Are you overstaffed? Or understaffed? Are you paying too much? Or not enough?
By Susan Saldibar
There is nothing like trying to balance pay versus service and profits to fuel a massive headache. Are you overstaffed? Or understaffed? Are you paying too much? Or not enough?
I sat down with Doug Fullaway, VP of Senior Living Business Development at RealPage, a Senior Housing Forum partner, to address the underlying questions that must be answered in order to properly balance staffing and compensation with services and profits. And, they all start with the same premise: a senior living community must deliver quality care. So the care provider needs to lead the way by first determining what “quality care” looks like for their community.
What services are you delivering?
Are you a Ritz Carlton or a Holiday Inn Express? Okay, you’ve probably heard that one before. But the importance of defining your service model can’t be overestimated. The Ritz and Holiday Inn are both highly successful business models. But they are very different. “They are successful because they have properly identified their customers and the services they provide them. They have optimized their staffing levels and pay scales to meet the services their customers expect,” says Doug.
So, if you haven’t done this formally, sit down and clearly define, not only the demographics of your clients, but each and every service that you are delivering to meet their needs. That means including everything, from sweeping the snow off the front steps to passing meds to setting the dining room table.
How many hours of labor does it really take to deliver your services?
There is no one size fits all when it comes to calculating labor hours. Case in point: for some residents the process of bathing may only require 20 minutes. For others, it may require a full hour. So the equation should be: I need X hours per day to complete X action for X resident. “A mistake that many make is to revert to a standard ratio, such as X caregivers to X residents,” says Doug. “But the problem with averages is that they only work about 50% of the time.” If you are understaffed, quality suffers. If you are overstaffed, profit margins suffer. There are plenty of good tools to help you strike that balance. Make sure your tools support personalizing by resident.
Be sure to account for every task, no matter how small. Who is setting the dining room table? Who is sweeping the snow off the steps? And how long does each process take?
And, if your calculations show you need 10 hours of service to be delivered, Doug suggests adding 2 hours to cover “time to go to meetings, breaks” and, more importantly, time to stop and “give Martha a hug”.
People and payroll: How many and how much?
Determining staffing requirements is where technology can really help. There are tools (RealPage has them) available to help you identify, based on resident requirements, how many people you need in each position per day to provide the level of service you are aiming for.
How much should you pay your employees?
Let the market lead you, suggests Doug, using Henry Ford to make his point. “The conventional wisdom is that Henry Ford paid every employee $5 per hour, which was a lot of money back in the early 1900s,” says Doug. “As I read in a Forbes article, he actually paid $2.25 per hour plus a bonus. And there was a good business decision behind that. The fact is that in 1913 he was getting very high turnover. He realized that he needed to raise pay just enough to reduce the turnover. So he increased wages to $2.25 and added a bonus tied to specific employee goals.”
So Ford basically “backed into” paying what his market demanded. And the rest is history. His production went from 170,000 cars up to 220,000 cars. And he did it with the same 14,000 people.
The senior care industry can take a page out of Henry Ford’s book and use a similar model. What is your market telling you? Is your turnover too high? Then, yes, you may need to increase salaries. But don’t ignore the value of bonuses tied to achieving specific goals or for demonstrating a higher level of care and personal attention to residents.
Right pricing to your market: don’t knee-jerk react.
First consider that you might not have a price problem. Doug cites a recent conversation with the CEO of a senior housing community who wanted to know what Doug thought about his pricing. He was charging $4,950 per month for a single resident apartment. He was worried because his competition was charging about a thousand dollars less. “I asked what his occupancy was and he said ‘92%’. So no problems there,” says Doug. “But his turnover was higher than he wanted. So I suggested that instead of lowering prices, he consider cutting his margins slightly to pay a bit more to employees,” says Doug. “So his problem wasn’t price, it was payroll.”
Doug also warns against avoiding knee-jerk reactions to what someone else is doing —“Gee, last year we charged XX and now the competition is only charging XX. Guess we’d better follow suit.” Just as bad is to panic when someone comes along and opens a new building down the street and your occupancy takes a bit of a hit. “Before you start making a list of all the things you need to do to make your building look better, remember that pricing should be driven by the market and by your consumer. Check in with your residents. Are they happy? That’s what matters,” says Doug.
When you get it right, everyone wins.
Successful senior living communities incorporate programs and incentives within their work design to keep it interesting and rewarding for their employees. “Automate the things that can be automated,” says Doug. “Make sure you are making the best use of existing tools and technology for things like planning on the front end and scheduling and online training on the back end.” Then invest in your employees. That starts by hiring the right people for the job. As they say, “Hire for attitude and train for skills”.
Finding that point of convergence where services, staffing, wages and pricing meet will always have its challenges, whether you run multiple campuses across cities and states or operate a single 60-bed community. But with the help of tools and technology, a little insight from pioneers, such as Henry Ford, and letting the market lead the way, you’ll win.