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Journal of ASPR - Summer 2012 - Building a Business Case for Recruitment and Retention Best Practice
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What You Don’t Know Can Cost You: Building a Business Case for Recruitment and Retention Best Practices

By Lori Schutte, MBA, President, Cejka Search, St. Louis, MO

In an industry driven by evidence-based outcomes, it is surprising to learn that the majority of healthcare organizations do not measure how much high turnover and an inefficient hiring process may be costing them. Only one in four medical groups quantifies the cost of turnover.1

However, with key benchmarks and recruitment metrics in place, you can make informed decisions about how — and how much — to invest in building an efficient, effective recruitment and retention program.

Start by developing benchmarks for your recruitment and retention programs. For example, do you know your ratio of interviews-to-hire? What about your acceptance rate? Which sourcing channels and tools perform best? Do you fully understand the full impact of the cost of sourcing and interviews? Do you have an estimate of the loss of downstream revenue by a vacancy?

Over 30 years and experience with thousands of searches, we have isolated the three common factors that drive up costs: 1) high turnover, 2) prolonged vacancy and 3) an inefficient recruitment process. The good news is that, in nearly every case, each of these “causes” has a “cure” — a best-practice solution that can be uniquely adapted and implemented within your organization.

High cost of turnover

The 2011 Cejka Search and AMGA Physician Retention Survey reports little change in overall physician turnover from 6.0% in 2011 from 6.1% in 2010. However, turnover in 2011 and 2010 was slightly higher than in the previous two years, as physicians were somewhat more likely to retire or relocate given the signs of improvement of the stock and real estate markets.

“Fit and family” are consistently reported as the top reasons for turnover.2 The most prevalent reason being poor cultural and community fit (72%), followed by relocation to be closer to family or for a spouse’s job relocation (50%).

Another key finding is the persistence of high turnover in the first years with a practice, which indicates that many physicians and hiring organizations may lack an accurate assessment of culture, career motivations, and satisfaction with the location on the part of the spouse or significant other. The turnover rate drops below the yearly average after year five, once the physician and his or her family successfully become established in the practice and community.

High turnover in the early years of practice is costly, given the investment in recruitment, relocation and practice start-up. Measuring these costs and investing in prevention of turnover can create an advantage over competitors who neglect it.

Of those groups who report that they quantify the cost of turnover, most include direct recruitment costs such as sourcing and advertising expenses, and interview travel costs.

 

Average Interview Costs Per Vacancy
Agency recruiting fees $0 - $30,000
Sourcing/Advertising $0 - $10,000
Interview: Travel cost1 $0 - $2,205
Interview: Entertainment1 $0 - $911
Signing bonus $0 - $30,000
Moving cost $0 - $15,000
Total Up to $88,116
1. Average Interview Cost per Vacancy. Source: 2011 Cejka Search and AMGA Physician Retention Survey

Hard Costs of Recruiting

However, fewer groups incorporate indirect costs, such as the human resource cost incurred by the entire recruitment and interview team, start-up costs or lost revenue while the position remains vacant. A comprehensive set of direct and indirect costs should be considered when calculating the expense of turnover, particularly when the physician did not stay long enough for the practice to recoup those investments.

The components that medical groups include when calculating the cost of turnover will be variable. But doing so reveals the economic benefit — or significant cost — that can result from an incremental change in the turnover rate.

To avoid high turnover, establish a clear strategy for recruitment and define what attributes make candidates successful. Hire for “fit and family” by screening effectively, conducting behavioral interviewing, engaging the spouse early in the process, and evaluating teamwork and team leadership qualities in candidates.

Be aware of — and frankly address — any red flags at the beginning. For example, probe further on the cultural fit if a candidate expresses more interest about the location of his or her reserved parking spot than the patient experience. Make the most of the on-site interview; watch the actions of the candidate and significant other. They will speak louder than words.

