The Cost of Staff Turnover

From recruitment to training and staff burnout, what’s the real cost of losing an employee?

By Iris Kimberg, MS, PT, OTR*

For many physical therapy practices to grow and thrive in today’s competitive marketplace, finding competent and qualified clinical and administrative staff can be a real challenge.

What many practice owners soon realize is that while finding staff is the first step, retaining them is a separate but equally important step. This can be especially challenging for small practices who must compete with larger ones with bigger budgets and often more attractive benefit packages and opportunities for growth within the company. Ironically, it is usually the smaller-sized practice that stands to lose the most if personnel leave because they have less staff to share the increased workload.

The direct and indirect cost of staff turnover is multi-faceted, with both an emotional, subjective component and an objective, tangible one. Frequent voluntary staff turnover tends to have a negative impact on employee morale and productivity. At times, when one employee leaves, there can be a snowball effect with others following suit. How you react when a staff member leaves sends a strong message to the rest of your team. If a therapist or staff member popular with patients leaves, it can lead to patient attrition as well. Even the most carefully crafted employment agreement with non-compete and non-solicitation clauses cannot prevent a patient from “following” a therapist. In a climate and industry where job-jumping has become the norm, practice owners are routinely confronted with the associated challenges arising from increased employee turnover, especially if this is a recurring problem. Understanding the cost of turnover, pinpointing potential sources, and implementing proactive best practices for preventing the problem is paramount.

Beyond the emotional component, recruiting and training a new employee requires time and money. The Society for Human Resource Management (SHRM) estimated in 2019 that the average replacement cost of a salaried employee to be six to nine months’ salary.¹ For an employee earning $60,000 per year, that totals approximately $30,000 to $45,000 in recruiting and training costs. Other studies have estimated this figure to be even higher, as much as twice the employee’s annual salary, especially for high-earner or executive-level employees.

While there is no global methodology, here are some of factors practice owners should take into consideration when trying to quantify their own turnover costs:

• Hiring costs: including advertising, interviewing, screening
• Vacancy costs (i.e., paying for temporary help, overtime for others, having to turn down patients because of no/low staff)
• On-boarding costs: including training and management time
• Lost productivity: new employees can take one or more years to achieve the productivity level of the former employee
• Company culture impact/lost engagement: employees who observe frequent turnover may become demoralized especially if it means they have to pick up the slack, assume more duties, etc.
• Patient services and down time: new employees are often slower in work completion and initially less adept at solving problems
• Supervision and training costs: some practice owners may invest as much as 10-20% of an employee’s salary, or more, into training over a one-year period

Occasionally the practice may benefit from the loss of an employee if they were a poor performer, and the practice may realize a reduction in salaries and benefits for newly hired therapists vs. departing ones. Sometimes replacement staff bring new ideas, clinical skills, creative energy, and innovations as well as new knowledge of competitors or the marketplace.

Once the financial and emotional toll the loss of an employee can have on your practice becomes apparent, the impetus to build in processes for retaining your staff becomes more important. First, confirm you have a clear understanding of what you are up against – make sure you are benchmarking employee retention rates and are tracking turnover by department and position.

Some best practices for retention may include:

• Trying to get a true understanding of why any employee leaves: conduct an exit interview. Search online reviews your practice to glean what former (and current) employees are saying about the practice. Pay particular attention to whether the cause is from burnout; oftentimes high turnover rates are intrinsically linked to staff burnout and staff shortages.
• Creating a company culture that is a high feedback environment in which employees feel valued and there is open communication. A high salary does not negate staff dissatisfaction.
• Investing in professional development: providing employees with training, education, and meaningful work. Offering three-prong opportunities for advancement within the organization: consider pay, responsibility, and recognition.
• Making sure you clearly communicate expectations through written and consistently enforced policies, typically in an employee handbook.
• Understanding why employees stay: supervisors should solicit insight from direct reports concerning what compels someone to remain employed with your practice.
• Making sure you are offering competitive compensation and benefits and that they align with industry standards. Many practices do not make a practice of annually performing market assessments and salary comparison to make sure they are staying competitive.
• Getting feedback on the types of benefits staff would most appreciate is key – don’t neglect perks like flexible spending accounts, health savings accounts, etc.
• If you do not already, consider offering retention bonuses and/or employer assisted student loan repayment programs. Both can be great incentives to keep employees.
• Employee recognition programs have the ability to reach all levels of your practice. These programs show appreciation for your staff, reward them for their efforts, and reinforce the core values your practice depends on to reduce turnover.

High employee turnover should not be the norm in any practice, yet on many occasions I have had to remind practice owners that everyone is replaceable and not to panic when a key employee leaves. While much is discussed about the importance of exit interviews, on many levels it is more important to understand and focus on why you staff stays with you.

Understanding how a staff member’s personal values align with your practice can serve you well. If a practice wants to keep its employees, then you also need to understand the reasons for retention and continuation, and work to reinforce these. From the viewpoint of a company’s policies on employment and turnover, the reasons why people stay in their jobs are just as important as the reasons why they leave them. Make sure that your staff stays on the job because they “want to” rather than “have to.” Knowing that staff stay on for the “right” reasons (i.e., job satisfaction including achievement, recognition, responsibility, growth) and not for the wrong reasons (i.e., inertia, tight job market) can go a long way toward peace of mind and the sustained growth of your practice.

References:

¹OWL Labs. State of Remote Work. https://www.owllabs.com/state-of-remote-work/2019. Published September 2019.

Iris Kimberg, MS, PT, OTR, is a long-time private practice consultant and works with therapists across the country on all aspects of start-up, growth, and sales of private practice entities. She can be reach directly at 212-343-0236, iris@nytherapyguide.com, and her website www.privatepracticeopportunitiesandguidance.com.

*The author has a professional affiliation with this subject.