Despite strong unemployment numbers nationwide, layoffs continue to take place across the workforce, including everything from cuts at the New York Daily News to eBay, Mattel, Deutsche Bank and more. Notably absent from that list? Credit unions.
Despite being a fact of life in much of the labor market, layoffs rarely occur at CUs – but why?
Credit unions make a big deal about their cooperative structure, and one CEO suggested that structure may play a part in why layoffs are so uncommon.
“Because of our not-for-profit structure, we return our revenue back into the organization and into the membership,” said Michael MacPherson, president and CEO of Freedom Federal Credit Union in Bel Air, Md. “We believe in being good stewards of our members’ money, which means continuous focus on minimizing expenses and inefficiencies, while continuing to provide exceptional member service.”
MacPherson added that he thinks credit unions “make every effort to make the employee experience as important as the member experience, attracting and retaining the best employees, and providing them a workplace fostered on growth, diversity, and inclusion.”
Cutting expenses through staff reduction, he suggested, would be “counterintuitive” to creating a culture of “attracting the best and keeping the best.”
Sarah Hilton, vice president at D. Hilton Associates, an executive search firm based in The Woodlands, Texas, pointed out that most credit unions run with “lean staffs” anyway.
A credit union with fewer than 100 employees, she noted, often doesn’t have excess employees to layoff to begin with.
“We often see vice presidents and C-level roles overseeing multiple areas within a smaller credit union in order to keep overhead at a minimum,” observed Hilton.
Even more importantly, Hilton said, credit unions are often more “stable employers” because of their not-for-profit status. “A bank of $300 million, or even $1 billion, can be purchased and merged for a profit to the owners or shareholders, whereas a credit union’s independence and stability as an employer is based largely around membership and management, as opposed to profit for a just a few,” she pointed out.
But avoiding layoffs doesn’t just happen – there’s a strategy to it. According to Joe Mecca, VP and communications spokesperson at Coastal Credit Union in Raleigh, N.C., the $3.1 billion-asset CU has generally been able to avoid layoffs because “we regularly reevaluate our needs and realign our structure.”
“We also do a great job of planning ahead for our future needs, so it would be unusual for us to be in a position to have a lot of roles that aren’t necessary anymore,” he added. “In any case, we run a fairly lean operation, even with 500-plus employees.”
Lean times? What lean times?
Despite being not-for-profit cooperatives, credit unions still have to generate net income and grow assets in order to survive – and yet, even in lean times, credit unions rarely (if ever) unload employees en masse.
MacPherson credits this to most credit unions doing a “great job” of forecasting the financial landscape three to five years ahead of time, in order to be able to “adjust their organizational strategy and mitigate any exposure during anticipated leaner years.” This allows for changes in the workforce to come about organically, rather than forced through job cuts.
While it doesn't happen as often as it used to, it's not uncommon to see someone spend their entire career not just in the credit union industry, but at a single credit union, sometimes even working their way up from an entry-level teller position to CEO or other C-level jobs.
For Coastal Credit Union, explained Mecca, the CU’s biggest cuts came during the Great Recession, which coincided with “closing some underperforming branches and focusing our branch strategy into one market area, and centralizing our teller operations. Even then, the impact was minimal compared to what we were seeing at other local companies.”
John T. DeCelle, president and CEO at the $401 million Nassau Financial Federal Credit Union of Westbury, N.Y., reminded that credit unions may typically look to reassign employees if a
“business decision was made to change a particular department due to financial concerns.” But, he added, it is “highly unusual” for a credit union to cut staffing in order to improve the bottom line.
Merger matters
Even as the movement consolidates and the number of overall credit unions shrinks –
For example, Coastal’s Mecca noted that when
“The seven who left did so voluntarily and were given a generous severance,” added Mecca.
Of course, credit unions sometimes do have to fire or downsize people for various reasons. MacPherson reminded that although most credit unions will find ways to accommodate displaced employees, reductions can occur as a result of ”efficiencies built into organizational processes, consolidations of operational functions, or as a result of new technology that allows credit unions to function more effectively and better serve their membership.”
DeCelle indicated that while his credit union has never cut jobs (and, in fact, is now increasing staff as the credit union continues to grow), job losses do occur as the result of technological advances or moving certain services from in-house to third-party vendors. In those situations, he said, staffing at his credit union wouldn’t change. Rather, he said, Nassau Financial would “look for the means to help our employees build careers and maintain continuity in staffing by integrating those effected by outsourcing into other departments.”
According to recruiting expert Hilton, the most common cause of layoffs (rare though they may be) is also one of the most common problems across the movement: net losses or “small” profits, which most frequently occur at small to mid-size credit unions. And when that happens continuously, leading to a reduction of reserves, it often ultimately leads to merges into larger institutions.
