4 ways a DEI lens aids succession planning & continued relevance for credit unions

The NCUA recently issued a proposed rule regarding succession planning for federal credit unions. While many credit unions have plans in place, the number of mergers of smaller credit unions indicate that many do not.

In 2020, 130 credit unions merged away and that increased to 161 in 2021. Now, more than 40 have either received member approval or are awaiting member approval in 2022. Most of the merging institutions are small. Some of the merging credit unions cite lack of volunteers or staff to continue providing services to their members. Others claimed they were unable to provide modern services, despite having capital well into the double digits and/or loan-to-share ratios of less than 50%.

We can solve many of these problems with a singularly focused strategy: Diversity, Equity & Inclusion. In 2012, the majority of babies born across the country were not white, meaning the future of credit union membership and talent is diverse. Boards, management and personnel should reflect their community to better understand their diverse needs and behaviors to develop policies and strategic initiatives that support organic growth through innovative products and services for everyone.

Current credit union leaders are not as diverse as our potential memberships in the melting pot that is the United States. Now is the time to include DEI principles in succession strategies and planning to recruit the most talented pool of diverse candidates. Credit union policies, procedures, product specifications and marketing are derived from what we know. But we don’t know what we don’t know if it’s not been our life experience. Our assumptions about others distort our perspectives of what consumers who are not like us really want and need.

So, how does DEI help your credit union remain relevant to members and job candidates?

Innovation

Employing people of diverse backgrounds drives innovation through collective creativity and understanding, resulting in new policies, products, services and, ultimately, revenue. According to Forbes, 56% of international business leaders strongly agreed diversity boosted innovation. Innovation revenue at companies with above-average management diversity reported revenue 19 percentage points higher than companies with below-average diversity. Note, in this equation, equity and inclusion are as important as diversity. That means listening, learning and adapting.

Profitability

A report from McKinsey & Company found that the most diverse companies were 35% more likely to achieve above-average industry earnings. Those in the top quartile for ethnic and cultural diversity on executive teams were 33% more likely to have industry-leading profitability, according to another McKinsey study. Credit unions should be able to easily measure these trends in their Key Performance Indicators.

Recruitment

Well more than half, 67% of job seekers consider a company’s diversity practices before accepting a job offer, according to a survey by Glassdoor. An employer’s DEI practices have even greater influence on women and people of color.

Retention

DEI is a consideration for younger employees to remain in a position; Deloitte found that more than half of top young talent leave for a more diverse workplace. Turnover is incredibly expensive because of the loss of expertise, the cost of onboarding and training, and lost efficiencies due to bringing on a less experienced person. I don’t have to tell you financial services companies have some of the highest turnover rates across all industries. Employee turnover costs employers 50% of an entry-level person’s salary and 50% to 250% of salary for more senior executives, according to LinkedIn.

Building a more diverse, equitable and inclusive credit union system, representative of the beautiful diversity of America, increases profits from innovation, helps recruitment, reduces losses from staff turnover and mitigates the risk of the extreme potential costs of reputation and litigation. Employees in diverse environments consistently outperform those with less diversity, equity and inclusion. Consumers are shifting more toward belief-driven purchases, with 64% of consumers wanting brands to deliver on societal issues and products, a 2019 Edelman Trust Barometer report found. 81% of consumers say their ability to trust a brand to do the right thing can affect whether consumers choose your business or not.

Measuring DEI accountability is key, including reviews for a reduction in tardiness, missed workdays and increases in transactions per employee. Creating a system in which diverse populations are stakeholders in credit unions – as member-owners, employees and employers – is critical.

Transparency is critical. Access to information is in nearly every consumer’s pocket to determine whether a credit union’s commitment to DEI is deep or a marketing tool. When credit unions live up to the promise of DEI, they improve internal operations, employee satisfaction, member service and loyalty, which all contribute to continued relevance as a financial services provider and employers. It is time for credit unions to assess their commitment to DEI.