A New Paradox: Win the War for Talent by Losing

A paradox is often used to describe a counter-intuitive result or statement. We see examples of paradox all the time. In our day to day we hear such statements as "Your enemy's friend is your enemy." In literature Oscar Wilde famously said, "I can resist anything but temptation." And in our world of credit unions we see such paradoxical decisions as investing more in a less popular delivery channel (branches) than an emerging/more popular channel (mobile banking).

A paradox I'm excited to share with the credit union industry is highlighted in an upcoming Filene research study entitled "Winning by Losing: A Case Study of Alumni Effects on Credit Union Recruitment" (March 2020) by University of Texas professor and Filene Research Fellow Y. Sekou Bermiss, PhD. Effectively, the research examines the potentially positive effect of losing credit union employees to brand name competitors in the credit union's own recruiting efforts. Despite the obvious evidence about the dangers of losing your employees to competitors, the research indicated organizations can indirectly benefit when they lose employees to high-status competitors. Because high-status organizations are held in such high regard, often due to previous financial successes or historical legacy, being associated with such organizations can be beneficial. When an employee moves on to a well-known high-status organization, that can be a positive signal to potential candidates that being employed at your organization can lead to prestigious future opportunities.

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Examining the Data

Let's look at an example. Credit Union XYZ is a $500 million institution located in a large metropolitan area with a host of brand name technology firms competing for talent. XYZ is well known as a long-time member of the community. They have a talent pipeline from the local community college offering management level positions for young professionals interested in a career in finance and banking. The CEO of XYZ notices that as the tech sector heats up, she loses some of the employees that originally came from the community college pipeline after three to five years of service. Additionally, she discovers that approximately 25% of those who leave boomerang back to the organization after five to seven years in the tech sector.

By analyzing these trends, the CEO of XYZ and her HR lead begin to highlight these facts in the "Careers" section of their website. For instance, in addition to the typical benefits XYZ offers to new employees (health insurance, 401(k), vacation, tuition reimbursement, etc.) they begin to highlight their alumni network. XYZ characterizes their alumni network through stories of specific employees that have significant jobs in the tech sector, or the so-called boomerang employees who got trained at XYZ, gained valuable experience at a brand name firm and are now back at XYZ with a senior level position.

Running the Experiment

As part of Filene's soon-to-be-released study, we conducted a field experiment to test the effectiveness of this approach with a credit union. We first identified two branches in similar labor markets that were both looking to hire for the same position within the same time period. We selected an entry-level position for this study because these jobs have the most churn and would improve the applicability of our findings. The branch in the control condition used the typical advertisement, which highlighted: 1) What it was looking for in a candidate; 2) What benefits it provides including base pay, travel pay, full benefits and career advancement opportunities; 3) What qualities would make an applicant stand out; and 4) Why applicants should choose the credit union.

The branch in the Alumni test condition used the same advertisement as the control condition but added a section between sections two and three, which indicated five positions that former employees currently hold:

CEO of another credit union;
City mayor;
Consultant with a Fortune 500 company;
CFO of another credit union; and
COO of a fintech start-up.

These two job advertisements were posted on the credit union's employment website and were automatically posted to the Indeed and Glassdoor websites as well. The two postings went live on the same day with plans to remain open for 30 days or until the position was filled. Human resource managers at the credit union operated their usual recruitment processes and attempted to fill each position. The data on the applicants who applied for each position were collected by the credit union, anonymized and shared with Filene for analysis.

Understanding the Results

The research results suggested there were significant differences between the applicant pools generated by the advertisement in the Control condition versus the Alumni condition. Specifically, the applicant pool for the Alumni condition was larger and had more qualified applicants. Additionally, the applicant pool for the Alumni condition also attracted a higher percentage of qualified applicants. Pretty cool, right?

Attracting talent remains a top priority for credit unions, particularly as unemployment levels reach historic lows throughout North America. The results of the field experiment suggested that making a slight tweak – essentially adding a few bullet points highlighting Alumni – in recruiting materials can increase the size and quality of a credit union's applicant pool. This is a significant finding because updating recruiting materials is a significantly less expensive strategy for increasing the applicant pool as compared to the more common options, such as increasing salary or paying a referral bonus.

While losing employees can incur psychological, team and financial costs, it is important to recognize that an alumni employee is also a valuable (and underused) resource. If alumni employees boomerang back, they often return as better employees than when they departed. And even when they are "gone," they can be advocates for your credit union to prospective employees, members and/or strategic partners.

So, the paradox of "winning by losing" is one that credit unions should consider in the fierce war for talent.