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Practice Management

What’s Your Hiring Strategy?

by Stith Keiser
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    Every year, in my role as a veterinary matchmaker, I speak with hundreds of veterinarians, many of whom are seeking to change their current practice for one that “fits” them better. In this capacity, I recently interviewed Dr. C, a practitioner with 9 years of experience, all at a high-quality, progressive, multidoctor practice in central Ohio. Dr. C is proficient in both soft tissue and orthopedic surgery, has pursued extensive continuing education in dentistry (a potential great revenue center in the right practice), excels at client communication, and has used her teaching background to develop marketing/educational material, train staff, and educate clients. She had also been unusually loyal to her practice—her first and, to that point, only employer—given that the average new graduate changes jobs three to four times in the first 5 years of his or her career. Of all the veterinarians I’ve interviewed, Dr. C ranks near the top of my list of star job candidates.

    As I looked into Dr. C’s references, everything that I thought made her exceptional was confirmed, so the only question that remained for me was why she was suddenly making the decision to move on. As she and I further discussed her situation, I learned that she enjoyed working with her coworkers, was satisfied with the level of medicine practiced, and was happy with her compensation and benefits. Her dissatisfaction—and the reason she ultimately left the practice—was because she took the job under the impression that she would have the opportunity to buy in. Unfortunately, after she had helped grow the practice and the bottom line, the practice owner decided he was better off keeping her as an employee and keeping the profits for himself. There is a supposed glut of veterinarians in some parts of the country, but I would challenge anyone to say that there ever has been, or is now, an excess of exceptional associates. Given this fact, it baffled me that a practice owner would allow himself to miss the opportunity to keep someone like Dr. C, all because he failed to hire her with a strategic plan in mind.

    Strategic Planning

    According to the 2011 Bayer Veterinary Care Usage Study, nearly two-thirds of practice owners in the United States fail to use simple business tools, such as profit and loss statements or strategic plans, to guide their business.1 This lack of business acumen extends into the hiring process. In 2011, the average starting salary for a newly graduated associate veterinarian was $66,714.2 In a well-run practice with a strategic plan, any good veterinarian should easily produce enough to cover his or her salary, but if you are hiring on a whim, there is a very real risk of having your new associate cost you more than he or she is worth. To ensure that you’re hiring for the right reasons and setting both your practice and your new employee up for success, it is critical to consider how any new hire fits into your strategic plan for the clinic.

    Why Are You in Business?

    Strategic planning is about the whole business, including how to incorporate a new employee. (For the purpose of this article, we’ll assume that the employee is a veterinarian.) Strategic planning starts with developing a fully formed organizational mission. When I first started my business, I remember thinking to myself, “I don’t have time to put together a mission statement; I need to make money.” Contrary to my initial beliefs, studies have shown that businesses that operate with a strategic plan—starting with a mission statement—increase revenue by 10% to 12%.3

    Your mission tells you why you’re in business. For example, I recently worked with a practice with the mission “to provide the most advanced and compassionate veterinary care available and the highest quality of customer services in an effort to improve the lives of companion animals and their families.” However, having a mission statement just for the sake of having one is a waste of time. For a mission statement to have any meaning, it must be part of the practice’s culture and enacted by everyone in the hospital, from the owner to the kennel assistant.

    Once you have formed and instituted a mission statement, you can move on to the next stage in the strategic hiring process.

    What Else Can You Do?

    Most of us are familiar with the acronym SWOT, which stands for strengths, weaknesses, opportunities, and threats. Regardless of why you’re hiring—adding a truly new position or replacing a previous employee—each new hire opens a world of opportunities. Those opportunities may include the chance to bring in a higher producer, to grow a new service center such as acupuncture or dentistry, or to get you one step closer to your exit strategy.

    Although not as fun as considering new opportunities, identifying threats is also important. Threats can be internal—personality styles, management styles, a toxic work environment, a lack of staff education—or external, such as competition or the economy. Failing to address internal threats often sets your new hire up for failure. Recognizing external threats, on the other hand, may allow you to do a better job of hiring because, often, external threats can be tempered with the right staff.

