Expanding Diversity Into the C-Suite

Editor's note: This piece originally appeared in the September 2020 print issue of DS News, out now.

Over the past two months, national events have exposed a level of injustice in our society that has awakened us all to a new sensibility: for humanity to advance, we must treat each other with respect and equanimity, regardless of our heritage, skin color, or gender.  

 We would be remiss to believe this call did not apply to us as business leaders or as organizations. Unfortunately—or perhaps, fortunately—today’s heightened awareness of racial inequality has reminded us of our own failings as an industry. This includes our inability to build organizations that reflect our customers, from the very bottom to the very top levels.  

 The good news is that we can still fix this picture. For most mortgage servicing organizations, it will take some self-examination and introspection that may be difficult and even a bit uncomfortable. But the benefits of acting now far outweigh these obstacles.  

Where We Are Today   

The increased attention to diversity and inclusion efforts in the mortgage industry in recent years has been very apparent, and indeed, progress has been made when it comes to organizations becoming more diverse. In the C-suites, however, the needle hasn’t moved very much, if at all.  

 Unfortunately, there are no hard numbers showing how diverse or non-diverse the mortgage servicing industry is. But we can draw some conclusions based on data about the financial services industry as a whole.  

Earlier this year, the House Financial Services Committee held a hearing in which members reviewed data on diversity and inclusion efforts among financial services companies. There were some positives among the data. For example, the staffs at 44 banks that were included in the research were 58% white in 2018, compared to 63% of the national population. African Americans made up 12% of the banking workforce, which is roughly their same percentage of the U.S. population.  

However, these numbers were not the same for positions of leadership. According to the report, senior-level employees were 81% white, compared to 63% of the national population. For some banking institutions, the number of minorities in senior leadership positions was in the single digits.   

One of the obstacles in determining the true level of diversity in our industry is that a lot of the reporting by banks is voluntary. In their annual Office of Minority and Women Inclusion (OMWI) reports, the FDIC, the Office of the Comptroller of the Currency, and the Federal Reserve Board of Governors all reported that the response rates in their diversity surveys was 16.7% or less.  

From my own experiences and observations, I can say emphatically that the overall diversity among senior leaders in the mortgage servicing industry is on par with what these numbers tell us. For proof, one needs only to look at the leadership teams for most servicing organizations, which are mostly comprised of white men. 

They are also in line with what we know about the U.S. business world in general. According to a 2019 analysis by the Center for Talent Innovation, a New York-based workplace think tank, African Americans accounted for just 3.2% of senior leadership positions at large U.S. companies, and just 0.8% of all Fortune 500 CEOs. 

A Greater Need for Diversity Than Ever  

While diversity has always been important, there is a particular need for servicers to ramp up their diversity and inclusion efforts now. To be sure, the mortgage servicing industry has never experienced a crisis like the one we face today. Millions of borrowers are facing financial hardships and job loss as a result of the COVID-19 pandemic and are looking to their servicers for help. That is placing enormous demands on servicers to operate more efficiently while giving every borrower the relief they so desperately need.  

This challenge is being magnified by the reality that most servicers were ill-prepared to transition their organizations to remote work environments. If this obstacle was not difficult enough, servicers that outsourced forbearance requests and loss mitigation processes to third parties overseas have found these providers were also ill-equipped to continue operating during the pandemic.  

As far as the pandemic and the financial crisis goes, we really don’t know where things are going to end up. We only know that at some point, the number of relief options will end, and we will experience an upswing in loan delinquencies and defaults of unknown size. When the pandemic fades into history, our industry is going to be graded on how well we were able to help borrowers at their greatest time of need, and whether we did all we could.   

More than ever, mortgage servicers need the kind of outside-the-box thinking that diverse organizations are better able to provide. In fact, organizations with diverse leadership are often those that are better able to innovate and create better ideas and strategies for success. Indeed, there is a growing body of evidence that suggests organizations that prioritize diversity and inclusion perform better than organizations that lack diversity.  

McKinsey & Company, which has been studying workplace diversity for the past several years, has found that organizations that rank in the top 25% in terms of gender and ethnic diversity typically perform better than companies that ranked in the bottom 25%. In addition, companies that were racially more diverse were 35% more likely to outperform other companies.  

What Servicers Should Be Doing  

Clearly, the need and the value of diversity in the servicing industry is more evident than ever. The question for many organizations is how they can further improve opportunities for African Americans and other minorities to advance their careers and move up into leadership positions or the C-suite.  

While there is a growing number of resources available to help women and minority mortgage industry professionals advance their careers, the bottom line is that change needs to start with the organization. Our company founders at BSI Financial, for example, have always believed in the principles of diversity, inclusion, and tolerance, and they are central to how we hire, retain and develop our people. But in order for these beliefs to mean anything, they need to be put into action.   

Another obstacle to change is that many organizations look at diversity and inclusion as the same thing, but they’re not. Diversity applies to how people are represented in an organization; it’s more of a state of being. Inclusion, on the other hand, refers to engaging people in how organizations are run.  

According to a recent study published in the Harvard Business Review, increasing diversity doesn’t necessarily lead to inclusion. Researchers found that few minorities in positions of senior leadership will sponsor lower level employees of the same gender or ethnicity because they fear being perceived as giving special treatment to others or that the people they sponsor won’t “make the grade.”   

Organizations can increase inclusion by ensuring that minority employees feel empowered to speak up, knowing that they will be heard. Another way is to empower employees to make decisions, provide constructive feedback and share the credit when there are successes. According to the Harvard study, 87% of employees who say their leaders exhibit these traits say they feel welcome and included on their teams and feel free to express their opinions, while 74% believed their ideas are heard and recognized.   

According to the Center for Talent Innovation analysis mentioned earlier, one reason African American professionals were having trouble advancing into leadership positions was a lack of facetime with senior management. One way any organization can improve inclusion is by holding regular conversations with their employees and managers in which their work is recognized and their input on key business decisions is sought. This can be followed up by extending opportunities to all staff to grow beyond their current roles by providing continuing education and mentoring opportunities.  

While there are variances between different segments of the housing economy, overall, most mortgage servicers are still falling short of their goals when it comes to diversity in the C-suite, particularly when it comes to African American representation. Thankfully, there are more strategies and resources available to change this picture. All we need to do is use them.