The REAL Cost of Turnover. Leveraging Retention to Improve Margin

Transcription

1 The REAL Cost of Turnover Leveraging Retention to Improve Margin LeadingAge Missouri Annual Meeting September 17, 2018

2 Today s Objectives Recognize the factors influencing the problem Understand what comprises the full cost burden of staff turnover Differentiate direct costs from indirect costs Utilize data to make informed management decisions on retention strategies 2

3 Organizational Characteristics Affecting Turnover Lower staffing levels Lower quality of care For-profit ownership Higher bed size Castle and Engberg, 2006

4 Correlation of Job Satisfaction to Turnover Organizational Characteristics Staffing levels Top management turnover Resident case-mix Quality Medicaid Occupancy Ownership Chain membership Bed size Job Characteristics Workload Professional interactions Institutional loyalty Relationships Job pride Pay and benefits Autonomy JOB SATISFACTION Castle and Engberg,

5 Staff Turnover The Numbers Nationally CNA = 51.5% Licensed Nurses = 43% Minimum average cost per turnover of $2500 to $3500 Based on front-line caregivers (higher for licensed staff!) Usually only represents the direct costs

6 Staff Turnover The Numbers (Cont d) A provider averaging 40 terminations annually is spending a minimum of approximately $100,000 to $140,000 each year in additional recruitment, orientation, training, disciplinary & termination costs With all costs (direct and indirect) considered, some sources estimate entry-level costs at as much as 30-50% of annual salary

7 Direct Costs of Turnover Separation Vacancy Replacement Training & orientation Increased worker injuries

8 Separation Costs Exit interviews Administrative processing Experience rate increases in unemployment insurance Unemployment claims Separation pay (if applicable)

9 Vacancy Costs Overtime Temporary staffing (agency) Can be the largest direct cost, outpacing training, especially if differential between employees & temporary workers is significant

10 Replacement Costs Advertising Screening of applicants Interviewing & selection Physicals, TB, Hep B vaccinations Background verification Certification & payment of hiring bonuses Costs vary from market to market

11 Training & Orientation Costs Formal classroom training On-the-job training Often one of the largest, if not the largest & most visible, direct cost of turnover

12 Increased Worker Injuries Disrupted organizational operations Compromised working conditions Impact employers through lost work time & higher experience ratings for workers compensation insurance Lost work time = increased overtime or agency costs

13 Indirect Costs of Turnover More difficult to measure Not always experienced as out-of-pocket costs Account for the greater part of total turnover costs

14 Lost Productivity Costs of ramping up a new employee Cost associated with the lower productivity of new hires can constitute from 42% to 66% of total turnover costs* Waldman, et al., 2004 These costs can significantly exceed costs of hiring & training by several thousand dollars

15 Reduced Service Quality Quality of care Affects continuity Affects care recipient relationships Affects quality & quantity of information shared

16 Leadership, Relationships & Work Design Leadership philosophy Organizational practices work design Nurses/managers CNAs Residents Quality of work Quality of care Eaton, Bishop, Gittell, BJBC study

17 Survey Implications Deficiency citations CMP s Denial of payment for new admissions

18 Legal Implications Malpractice claims Attorney / court costs Administrative costs associated with claim research & settlement

19 Lost Revenues or Reimbursement Self-imposed restrictions on census results in a capping of revenues Lower direct care costs to report Compromised relationships with referral sources Loss of reputation due to staffing shortages can last longer than the shortage itself

20 Lost Revenues or Reimbursement (Cont d) Satisfaction of residents, families & staff negatively impacted Vicariously through publicly-reported initiatives such as Advancing Excellence Many value-based purchasing programs (pay for performance)

21 Service Delivery Level Costs Lower satisfaction Decreased care quality Higher risk of injury & illness Physical & emotional stress

22 Third-Party Payer Costs Increased prevalence of injury & illness related to secondary conditions Leads to increased ER and hospitalization days at higher cost to programs (Medicare/Medicaid) Tantamount to a tax that implicitly accompanies every day or hour of care services funded by taxpayer dollars

23 Practice/Provider Implications Turnover costs can be substantial Constitute a significant drain on the bottom line NOT an inevitable cost of doing business However, reducing staff turnover is not without cost itself

24 Strategies Providers can reduce turnover costs by: 1. Conducting an assessment (root cause) 2. Knowing the true cost of turnover - Make informed decisions about how much to invest in retaining employees 3. Calculating turnover / retention rates carefully - Know what you re looking for - Know what it means 4. Invest in proven retention strategies

25 Alternative Strategy for Lower Costs Management practices that: Maintain low staffing levels Keep salaries and benefits low Avoiding salary increases Forgoing investment in personnel, such as training, staff rewards, team building, and any other activities that would make the work environment more attractive to staff Limit investment in physical environment, supplies, and equipment Mukamel et al 2009

26 What are You Measuring? Turnover? Vacancies? Retention? There are formulas to calculate all of these uses depend on the circumstances and need

27 Vacancy Costs

28 Separation and Replacement Costs

29 Training & Lost Productivity

30 Annualized Impact

31 Annualized Impact

32 The REAL Cost of Turnover

33 In Summary- Retain and Gain Estimated that a 10% reduction in employee turnover is worth more money than a 10% increase in productivity, or a 10% increase in sales!

34 The greatest rewards come only from the greatest commitment. ARLENE BLUM 34

35

36

37 Contact Me! Bob Lane, MA, CNHA,