    Before even beginning the search for a new associate, run a SWOT analysis on your practice to determine what strengths a new employee could enhance, what weaknesses you want to balance, what skills/interests could allow your practice to pursue new opportunities, and what threats you may need to address.

    Strategic Hiring

    Before embarking on the hiring process, you need to ask yourself many questions, not the least of which is, “What am I hoping to accomplish by adding another veterinarian to my team?” While this may sound like a simple question, it has several valid answers, such as:

    • Keep up with current practice growth
    • Anticipate growth or expansion
    • Add new services/build a niche
    • Extend practice hours
    • Plan for partnership/retirement

    Each of these goals needs thorough analysis to determine whether a new associate is indeed the solution.

    Keeping up With Current Practice Growth

    The most obvious and common motivation for hiring a new associate is current growth. Simply put, a practice’s client and patient base is increasing so rapidly that the staff can no longer see patients in a timely and efficient manner or provide the same level of service and care as before. What a great position to be in, right? While hiring another doctor may well be the solution, it is still important to take a step back and maximize your productivity fist.  

    According to a poll conducted by the National Commission on Veterinary Economic Issues, the average practice experienced revenue growth of 1% to 3% in 2011a—nothing to write home about, but still better than the numbers many practices saw during the recession. With an increase in revenue, it’s easy to get overly optimistic and assume that you have the business to support a new full-time equivalent (FTE) veterinarian. Before committing to a new hire, however, I recommend conducting an intensive analysis of your practice’s financial metrics, procedural efficiency, and any other potential underlying issues that may be inhibiting your ability to handle the current rate of growth.

    There is no industry-wide standard with regard to measuring practice productivity, but some general ranges and guidelines can be derived based on studies done by AAHA and the Well-Managed Practice (WMP) study.4–6 For example, we know from these studies that the average small animal general practitioner should generate roughly $530,000 in total services on an annual basis. I recently consulted for a practice in Kentucky that has three veterinarians. The practice owner thought she needed to hire a fourth, but when I asked what the three existing full-time veterinarians were producing, she responded that they were each bringing in roughly $275,000. This particular practice does not need to pay a fourth veterinarian until its current doctors are producing at a higher level. In another instance, a practice in Indiana called me because they were “swamped” and thought they needed another veterinarian. When I asked about the growth potential of the practice, they reported that they were gaining only a handful of new clients each month (the average is 25) and had far less than the average of 1500 active clients/veterinarian that the AAHA and WMP studies recommend. Had I been the practice owner of that clinic, I would have been concerned about whether I had the caseload to support another full-time veterinarian. Sure, you can always hire someone and try it out, but if you’re wrong, you could be looking at more than $100,000 in turnover costs walking out the door.7

    On the other hand, let’s imagine a practice with three FTE veterinarians who each see 2000 clients/year. If it generally takes 1200 to 1800 clients to support a new small animal FTE veterinarian, the numbers say that adding an additional doctor is probably necessary. Now let’s say that in this practice, the average client transaction (ACT) per doctor is $135. If the ACT had previously been higher (let’s say $157, which is a more accepted standard for a well-managed practice),8 it is very possible that, due to the overloaded schedule, the quality of care has decreased. An assumption can be made that reducing the number of clients per doctor by 400 would allow each veterinarian more time to focus on each patient, thus increasing the ACT. As long as the increase will counteract the reduction in patients seen, practice revenue will increase. Let’s work through the math:

    Current production:         

    2000 clients × $135 ACT = $270,000/DVM × 3 DVMs= $810,000/year

    Potential production with additional FTE DVM:

    Existing staff:  1600 clients × $157 ACT= $251,200/DVM × 3 DVMs = $753,600

    plus

    New DVM: 1200 clients × $157 ACT = $188,400

    $753,600 + $188,400 = $942,000/year

    In this scenario, a new veterinarian would take total production from $810,000 to nearly $1 million, so adding a new doctor might make sense.

