Diversity and Inclusion Give Credit Unions a Competitive Edge

Smart credit union leaders have long known that they need to reflect the diversity of their membership and communities in management and on the board. It makes intuitive sense that in an increasingly diverse society, management and governing bodies should reflect the population they serve. Numerous studies confirm that this insight is correct, yet it is wise to consider diversity in even larger, more strategic terms, because companies that rank above average for diversity have higher margins, greater returns from innovation, improved customer/member-centric service and market awareness than less diverse peers.

A recent Wall Street Journal study reinforced what many other studies have shown. The Journal’s researchers, in their first diversity rankings of S&P 500 companies, concluded that the 20 most diverse companies had better operating results and higher compound average annualized return on investment than the lowest scoring organizations. Moreover, their shares outperformed those of the least-diverse firms. The Journal observed that a well-rounded workforce helps companies create better products and be more innovative, leading to growth in sales and profit. Similarly, a Harvard Business Review study reported how EBIT margins were about 9% higher in companies with greater management diversity than for those that were below-average. HBR also reported that when at least one team member shares a client’s ethnicity, the entire team is better able to understand the client’s needs than in those teams where no member shares that trait. And other studies by economists, demographers and research firms showed socially diverse groups are more innovative than homogeneous groups.

How should we think about the diversity that provides proven results? There are commonly identified, intrinsic inborn traits like age, gender, race and sexual orientation. Very importantly, diversity also encompasses traits gained through experience like educational disciplines, industry background and varying career paths. Veteran and foreign work experience, in particular, engender appreciation of cultural differences.

For credit unions, as with public companies, it makes sense that diversity creates long-term member value. Although managing a diverse workforce and incorporating differing viewpoints into the decision-making mix may feel disruptive to traditional ways of doing business, it can turbocharge the fresh thinking needed for innovation and improved member service. Decisions suffer when team members think alike and are unwilling to change the status quo. Groups with diverse expertise are also shown to generally be better than homogeneous groups in considering and solving complex or unconventional problems. A recent BCG study pointed out how increasing the diversity of leadership teams leads to more and better innovation, and improved financial performance. Team members with different backgrounds and experiences grasp problems in alternative ways and bring additional information to bear. This can produce novel twists and different solutions to old and new problems, increasing the chance of a successful outcome.

Another benefit of diversity comes from what happens when people interact with others who are different from themselves. Columbia Business School’s Katherine Phillips described the desirable effects in a Scientific American article, “How Diversity Makes Us Smarter.” Differences forces an individual to anticipate alternative viewpoints and to expect that reaching consensus will take more effort. This means that there is less complacency, people prepare more, and they work harder to communicate their thinking. The work group as a whole becomes better positioned to succeed at the task at hand.

You will not attract and retain a diverse team, however, without a healthy, inclusive and welcoming work environment. Nurturing a healthy culture starts at the top. The CEO and senior leadership team must treat a diverse workforce and inclusive culture as the strategic business imperative that it is. All employees must feel they are valued and part of the team. They must know they are safe in expressing diverse viewpoints and perspectives regardless of age, background or experience level. Value-driven insights occur when all voices are given airtime and everyone’s ideas are considered. People become more empowered and engaged. Management focuses feedback on what is working well and going right. Fair employment practices include a strong non-discrimination policy and equal pay for equal work. Budgets, communications, business systems and metrics support and track the status and progress of a diverse inclusive culture.

Smart leaders will take every opportunity to gain an edge for their credit union.  A diverse workforce and inclusive culture deliver just such an edge. Investment of senior management’s time, attention and resources to this strategic imperative energizes innovation, adaptability, creativity, nonlinear thinking, agility and teamwork. It is fundamental to a strategy that enables all employees to contribute to their full potential.

Stuart R. Levine is Chairman and CEO for Stuart Levine & Associates and EduLeader LLC. He can be reached at 516-465-0800 or slevine@stuartlevine.com.