While diverse hiring practices and an awareness of the growing demographic shift within the U.S. has lessened the gap between minority and non-minority bankers in the past several years, there’s still work to be done, particularly when it comes to including minority bankers in decision making processes. This was the message for attendees at the Federal Reserve’s fourth annual Banking and the Economy: A Forum for Minorities in Banking held in September at the Fed’s St. Louis branch.
“Our vision is that this forum will assist minority leaders in the banking industry in enhancing their industry knowledge, connecting with other professionals in the industry and at the Federal Reserve, and preparing to better serve the future financial needs of our communities,” said St. Louis Fed President and CEO James Bullard in his welcoming remarks.
Bullard noted that minority representation at all levels of financial services management has increased from about 17 percent in 2007 to 21 percent in 2015, according to a 2017 report from the Government Accountability Office. “However, the level of representation by minorities varied by race and ethnicity group, as well as by seniority,” he said. “Specifically, representation of African Americans at various management levels decreased slightly during this period, while representation of other minorities increased.”
“I am often the only person who looks like me in a lot of rooms,” said panelist Martie North Hamilton, senior vice president and director of community development/CRA for Pine Bluff, Ark.-headquartered Simmons Bank, a sentiment that was echoed by many attendees and presenters during the two-day event.
Still, Bullard views prospects for minority bankers as favorable. “The management pipeline at financial industry organizations — through which diverse candidates can move into senior-level management positions — has grown,” he said, citing more GAO statistics which found that representation of minorities in first- and mid-level management positions was 22.4 percent in 2015, up from 18.7 percent in 2007. (However, also in 2015, the GAO stated that representation of minorities in senior-level management positions was only 12.3 percent.)
While individual minority representation has risen in recent years, the number of minority depository institutions has declined in the wake of the financial crisis. However, it has declined at a slightly lower rate than that of community banks as a whole, Bullard stated. According to the FDIC, the number of MDIs decreased by 31 percent from 2008 to 2018, while community banks recorded a 33 percent decline in the same period. Interestingly, in this time frame, the number of MDIs owned by Asian American, Hispanics and Native Americans increased, but those owned by African Americans declined, representing just 15 percent of all MDIs by the end of last year. And the number of MDIs overall is still tiny in comparison — in 2018 there were only 149 MDIs in all of the 5,400 insured financial institutions, down from 215 before the financial crisis.
“On the plus side, financial performance at MDIs has improved significantly over the past five years in terms of revenue generation and loan performance, according to the FDIC,” Bullard told the assembly. “These institutions make a greater share of mortgage originations — as well as small business loans — to borrowers in low- and moderate-income census tracts.”
“Diversity and inclusion aren’t just good for morale,” Bullard said. “They’re a good business strategy. We can attract and recruit the best possible talent by casting a wide net and expanding recruiting efforts. A diverse workforce enhances our ability to be innovative and better serve the communities in which we operate.”
Many speakers made a “business case” for inclusivity, as opposed to simply checking the “diversity box.”
“Diversity is inviting people to the dance,” said presenter Shirley Davis, president of SDS Global Enterprises. “Inclusion is asking them to dance.”
Davis believes bank leaders should engage in self-assessment, asking themselves if they are the kind of leaders who build more leaders through vision, inspiration and inclusiveness, because inclusive cultures will attract top talent, she said — well-networked, self-starters with critical thinking skills who are team leaders and communicators. But banks have to build the type of culture that attracts diverse talent. They must create an environment in which employees feel safe, not just physically but psychologically, a culture in which they feel free to “say something if they see something.” And you have to keep your employees engaged, not just require them to be in their seats.
Davis shared her “6 ‘C’s of Inclusive Leadership”:
- Commitment: Inclusive leaders are committed to diversity and inclusion because these objectives align with their personal values.
- Courage: They speak up and challenge the status quo and are willing to have difficult conversations, admit what they don’t know and aren’t afraid of discomfort.
- Cognizance of bias: They are mindful of personal and organizational blind spots and self-regulate to ensure “fair play.”
- Curiosity: Inclusive leaders have an open mindset and a desire to understand how others view and experience the world.
- Cultural intelligence: They are confident and effective in cross-cultural interactions.
- Collaborative: They empower individuals as well as create and leverage the thinking of diverse groups.
For North Hamilton, inclusion extends beyond the office and into the community. She believes that when banks are considering community engagement or community reinvestment act activity, they are often quick to assume they understand the wants and needs of the community.
“We look at a lot of demographic info, which only takes you so far, but you’ve really got to understand that this community is different from that community,” she said. “So what worked as a solution in this community may not work in another community … Understanding that is often hard because we want to do one thing and just blanket it everywhere and it’s going to have the same results everywhere. But you may have to nuance and work it a little differently. I think it’s really taking the time to get to know the community, and not from an academic perspective.”
North Hamilton suggested forming community advisory committees or focus groups and listening to everyone involved to understand community needs and what the primary challenges to any proposal are.
“Pulling that information in and seeing where our priorities and opportunities are and seeing if there’s a potential to develop and pilot something …,” she said. “It may take a little while to get there, but taking that information, documenting it, keeping record of it, and then trying to build a business case around it and constantly informing the community [of progress on the project]” are the building blocks she sees for an inclusive community.