The Economics of Health Care Recruiting

By Ken Levinson, President, Absolutely Health Care, and Michael A. Brown, President, The Business Marketing Consultancy

So the recruiting budget is set. You and your CFO, COO, and HR chief have evaluated previous and projected hiring requirements. You also have taken into account your facility’s plans for physical expansion, growth or contraction of patient occupancy and usage, and if yours is a public institution, the status of the tax base.

Now you have to go find top-flight talent! In tough times as well as good times, most hospital and other direct patient care executives consider doing so a strategic imperative. The question then arises, how best to allocate the money?

In the hospital sector, “The average recruitment expense per hire ranged from $665 at small hospitals to $982 at medium-sized hospitals, and $917 at large hospitals.” Source: NAS Recruitment Communications,  NAS Insights: Healthcare Recruitment Metrics.

Here is how the costs per-hire break down by recruitment medium:
Radio/TV: $1,500
Trade Publications: $715
Local Newspapers: $550
Associations: $495
Referrals: $489
On Line Job Boards: $291
Industry/Regional Job Fair: $107
Company Web Site: $99
Craigslist: $37
Online Social Networks: $17
State/Federal Employment: $14
[Source: 2008 Study of Recruiting Practices, the Inavero Institute for Service Research www.inavero.com]

This means if you run a medium-sized hospital and hire 100 allied health professionals, much of your nearly $100k recruiting budget likely is spread among these media. Even more likely, your money is being misapplied at best, entirely wasted at worst. Examples:

• At far too many health care facilities, the HR and recruiting staff has not been adequately educated in the economics of what they are chartered to do. We spoke with an HR Manager who said she could not even consider recruiting beyond her hospital’s local area, because of a policy of not paying relocation expenses. Yet her hospital is spending thousands of dollars more than relocation expenses for outsourced recruitment and an annual contract for space advertising in her local newspaper, neither of which are producing enough viable candidates. Strategically, executives can and should correct this false economy by amending the policy and by providing fundamental cost-benefit education to the HR and recruiting staff.
• At other facilities, the issue is not education, but lack of systems: they have not yet purchased or subscribed to effective recruitment tools due to a supposed lack of budget. But the same facilities will pay an agency $15,000-$20,000 recruiting fee for just one hire. Again, a false economy that needs to be addressed strategically, and then communicated to HR and recruiting management.
• Some HR and recruiting departments have been so decimated by budget and staff cuts, they no longer have enough manpower to utilize fully the recruitment tools already in place. On-line health care job boards like ours encounter this quite often. Even though the technology enables automated, efficient, and effective recruiting, the overloaded HR staff plugs along with “business as usual” because they perceive (rightly or wrongly) that they lack the time to learn and use the new process.
• We also have discovered that some health care executives inadvertently allow what ought to be proactive recruiting to degrade into passive application processing. As a result, the recruiters mostly filter applicants out rather than influence good candidates in. This dismal practice costs the institution big bucks: the absolute costs of recruiters functioning as clerks plus the usual expenses associated with recruiting … and the opportunity costs of letting good people find jobs elsewhere.
• When a facility depends too often or too heavily on ad agencies, there may be an economic conflict of interest. That is because the ad agencies earn their commissions based on media and\or on-line  placements. They have an incentive to use the outlets that generate the most revenue for their business. They may have a dis-incentive to select and use lower-cost tools or media. By no means do we suggest that ad agencies are dishonorable. We do suggest that it behooves health care executives and managers to carefully weigh the ad spend their agencies recommend, and compare and contrast the ad investment with alternative recruiting media. Mike Rink, Employment Manager for Alaska Native Medical Center, has done so: “We developed an entirely new candidate sourcing model. We purchased annual subscriptions to selected on-line job boards.” The results, reports Rink, have been extraordinary. (Nurse Shortage? What Nurse Shortage?  Washington Health Care News, June 2009, p. 12.)
• Indeed, while outsourcing may be right and valuable in some circumstances, it is not a panacea. The most visible and costly downside examples include health care facilities that retain staffing company people and travelers, but do not acquire or subscribe to cost-effective recruitment tools to assist with permanent hires due to a supposed lack of budget. The economics of your present recruiting strategies and practices merit re-examination, because the new technologies and methods can potentially save your facility a great deal of money.
• Nowadays, your facility will be conspicuous, and not in a good way, if you are not involved in health care professional and social networks. They are extremely valuable recruiting tools because they are subtle. They allow you to establish a “friendly” presence on-line, and to slowly influence passive job seekers. That is, you can establish credibility, then viability, then desirability as an employer. Doing so complements your more proactive recruiting, both on-line and via traditional media, and does not cost a bundle.

And now the rub … even if you do all those things we recommend, you may discover, as we have discovered, that recruiters themselves often hold quite a different view from the executives. Many recruiters tell us they are not hiring, and therefore not recruiting! Some have told us they find job seekers waiting in the employment lobby when they arrive for work.

Why this apparent disconnect? First., despite recruiting’s strategic importance, executives too often allow it to occur as a clerical function. They know and run the forest but have little contact with the trees. Second, the Director level of management at some health care facilities has gone away in cost-cutting purges. At others, Directors remain such in title only, handling lower-level managerial functions. This is detrimental because Directors traditionally translated executive strategies into practical operational guidance for managers and staff. Because Directors understood both the forest and the trees of the facility’s business, they provided the vital linkage to ensure that recruiting practices occurred within the proper strategic business context.