Average Interview Costs Per Vacancy
Avg. Candidates Interviewed   x
 Avg. Visits per Candidate
(3.1  x  1.7)
Avg. # of Interviews Per Vacancy 5.3
Avg. Travel/Lodging  +
 Avg. Entertainment
($2,205 + $911)
$3,116
Avg. FTEs Involved   x
Avg. Projected Avg. Hourly Rate  x
2 hours
(5.5  x  $250  x  2)
$2,750
Avg. Cost Per Interview $5, 866
Avg. Interview Cost Per Vacancy
(5.3  X  $5,866)
$31,090

In the midst of a paradigm shift, organizations are placing greater value on teamwork than sole and autonomous decision making. The large majority (84%) of survey respondents said a physician’s teamwork qualities were somewhat or significantly more important today as compared with five years ago.3

Today’s successful models provide team-based care, where many people are involved in the delivery of patient care. The ability to work effectively as a member — and leader — of an accountable care team becomes a valued skill for physicians who increasingly will partner with colleagues in primary care, hospital medicine, a wide range of specialties and subspecialties, and allied health.

A successful team model requires a different skill set. Recognizing the benefits of teamwork, medical groups are now assessing these qualities in physician candidates. Most survey respondents (77%) believe references are an effective method for assessing teamwork qualities, but that places significant reliance on the source and quality of the reference. At the other end of the spectrum, emotional intelligence assessments are used by about half of the respondents, and only 35% of those believe these assessments to be effective.4

Investing in retention for the long term requires an organization to invest in a combination of initiatives and incentives, such as onboarding physicians effectively, providing a mentor, paying a retention bonus, developing a leadership or partnership track, and offering flexibility for work/life balance.

According to cross-tabulated data from the 2010 Survey, groups that did not assign a mentor had a turnover rate of 6.3% compared to 5.3% in groups where a formal program was established and a mentor was assigned. In a group of 100 physicians each 1% reduction in turnover — saving one physician from leaving — also saves up to $88,000 in the “hard costs” of recruitment, alone.

 

Cost of Prolonged Vacancy
Sample Calculation 12-Month Vacancy 6-Month Vacancy
Vacancy:
Annualized revenue loss per FTE $990,000
Annualized revenue loss per FTE X 50% $495,000
Recruiting cost:
Sourcing $10,000
Professional fee and sourcing $30,000
Interview cost x 5.3 Interviews Including travel, entertainment and “manpower” $31,090
Interview Cost X 3 Interviews Including travel, entertainment and “manpower”   $17,598
Signing bonus $30,000 $30,000
Moving cost $15,000 $15,000
Start-up new physician $211,063 $211,063
$1,287,153 $798,661

Potential Savings: $488, 492

Best practices for retention strategies should last throughout a physician’s career stages. Early career physicians are looking for security. Recent data from the Association of American Medical Colleges (AAMC) suggest that doctors graduated in 2011 with an average debt of $160,000, and it is not surprising that these physicians need a guaranteed income or loan repayment. Mid-career physicians are looking for opportunity. It’s all about growth in income, and career. And for late career physicians, flexibility is most common so they can relax, but balance that time for enjoyment with a rewarding career.

Prolonged vacancy

Vacancy metrics — measured in lost revenue and opportunity cost — hold the key to diagnosing and solving expensive recruitment or retention gaps. One client divides the prior year’s hospital and clinic net revenue by the number of departed physicians to calculate expected annualized loss of downstream revenue at approximately $990,000 per full-time equivalent physician. Add that to the recruiting and start-up costs, and you have a model for your monthly cost of vacancy — and a clear motivation to minimize that vacancy.

But what causes the delay?

A lack of stakeholder alignment, the laws of supply and demand, and an inefficient recruitment process all play a hand in prolonging the physician vacancy.

Candidates can be derailed by lack of alignment among stakeholders on issues that range across the board — from recognizing the need for a new physician, to settling on compensation and contractual terms, call schedules, practice location, staff resources, procedure room scheduling, and more.

