To reduce turnover, Unionbancal Corp. is changing its approach to hiring branch employees.
Its Union Bank of California plans to offer cash incentives to rank-and- file employees who bring in experienced workers from other institutions.
In addition, candidates will be interviewed and hired by their future bosses and coworkers.
A recent study by $32.3 billion-asset Unionbancal, which is mostly owned by Bank of Tokyo-Mitsubishi Ltd., found that reducing turnover can boost sales. The study helped Union Bank improve hiring practices in its 250- branch network, said vice chairman Richard C. Hartnack.
"I like to say we've made a breakthrough commitment to act on the obvious," he said in an interview last week.
The study, conducted with Monitor Co., a Cambridge, Mass., consulting firm, found that a vicious cycle often develops when branch employees leave. Because replacements are urgently needed, branch managers are often willing to hire the first reasonably qualified candidate rather than hold out for the best, the study found.
"You tend to fall into a 'doom loop' of the worst hiring practices," said Mr. Hartnack, Union Bank's retail chief. Also, the newly hired employees tend not to stay long, which exacerbates the problem, he said.
Getting the rank and file involved should prove a major step toward improving employee retention, Mr. Hartnack said.
"This tends to give employees more of a stake in the success of the person who has been hired," he said. Employees will not be able to blame management for poor decisions because they were part of the process, he added.
Union Bank managers also need to be clearer and more demanding about what they expect from the newly hired.
"We found that the managers here with the best practices told new hires they would have to stay in their positions for a year before posting for a job elsewhere in the organization," he said.
Many banks face turnover challenges. A strong economy at close to full employment makes it harder to hang on to workers throughout the industry, said John C. Wilson, managing director at executive search firm Korn/Ferry International.
Losing a good teller costs a bank as much as three times the employee's salary, when training a successor and the loss of institutional knowledge are factored in, Mr. Wilson said.
A big mistake banks make, he said, is refusing to take the blame when an employee leaves.
"I am amazed to hear people in this industry say, 'Well, Fred left because he wasn't any good,' when in actuality Fred was very good and just wasn't happy," Mr. Wilson said.
John A. Larson, the Monitor account manager who worked with Union Bank, has done similar analyses of other organizations with many retail locations. He said regardless of industry, the more experienced a company's employee base, the more profitable the firm.
While doing work for a consumer electronics company, for example, Mr. Larson asked customers whether there was an employee they felt they could seek out for advice.
"The customers who answered 'yes' to that question spent 20% more money at the store than those who said 'no,'" Mr. Larson said. "The more experienced the employee, the more productive he or she is."