We urge executives to assess carefully whether either or both of these circumstances are afoot in their recruiting functions. If so, do not default the resolution strictly to mid-level oversight. Your direct executive attention, and that of a genuine Director of HR or Recruiting, usually will resolve the disconnect.

We also strongly recommend you require your HR Director, Director of Recruiting, and the recruiters to complete this Recruiting Checkup and then report back to you. Compare and contrast the various responses with your perceptions. Act quickly to reconcile the differences.

10-Point Checkup for Health Care Recruiters in 2009

Rate what you do and how you do it. Then add up the points.

We have adjusted our recruiting to the difficult economy by (choose one)
    We did not have to adjust. We’re doing fine despite the recession. Two points.
    Laying off people. Zero points.
    Allowing open positions to remain open \ hiring freeze. Zero points.
    Hammering our resources and suppliers for price concessions. Zero points.
    Reducing and\or reallocating budget dollars. One point.
    Streamlining our processes and finding new, more cost-effective resources. Two points

The recruiting resources we use are based on  (choose one)
    The way we’ve always done it. Subtract one point.
    The lowest cost available. Subtract one point.
    Whatever we can do ourselves, such as internal postings. Zero points
    Existing relationships, such as with agencies, local newspapers, and colleges. One point.
    A cost-effective mix of internal and external providers who focus only on health care. Two points.

Our recruiting resources are (choose one)
    Really bad; e.g., incomplete\ deficient service or performance and\or too costly. Subtract two points.
    Minimal; e.g., ongoing but under-producing ads, generic on-line job boards. Subtract one point.
    Standard; we get what we pay for but not much else. Zero points.
    Better than most; we get additional \ free services such as newsletters or social web sites. One point.
    Outstanding; we couldn’t do it without them. Many great services and great value. Two points.
   
Because of the recession, my day-to-day recruiting activities have become (choose all that apply)
    Easier; there are fewer jobs to fill and lots of candidates. One point.
    About the same as during better times. Zero points.
    More difficult for these reasons;  Subtract one point for each
        Have to search through more résumés, many of them not qualified.
        Have to turn away good candidates because of hiring freeze.
        Have to do more with fewer people because of layoffs.
        Can’t use all the resources I used to because of budget cuts.
        The situation keeps changing and we don’t have a good handle on it.

I have been able to find ways to (choose one)
    Avoid looking at résumés that simply don’t match our positions. One point.
    Expand our recruiting reach beyond our local area. One point.
    Not pay for services I don’t need, such as recruiting resources that are general, not health-care specific. One point.   
    Save money on recruiting-related services such as printing, advertising, and office products. One point.
    Show the executives that I am fiscally responsible and making wise business choices. Two points.
    None of these. Zero points.

In terms of our recruiting technology, we are (choose one)
    Ancient: we do many things manually. Subtract two points.
    Behind the curve: we have basic computers and hospital systems, but nothing specifically for recruiting. Subtract one point.
    Marginal: we have a recruiting application, but it leaves lots to be desired. Zero points.
    Adequate (if not perfect); e.g., we have automated matching of our criteria with applicants’ résumés and a résumé tracking system. One point.
    Quite advanced: we believe we have the latest and the greatest. Two points.

My level of confidence that I can sustain and improve our recruiting despite the economy: (choose one)
    Slim to none. Subtract two points.
    Quite low. Subtract one point.
    So-so. Zero points.
    Pretty high. One point.
    Certain. Two points.
    I don’t know. Subtract one point.

I’m “making the case” with the executives for sustaining and improving recruiting by: (choose one)
    I’m not doing that. Subtract one point.
    Pointing out deterioration in care quality because of unfilled positions. Zero points.
    Showing marginal cost savings such as discounts and rebates from present resources. One point.
    Showing how better, smarter recruiting via process and resource improvement saves money, improves patient care, and preserves a competitive advantage. Two points. 

We are preparing for the eventual economic recovery by: (choose one)
    Doing nothing or more of the same. Subtract one point
    Renewing our contacts with our old recruiting resources and prior applicants. Zero points.
    Upgrading our system, processes, and technology. One point.
    Reconsidering how and where we allocate our recruiting dollars going forward. One point.
    Started training administrative and support staff to move up to professional positions. One point.

Your level of confidence that your boss, the CFO, and the Administrator will accept your recommendations: (choose one)
    Slim to none. Subtract two points.
    Quite low. Subtract one point.
    So-so. Zero points.
    Pretty high. One point.
    Certain. Two points.
    I don’t know. Subtract one point.

Ten points or higher? You’re looking good. Congratulations!
Nine or eight? Make the tactical adjustments before your competing facilities force the issue for you.
Seven or six? Your recruiting efforts probably are mismatched to your true requirements as well as the economy. Better make some big improvements.
Under six? Stop reading this and seek expert advice and assistance.

Summary
Your ability to live up to your health care promises depends on the professionals you recruit and hire. Recruiting, therefore, directly affects your facility’s reputation … your “brand.” That is why executives must amp-up their attention to recruiting strategies and tactics and the economics of both. When you do, we expect you will find outdated money-pits. You also will find grand opportunities to recruit the people you want and need much more cost-effectively.