Interesting piece in HealthLeaders this week:
The Intelligence Report on cost containment strategies is comprehensive and, as always, well done. One bar graph shows the responses to the following question:
Which of the following staff-related actions provided the highest dollar value in cost-containment contributions?
The top three responses:
- More efficient use of clinical labor
- Workforce reductions
- Consolidating/centralizing business function
What were the remaining actions?
- More efficient use of nonclinical labor
- Consolidating clinical functions
- Reductions in benefits
- Salary reductions
Sure, these all make sense but reducing turnover doesn’t even make the list?! Many hospitals have general discussions about the challenge of turnover and it certainly seems it would be something worth improving but they never quantify the actual cost.
Consider a hospital with 2,000 employees, of whom, 35% (700) are nurses. Average annual base salary is $67,000 and annual turnover is 20%. Assuming turnover cost of 1.5x average annual base salary, cutting turnover in half could save an organization $7 Million!
There are turnover costs that are harder to quantify but are just as real, which includes: impact on organizational culture, patient care, HR resources and employee workload. Most of our clients are changing their approach to talent and selection because they want to build a patient and family-centered culture and a workforce that is innovative and adaptable. We shouldn’t ignore, however, the bottom line impact of finding and retaining the right people.
One of our clients built their selection system to support their Lean/Toyota Production System culture but in the process, they were able to cut their already low turnover in half, saving over $1.5 Million– a nice bonus indeed! When senior leaders look to you to help contain costs, help them to understand the real cost of high turnover and the slam dunk rationale for investing in a better approach.