Recession Has Given Rise to the Power of Attrition Management
Given the economic climate over the last two to three years, a number of credit unions have had to seriously consider laying off employees, and some have actually done so. But for many credit unions, layoffs are a last resort.
And, fortunately, given that the worst of the economic crisis seems to have passed, layoffs are now a rarity.
"I think most of the layoffs have already happened," said John Andrews, executive vice president with D. Hilton Associates of The Woodlands, Texas. "I have not been seeing many of them recently."
Another reason layoffs have become a rarity is that, according to Andrews, most credit unions tend to operate very leanly from the start. "As a result, there is rarely any fat that can be cut from the staff or management," he explained.
However, if a reduction is necessary, most credit unions first turn to attrition management. That is, employees who leave are not replaced. "This has been much more prevalent than actual layoffs," Andrews said. And since there does tend to naturally be turnover in credit unions, this approach may be very effective.
Once the decision is made to focus on attrition, the next step is to make sure that the responsibilities of the employees who are leaving can be covered. "You have to make sure that you have the job skills internally, which will allow you to do some job-sharing or job shifting," Andrews said.
The credit unions that have been most successful with attrition management, he said, are those that have created variable pay plans or other incentives to recognize that the remaining employees are now doing extra work. "There are a lot of success stories of people picking up the slack in these situations," Andrews said.
In terms of maintaining the morale of the employees who stay, money is certainly important. However, what is more important is recognition. Andrews said the best morale builders are constant feedback and recognition for the people who are working extra hard for members. "One way to accomplish this is, if you conduct member feedback surveys, make sure the employees hear about the results," he said. Another benefit of maintaining morale is that, when the economy improves, you might be able to retain employees who otherwise would have moved on to different jobs.
One credit union that has had stellar success with attrition management is Navy Federal Credit Union of Vienna, Va. Navy FCU is the world's largest credit union, with 7,200 employees. "We are proud of the fact that we have never had a layoff in our 77 year history," said Louise Foreman, executive vice president, human resources.
One reason is the structure of the organization. "We have key areas of the credit union that require a large number of employees performing the same type of work," she explained. Examples include the call center, loan processing and branch operations. "This affords us the flexibility to detail or reassign employees as necessary for specific timeframes, based on operational necessity," she said.
Another reason for the lack of layoffs relates to developmental opportunities. Navy FCU has a practice of promoting from within. As a result, it has a significant pool of employees with strong skill sets from the various positions they have held. "We also look for opportunities for employees to cross-train within their own departments," Foreman said. Both of these practices are beneficial when the credit union needs to reassign or call back employees to support critical member-facing areas for either short or long periods of time.
A third reason relates to staffing management. Navy FCU has a mechanism for requesting staff and controlling its personnel growth through the annual budget process. In addition, HR and the business units partner to closely monitor staffing levels and requirements on a regular basis. "This allows us to react quickly to ramp up, or draw down, staffing," Foreman explained. For drawing down staffing, the options include placing a freeze on hiring new employees, attrition with a freeze on refilling existing positions, and/or detailing or reassigning existing experienced staff to critical vacancies.
If such strategies don't have the desired effect, then a layoff may actually need to occur. If this is the case, Andrews said, it is important to do it quickly, decisively, and with precision. "For example, you don't want to do a layoff one month, and then do another one the next month, and so on," he pointed out. "This will really hurt morale, because everyone will wonder if they are next."
According to Robert Rutkowski, a partner in the credit union department of the law firm of Weltman, Weinberg and Reis of Brooklyn Heights, Ohio, it is also important to differentiate between a reduction in force and a one- or two-person layoff. If you do an RIF, a federal law called the Worker Adjustment and Retraining Notification Act requires you to give 60 days notice in advance of closings or other mass layoffs if you have 100 or more employees, Rutkowski said.
You also need to take other legal and regulatory issues into account if you plan a layoff. For example, "employment at will" is different from "for cause" which is different from a collective bargaining agreement. "As a result, your approach will be different, based on the specific scenario," Rutkowski said. You also need to decide what criteria you will use for making the layoff. "If you are doing to it via performance or seniority, you still have to be sensitive to anti-discrimination issues," Rutkowski said. "For example, if everyone you RIF is over 40, you will have a class action on your hands."