Three ways having staff and directors with varied experiences and perspectives improve credit union strategy
As credit union executives and directors, you are tasked with creating shareholder value. This is your singular mission. In order to perform upon this guiding mandate, you should pursue actions that benefit members.
One of the ways credit unions can fulfill their aim of helping members is by insisting their talent resources are equipped to face various business scenarios. This takes a staff that possesses a myriad of skills and experience. This article is an examination of a business case for diversity. Here, we examine three areas where a focus on diversity can be good for the bottom line. Before doing so, let’s see if we can come to an agreement on the meaning of diversity.
To my way of thinking, diversity is simply the multiplicity of traits, skills and backgrounds your talent pool may possess. By talent, I mean your board, volunteers and staff. Diversity includes a wide variety of categories. Here are some descriptions:
Race – Gender – Gender Identity – Sexual Orientation – National Origin – Age – Marital – Status – Religion Disability – Ability – Personality – Income – Geography – Education – Parental Status – Class – Generation
As you can see, diversity may mean different things to different people. The utility of identifying these distinctions is not to highlight what separates us. The important takeaway is the realization that our members, staff and stakeholders may see the credit union in different ways. Armed with this understanding, we can see how well-intended decisions can be mistaken by audiences with different perspectives.
Rather than focus on diversity as a barrier to overcome, we should consider viewing diversity as a tool for competitive advantage. Let’s face it. The financial services market is a commodity business. The distinctions that separate credit unions from other types of financial providers is often lost on the public. It befits credit unions to seek advantages that highlight our superior business model.
Back to the business case. Here are three areas where credit unions can improve their bottom lines by incorporating diversity in their organizations.
Diversity as Duty of Care
Every corporate official has legal fiduciary duties which must be obeyed. One of the responsibilities is called the duty of care. The duty of care is a legal requirement imposed on directors and corporate officials requiring compliance to a standard of reasonable care while performing their roles for the organization.
The duty of care implies a reasonable officer seeks to advance corporate opportunities. Therefore, it seems reasonable that an effort to expand diversity would be expected if the anticipated results are better returns.
On the opposite side of the equation, corporate officials are warned to avoid wasting company’s resources. The corporate waste doctrine states directors have a duty not to squander corporate opportunities. It may be reasonable to conclude that the omission of qualified talent with diverse skills handicaps an organization’s potential. This is a wasted opportunity.
Another way to think about the duty of care is to consider how corporate resources are invested. The rule that warns against concentration risk has application for diversity. The same may be said for human resources. Diverse people talents may lead to greater returns.
Diversity as Risk Mitigation
Every credit union management team should be focused on quality control. Quality control requires constant attention to process improvements and strategy performance. One way to improve in these areas is by reducing errors. The first step here is identifying real issues. We call this issue spotting.
Most organizations make mistakes. Miscalculations result in bad execution, the formation of the wrong strategy or misjudgment on the cost of a venture. Smart organizations study past failures to understand what went wrong and how to avoid repeating errors. In many instances, bad results came from a failure to incorporate diverse perspectives.
When presented with a problem, management must discern which details are fact and which are noise. The purpose of issue spotting is to ensure management addresses the important matters and avoids missteps.
Diversity improves the odds of spotting issues by broadening the perspectives around the table. A team of people who see a situation from different angles improves the probability of recognizing obstacles and developing ways to alleviate the challenges. Furthermore, the team is more equipped to uncover new opportunities.
Diversity as a Marketing Tool
Freedom of association is an innate and fundamental human right. This choice is enshrined in the first amendment of the United States Constitution. People choose affiliations based on how they identify with a group.
The power of affiliation is natural to credit unions, which use fields of membership to build communities of members. The common bond notion is more than just a regulatory requirement. Common interests among the membership ensure a credit union focuses its attention on the needs of its members.
Diversity is in the eye of the beholder. How one sees him or herself defines the scrutiny applied to an organization’s image. Members may see themselves with different perspectives and identities. Members should be viewed through various lenses to see what representations are important to them.
People often prefer to conduct business with organizations that represent their interests. Identity is a common interest. Credit unions that reflect the character and content of their communities demonstrate a sensitivity that is not lost on its members.
Credit unions should ask what image they want to project in their target market. This is the lens through which members and the community will judge the credit union’s focus on representation. The adequacy of diversity is not determined by insiders. The audience should be asked for their impressions to get a sense of how members feel diversity has been attained.
A diverse board and staff improve the chances that the credit union will be in tune with its membership. The results may be the services and products that truly address the needs of the membership.
In summary, credit union leaders have a duty to improve the way they serve members. Diversity offers credit unions benefits in so many ways. Diversity uses a credit union’s whole field of membership as a competitive advantage. Seems like a no-brainer.
CUES member Maurice R. Smith is CEO of $2 billion Local Government Federal Credit Union, Raleigh, N.C., and $11 million Civic Federal Credit Union, a digital credit union based in North Carolina. Both credit unions are member-owned cooperatives serving the financial needs of employees, appointed officials, elected officeholders and volunteers of local governments in North Carolina. Smith celebrates 40 years in the credit union movement. Smith earned his B.S. in business administration from the University of North Carolina at Wilmington and a Juris Doctorate from the NC Central University School of Law. Smith is licensed to practice law in North Carolina, the United States Supreme Court and the District of Columbia. He is also a North Carolina Certified Superior Court Mediator and a Certified Credit Union Executive.