Building The Six Million Dollar Employee … On A Budget

Industry data reveals increased staffing numbers as well as evidence of enhanced employee roles and responsibilities among the nation's credit unions.
Janet Lee

If there is one lasting lesson from the recession, it is that stasis can be deadly. As cooperative business models and the regulations governing them evolve, credit unions are rethinking how to acquire and deploy the next generation of employee talent more effectively.

Traditional roles have served the industry well, but you would be hard pressed to find a job description from even a decade ago that would not require substantial updating to apply to today’s cooperatives.

A loan officer, for instance, is no longer confined to originating loans. Today, these employees are expected to be everything from relationship builders to technology gurus, and they can be found on the road, in the call center, or even on the screen of a public kiosk, personal computer, or mobile device just as readily as in a branch.

Many other tasks such as brand development or problem resolution now occur through myriad electronic and physical contact points, whose oversight involves multiple departments and employees.

Unfortunately, credit unions do not have the unlimited resources of those fictional government scientists in the 1970s series, The Six Million Dollar Man. However, cooperatives are learning to use every tool at their disposal including technology and a better sense of their membership’s needs to build a stronger workforce.

Evolving Roles For Front-Line Staff

Any employee role changes over time, but today some jobs are evolving faster than others. For example, member-facing leadership roles are under increasing pressure to help credit unions deliver more effective service than banks and other for-profit competitors.

One indication of this job sector’s importance is that credit unions are willing to pay more for top talent. According to the 2013 CUES Executive Compensation Survey, the job of a branch or member services executive posted a 9.3% increase in total compensation, the highest increase for all executive positions.

Peer-to-Peer Analytics by Callahan Associates

Even junior and mid-level employees in the branch or contact center must be knowledgeable and tech savvy about different banking channels for those operations to succeed and produce a profit.

The new demands on member-facing employees led Mountain America Credit Union ($3.9B, West Jordan, UT) to create an entirely new job, that of tech champion, last year. These employees, who are at every branch as well as out in the community, teach members how to use different banking channels. Tech champions have not only increased member participation in Mountain America’s online and mobile services but also trained their colleagues to be more tech savvy so that they could respond to members through these channels, too.

Quality And Quantity Are Within Reach

Credit unions aren’t just hiring more; they’re also hiring better. Although the cost of this deepening talent pool is growing, the price tag isn’t as steep as you might think. For one thing, these additional employees help credit unions generate more business.

Following a tide of surging demand, total outstanding loans for the credit union industry reached $660.6 billion as of March 2014, according to Callahan Associates’ Peer-to-Peer analytics. This figure is up 8.8% $53.2 billion from the year before. Membership also increased consistently over the past decade, growing 2.7% from last year to top 98.3 million as of the first quarter.

Peer-to-Peer Analytics by Callahan Associates

To keep up with this growth, employee ranks swelled nearly 25% over the past decade, resulting in 255,496 full-time equivalent staff members as of March 2014. Adequately staffing for increasingly complex roles is more crucial than ever. Still, this undertaking needs to be balanced against other financial concerns, such as rising labor costs.

As credit unions expand their employee base with new talent, the total cost for salary and benefits is rising, up 3.4% compared to the first three months of 2013. Annualized average cost for salary and benefits also increased 0.7% to $66,044 as of March 2014, although it still constitutes the lowest growth rate for this metric within the last decade.

A Better Benchmark For Employee Performance

To maximize the value from investing in a better workforce, many institutions find it helpful to deploy additional performance measures as a litmus test for productivity.

One traditional way of measuring staff productivity is the member-per-employee ratio. Theoretically, a higher ratio indicates a more productive credit union.

Peer-to-Peer Analytics by Callahan Associates

This particular metric has been rising since March 2009, currently topping 385 members per employee as of March 2014, and is primarily attributed to stronger membership growth. However, the growth for employees did outpace that for membership in March 2013 for the first time in 2008 by more than a percentage point.

Annual growth rates for both employees and membership have leveled off at 2.6% and 2.7% respectively as of March 2014.

Although the members-per-employee ratio effectively evaluates productivity from a purely labor perspective, an alterative method is net revenue per dollar of salary and benefits. That ratio offers credit unions a more complete picture as to whether their service model is producing stronger relationships and more business with each member.

Net revenue per $1 of salary and benefits is currently down 2.3% annually to $2.60 in the first quarter of 2014, but that figure is up more than 4.4% compared to 2008 levels.

Net revenue per $1 of salary and benefits is currently down 2.3% annually to $2.60 in the first quarter of 2014, but that figure is up more than 4.4% compared to 2008 levels.

Credit unions can also expect to see this ratio increase over the coming years, as revenue will likely rev up as a result of rising demand for consumer loans. Loan and investment income is already up 1.9% and 7.3% compared to the first quarter of 2013.

Given the higher interest rate environment, the yield on investments also increased 12 basis points year-over-year, with 1Q 2014 marking the first time since 2007 that this metric has risen annually.

In the recent past, a volatile economy and members’ changing needs presented a challenge for credit unions because they needed steady revenue before adding new staff. However, the financial outlook for 2014 and beyond is rosier, allowing credit unions to hire more aggressively than before.

Read on for more specific examples of where and how to deploy new employees to fill crucial gaps in sales and service, stand out from your peers, and establish an operational vision that takes into account not only where your cooperative has been but also where it is headed.

July 7, 2014

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