inequities historically underserved groups experience—making this work all the more urgent.