Staff Management

Hiring and Firing by the Numbers: Calculate Which Employees are Worth their Weight in Payroll

Scot Morris, OD

Deciding who to hire and fire should not be a guessing game, or a matter of simply weeding out under-performers. It is in your best interest to take a proactive, finances-based approach to building and maintaininga staff.

One of the most difficult decisions that most business people make is when to hire (or fire) an employee to strengthen the business.There is no single number that can universally define this decision, but the followingtwo ratios will provide a very clear picture.

Staffing Ratio.This ratio is defined as the gross wages of all non-professional staff divided by net collections.It is used to determine the efficiency of non-professional personnel.The “accepted national average” has been described as 15-20 percent. I personally feel that to recruit and retain quality personnel in today’s world it needs to be more in the range of 20-24 percent.A high ratio may mean that youhave too many staff being paid too much for the amountof income that you are producing.A low amount may mean that you are understaffed, or paying your staff too low and possibly not being competitive in the HR market

Staff Profitability.This ratio looks at the overall profitability per staff hour.It is calculated as the total collections in a given period divided by the total staff hours worked over that same time period.The normal range is $70-90/hour.A staffing number in the lower $70/hour range typically means that you are overstaffed for the amount that you are collecting.Conversely, when you reach the $90/hour range you need to start looking for more help.If you don’t, your staff will burn out and profitability will fall and thatnumber corrects itself because your income decreases. The mid to upper 80s is the ideal. Because this ratio can be influenced by both staff time off and doctor time off, I recommend that you look at these numbers over three consecutive months. If you identify a trend discussed by the numbers above, it is time to do something about it.

Understanding, and taking the time to calculate, staffing ratio and staff profitability is the first step to creating a staff that will aid, rather than hinder, your practice growth.

Related ROB Articles

Total Staff Buy-In: Involve Entire Staff to Reach Practice Sales Goals

Hit the Staffing Sweet Spot: How to Compute Optimal Staff Size

Hiring Top Talent: Assess Will-Do vs. Can-Do

Scot Morris, OD,of Eye Consultants of Colorado in Conifer, Colo., is an international speaker and educator on optometric subjects. He directs anophthalmic consulting service, Morris Education & Consulting Associates, as well as Ocular Technology Solutions, Inc. To contact him:smorris@eccvision.com

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