Editor’s Note: Former NCUA Chairman Debbie Matz recently addressed the annual meeting of the North American Securities Administrators on the subject “Diversity in Today’s Financial Marketplace.” The article below is excerpted from those remarks. The full remarks can be found here.
By Debbie Matz
In the immediate aftermath of the crisis, in August 2009, my priority as NCUA chairman was, first and foremost, preventing the collapse of the credit union system. But our job wasn’t just about staunching the hemorrhaging from the crisis. It became increasingly clear that even prior to the crisis, many credit unions were finding it difficult to make loans. It wasn’t that they didn’t offer loan products. And it wasn’t that their rates weren’t competitive. So why weren’t they making loans? Quite simply, their members were not in the market for loans.
The average age of credit union members is over 47 years old. However, peak borrowing years are between ages 25 and 44. At their age, they are probably more interested in investing than borrowing. Credit union officials with whom I met were often frustrated by their lackluster loan growth and their difficulty attracting new members, notwithstanding membership drives and attractive rates. They often asked me what they could do differently.
As their financial regulator, I was very concerned about the safety and soundness implications of their situation. No matter how hard they were trying, their tactics weren’t working. Clearly, the status quo – targeting their existing membership base – would not bear fruit.
Getting Blank Stares
My advice to these credit union officials focused largely on demographics: I never had a discussion about increasing membership that didn’t focus on millennials. I’d look at directors of credit union boards who, most often, were well into their retirement years and ask: What social media does your credit union use to reach new members? Are you on Twitter? Facebook? SnapChat? Can members make deposits or get a loan on-line? Can an individual open an account on-line? I’d frequently get blank stares.
Invariably, I would ask them to take a hard look at their membership and then to assess whether it represented the composition of their community. With the increasing growth of immigrant populations in many jurisdictions, were they reaching out to these groups? Did they have tellers and call center staff who could converse with individuals in their native language? If their community had, for example, a large Hispanic population, were they participating in Hispanic community events? Partnering with Hispanic organizations? Providing a Spanish website?
Likewise, I asked similar questions of credit unions in communities with a large concentration of African-Americans. Was the credit union providing a welcoming environment that reflected the cultures of potential members? Would they feel comfortable doing business with the credit union? Did the credit union literature have photos of people that looked like them? Did they have staff that came from the same backgrounds?
It always came down to the same thing – credit unions needed to expand their horizons and actively reach out to new members in new ways. After all, 30% of the US population is under 20 years old; 16% is Hispanic and 13% is African-American. While the Asian population represents only 5.5% of the U.S. population, it grew by 46% in the first 10 years of this century. My message was pretty blunt: if they weren’t figuring out a way to successfully reach these groups, the future of their credit union was not bright.
What Can You Do?
So, what can an organization or institution do to bring about this change? Perhaps the single most important thing is hiring a staff that reflects the community the business is striving to serve. And how does this come about? First and foremost, leadership at the top of the organization must make this a priority goal and provide the resources and processes to ensure success. The leadership must have a commitment to increasing employee diversity. They must understand that a staff that reflects the population of the commmuity will make it easier to build in-roads with community leaders and non-profit organizations; and that is essential in developing trust.
Making diversity a business priority can lead to financial benefits and help a company or an agency realize its full potential. I can’t emphasize enough, that to reap the bottom-line benefits that diversity can bring, insistence on achieving this goal must come from the top.
There is a caveat, however. Diversity without inclusion will not produce the desired results. In the diversity field there’s a saying: “Diversity is the mix, inclusion is making sure the mix works.” Without intentional inclusion, any potential benefits from increased diversity could be derailed.
At NCUA, we set up a diversity council composed of employees from all levels within the organization. It was empowering to those involved, particularly when their suggestions were implemented, which they almost always were. In addition to the frequent messaging from the top about the importance of diversity and inclusion, holding managers accountable through their performance evaluations proved very effective in producing change.
Change Begets Change
And positive experiences with change begets more change. Once employees realized that hiring people from different backgrounds and cultures enhanced the agency because they offered fresh eyes and new perspectives, increased diversity led to increased inclusion.
Diversity and inclusion make good business sense for credit unions, which are in the business of helping their members. Credit union employees, managers and board members who reflect the membership they serve allow credit unions to better understand and serve those communities.
Debbie Matz is the former chairman of NCUA.