Changing the Way Small and Medium-size Credit Unions Hire for the Future
Rising labor costs, employee turnover, and the high costs of recruiting have small credit unions struggling to compete for talent. Introducing a new Credit Union Service Organization dedicated to revolutionizing affordable and efficient talent acquisition.
A Credit Union Industry White Paper from
KEY TAKEAWAYS
· Employee turnover affects credit unions of all asset sizes and budgets. Because they are compensated based on multiples of annual salary, most recruiting agencies have built their strategies around frequent turnover in large credit unions.
· 85% of federally insured credit unions have total assets of $500 million or less. Overall, during 2023 these credit unions suffered a decrease in shares, assets and members while hiring costs skyrocketed in the face of high employee turnover.
· Cost-effective talent acquisition strategies need to replace traditional recruiting tactics.
· The first-ever Talent Acquisition CUSO provides revolutionary talent acquisition services at a fraction of the cost associated with traditional recruiting methods.
THE HIGH COSTS OF EMPLOYEE TURNOVER
Just like other sectors,
credit unions are facing high employee turnover. Industry estimates suggest a
25% turnover in Front-line employees – the first point of contact for members,
making their role integral to a credit union’s success. The U.S. Bureau of
Labor Statistics estimates roughly 35,000 open teller positions each year over
the next decade will need to be filled due to workers exiting the labor force
or transferring to other occupations. This doesn’t include tens of thousands of
other positions “from the mail room to the C-suite.” For example, credit unions
have recently experienced back-office employee turnover of 11%, lending staff
at 10%, management is 6% and senior executive turnover at 4%.
In the current hiring market, credit unions are challenged with rising wages and hiring expenses. SHRM (Society for Human Resources) reports an average hard cost of $15,800 per $75,000 salaried employee, but the total hiring expense often amounts to three or four times the salary, as noted by Edie Goldberg of E.L. Goldberg & Associates who is also the SHRM Foundation chair-elect and co-author of the book The Inside Gig (LifeTree, 2020). That means if you're hiring for a job that pays $60,000, you may spend $180,000 or more to fill that role. "Of those costs, 30 percent to 40 percent are hard costs, and the other 60 percent are soft costs," said Goldberg. Soft costs including the time invested in the recruiting process, downtime of having roles open, lost revenue, decreased employee morale, burnout, and ultimately increased turnover.
Employee turnover impacts credit unions of all sizes, with recruiting agencies primarily focusing on high turnover in large unions as these are the credit unions that will give them the largest fees. However, the industry is predominantly made up of small unions with limited resources and shrinking balance sheets. 85% of federally insured credit unions have total assets of $500 million or less. Each cohort (under $10 million, $10 - $50 million, $50 - $100 million, and $100 – $500 million) has suffered a loss in shares, loans and members for the year ending 2023
Yet all of these institutions are
almost wholly ignored by traditional recruiting agencies as their fees are cost
prohibitive to smaller Credit Unions. In
its 2024 Letter to Credit Unions, the NCUA states, “The credit union system
over the last year has remained largely stable in its performance and
relatively resilient against economic disruptions. However, during 2023, the
NCUA observed growing signs of financial strain on credit union balance sheets.
The rise in interest rate and liquidity risks resulted in an increase in the
number of composite CAMELS code 3, 4, and 5 credit unions. Inflation and
interest rates are affecting household budgets, which could lead to an increase
in credit risk in future quarters. Economists are also forecasting an economic
slowdown as the lagged effects of elevated interest rates take hold. Each of
these developments could affect credit union performance, create challenges for
consumers, and pose a risk to the Share Insurance Fund in 2024.”To read full paper click here