Being on the “same page” and ready to recruit is essential when a limited pool of physicians can choose from multiple opportunities. Quite simply — in most communities — there are more jobs open than there are qualified physicians to fill them.

A more competitive market can drive up both costs and the time required to fill vacancies, fundamentally linking retention and recruitment. The loss of downstream revenue during a prolonged vacancy, combined with the time and money it takes to recruit a physician and get them on board, can be detrimental to an organization. Identifying and removing the barriers that are prolonging your vacancy, and investing in an efficient process, will save time, which equals money.

Inefficient recruiting

The business case for increasing efficiency is clear when considering that hard and soft costs of recruitment, start-up and lost revenue can total more than $1 million per physician vacancy annualized. Investing in an efficient recruitment process and effective retention strategy becomes a critical, strategic priority for the health of an organization.

Start with effective sourcing.

 

Drive Down the Number of Interviews
Number of Interviews
Source: Cejka Search proprietary client data (click image for larger version)

Know where candidate responses are coming from and what you would do if one or more of these sources no longer provide you with responses. Evaluate the effectiveness of your marketing effort and measure results.

Then, implement a highly efficient screening and interview process. According to The Advisory Board, a typical recruitment timeline from initial candidate response to signing averages 19 weeks. But, best practice is six weeks.5

How do you drive more than three months of time — and expense — out of your timeline?

You collapse the number of candidates you interview and the number of interviews you conduct per candidate.

Interviewing can become the single largest driver of expense when valued for hard costs, recruiting team time and lost revenue due to the position vacancy, which increases as the interview process is protracted.

Through a thorough assessment and benchmarking you can identify areas where greater efficiency and effectiveness could significantly widen the candidate pool, reduce the number of interviews, increase the value derived from each interview and lower the overall cost of filling a vacancy.

While it may be counterintuitive for organizations to consider, it is possible to increase hiring rates while driving down the number of interviews.

A healthcare organization can achieve significant improvement in hiring efficiency and results over time by a) increasing transparency, b) committing to timeliness, and c) avoiding competition with itself.

Transparency in the recruitment process simply means that once a process is established, everyone involved knows what the expectations are and will be prepared to meet them. Commitments to meeting established recruitment process timeliness will protect the organization from losing top candidates to the competition. And lastly, multi-system organizations need to make sure the left hand knows what the right hand is doing so as to avoid competition internally for the same candidate, and potentially cause the organization to unnecessarily inflate salary and bonuses.

Organizations that invest in these practices will be well positioned in an increasingly competitive environment by establishing benchmarks and adhering to proven processes that:

  • Ensure the practice is “ready to recruit;”
  • Remove barriers to recruitment;
  • Screen for fit prior to on-site interview;
  • Engage spouse/partner early in process;
  • Prepare the team to deliver a red-carpet experience;
  • Debrief the candidate and interview team immediately;
  • Deliver an offer within 48 hours.

Conclusion

Save both time and money by hiring for “fit and family,” decreasing vacancy time, and monitoring recruitment practices for improved efficiency. Since retention begins with an effective and efficient recruitment process, organizations that build a culture of “intentional retention” through creative, competitive recruitment produce a tangible return on these investments through the increased loyalty of their workforce, patients and community.

Physician recruitment and retention will become increasingly important and those groups that have the benchmark data and processes to support best practices will have a competitive advantage in attracting and keeping talented physicians.

Lori Schutte, MBA, is president of Cejka Search, a national physician recruitment and executive search firm serving healthcare organizations exclusively for more than 30 years.

References

  1. AMGA and Cejka Search 2010 Physician Retention Survey.
  2. AMGA and Cejka Search 2009 Physician Retention Survey.
  3. AMGA and Cejka Search 2011 Physician Retention Survey.
  4. AMGA and Cejka Search 2011 Physician Retention Survey.
  5. The Advisory Board Company, 2009, “Elevating Physician Recruitment”

 

Journal of ASPR - Summer 2012

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