A talent recession looming: The changing landscape

By William C. Behrens, Senior Partner

There is no doubt in anyone’s mind that the last two years have been difficult and trying for all sizes of healthcare organizations. Healthcare was one of the last sectors of the economy to be effected by the recession. It will be last to exit from the effects of the recession due to continued high unemployment (which translates into lack of healthcare coverage) and by the federally mandated healthcare program which was enacted by President Obama in 2010. The results and changes due to the President’s plan are still under review and most of the changes do not take effect for several years.

“CEO turnover remains constant between 14% to 16%, yet for the specialty organization turnover is now approaching 17.5%”
-William C. Behrens

The landscape of the traditional Human Resources department has forever changed.  According to a 2009 Society for Human Resource Management (SHRM) survey, the rising costs of health care are still in the top three most important factors affecting the financial viability of their respective organizations. This means that until the new law regarding health care coverage or unemployment improves you will continue to see healthcare organizations struggle due to supply (patients).

The most acute shortage is still nursing, which will continue well into 2025. A large number of healthcare organizations are requiring higher standards for entry, i.e. a Bachelors in nursing, which will keep the vacancy in this profession elevated.

The workforce will become increasingly gray as the older employee continues to recover from the fiscal blows of the stock market and the value of the retirement accounts. They will continue to postpone exiting the workplace while they recoup losses. According to Watson Wyatt, one third of the US workers have increased their planned retirement since 2008.  These changes are more pronounced for the more senior worker, 44% who are 50 years or older plan to delay their retirement, compared to 25% of those under 40.  While the average age for retirement is still 65, those who are 50 or older plan to now retire at age 66 or older.  The principal reason given for postponement of retirement is the decline in the 401k and the real estate market.

What does this mean for your healthcare organization?

According to ACHE surveys, the average CEO turnover remains constant between 14% to 16%, yet for the specialty organization turnover is now approaching 17.5%. The uncertain healthcare landscape means CEO's are asking their teams to continually evaluate expenses and look for ongoing technology efficiencies.  With the improvement in the economy the senior executive sees ongoing value in building team skills and is becoming aware that with the improvement in the economy this may affect the voluntary turnover in management.  However, this same senior leadership will not make retention a top priority until they see a general improvement in their respective margins. This is demonstrated by the demand for business development and sales talent to gain as much of the market share as possible and to create new patient-client relationships.

What can your healthcare organization do to achieve success in the next 12 to 18 months as the economy improves?

• Manage your service lines effectively. Keep your executive talent on board and focused on the bottom line since your competition is looking to lure your key talent away from those profitable service lines! By 2011 the exit of senior talent will become a growing trend. Stay ahead of the curve by developing a succession program and developing a relationship with an executive search firm. Bring that search firm into your trusted circle of planning for the replacement of senior executives, either voluntary or involuntary.

• Create and develop strong physician relationships. The number of available physicians is not growing and the demand is increasing almost monthly! I recently spoke with a large national healthcare firm and they were poised to add a minimum of 500 new physicians in 2010. What can you do to counter this sudden demand in physicians? Create a partnership with an executive/physician search firm that understands your organization and is a trusted search management consultant, versus a firm that is simply transactional. The winner in physician recruitment is going to partner with a firm who understands supply and who has deep physician relationships nationally that can recruit for your ongoing demands for patient care.

• Stay focused on efficiency, reduce costs, and collect every fee available, which means finding the best and the brightest revenue cycle management available.

What can you as the employer do to reduce key employment turnover or prevent key executives from being recruited away?

Employees leave for many reasons, most of which are outside the organization's control. Healthcare employees have too many options to retain them if you continue to live in the past.  According The Bureau of Labor Statistics half of all new jobs created by 2016 will be in healthcare.  The more proactive you become and make retention a part of senior management's key measurements the better you will be at keeping your key team members.  The real reason high performing employees leave is because they can! 

Hold executives and supervisors accountable for retention goals. Actively manage the initial 90 days of new hires, and do not simply hire the person and automatically believe he/she will be successful in that role.  If you calculate the cost associated with turnover to include work or patients not seen you will be amazed at the actual cost.  If you ask your CFO to calculate the lost or saved dollars each month based on turnover or retention you will then have a key measurement by which to quantify executive/department success.  All senior executives should commit to retention goals by adding this measurement to bonus plans. The need to retain solid performing executives and directors is greater than ever before.   Employees stay because they are actively involved within in the organization and participate in unique opportunities within the organization. Executives should take the initiative to build exceptional relationships with their management teams, which drive retention and reduces turnover.

Executive search firms report that clients significantly reduced executive hiring in the last 12 to 18 months, with corporate recruiters shouldering the hiring responsibility to minimize recruiting costs. Although there was a reduction, search firms continued to receive search assignments. These searches were typically more difficult to fill and were only available after the internal recruiters had exhausted all resources.  As the economy heats up and the senior executives see their 401k recover, the internal recruiters will not be able to find and recruit the executives or physicians as before.  The smart and intuitive executive will form a partnership and relationship with an executive/physician management search firm. Considering executives only stay within the same organization on average of 2.8 years, can you afford to not make retention a top priority?