We often hear about the “business case” for diversity, or how diversity at different levels of an organization can improve financial performance. We also hear that in order to realize those performance benefits, organizations must have systems and practices in-place to increase and leverage diversity towards the fulfillment of business goals.
What we don’t hear about are the specific practices that help drive business value.
Organizations often assess their success in managing diversity by instituting what are considered to be “best practices” in the field. Practices for recruiting and retaining diverse workforces, training to facilitate inclusive cultures, and developing future leaders throughout the organization have been identified as critical for driving meaningful change. Yet, we have little evidence to demonstrate what makes these practices better than others for creating and maintaining diverse, equitable and inclusive organizations.
What we don’t hear about are the specific practices that help drive business value.
We at Filene’s Center for Excellence in Diversity, Equity and Inclusion (DEI) wanted to fill this gap within the field and understand the “business case” for DEI practices within the credit union industry. Specifically, we were interested in identifying the reach of different DEI practices within the industry and how such practices create value in credit unions. Therefore, we conducted a study to examine relationships between bundles of DEI practices and measures of operational and financial performance.
CEOs, CHROs, Chief Diversity Officers, and other leaders at credit unions and system partners throughout the U.S. were invited to complete an online survey about DEI policies and practices that have been implemented since 2019 or will be implemented this year. We received 232 responses from credit unions and partner organizations that have an average assets of $1.9 billion, 332 full-time employees, and 16 branches. Of the responding organizations, 18% are Community Development Financial Institutions (CDFI) and between 6-10% had memberships and boards with more than 50% minority representation.
Our preliminary results revealed several bundles of DEI practices that are already being used by credit unions. These include bundles focused on:
- Strategy
- Governance
- Staffing
- Training
- Development
- Work-life balance
- Accountability.
However, there is variability in the extent to which these bundles have been implemented. For example, while approximately two-thirds of respondents advertise job opportunities in outlets designated for diverse talent pools, have diversity training, or identify and develop diverse high-potential employees, less than one-third have a section of their website dedicated to DEI, utilize affinity or employee resource groups, or have a supplier diversity initiative.
We matched survey data with credit union data across several indicators of operational and financial performance to examine the effects of DEI practice bundles. Our initial findings show three bundles of DEI practices to be related to firm performance:
- Strategy: strategic approaches to DEI that enable a credit union to achieve its mission and goals
- Governance: actions taken to coordinate and monitor a credit union’s approach to DEI
- Accountability: formal performance standards to ensure progress towards a credit union’s DEI strategy and goals
Firms with more DEI strategy, governance and accountability practices are shown to have higher performance than firms with fewer practices within these areas.
These preliminary results suggest that strategic approaches to DEI may be effective for focusing credit unions on how DEI create value and relate to the achievement of business goals—thus helping them to elicit and realize the benefits of diversity in ways that enhance performance. They also suggest that DEI governance structures are useful for coordinating and monitoring credit unions’ approaches to DEI and subsequently, enhancing their capacity for driving change and performance. We find that DEI accountability systems in terms of goals and metrics may help to track and assess progress, thereby complementing and amplifying the performance effects of strategic and governance DEI practice bundles.
We speculate that credit unions that have a more comprehensive set of practices to scaffold for DEI will have greater alignment with mission and operations, and therefore be more likely to realize performance gains from diversity.
Overall, our preliminary results highlight the importance of creating institutional structures that situate DEI within the organization’s broader strategy and goals and direct, monitor and support meaningful change from its DEI efforts. We speculate that credit unions that have a more comprehensive set of practices to scaffold for DEI will have greater alignment with mission and operations, and therefore be more likely to realize performance gains from diversity.
However, we have more data to sort, analyses to run, and reports to write to gain more comprehensive insight into effective DEI solutions within the credit union industry. Stay tuned for more from us as we work to identify evidence-based “best practices” for creating and fostering diverse, equitable, and inclusive workplaces and move closer to understanding the true “business case” for DEI.