Your veterinary staff costs are too high?
Mysterious overtime, skipped lunches, and non-merit raises could add up to a financial disaster.
Dr. Jensen—the theoretical practice owner we introduced last month—wants to improve his practice's profit margin. He focuses on support staff costs, because it's one of his practice's biggest expenses.
The problem
His staff cost numbers are more than 28 percent of gross revenue. He consults 2011 Benchmarks: A Study of Well-Managed Practices (dvm360.com/benchmarks) and sees other practices average about 22.1 percent for the same costs.
Dr. Jensen examines payroll, time clock reports (he doesn't usually review these), and each employee's pay rate and raises.
He finds that all of his employees consistently accrue at least eight hours of overtime per week. He realizes that by scheduling employees 38 to 40 hours per week, it's easy for them to go into overtime if one or two days run late. Dr. Jensen also notices that his lead technician clocks in a half hour before her shift starts and employees are skipping their lunch breaks.
The solution
He'll discuss these changes at the next team meeting:
> Each team member will be scheduled for no more than 35 hours per week
> Lunch times will be assigned, and everyone must clock out for a full hour.
> No one may clock in more than five minutes early for a shift without permission.
> Employees must notify him at least one hour in advance of accruing overtime so that he can adjust the schedule.
Next, Dr. Jensen reviews AAHA's Compensation & Benefits publication and is surprised by how much higher his wages are than even the 75th percentile of practices in his region. Here's why: Dr. Jensen conducts annual performance reviews, but he gives pay increases regardless of actual performance improvements.
He decides to rank employees on their skills and value to the practice. Then he lists each employee's current rate of pay. When he places these lists side-by-side, they don't match up. (Visit dvm360.com/staffanalysis to download a spreadsheet to help conduct this analysis.)
Dr. Jensen commits to implementing a merit-based system for pay increases. These expectations will be clearly correlated with the performance appraisals used in the hospital.
Next month, we'll check on Dr. Jensen's client rechecks.
Dr. Karen Felsted, CPA, MS, CVPM, is the president of Felsted Veterinary Consulting. Jessica Goodman Lee, CVPM, joined Brakke Consulting in 2011.