    Benchmarks are helpful guides, but at the end of the day, it is up to each of us to know what is “normal” for our practice. When I see production numbers and ACTs that are lower than I expect, my first reaction is to better train and leverage the current staff rather than hire another veterinarian.

    Anticipating Growth or Expansion

    Another common reason for adding a veterinarian revolves around expanding a current facility or building a new one. Unfortunately, I have heard story after story of practice owners who planned to expand and hired a new associate in anticipation of increased growth…and were left with more staff than they could support when the construction fell through. What must be analyzed in these situations is the optimal timing for adding doctors and staff. In general, the goal is to minimize any increase in overhead until the project is completed and an increase in revenue ensues. Again, however, every situation is unique. If you are currently bursting at the seams and anticipate no problem having enough appointments for an additional doctor once the project is completed, then it may be best to hire before the move so that everyone is trained, comfortable, and ready for the surge.

    One thing to keep in mind when anticipating growth is that conducting a search for the “perfect fit,” regardless of the position, can easily take up to 6 months or more. While you need to weigh your priorities, one thing is certain—it can be disastrous to move to a new facility when you are understaffed. An initial plethora of new and curious clients can quickly disappear if your service and patient care aren’t aligned with the quality of your facility.

    Adding New Services

    After performing a thorough SWOT analysis, many owners discover opportunities to build practice revenue and attract an untapped group of clients by expanding their service offerings. The most common of these in a small animal practice include exotic or avian care, acupuncture, dentistry, chiropractic, herbal/alternative therapies, and rehabilitation. While these specialties can all be great additions, it is important to have answers to the following questions before moving forward: 

    • Based on your demographics, is there a large enough potential market?
    • How many other practices are offering these services in your area? Keep in mind that these are the types of services for which many pet owners will travel outside the traditional 5- to 7-mile radius for general veterinary care.
    • Do you have a solid relationship with other general practitioners in your area so that they would be willing to refer patients to you for these services?

    Even if you answer “yes” to the above questions, consider looking internally for a veterinarian who might be interested in getting training or certification rather than immediately hiring from the outside.

    When calculating the time, energy, and costs associated with developing new services, it is also important to consider:

    • The cost of marketing these new services
    • Personality issues (Are your current doctors open-minded and team-oriented enough to make internal referrals to another doctor within the practice? Unfortunately, this can often be an unanticipated “hiccup.”)

    Building a unique niche, when managed correctly, can be a great way to have your practice stand apart in the community and to significantly grow your patient base and your revenue. Finding a doctor with the certifications you desire can take some time, but they are out there, and their numbers are growing! Also, many newer graduates express a strong interest in complementary modalities such as acupuncture and rehabilitation, and if you are willing to invest in them, it can be a win-win situation for both parties.

    Extending Practice Hours

    Following the release of the 2011 Bayer Veterinary Care Usage Study, which cited reasons behind the decline in veterinary visits, many practice owners started considering longer hours. According to the survey, 45% of cat owners requested extended hours and 41% of dog owners said they would bring their dog to the vet more often if extended hours were offered.1 In other words, convenience is a critical component in how much veterinary care a pet receives. Think about it: opening at 8:00 a.m. means that many owners who need to drop off their pets will be late for work, which is never a good way to start the day. And how many owners can bring their pets in before 6:00 p.m. without having to leave work early? And with busy schedules, how many of your clients might appreciate having more opportunities to bring their pets in on Saturdays (we all know that Saturday morning appointments are usually booked solid far in advance)?

    If you decide to offer extended hours, it is important to hire specifically for these hours. You may also want to consider someone with emergency experience, which can be a plus, although not a necessity. I have a friend who owns a six-doctor practice in Cheyenne, Wyoming. The associates work split shifts so that the practice can be open from 7:30 a.m. to 8:00 p.m. It is the only clinic in town, out of six practices, that offers extended hours, and its client base—and bottom line—has grown as a result.

