“How much employee turnover do you have at your veterinary hospital?” I squirmed down into my seat as I reflected on the high turnover that we had last year. It was late January and I had just finished printing out W2 forms the week before. For those of you outside the United States, W2s are a tax form that you have to send to each employee – current or former – that worked for you that year at the end of the year . The number of forms that were to be sent to former employees was quite significant. And now the veterinary associate candidate posing the question was expecting an answer.

I dug in my heels and vowing not to sound too defensive, I replied to her question with the following analysis. First of all, I divide turnover into two categories: “good” turnover and “bad” turnover – sort of like “good” cholesterol and “bad” cholesterol. Good turnover counts those employees who did not fit in with the hospital and have now left – either voluntarily or involuntarily. Bad turnover, of course, counts those employees who you really wished would have stayed.

Every year after printing my W2s, I sort through them and divide them into the following piles: current employees, fired employees, those who left and we were happy about it, and those who left and we were sad about it. I then take the number in the first pile (current employees) and divide it by the total number of employees minus the number in the two middle piles. That is my true “retention rate”. In other words, I am most interested in what percentage of employees who succeeded at the hospital did I actually keep.

This brings one to an important statistic; how many employees were actually encouraged to leave or were terminated? A competent practice manager will not be afraid to make tough decisions where necessary. There are many practices where no one is ever terminated; either the hiring process is so fine-tuned that only great employees are hired or someone at the top cannot terminate anyone. Usually, the latter is true. And in these practices, great employees tend to stagnate as they see co-workers get away with subpar performance.

When I do lose a great staff member, I usually have to hire up to 7 employees before I find a suitable replacement. You can imagine what that does to your turnover rate if you only looked at it in the traditional sense.

So the next time someone asks you about your employee turnover, be proud if you have made tough decisions that year in order to cultivate a great staff.

Unfortunately no matter how you classify it, turnover has costs. With each new hire, you incur the cost of time and money spent looking for him or her, the cost of training, and the cost of incompetency. Your time is valuable and time spent placing advertisements, going through applications and interviewing must be factored in. The cost of training includes the hours paid for training the new hire before they are even exposed to their work environment, the cost of slowing down your other employees as they mentor the new hire, and the cost of the new hire as you double them up with one of your current employees shifts until they are ready to handle the shift on their own. The cost of incompetency includes the charges a new hire will potentially miss, the services the new hire will potentially not sell, and the potential clients the new hire will turn away. As you may note, these costs can convert to quite a significant monetary amount. As such, preventing “bad” turnover – losing valued employees – and limiting the cost of “good” turnover – replacing incompetent employees – becomes imperative.

To avoid losing valued employees, many factors come into play. Employees leave for a variety of reasons which include but are not limited to the following: poor work atmosphere and inadequate compensation. These reasons are not mutually exclusive. For example, employees will work at a hospital with a poor work environment if the compensation is high enough and vice versa.

Enhancing the work environment is a whole topic onto itself. One should start with an assessment of your hospital’s work environment by surveying your employees. At SurveyMonkey.com, a free basic membership allows you to conduct an online survey with up to 10 questions for up to 100 employees.  The survey should be done anonymously. To make sure that an employee does not submit more than one survey, have everyone pick fictitious names or numbers out of a hat which they can use to identify themselves on their surveys. Include questions about their feelings on their current compensation, the amount of recognition they receive, whether or not they are currently seeking employment elsewhere, how they feel about their co-workers in a general way, whether or not they enjoy coming to work every day, etc. Include a suggestion area at the end. Be prepared for some interesting answers. Revealing these answers to your employees may be helpful (make sure that you edit out anything that might reveal an individual’s identity). You now have a good foundation to start from to enhance your employee’s work environment.

Enhancing compensation may not be that simple. Generally, twenty percent of hospital revenues are budgeted for overall non-veterinarian employee compensation. The only way to increase this budgeted amount relative to the amount of employees is to increase prices. The immediate effect of increasing prices is either to increase revenues allowing you to pay your employees more or to decrease the relative amount of services performed freeing up your employees time or a little of both.  As an aside, the best way to immediately improve the quality of care in any hospital is to raise prices to the point that clients begin to opt for fewer services per patient; your employees now have more time available to deliver these chosen services. Many veterinarians would then argue that you are compromising your patient’s care by doing this. On the contrary, you have made an ethical decision that you will not undervalue your services to the extent that your employees can not spend the needed amount of time on them. Curiously, as your employees are paid more and have more time to communicate the value of needed services to your clients, revenues now increase due to more services being sold.

Obviously once prices are set, the budget limits overall compensation. Individual compensation, however, is only limited by an individual’s productivity. Three very talented employees may produce as much as four or more not so talented employees and as a group deserve the same overall compensation. Being willing to terminate incompetent employees – “good” turnover – allows one the opportunity to find these very talented employees. Cultivating these talented employees depends on having both an excellent training program and an encouraging work environment.

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