Your Compensation Program is Your Best Chance to get Better

There is nothing your health center can do right now that is more important to achieving your mission than taking a hard look at your employee compensation program.  Given that there is not a single thing your health center can do without employees, and that what you pay is directly linked to the quality and engagement of your employees, there is a compelling argument that your compensation program should get a great deal of your attention.  Wages make up more than half (55%) of your expenses, and when you add in taxes and benefits, the “average” health center spends more than two-thirds of its total expenses on employee costs.  Employee costs as a percent of expenses have been increasing every year, and there is nothing to suggest that will be changing soon.

We estimate that as much as a third of the total payroll and benefits cost of the typical health center is wasted.  With turnover of about 20%, you’ll conservatively lose about 5% of total compensation to turnover costs.   Unengaged employees, who likely make up about 70% of your workforce, are estimated to only really “work” about 60% of the time, and about 25% of employee engagement problems are compensation-related, so subtract another 20% for compensation-related employee disengagement costs.  In virtually every assignment we’ve had, roughly 8% of current total compensation is mis-allocated, typically paid to long-service, poor performers.  Add those three costs together and you’re up to 33%, and we haven’t even asked the fundamental question — what percent of your “planned” performance are you getting from employees who are frequently not qualified to do the work.

An effective compensation plan tells you the current value of every employee to your health center.  With this information you can determine whether you have the right jobs and the right people, and whether they are performing at a level that justifies what they are paid.

Employees paid fairly do not turn over at the same rate, saving you money.  Research shows that when employees feel they are treated fairly  they are more engaged, and far more productive, not just saving you money, but increasing your revenue.   Imagine what you could do with a third less expenses, and a workforce who can actually afford to be mission-driven.

Eight out of ten health center clients we work with already have a payroll budget sufficient to pay a highly qualified workforce, but they “can’t afford” to pay correctly because of the money they have tied up in the wrong people performing the wrong jobs.  You have the resources, you just need the will to use them the best possible way.

 

 

 

About Edmund B. Ura

Edmund B. Ura, MAIR, JD, works with governing boards, executives and human resources staff to develop methodologies for ensuring fair and equitable compensation programs that support achievement of organizations' missions. Contact Ed at ebura@mercesconsulting.com.
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