Compensation in Wachovia Bank's Base Employee Tier
Bank Teller Pay
Compensation in Wachovia Bank's Base Employee Tier
Banking Industry Practices
Retention Rates for Tellers
Opportunity Cost for Promotion
Consideration of Drawbacks
Compensation of tellers at Wachovia Bank is closely tied to turnover rates. Employee turnover is costly because resources must be expended to replace employees who leave. Recruitment and training can be expected to be approximately one-third of an employee's salary. In the banking industry, the turnover rate for tellers also impacts the bank's ability to efficaciously cross-sell investment products. High turnover rates of promotable employees contribute to increased expenditures by the human resources department since searches must be orchestrated with outside executive search consultants. The banking industry is in survival mode. In order for Wachovia Bank to survive in this industry, we must take care of our frontline. The frontline of Wachovia Bank is our tellers. A recommendation to implement a tiered increase in teller hourly pay is justified in this report.
Proposal introduction. Wachovia Bank's employee turnover rate is considerably higher than that of our competitors. Along with other businesses in the banking and financial services sector, employee wages and benefits expenses are the bank's largest expense. This is true when turnover is not factored into the equation. When the cost of employee turnover is included in the wages and benefits figure, that number increases by approximately one-third. Many variables with the capacity to impact Wachovia's profitability cannot be ameliorated or eliminated by something as simple as making sensible business decisions. But the bank's cost of employee turnover can be reduced by a practical and sound approach to employee compensation, training, and promotion of the ranks of Wachovia's largest employee group.
Banking industry practices. To provide context for this report and to lay the foundation for my recommendation to follow, below I briefly review banking industry practices as they relate to teller compensation and promotion opportunities.
Wachovia currently pays the highest hourly rate of all our competitors. Only financial services positions and retail positions top our high-end rate of $11.99 per hour. This point should bear more of our scrutiny. Hourly employees at retail establishments are able to earn more than Wachovia Bank's tellers. A retail employee's ability to impact the bottom line of its company is circumscribed by the nature of the job. Most retail customers do not have a personal relationship with the cashiers they pay in order to make a purchase. Nor is it important for a retail customer to place trust in a cashier or a stocker at the retail establishments they frequent.
Retail customers place their trust in the brands with which they become engaged, and ultimately purchase. The position of the cashier in the transaction -- from the perspective of the retail customer -- is superfluous. Wachovia Bank's tellers are not superfluous to the banking transactions of our customers. This is an important and critical difference. In fact, the purpose of this proposal is to establish that the role of Wachovia's Bank tellers is pivotal to our success in the banking industry today. As manager of a Wachovia branch, I feel compelled to address the issue of high teller turnover.
Recommendation. I am recommending that a tiered plan to increase the hourly pay of our tellers be implemented. In support of this recommendation I will briefly address here the reasons for this recommendation, and continue in more detail below this section. A plan to increase the hourly pay of our tellers should be adopted because:
1. It will result in an improved retention rate for tellers and their supervisors
2. It will strengthen our ability to cross-sell investment products to our customers
3. It will improve the talent pool for management and promotion
Retention rate for tellers. The pattern of turnover in Wachovia Bank's tellers points to a problem with our industry ranking on the low-end hourly pay scale. A snapshot of years of experience across the universe of tellers in the banking industry shows that a majority of tellers (61%) have one to four years of experience. The next largest group (21%) by years of experience is less than one year. There is nothing inherently difficult about the work demands of a teller that would warrant that level of turnover. The hours are good. The work week, while not on par with tellers in British banks with their banking holidays, is good, even for those banks that are open on Saturdays. There are few demands (or opportunities) for overtime.
It is important to note that the majority of tellers in the banking industry are women. National statistics indicate that 75% of tellers employed across the banking industry at a given time are women. This is a situation that Wachovia Bank is working to change, but at the present time it does hold true. Patricia Shiu of the Office of the Federal Contract Compliance Programs said, "Because the rise in unemployment has increased the number of men who are out of work, that responsibility [of women as wage-earners] is rising. Since the recession began, 2 million more women have become the sole breadwinners for their families" (Shiu, 2010). The current economy has put considerable pressure on women job seekers to not only find gainful employment -- often as the sole source of economic support for their family -- but also to find employment that contributes the largest salary they can negotiate. Four out of every ten women were the sole support of their families in 2010. Increasing the hourly pay of tellers will result in an improved retention rate and save Wachovia Bank considerable funds that are currently used to recruit and train replacement tellers.
Opportunity cost for promotion within. In exit interviews, tellers regularly report that they would have stayed with the bank if they had been able to earn more money at their job. There are two ways that Wachovia Bank tellers can earn more money: Tenure and promotion. A substantive number of our tellers do not stay with Wachovia Bank long enough to be considered for a promotion. Through our inability to retain good teller candidates for promotion within Wachovia Bank, we experience an annual opportunity cost. What this means for Wachovia Bank is that once we have expended money to recruit, hire, and train new tellers, we are highly likely to lose those tellers -- and potential managerial candidates -- to more lucrative jobs in the short-term. In this scenario, Wachovia loses twice: We open our wallets to pay recruiting and training costs, and we increase our costs to find candidates for higher level positions within the firm (Winkles, n.d.). If done well, it is substantially more cost efficient to promote from within than to engage the services of an executive search firm, which, generally speaking, also increases the lapsed time until positions are filled. Increasing the pay of Wachovia Bank's tellers will have the long-term effect of an improved talent pool for management and promotion within. When provided with solid training and timely mentorship, bank tellers can become good branch managers. I started out as a teller myself, and I'm a perfect example of this. "You cannot go out and buy the kind of loyalty and responsibility you get from promoting within" (Spillane, 1987). A Wachovia Bank human resources goal is to ensure a strong succession plan is in place for all of our management positions, not just those of our top executives. Across the banking industry, national banks are providing evidence that promoting from within is good corporate policy for succession planning and good banking practice.
Enabling cross-selling. Increasing teller pay at Wachovia will result in an improved retention rate, thereby retaining tellers in their positions as trusted members of the banking community. Customers who are familiar with and trust the bank tellers they regularly do business with are considerably more likely to be receptive to overtures about the cross-selling of investment products by those tellers. Wachovia Bank has been ranked number one in customer satisfaction nine years in a row. Our customers expect to see their "favorite" tellers when they come into their neighborhood branches to bank and when they do see a familiar face, it engenders a sense of trust. Our customer satisfaction surveys indicate that customer trust is highly correlated with higher rates of cross-selling of our investment products. Trust must be a component of a banking institution's core value proposition
Because our tellers establish a personal relationship with their regular customers, cross-selling is more efficient. Regular casual and friendly exchanges between our tellers and our customers mean that cross-selling transactions can occur in less time and with greater frequency. This is the Edward Jones model, one of the industry's biggest holders of investment product market share. In 2008, Edward Jones had a voluntary turnover rate of 9% and 63% of its employees were women.
Consideration of drawbacks. When a proposal is made to increase teller's compensation, an initial reaction is going to be that it is not an affordable option…