Fulfilling the Recession Prophecy
There's a way to structure a CU as an evolving organism without leaving hundreds or thousands out of a job.
An easy riddle: What do GreenState Credit Union, Amazon, Meta, Netflix, Spotify, Chime, Stripe, Alphabet, Lyft, Collins Community Credit Union, Apple, Coinbase, Twitter and Shopify have in common?
All of these organizations have announced layoffs or hiring freezes just in the past month.
As of this writing, CU Times is working on a story of a very large credit union that reportedly laid off somewhere between 200 and 400 people.
So, we’ve just decided to end the year on this kind of note? Thanks a lot, 2022. You had a lot of potential early on.
Fintech giant Fiserv reported “staffing adjustments” in July and October, citing higher costs due to inflation. Most of the “staffing adjustments” apparently targeted remote employees as the company appears to be shifting employees back into its offices.
Government reports found that job-cut announcements were up 48% compared to this time last year. We don’t yet know the data for 2022 credit union job cuts compared to last year, but we will report those numbers once they are available.
There are dozens of reasons given lately by organizations to cut their headcount: Increased costs, inflation, grew too fast, challenging economy, decline in consumer spending and the slowing mortgage market.
In the capitalistic reality we exist in, those are legitimate business reasons.
What I disagree with are the statements given for cutting headcounts because of “a possible 2023 recession.”
It has seemed lately from our reporting, and reading The New York Times or Wall Street Journal’s business sections, that organizational leaders are attempting to fulfill a recession prophecy as an excuse for their headcount decisions that are not based on anything other than “We aren’t getting enough record profits.”
The expectation of a recession in 2023 has become a storyline of sorts. For example, The New York Times had a story headline that read, “Workers Expect Fast Inflation Next Year. Could That Make It a Reality?” Literally above that headline was this story: “U.S. Added 261,000 Jobs in October, a Sign of Economy’s Resilience.”
I understand we can have competing economic realities here. But our economic landscape doesn’t seem to fit historical explanations and trends – it’s upended and the math isn’t lining up.
Sure, inflation is at its highest levels in 40 years. But corporate profits are at their highest levels in 70 years. Is the economy that bad, or is this a manufactured economic emergency by corporations and investors?
I don’t believe we are living in an economic conspiracy. I believe we have had a wild ride for the past three years in which the pandemic absolutely crushed how math works as an economic predictor. Let’s face it, how we as people over the past three years have been coping is off-the-charts unpredictable too.
I should state for the record, I’m not anti-capitalism at all. Marketing emails absolutely work on me. How else would you explain the Sonos speakers I have around the house?
The economy’s wild swings, paired with COVID variants, politics, elections and Elon Musk buying Twitter can make us feel unhinged or even pessimistic about what is coming in 2023 and beyond.
Like Spock, I tend to be too logical when it comes to deciphering the meanings of the economic signs we are all trying to read. Then I think about a quote from a guy I was fortunate to meet a couple of times growing up in Northwest Arkansas.
When asked about his thoughts on a recession happening at the time, the founder of Walmart, Sam Walton, said, “I thought about it and decided not to participate.”
That’s the kind of focused confidence I dream of having one day. That ability to stay steady and smartly push forward inside a storm of noise and assumptions is an envious quality. Or maybe it’s a dumb way to view things. I don’t know. I’m not that smart.
Walton had a series of beliefs and goals for his company that he stayed focused on, all while understanding the economics of being steady and gradual with his growth expectations.
Granted, a lot of those things went out the window once he died and the family took over.
Anyway, my point is this: Has this economic chaos unveiled that credit unions have pushed too far, too fast?
What we are seeing in the broader sense appears to be a reaction to external forces, instead of staying focused on what credit unions want to accomplish. Those accomplishments could be a number of things.
Credit unions aren’t run or owned by unscrupulous private equity firms that react to Wall Street and what’s happening in the moment.
We all have different growth metrics to meet in our jobs. But, are those metrics the right ones to shoot for each year?
Yeah, yeah, yeah … I’m not trying to solve the problems credit unions are quickly experiencing with the dramatic drop in first mortgages and the dramatic rise in interest rates. Credit unions tried to staff for what they needed as far as the incredible volume of mortgage applications in late 2021 and early 2022, and those staffing choices are coming back to bite credit union employees who are now having to look for a new job.
It just appears that many credit unions tried solving an “in-the-moment” problem we knew wasn’t going to last. Every trend-related bubble bursts.
I look at Netflix as an example here. Not the best example, but hear me out.
For a long time, the streaming giant has indicated that it was developing a long-term revenue growth plan with an advertising-based streaming model. On Nov. 3 it made good on those plans with what can be described as how cable or satellite TV subscriptions used to be in the 1980s. The lowest tier of $6.99/month is low-quality resolution, 3-5 ads/hour of viewing, no downloads, no device sharing and fewer shows to watch. The highest “Premium” end is $19.99/month with no ads, 4K and HDR resolution, downloads for offline viewing and subscribers can watch on four devices.
Despite the fact that Netflix lost more than 200,000 subscribers in Q1 and potentially two million subscribers in Q2, it held steady on this advertising plan because it knew the limited pool of subscribers it has available. Growth for Netflix appears to now be solely focused on subscription pricing and not the number of subscribers.
Netflix’s annual reported revenue so far in 2022 is $31 billion, with profits sitting around $6 billion.
Like cable, I think this streaming plan will get them through the next decade until the “Premium” pricing hits $70/month, and then consumers will go elsewhere and Netflix will restructure – again.
Netflix grew so fast and so quickly that it created an unsustainable business plan, which caused an unstable corporate employment environment and more than 300 employees lost their jobs in June with more to come.
Credit unions witnessed a “staffing adjustment” phase in 2009, albeit very quietly. Now we appear to be seeing those adjustments happening again due to adding a large number of staff to the mortgage areas of the business that have now tanked.
I believe there’s a way to structure a credit union as an evolving organism without chopping off a limb and leaving hundreds (if not thousands) of smart and good people without a job: Hiring and training those to be skilled in multiple areas and shifting employees into those spots where the in-the-moment needs are, while pulling back on the areas where we once saw that momentary staffing need.
None of us are just good at one thing anymore. Just look at the job descriptions for the areas you’re hiring. If your credit union demands multiple abilities and areas of expertise from your employees, you should be fulfilling that prophecy by giving them more opportunities to help you in the areas for the in-the-moment and long-term demands – no matter the economic chaos happening in the moment.
Michael Ogden Editor-in-Chief mogden@cutimes.com