JSC FCU Begins Its Path to Diversity, Equity & Inclusion

JSC Federal Credit Union began its journey to make diversity, equity and inclusion part of its identity in earnest 14 days after the killing of George Floyd by Minneapolis police.

The Houston-based credit union ($2.6 billion in assets, 134,581 members) announced its commitment as part of a response to Floyd’s death. In a few months, the vow became a detailed plan, and by year’s end it had hired a contractor to run the program.

This year employees, including managers and board members, are taking anonymous tests to determine the level of unconscious bias regarding not only race and gender, but people’s size, sexuality and disabilities. The assessments are designed to provide the credit union with a baseline to help chart its progress down the road.

The process was set in motion by Brandon Michaels, who had become president/CEO of JSC less than two years earlier at age 38. He was working with support from board chair Deborah Acosta Conder, who had been talking with Michaels about the importance of the issue since his job interviews.

Michaels started his career as a bank examiner for the FDIC from 2002 to 2005, before switching over to credit unions. He was president/CEO of Mazuma Credit Union, based in the Kansas City area, from 2012 to 2018.

Mazuma had $661.6 million in assets and 64,500 members in September 2018 when he was hired to run JSC, which was founded in 1961 to serve NASA employees at what would later be known as the Johnson Space Center. In September 2018, the credit union had $2.6 billion in assets and 134,581 members.

Houston is known as one of the most diverse cities in America. It has been a majority-minority city for more than 30 years. Its white, non-Hispanic population accounted for 62% of the population in 1970; by the 2010 Census, it accounted for just 22% of the population. Hispanics and Latinos accounted for 44% of 2010 population, Blacks 32% and Asians 7%.

Michaels felt at home.

“I grew up in the Bay Area. I loved the various perspectives,” he said. “I’d go over to some friend’s house and have Hispanic food, and I’d go over to another friend’s house and have really authentic Asian food.“

“That’s one of the reasons I loved coming to Houston, because of how diverse this city is,” he said.

The credit union’s board was evolving as he arrived. In September 2019, the chair retired after 35 years on the board. He was replaced by Conder, who is Hispanic. The nine-member board now includes three Blacks, two Hispanics and six women.

Michaels said he and Conder shared a commitment to diversity from the start, but it wasn’t the only issue facing the credit union in 2018. When Michaels arrived its loan-to-share ratio was 35%, and much of its technology was a patchwork of systems with a four-person IT department trying to hold it together.

“I jokingly told people, ‘Anything that plugs in is going to get replaced.’”

He added, “Anything: I’ve already replaced some Keurigs.”

Perhaps more substantially than coffee makers, the credit union will be replacing a core system this year that rivals Michaels in age.

“You have to understand, there were a lot of priorities down here. There was a lot that needed to happen.”

In Michaels’ first year, JSC made notable progress:

• Average shares per member rose little in the first year, ending 2019 at $14,903.
• However, average loans per member rose from $5,462 at the end of 2018 to $7,639 at the end of 2019.
• Borrowers per members rose from 38% at the end of 2018 to 48% at the end of 2019.
• As a result, its loan-to-share ratio rose from 36% as of Dec. 31, 2018 to 51% by December 2019.

“Then George Floyd happened,” Michaels said.

There was nothing particularly new about Floyd’s death: another unarmed Black man who died in police custody. Just four months earlier Breonna Taylor was gunned down by Louisville, Ky., police in her home. The police killings of Eric Garner in New York and Michael Brown in Ferguson, Mo., in 2014 also sparked protests.

Floyd’s killing on May 25 was different in the vividness of the documentation and in the response. The protests were not only in Minneapolis, but spread to cities across the nation. By Saturday, June 6, The New York Times was reporting that “demonstrations across America that began as spontaneous eruptions of outrage over police violence appeared to have cohered by Saturday into a national mass protest movement against systemic racism, marked more by organization and determination than by street fury.”

On June 8, the eve of Floyd’s memorial service, Michaels wrote a two-page letter that he emailed to JSC employees.

“I am not sure where to begin this message. I am sickened at the senseless killing of George Floyd and am struggling to understand why this continues to exist in 2020 America,” he wrote.

He went on to write that the credit union must speak out. He wrote that to be a catalyst for change, the credit union employees must be “avid students.”

“Solidarity is not enough,” he wrote. “As a financial institution, we serve a vitally important role to break down socioeconomic barriers that divide our nation and lead financial inclusion and equity.”

He then ticks off some of the steps the credit union will take:

• “We will embark on a series of internal programming on unconscious bias in the workplace.”
• “We will partner with the Houston Hispanic Chamber of Commerce and the Houston Black Chamber of Commerce to provide financial literacy workshops.”
• “We will also partner with organizations that provide financial literacy training to high school students in the Houston area.”
• “We make a long-term commitment to diversifying our workforce, leadership, and Board of Directors. We will be implementing policies and procedures that hold the organization accountable for recruiting, pay, matriculation and retention of diverse team members.”
• “We will always create safe spaces for transparency and discussion on racial, gender, LGBTQ+ and other diverse issues.”

Michaels said the email not only provided an opportunity to outline his plan to the staff, “but it also provided an opportunity for 300 people to hold me accountable to it.”

So he began laying out the steps. One decision was to integrate a plan for a corporate social responsibility program with one for diversity, equity and inclusion (DEI).

“We could do both,” he said. “That’s the approach we’re taking — marrying those two things together, so it becomes who we are, not what we do.”

On top of that, JSC had already begun a re-branding process. Michaels said he expects to announce its results — including a new name — later this year. And, despite COVID-19, JSC continued building its loans and generated above-average returns last year.

Last fall a plan was presented to the board on how to carry out the DEI plan. It included the unconscious bias testing, and other means to measure progress down the line. It also included several different outside firms to be considered to run the process.

Michaels said the plan was presented from a “business imperative perspective, and from a talent perspective.”

“Innovation comes from diverse perspectives,” he said. “Sometimes people get wrapped around the axle on the race aspect of it. But really, it’s a very holistic process if you’re doing it right.”

“It’s inclusion,” he said. “That goes for Black, it goes for Asian, it goes for white, it goes for gay, it goes for straight, it goes for large people, small people. It goes for the whole gambit.”

JSC interviewed companies to run the program, and in December it hired CU Strategic Planning of Tacoma, Wash.

The credit union’s employees completed the Harvard Implicit Association Tests in early March, and tests for board members were to follow. Tests for most employees took about 20 to 30 minutes. Managers were assessed on a broader range of issues, and their tests took 45 to 60 minutes.

The board is to be tested next.

The results go to CU Strategic Planning, which does not share individual results with anyone at JSC. Instead the results are returned to Michaels and the board as composites. However, individuals could see their scores when they completed the test, and some talked about it.

“Some of them questioned their results, because everyone wants to come across and be perceived by themselves as not having bias. So they were shocked at some of their scores,” Michaels said.

According to JSC’s plan, next steps this spring include:

• Unconscious bias training.
• Affirmative action and Equal Employment Opportunity statement.
• Office of Federal Contract Compliance Programs compliance (affirmative action plan).
• Become an active part of the National Diversity Council, the Texas Diversity Council and get senior leader certification.
• Evaluate diversity and inclusion programs regularly, and identify areas for future improvement.
• “Hold management accountable for diversity and inclusion efforts, for example by ensuring these efforts align with business strategies or individual performance plans.”