Off the CUff has posted several blogs about retailer best practices that translate to financial services providers – read my Best Practices On Aisle 3 and Retail Revival or check out my colleague’s blog Retail Industry Harbors Customer Service Lessons. Now, The New Yorker offers more insight from retailers. This time the topic is on the importance of balancing staff expense with business success. A too-large labor force cuts into the bottom line while too few employees cuts into customer satisfaction.

Leanness might be an admirable quality in business, but according to The New Yorker, “too much cost-cutting turns out to be a bad strategy, not only for workers and customers but also for businesses themselves.”

The article references several studies. One, conducted by the Harvard Business Review, looks at the staffing strategies of Costco, Trader Joe’s, QuikTrip, and Spanish supermarket Mercadona. Compared to their competitors, these retailers employ more full-time workers, have more employees on the floor, pay their employees better, and invest more in training, which all translates to higher labor costs. As you might guess, these retailers are better places to work (QuikTrip has even made Fortune Magazine’s “100 Best Companies to Work For” every year since 2003). But these companies are also “more profitable than most of their competitors and have more sales per employee and per square foot,” according to The New Yorker.

Furthermore, a Wharton School study found that every $1 in additional payroll at a large retailer (i.e., 500+ stores) led to $4-$28 in new sales. That’s a significant range, but the research also provides a more tangible take away on customer needs. Customers “want to be able to find products and helpful salespeople, easily,” says The New Yorker. “And they want to avoid long checkout lines.”

These are the retail stars. For lessons on what NOT to do, The New Yorker calls out Home Depot, whose “You can do it. We can help” tag line is laughable. The home improvement giant’s strategy to reduce salespeople and full time jobs turned its big box stores into “cavernous wastelands, with customers wandering around dejectedly trying to find an aproned employee, only to discover that he had no useful advice to offer.” Customer-service ratings and sales growth were likewise lost. In 2007, Circuit City replaced more than 3,000 experienced sales people with newer workers. By January 2009, the electronics superstore had filed for bankruptcy.

Okay, so your members aren’t walking into your branches to buy a sweater, a laptop, or 100 rolls of double-ply toilet paper. So what in these lessons is applicable to credit unions? Plenty.

• How many employees must one member speak with in order to find the answer they need? Many call centers strive for one-call resolution so members don’t feel passed around or deserted. If the credit union cannot resolve the issue in a single transaction, the dialog between the member and a member service representative at least demonstrates the credit union recognizes the issue, which reinforces the member’s importance.
• Salary and benefits costs are half of credit union operating expenses (and totaled more than $14 billion in 2011). If management – in an effort to curb costs or increase revenue – needs to adjust compensation, consider the issue carefully. What other strategies can the credit union employ or what other intangible benefits can it offer affected employees in order to retain the talent that drives member service as well as the organization?
• Members talk back! Whether it is through net promoter scores, national customer service studies (e.g., J.D. Power and Associates) or through review sites such as Yelp, organization complacency can lead to a slow, painful decline. Finding the right balance of staff skill and number requires a nuanced approach. However you find that balance, though, remember focus, dedication, and drive at the organizational level encourages employees to commit to serving members every single day.