The good news is that there is broad agreement that diversity serves a social good. The vast majority of technology executives (72%), for instance, see diversity as very important, according to a recent survey by Lawless Research.
The bad news is that businesspeople fail to recognize that diversity also has benefits to the bottom line. Only 23% of respondents in that same study said they see a clear connection between diversity and financial performance. While similar data does not exist for banks and credit unions, my experience indicates there is a similar disconnect: Our industry believes that diversity is the right goal to pursue, but we don't necessarily see a financial incentive for taking action.
This bodes poorly for the future of the industry. There is no question that the demographics of our country are changing: 16% of the U.S. population is Hispanic and 13% is African-American. Furthermore, the Hispanic and African-American populations grew by 43% and 17%, respectively, between 2000 and 2010. And 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. If businesses aren't figuring out a way to change, too, they risk being left behind.
The financial services industry should view these changes as a massive opportunity. For example, while 55% of white Americans are invested in the stock market, just one in three African-Americans and one in five Hispanics are investors, according to a 2013 Pew Research Center study.
Many of us are quick to think about closing this divide in terms of social justice. Since the Great Recession, the stock market's climb has created an extremely uneven recovery. The net worth of the wealthiest 7% of Americans increased by about 28%, while the net worth of the other 93% declined by 4%, according to the Pew Research Center. But shrewd business leaders will match their desire to create wealth for more American families with some simple math: add up all the potential new customers that will come from helping more Americans achieve financial stability that long-term investing can bring, and you will realize that striving for diversity is an excellent example of acting in one's enlightened self-interest.
Now comes the hard part: how can a financial services firm appeal to a more diverse clientele? During my tenure at the National Credit Union Administration, we thought a great deal about this. What we found, in consultation with credit unions in communities across the country, is that perhaps the single most important step is to hire a staff that reflects the community the business is striving to serve.
This is a tall order. To accomplish it, leadership at the top of the organization must make increasing employee diversity a priority goal by providing resources and processes to ensure success. The leadership must also make sure that managers and supervisors understand that a staff that reflects the population of the commmuity makes it easier to build inroads with community leaders and nonprofit organizations – essential elements to developing trust.
Hand-in-hand with hiring more diverse staff is participating in community events sponsored by local groups and offering classes in various aspects of financial education. Classes might include basics such as budgeting, understanding credit scores and borrowing prudently along with more sophisticated topics such as explaining the stock market and how to invest wisely. If done correctly, these initiatives will open the door to further dialogue and earn trust among the target constituencies. The institutons that are most successful in reaching various demographics are those that really became active members of their communities.
It is important to understand that this will be a long-term effort. Building trust and new relationships, particularly among communities that have historically felt disconnected from the financial services industry, won't come easily. But the result is worth the effort. Making diversity a business priority can lead to financial benefits and help a company realize its full potential.
There is a caveat. Diversity without inclusion will not produce the desired results. In other words, merely hiring a diverse workforce without providing an accepting culture could derail any potential benefits from increased diversity. For instance, studies indicate that when women feel they are hired to fill quotas, it hurts relationships between co-workers. The same can be said for other racial and ethnic minority group members.
So, to be effective, business leaders must be proactive. First, they will need to assess the current diversity level to set benchmarks. Next, they will need to develop a hiring strategy that increases diversity without ignoring merit. Finally, they will also need to foster an inclusive and engaged culture by providing training and messaging as well as setting diversity goals and holding leaders accountable for diversity progress.
The business case for diversity is strong, but achieving it will be complicated. It requires an astute understanding not just of a given industry, but also of a company's workforce and the unique needs of the community. By thinking about diversity as a matter of the bottom line, we can and must evolve it from "nice to have" to "need to have."
Debbie Matz is on the board of directors of Mutual of Omaha bank. She was the chairman of the National Credit Union Administration from 2009-2016. She also chaired the Federal Financial Institutions Examination Council from 2011-2013 and was a voting member of the Financial Stability Oversight Council.