ORLANDO–Most credit unions remain unaware of just how much employee turnover is costing them, according to one expert, who says that’s unfortunate–because the figure is much higher than many might expect.
According to Keith Hughey, a senior consultant in JMFA’s Business Strategies Practice, the downside of a recovering economy is there is upside for many workers in seeking new jobs. Hughey told the League of Southeastern Credit Unions’ annual meeting here that the voluntary turnover rate in the U.S. workforce has rise to 2% monthly from 1.3% when there weren’t so many jobs to be had.
Keith Hughey
“With 148.5 million people in the U.S. workforce, and with 66% of workforce saying they are unhappy in their jobs, if 2% are moving per month that’s 36-million people a year,” said Hughey. “Some of them may work for your organizations, and they are leaving because they are unhappy, and largely that’s due to leadership.”
Hughey, whose remarks centered on leadership and management, urged his audience to think about their own careers. He said most people are hired into narrow technical positions because they have those technical skills, and then as workers advance no one ever talked about or provided any training around leadership, “until a person’s glaring weaknesses are causing havoc in an organization.”
“And then we expect them to come back from leadership classes with new sets of skills and all the old bad behaviors to be gone and all their sins forgotten and forgiven,” said Hughey. “We tend to hire good technicians who are well equipped, but there are very few natural-born leaders. It is incumbent upon organizations to get people into leadership development, but to do so early in their careers.”
Hughey noted that exit interviews and surveys of those who have quit their jobs cite problems with their boss as the most frequent issue. Other issues often cited include feeling they and/or the company has no sense of direction or vision, the perception management cares only about itself, the work is not challenging,, and there is no connection between the organization and the goals.
A Turnover Cost Calculator
To help organizations understand just how much turnover actually costs, JMFA has created a Turnover Cost Calculator. Hughey used a hypothetical organization for numbers to plug into that calculator. In an organization of 100 employees with a voluntary turnover rate of 20% per year, the assumption was that among those departing is one person in senior management or a skilled specialist, six people in exempt-roles as managers/supervisors, and the remainder being non-exempt roles. Then using compensation study data that shows organizations’ replacement costs are typically between two and four times the salary cost for the senior folks, 1.5 times compensation for the exempt, and approximately .5 for non-exempt.
“For a 100-person organization that is $1.2 million in costs due to turnover, but you don’t see it because of how we account for it,” said Hughey. “Nothing on the balance sheet shows the value of people, and yet if you ask CEOs what is the most valuable asset, they all say ‘People.’ Cut that amount by one third and that’s a $350,000 in annual savings.”
That figure does not include the “huge costs” of lost knowledge and lost external relationships, Hughey said. “And then there is also the domino effect as someone else leaves for greener pastures, plus the recruiting costs.”
Eight Leadership Skills Identified
Hughey said JMFA has identified eight leadership skills it believes are absolutely essential in managers, including the ability to:
- Motivate and Inspire Others.
- Communicate (which includes listening)
- Lead by personal example
- Good at delegation
- Build (and are part of) effective teams
- Earn respect and trust (through consistency and transparency)
- Make hard decisions
- Flexible and open to change.
“The best leaders also develop their successors by modeling the desired behavior, caring deeply for their people and their well being, communicating a compelling vision, involving their people, teaching, and training their people, delegating responsibility to their people, and commissioning their people as co-laborers in their work,” he said.
Hughey noted that most organizations do training, but “often it’s ineffective.”
He further told his audience that all of them crave praise and recognition, “so doesn’t it make sense that the people who work for us need it as well. And it’s a whole lot cheaper than giving raises and bonuses. People will walk through water for bosses they believe in.”
Most managers are poor delegators, he observed, believing they can do it better and faster. But that really only holds true in the short term, he said.
'Great Rationalizations, But...'
“All of those things are great rationalizations, but if our timeframe is longer term, for us to continue to do the work it’s terribly inefficient. All of our excuses for delegation are simply that, excuses.
“Every person in this room takes pride in what you do,” he continued. “You believe in your heart of hearts that you are good at your job, that you lead by example. But the reality is we kind of become enamored of our own resumes. We become victims of the success paradox. An effective leader has to own their mistakes. Often CEOs complain that ‘My people aren’t accountable.’ And I always think, ‘Well how accountable are you?’ Anytime employees are criticized in public, that employee will never again make a decision, and every employee who witnessed it won’t make one either. You have to praise in public, criticize in private.”
Another challenge for leaders is they often take pride in taking that longer term, bigger picture view.
“Leaders are called upon to make a lot of decisions, and we give them credit for the 30,000 foot perspective,” said Hughey. “But they are so far removed from the grassroots that they make decisions that actually make things worse at that grassroots level.”
Hughey urged credit union leaders to not just give everyone permission o challenge the status quo, but encourage them to do so.
“The staff becomes excited when they feel like they have a voice and they can see their fingerprints on the changes made,” he said.