The New Theory Of Everything: Building Exceptional Value Through Your Workforce Culture

By Glenn Lippman, MD, DFAPA and Tom Schramski, PhD, CMAA

Volume 2 Issue 7, March 31, 2015

unnamedThere’s an often repeated story that, while at Cambridge in the 1970s, internationally recognized physicist Stephen Hawking was engaged in a conflict with the University over who would pay for the ramp that was needed for him to enter his workplace.  While eventually he prevailed, it is interesting to consider what would’ve happened had his growing fame and the country’s parliamentary law not been so persuasive.

One probably wonders how this story applies to the acquisition or merger of your own healthcare company. Simply put, it calls to mind how each organization needs to be constantly vigilant to assure that it is not creating barriers that will lead to employee dissatisfaction or turnover.  In fact, the focus should be on building a workplace culture that supports and inspires the very best performance and customer service.

Today, it is estimated that in the United States healthcare industry the employee turnover rate varies between 20 to 40 percent (in some low-wage settings the turnover can exceed 75-100%).  The negative impact to an organization’s bottom line can easily exceed 5% of their total operating budget, which can erase 50% or more of the company margin.

It is further estimated that the replacement cost for the typical healthcare employee equals approximately 20% or more of their annual salary.  This percentage increases with the sophistication of the employee’s technical and professional skills and likely does not reflect the full “hidden costs” associated with the impact on workplace efficiencies and co-worker morale.  At this level, the impact on a healthcare company’s profitability is clearly significant.

As you begin your preparation for transitioning from your company or considering the acquisition of another, a careful examination of the stability of your workforce can lead to furthering your own bottom line. Today’s savvy buyers, especially private equity funds, give equal attention to the stability of the workforce and past financial results, when they evaluate the opportunity.  Why?  Because a great workforce is a key to future performance and financial success.

Examining your company’s leadership structure, salary and benefits, employee career development, and workplace culture is worth the time and effort in advance of going to market. If you’re looking for assistance you can reach us at glippman@vertess.com or tschramski@vertess.com.