Case Study: Engaging Others
You can bank on it: How employee engagement helped the FDIC stabilize the nation’s financial system during the Great Recession
From December 2007 to June 2009, the U.S. experienced its longest economic downturn since the Great Depression. Precipitated by a nationwide collapse in the real estate market, the crisis cost the country nearly 9 million jobs, led to roughly 3 million mortgage foreclosures and triggered hundreds of bank failures, shattering public faith in the American financial system.
The emergency required swift action from the Federal Deposit Insurance Corporation, an agency that maintains the stability of—and public confidence in—the nation’s banking system by insuring deposits and supervising troubled or failing financial institutions.
At the time, however, the FDIC faced severe personnel shortages, sagging morale and a growing disconnect between staff and leadership that led to low levels of employee engagement. Collectively, these trends left the agency ill-equipped to respond to the crisis.
But that all changed thanks to Arleas Upton Kea, then the agency’s director of the Division of Administration. As director, Kea oversaw a rapid hiring surge and extensive culture change initiative that revamped the FDIC’s work culture and enabled the agency to meet the challenge of stabilizing and reinspiring confidence in the nation’s financial system during the 2008 recession.
Kea had to engage others across the agency to drive these critical changes. She communicated openly and honestly to internal stakeholders about the agency’s personnel needs and larger hiring strategy, and instituted engagement strategies that increased employee performance and built consensus around bringing in so many new staff—particularly from the private sector—at once. These internal reforms empowered employees, cultivated trust between FDIC leadership and its workforce, and ultimately helped the FDIC better serve the public.
“The employee engagement work that we did ensured that the hard-earned money depositors worked for was protected. Not one penny of people’s insured deposits was lost,” Kea said.
To engage others, strive to foster an inclusive culture that encourages team members to offer constructive feedback, recognize good work and pursue professional development. This environment is the foundation for collaboration within and across federal agencies. Individuals, teams and agencies working together will have a greater impact on government effectiveness.Learn more
From the story: Why was employee engagement important in the midst of this crisis?
For reflection: When your office or agency has faced a crisis, was there a foundation of trust in place between leaders and employees?
For action: How might you prepare for your next crisis by proactively building trust and relationships?
Stepping into crisis
Even though it serves as one of the federal government’s chief banking regulators, the FDIC was severely challenged to manage such a severe economic crisis like the 2008 recession. While the agency had scaled up its operations and staff in response to previous economic disruptions—like the Savings and Loan Crisis of the late 1980s—it employed only about 5,000 people by 2008, down from a peak of 22,000 two decades earlier.
This significant reduction inevitably led to workforce imbalances and coverage gaps. These staffing shortages also led to employee fatigue. As a result, morale sunk, dissatisfaction with leadership grew and the agency’s overall employee engagement declined. In 2007, the agency placed 21st out of 30 large agencies in our Best Places to Work in the Federal Government rankings, produced annually with Boston Consulting Group. The lowest scores showed up in categories related to effective leadership and employee recognition.
“People were overworked and, a lot of times, I would hear people talk about the fact that they felt their boss didn’t listen. We were very aware of the potential for burnout,” Kea said.
In addition, the FDIC—like other federal agencies and the broader public—did not adequately anticipate either the speed or severity of the 2008 crash. On the surface, the mid-2000s U.S. economy was booming and showed no sign of recession. Indeed, the agency went roughly 900 days without a bank failure in the middle of the decade, fostering a false sense of security about underlying health of the nation’s financial system.
Things changed quickly. In the span of a few months, Bear Stearns, one of the country’s largest global investment banks, collapsed. IndyMac, then the largest FDIC-insured institution to fail in FDIC history, closed as well. Washington Mutual, a bank with over 40,000 employees and $188 billion in deposits also failed.
For the first time, the agency began guaranteeing certain types of bank-issued debt instruments that were not deposits.
All told, nearly 500 FDIC-insured banks failed between 2008 and 2013, costing the Deposit Insurance Fund—managed by the FDIC to insure deposits and to resolve, or stabilize, a bank’s operations—roughly $73 billion. Over 150 of these banks closed in 2010 alone.
With the DIF balance at its lowest level in history and more banks on the brink of collapse, the FDIC had to raise assessment rates for banks to replenish the DIF.
The FDIC examined or conducted extended oversight of numerous failing financial institutions. In addition, the agency had to frequently communicate with banks about delayed timelines and project plans—processes that only created more work for employees.
