MADISON, Wis.–A question often asked by credit union leaders–do diversity, equity, and inclusion (DEI) practices and policies affect CU performance?–now has not just an answer, but insights that reveal the best strategy involves using “bundles.”
First, the answer is yes. According to Filene, first-of-its-kind research shows implementing DEI policies and practices has a direct effect on the bottom line.
Following a survey and analysis of more than 200 credit unions divided into three asset size groups, Filene Center for Diversity, Equity and Inclusion has released a report titled What’s the Bottom Line? Diversity, Equity, and Inclusion (DEI) Practices and Credit Union Performance that found DEI also generates another three-letter abbreviation: ROI. But that return on investment and performance change only occurs when credit unions implement “practice bundles,” according to Filene.
Introducing the findings to credit unions during a webinar were Taylor Nelms, senior director of research with Filene; Dr. Quinetta Roberson, the John A Hannah Distinguished Professor of Management and Psychology at Michigan State and head of Filene’s Center for Excellence on DEI, and McKenzie Preston, doctoral candidate in management at the Wharton School at the University of Pennsylvania.
The research findings follow an inaugural survey on DEI policies and practices at credit unions that was launched in the spring and which sought to baseline and benchmark DEI efforts. According to Nelms, plans call for the research to continue for five years.
According to Filene, “the research is clear: when your DEI policies and practices are bundled together to advance strategic goals, your credit union is more likely to improve operational performance, financial returns, and mission fulfillment.”
Topline Findings
The report’s topline findings’ include:
- DEI practice bundles move beyond a focus on best practices and identify sets of complementary practices that reinforce an organization’s value for, and commitment to, DEI.
- The bundle that shows the most promise for improving credit union performance is the DEI strategy bundle. Firms with diversity related to, and supportive of, their strategic goals were found to realize performance gains from such diversity.
- Strategic approaches to DEI may focus credit unions on how DEI practices create value and relate to the achievement of business goals, thus helping them to realize the benefits of diversity in ways that enhance credit union performance.
Lessons Learned
“I think we learned during this that process ended up being far more important than we had anticipated,” said Nelms. “We are walking away with a new paradigm for the implementation of DEI; one that emphasizes the transformative power of DEI for the CU business model.”
According to Nelms, the survey asked about:
- Existing practices related to DEI, and when they were implemented
- Internal and market-facing written policies, plans, goals, metrics, benefits and development opportunities related to DEI
- Presence of senior-level official or council to oversee DEI programs/initiatives
- Presence of data tracking and collection relating to DEI
- Level of leadership commitment to DEI
- Organizational NPS Score
The survey did not ask about workplace demographics, measures of workplace inclusivity or specific DEI outcomes, or individual perceptions, according to Roberson.
In all, the survey received some 232 responses, representing 204 credit unions, with the majority of respondents being C-suite executives.
‘Not Necessarily the Best Approach’
Among the other findings, the research found:
- DEI policies and practices that had been implemented by at least 75% of respondents including advertising job opportunities in targeted outlets, having a structured interview process, and doing diversity training.
- Implemented by 25% or less of respondents were including DEI in performance evaluation processes, linking DEI goals to compensation, and outreach to women- and minority-owned businesses.
“I know existing research suggests linking DEI to performance evaluation and compensation isn’t necessarily the best approach, because sometimes people will drive toward the metric rather than thinking about the process,” Roberson said.
When asked by Nelms “what three things stick out to you in terms of the questions credit unions have had for you about the kinds of policies credit unions should be implementing,” Roberson responded, “Interestingly, the big one is diversity training; second is coaching and mentoring or some kind of development initiative for targeted populations and third, is kind of evolving. I want to say it’s staffing and recruiting and diversifying pipeline, but I also hear some shift toward engagement initiatives, such as (employee resource groups).
“When we hear these conversations about practices, there is always the word ‘best’ ahead of it,” continued Roberson. “That starts me twitching a little bit. We often hear about the practice but not what makes it best. So, one thing we set out to understand is do these things we put in place matter? We threw all these practices into the equation to see which matter. What’s the thing that actually drives performance?”
The Paradigm Shift
A key finding in the research, stressed Roberson, is that individual practices don’t matter. What matters instead are “practice bundles.”
“What we found is that it wasn’t that credit unions were implementing diversity training, they would implement a bundle of practices around some sort of practice.”
The Filene research identified eight such bundles: strategy, goals, tracking, recruitment, selection, career development, employee groups, and supplier diversity.
Nelms said Filene will be doing research around those bundles moving forward, and it has already launched research into ERGs.
Roberson said Filene then put the eight bundles into its analysis and found there were three that drove impact and financial performance more than the others. Those are shown below.
Having a responsibility system and accountability structure were among the key factors in success, according to Roberson. When it came to goals, Roberson said what was most interesting was that if a CU had a few of the metrics in place it had all of the metrics in place.
“Having goals in place is good, but also monitoring those goals we found to also be important,” said Roberson. “It’s about collecting data to see movement along those goals. We found the scaffolding is really important to being successful.”
A Clear Pattern
According to Preston, the research found a very clear pattern, which was that CUs that were low-performers in each of these practices tended to under-perform those CUs that were high in these practices.
Similarly, net income performance also tracks higher at CUs with DEI practices in place than those that do not, said Preston.
Credit Union Clusters
To examine if CUs with more DEI practices outperform those with fewer DEI practices, the researchers grouped credit unions based on DEI practices that have been implemented. Perhaps not surprisingly, it found CUs with no DEI practices were low in tracking, goals and strategies related to DEI; CUs with tactical DEI practices in place were high in tracking and goals but low in strategy, while CUs with strategic and DEI practices in place were high in all three categories.
“We see the most performance gains in those credit unions that take a comprehensive approach to DEI,” Preston stated.
‘Exciting’ Findings
Roberson said she found three things in the research particularly exciting, not including the fact there is no other similar research available and it offers an opportunity for some real thought and practice leadership by credit unions.
Among those findings, according to Roberson:
- “We often talk about busines case for diversity, but we never talk about business case for DEI practices. The fact we were able to investigate the business case for DEI practices is really exciting. We want to beyond the idea that implementing DEI will magically have an impact.”
- “The reinforcing nature of the practices is not so much about individual practices, but how these bundles work together. It reinforces the importance of communicating inside and outside of an organization what we value. The bundling approach really says we are really putting more attention and effort into it.”
- “The third thing that is really interesting to me is when I talk to credit unions, when we talk about DEI, my first question is always, ‘What is your why? What’s the end game? What do you want this organization to look like, to feel like?’ Understanding those practices is critical. Having a strategy matters. Having a thought about how you leverage and use DEI is critical. Being able to track it important, as is being able to have this continuous improvement mindset. We go through this very strategic process with other investments, but when it comes to people it’s (not given the same emphasis). We have to be just as strategic and just as analytical in our approach to DEI.”
The full research can be found here.