The Hidden Costs of Staff Turnover

Staff expenses are the single largest cost category for credit unions. The costs, however, may be greater than you think.

 
 

Staff-related costs are the single largest expense category for credit unions, representing over 50% of the industry’s total operating expenses. In 2005, the industry spent a total of $11 billion in salaries and benefits on approximately 220,000 employees.

Given the current business environment marked by low growth and tight margins, it is an imperative for credit unions to control their operating costs in general and staff-related expenses in particular. While the income statement captures the cost of active credit union employees, quantifying the cost of staff turnover is more difficult. Yet the cost to credit unions is significant.

Key Cost Components of Staff Turnover

There are five key components in calculating the cost of staff turnover at credit unions:

  • Termination Costs – the costs associated with severance packages, administrative functions related to the termination, etc.
  • Replacement Costs – the costs associated with advertising, interviewing candidates, pre-employment administrative expenses, travel/moving costs, etc.
  • Vacancy Costs – the costs associated with overtime expenses, temporary help, etc.
  • Learning Curve Costs – the costs associated with training staff, the new hire’s lack of productivity for the first 6-12 months, etc.
  • Intangible Costs – costs such as the impact to staff morale, customer service disruption, burnout/absenteeism among remaining employees, and the loss of institutional knowledge

Calculating the Cost to Credit Unions

The American Management Association estimates that employee turnover costs can range from 25 percent to almost 200 percent of annual compensation depending on the job function and title. Applying the conservative estimate (25%) to average credit union employee compensation ($49,500), we estimate that it costs the average credit union approximately $12,300 to replace each open position.

According to CUNA’s 2005-2006 Complete Credit Union Staff Salary Survey,* although staff turnover varies significantly by job position, the industry average in 2004 was 12 percent. Therefore, the credit union industry as a whole spent nearly $330 million on staff turnover!

A credit union’s biggest asset is its people. To learn more about how credit unions can better address the staff turnover issue, please join our webinar, Successful Staff Retention Strategies, brought to you by Callahan & Associates.

* CUNA’s 2005-2006 Complete Credit Unions Staff Salary Survey

 

 

 

April 3, 2006


Comments

 
 
 
  • Good data with fairly recent statistical research.
    Anonymous
     
     
     
  • I would love to see an article on what the industry is doing on benefits.
    Anonymous
     
     
     
  • I highly doubt the average turnover at credit unions is only 12%. At SAFE Credit Union we keep detailed turnover records. We record in detail the reasons for turnover. Our turnover in 2005 was nearly three times the average you report. We know our turnover is high but we also know that many of the credit unions in our area have similar turnover statistics--they just don't keep records like we do. Our back office turnover is about 12%. But our front office member contact positions have high turnover. Tellers and platform staff turnover is close to 50%. Turnover has increased as we have added accountability for sales in addition to the service metrics we have always had. Many of our front line staff do not intend to make a career in the credit union. They work at the credit union while attending school. I agree that the cost of turnover is as high as you estimate it to be. An unknown cost of turnover is the impact on member service. We have had to invest large sums in making our systems easier to learn and more error proof because we have to shorten the learning curve so that staff are competent quickly. We can't take long to train someone who is only on the job on average one year. High turnover means we have a full time recruiting staff and a very large training staff. We run classes for new hires all the time just to keep up. What are we doing to combat turnover? We are paying a premium to tellers. We call it teller factor pay so that they have a monetary incentive to stay on the job. Tellers at SAFE don't do much sales--they process transactions and make qualified referrals to the platform staff. We are paying the platform staff generous sales incentives and we incent them for high scores on our mystery shops that measure member service. We are training our supervisors and managers in how to bond with employees and create a positive work environment. We have improved our screening process for new hires to get a better fit between what our culture is and the people we hire. We have made turnover goals a part of each supervisors evaluation and each recruiter is evaluated on the average length of employment of those that they hire.
    Anonymous
     
     
     
  • For two years we had 0 turn over and our average tenure was 10+ years. Now in the first 5 months of 2006, we have had 2 long time managers resign (1 left to return to Germanyand 1 retired) and 1 full time teller and 1 part time. This equates to one fifth of our staff, and very strerssful for me as CEO of a 41 million asset CU with 8 locations in two states. I wish I could set up a training department but I can't. I read a lot and articles like this is some of the best education I can get. We train with computer servers and have different test for our employees on different things, we just did a continuing education paper on SAR's. By the way I also handle compliance. Thanks for sharing the insights of the large cu's, I read and I learn.
    Virginia Smith