Previous downsizing significantly challenged the FDIC’s capacity to assume these responsibilities. At the onset of the crisis, the agency did not have enough examiners to investigate the rising number of troubled banks in a timely fashion and lacked satellite office personnel who could quickly manage the closure of struggling financial institutions around the country.
“Our workload exploded,” said Bret Edwards, the FDIC’s deputy to the chairman and chief financial officer. “It’s like the Federal Emergency Management Agency: One day, you’re sitting at your desk and things are quiet. The next day, you’ve got 10 wildfires, a couple of hurricanes and a flood.”
“We didn’t have enough people who were knowledgeable and trained and equipped to help us,” Kea said.
From the story: Three challenges—low morale, low trust and staff retention—can exacerbate one another in an organization. Which is the most important to tackle first?
For reflection: Knowing that effective leadership is the number one driver of employee satisfaction, how might leaders drive improved morale amidst a depleted and beleaguered workforce?
For action: How might you as an individual leader ensure those who work for you feel listened to?
Building a new workforce
Kea sprang into action to respond to these challenges. She designed and implemented an agencywide hiring surge strategy that required her to address personnel requests from specific teams while still considering the agency’s overall staffing needs—a delicate process that risked alienating key internal stakeholders.
Bret Edwards, the FDIC’s chief financial officer, said Kea walked this fine line by communicating frankly about what was possible and continually reassuring people that she had heard their concerns and was working to address them.
“You can imagine the clamor at the front door of her office—everybody’s saying, ‘I need people, I need contractors.’ She communicated expectations clearly and always said, ‘I hear you.’”
Kea and her team also extensively researched federal hiring rules to find creative ways to bring on more people. For example, she worked with the Office of Personnel Management to make more direct hires and extend offers to multiple applicants for the same position posting. The agency also required candidates to submit only a resume and not the standard federal application form for some jobs.
Other critical decisions included bringing back retired FDIC employees, hiring more employees on term appointments and launching three new satellite offices that could operate close to areas with a high number of bank failures.
Collectively, these efforts provided critical FDIC offices with the staff they needed to respond to identify and stabilize more at-risk banks.
Each of the three satellite offices—located in Chicago, Jacksonville, and Irvine—hired hundreds of employees in just six months. The agency’s Division of Resolutions and Receiverships—tasked with directly managing failing financial institutions through asset sales and other means—expanded its staff from 227 to more than 2,100 between 2008 and 2010. By 2011, 80% of these employees were on term appointments and many had worked as regulators or liquidators during previous economic downturns. Nearly 500 additional term employees were also hired to handle the agency’s increasing number of bank examinations.
“Handling the crisis would not have been possible without a massive hiring surge,” Kea said. “Our new staff was critical to us preventing additional bank failures and shoring up the deposit insurance fund.”
From the story: How did Kea collaborate within and beyond the agency to manage the hiring surge?
For reflection: What new knowledge or relationships outside your agency would help you in finding solutions to challenges within it?
For action: How might you go about building that knowledge or relationships?
Empowering staff through diversity, equity and inclusion
As part of these efforts to empower staff, Kea also provided underrepresented groups with more opportunities to climb the FDIC’s career ladder. She and her team incorporated new diversity, equity and inclusion metrics into the agency’s performance system and created professional development opportunities to upskill new staff.
“We were pretty direct in terms of telling managers and supervisors what our DEI expectations were and defining expected outcomes,” she said. “Then we monitored it through our scores that came back in the Federal Employee Viewpoint Survey.”
“We tried to embed diversity, equity and inclusion into everything we did.”
Kea also established programs to help younger, entry-level staff advance at the agency. For example, an 18-month program called ACE trained and provided educational assistance to low-level employees interested in moving into new professional tracks. A new “developmental rotation” program and mentoring initiative helped new hires gain new skills, while a new on-site day care center and health facility at the agency’s Virginia office promoted work-life balance for working mothers and employees at all socioeconomic levels.
Kea said employees often came to her with DEI concerns because of her own background. She grew up in segregated Texas, was the only African American girl in her newly integrated first grade classroom, attended the University of Texas and the University of Texas law school with a small number of Black students, and was the first African American woman to serve as an assistant general counsel, a deputy general counsel, a division director, and deputy to the chairman and chief operating officer at the FDIC.
“I heard from a lot of employees – they felt comfortable bringing their concerns to me,” she said.
These initiatives laid the groundwork for the FDIC to become a more diverse organization and enabled it to support more underserved communities. In the 2010s, for instance, Kea led the FDIC’s outreach to minority- and women-owned financial institutions and the agency continues to create financial literacy programs that encourage people from low-income communities to keep their money in FDIC-insured banks.
