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Health Care Industry

Staff turnover: What it costs in dollars and cents

Optometric Management, May 2000 by Schwartz, Carol A, McCabe, Nancy L

Find out how much it really costs to replace employees.

YOU HAVE A GREAT STAFF THAT'S DEDICATED to your patients - employees who will stay with you for life, right? Think again! The numberone challenge in this vibrant new economy is not increasing your revenue - it's keeping your employees. If you're practicing in an area of high growth or hi-tech industry (or both), you're in real trouble. The tighter the job market, the farther employers will go to search for new recruits - including stealing your staff. Find out how much it really costs to replace employees and what steps you can take to prepare yourself or to avoid the situation.

The inevitable

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It's no secret that because of today's managed care-induced time constraints, your patients are more likely to bond with "that sweet little Jennifer who always remembers to ask about my cat, Fluffy" than you, the doctor who oversees their care.

This situation isn't a problem, unless "sweet little Jennifer" decides to take her skills to another practice or industry.

* How likely is this to happen? According to WorkForce magazine's Web site (www.workforceonline.com), most businesses average a 30% to 40% turnover. No statistics exist for turnover in optometric practices, but the popular belief is that it's somewhat lower. You're competing with every company in your area - not just other optometric practices.

* How prevalent is the problem? In southern California, the going rate for telephone receptionists has escalated from $7.50 per hour to more than $11.00 per hour in a few months - and human resource professionals are having a hard time filling the jobs even at the highest rates!

Big growth is bad news

The American Management Association (AMA) has invested a considerable portion of their resources in the area of employee retention. Several surveys indicate a healthy job market -- good news for employees, bad news for employers.

An October 1999 survey shows that the overall number of potential employees is slowing.

"Almost 66% of respondent companies say that skilled workers are currently scarce, which is up from 60% a year ago." As of mid-year 1999, 48% of firms had plans to create new jobs in the coming year. This percentage is an increase from previous years, and it's an indication of future competition for every available body.

The AMA's 1999 annual survey concludes that, "Robust as hiring projections are, respondents anticipate some difficulty in meeting staffing goals." What does that mean for you? Not only will MegaCorp down the street welcome Jennifer, but they'll consider themselves lucky to pay for her training to assume a position in their firm.

Is there an "X-factor?"

An AMA/Ernst & Young Survey from late 1999 states that the employees most "at risk" for job switching are members of Generation X - those born after 1964. More than half of the respondents said that turnover was especially high among those under 30 years of age, and over one-third said that they'd experienced difficulty retaining newly hired employees in general.

Young employees may be the life-blood of your practice, but they may also be costing you a lot of money. Why? Because the cost of hiring and training them may be higher than you think.

Bear in mind that the workforce is not a flat plane demographic - the vast majority of working Americans are Baby Boomers. As they begin to opt out of the workforce (the oldest Boomers are approaching retirement age), a diminishing number of Gen-Xers will be available to fill their slots, and the competition for good help will increase dramatically.

What does all this cost?.

Consider the cost of employee turnover. The average cost of hiring to a firm is 25% of the position's annual salary, plus 25% of the cost of benefits (on average, another 30% of base annual pay). So for example, the cost of replacing an office manager salaried at $35,000 is $8,750 plus another 25% of benefits (or $2,650) for a grand total of $11,400 (see "Calculating the Cost of Turnover"). This amounts to about a third of the position's annual salary. If you figure an annual turnover rate of 30%, you could easily spend more money hiring new staff than keeping your old staff!

"It's difficult to put a dollar value on the cost of losing a good employee. I spent in excess of $2,000 last year in advertising fees and didn't find a good replacement," says Richard Baker, O.D., of Lafayette, Calif. "You also need to factor in training costs of several thousand dollars over the first 2 years when you hire an inexperienced employee."

Dr. Baker acknowledges that in his area (San Francisco Bay region), salaries are higher than the national average. He's found that he has to compete with the hightech companies surrounding him in order to attract and keep good people.

And the 25% rule for training costs is an industry average. If the job is technical, the training costs are higher - if the job requires general skills, costs are lower. So, all things being equal, replacing your chairside assistant will likely cost more than replacing your front office receptionist. But replacing either one is a challenge to your practice's bottom line. What can you do to avoid this problem?

Health Care Industry

Staff turnover: What it costs in dollars and cents

Optometric Management, May 2000 by Schwartz, Carol A, McCabe, Nancy L

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