    Planning for the Future

    This is one area where practice owners can get themselves into trouble, so here are some words of advice: Don’t dangle a carrot unless you really mean it! In other words, unless you truly have a retirement plan, or are absolutely positive that you want to take on a partner, do not mention it as a potential opportunity to entice someone to work for you. In the end (and the “end” depends on what you promised and the timeline you presented), a would-be partner will quit, often in an emotionally charged manner. These types of “breakups” are the ones that can lead to the departing doctor taking a position with a direct competitor or opening his or her own clinic immediately outside the noncompete zone. Often, the ex-associate is bitter and frustrated with his or her former clinic and won’t hesitate to tell anyone who asks!

    Dr. C’s practice lost her because it hired her under the premise that she’d have the opportunity to be a partner and then didn’t follow through. The owner’s hesitancy to sell cost him not only his exit strategy but also his most productive associate. According to the AVMA, more than 50% of mixed practice owners are over the age of 50, and more and more baby boomers are considering retirement.9 Selling a practice outright, through a broker, can be a great decision, but many owners want to transition their practice and longstanding clients to a new owner versus handing over the keys to a random buyer. If the option of a buy-out or buy-in is truly on the table, let it be known! This may very well help you to attract more mature veterinarians interested in the business aspect of veterinary practice. Years ago, veterinarians were apt to go out and build their own practice after getting their feet wet as associates, but that is no longer the case. While studies show that interest in ownership has greatly declined, those who do wish to own are looking for an opportunity in an established practice. Often, they are also looking to mitigate their risk, at least initially, through partnership opportunities. Attracting a doctor who voices interest in ownership and taking the time to nurture and mentor him or her can be the perfect exit strategy in these tough times.

    ***

    The days of graduating with a DVM, hanging a sign outside, and sitting back to watch the clients roll in are over in most parts of the country. Fortunately, there are still great opportunities to grow your practice, add new services, and successfully retire. It all begins with strategic planning, which leads to strategic hiring, which leads to a great chance of meeting your goal, whatever it may be!

    aUnpublished data, presented by Karen Felsted at the NAVC Conference 2012, Orlando, FL, January 14-18, 2012.

    References

    1. Bayer HealthCare Animal Health, Brakke Consulting, National Commission of Veterinary Economic Issues. Bayer veterinary care usage study. 2011. http://www.ncvei.org/articles/FINAL_BAYER_VETERINARY_CARE_USAGE_STUDY.pdf. Accessed March 2012.

    2. Shepherd AJ, Pikel L. Employment, starting salaries, and educational indebtedness of year-2011 graduates of US veterinary medical colleges. J Am Vet Med Assoc 2011;239(7):953-957.

    3. Brice C. Strategic planning. AAHA Trends 2011:56-59.  http://content.yudu.com/A1tco3/AAHATrendsAug2011. Accessed March 2012.

    4. American Animal Hospital Association. State of the Industry 2010 Review. http://trends.aahanet.org/uploads/2011AAHAStateoftheIndustryReport1.pdf. Accessed April 2012.

    5. American Animal Hospital Association. Compensation & Benefits. 5th ed. Available at: https://www.aahanet.org/Store/ProductDetail.aspx?type=All&code=CBEN5.

    6. Wutchiett Tumblin and Associates. Benchmarks 2011: A Study of Well-Managed Practices. Available at: http://www.industrymatter.com/benchmarks2011.aspx.

    7. Sasha Corporation. Compilation of turnover cost studies. http://www.sashacorp.com/turnframe.html. Accessed April 2012.

    8. Wutchiett Tumblin and Associates. Benchmarks 2009: A Study of Well-Managed Practices. Available at: http://www.wellmp.com/PracticeStudy.html.

    9. Kornegay LM. AVMA president's address to the United States Public Health Service Scientific and Training Symposium. http://www.avma.org/press/speeches/USPHS-Symposium-Kornegay-110621.asp. Accessed April 2012.
     

    Stith Keiser is CEO of My Veterinary Career.

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