“We try to embed diversity, equity and inclusion in everything we do,” she said.
From the story: Diversity, Equity and Inclusion are integral to the mission delivery of FDIC. Why was it important to start with the internal culture at FDIC?
For reflection: Kea took a holistic approach to tackling DEI challenges at FDIC. When considering DEI, where are there gaps within your agency or team?
For action: How might you address the gaps you identified above?
Becoming a Best Place to Work
These efforts created a sustained culture of employee engagement at the FDIC. In 2011, three years after the culture change initiative began, the agency finished first in the Best Places to Work’s midsize agency category—increasing its engagement score more than 25 points from 2007. The largest increase—of over 35 points—occurred in the category measuring employees’ overall satisfaction with senior leadership. As a result of these efforts, Kea was recognized as a 2012 Samuel J. Heyman Service to America Medals® finalist in the management excellence category.
The FDIC finished first in the midsize agency category for the next five years and has remained in the top quartile since then. In addition, the agency’s DEI score ranked fifth of 24 midsize agencies, according to the 2019 Best Places to Work rankings.
This revitalized work culture enabled employees to respond to unexpected crises like COVID-19.
Kea noted that FDIC employees struggled to use new technology and access digital information when they shifted to mandatory remote work at the start of the pandemic. FDIC leadership altered its performance metrics and benchmarks to account for these gaps.
“We really spent some time with our managers and helped them make sure that they were doing all things appropriate to be supportive of the workforce,” she said.
As a result of these efforts, the FDIC finished sixth out of 21 agencies in the 2020 Best Places to Work COVID-19 category, earning even higher marks on the subcategory measuring the extent to which employees believe senior leadership prioritized their well-being during the pandemic.
Kea attributed these results to better communication between FDIC leadership and its employees.
“We communicated in every method possible to our employees. We were in a situation where we had to pivot quickly,” she said.
From the story: What difference did the level of employee engagement make, comparing the COVID-19 crisis to the 2008 financial crisis?
For reflection: How did you adapt to meet the needs of employees when COVID-19 required a significant shift in organizational culture and norms?
For action: Review your own agency’s Best Places to Work in the Federal Government® category scores. How might you gather more information to better understand your lowest scoring categories, and find ways to positively influence these areas within your office?
Rallying around the mission
But the FDIC did more than become a “best place to work.” The internal reforms Kea spearheaded enabled the FDIC to better serve the public. By engaging employees and hiring critical staff, she motivated the agency’s workforce to go above and beyond to fulfill its mission of protecting the nation’s financial system during a serious economic crisis.
For an organization with employees who had just previously experienced burnout and overwork, this was no small feat.
“Employees would brag about how they were up till 3:00 in the morning, going in and out of financial institutions, perhaps being in a conference room with stacks of paper reading through documents,” Kea said. “That was contagious and energizing. People were really rallying around the mission.”
The impact of these efforts are undeniable. The FDIC protected all of the nation’s insured deposits during the 2008 recession and developed strategies that have saved hundreds, if not thousands, of banks from potential failure over the past 12 years.
From 2008 to 2017, the agency designated nearly 1,800 FDIC-insured financial institutions as “problem” institutions. Less than one-third of those institutions failed, while roughly 1,375 either merged with other institutions or stabilized their operations.
“Without our response, the whole thing wouldn’t have worked,” Edwards said. “We made sure that people remained confident in the notion that their deposits were safe and secure. We were an essential part of keeping the public’s confidence in the financial system.”
Of course, Kea and Edwards knew where this enhanced public trust came from—it was due to their stewardship of the workforces they led. Edwards said that the agency is determined to heed the lessons from 2008, maintaining a robust, satisfied and fully engaged staff that works to combat and prevent future crises.
Indeed, the personnel brought on and trained under Kea’s leadership have helped ensure the agency prevent and manage future economic crises, train bank examiners to proactively help financial institutions manage their risk levels, offer banks more thorough analyses of their financial practices, and more quickly and efficiently elevate issues of concern to a bank’s board of directors.
Kea sees employee engagement at the heart of these achievements.
“If you want your employees to work toward the mission, then you want them to be engaged and feel empowered,” she said. “You want them to feel important. You want them to feel like they count.”
From the story: What contributed to employees feeling “energized” rather than overworked in the circumstances described above?
For reflection: How do you keep yourself and your team empowered during crisis?
For action: What might you do to continuously tie your team’s day-to-day work to the mission?