Evaluating Staff Efficiency

How does your practice measure up? And how can you make it better?

By F. John Pembroke, OD, MBA, FAAO

Identifying and maintaining optimal staffing levels in an optometric office is a common dilemma among practitioners. A realistic staffing assessment paired with a clear-cut plan for improvements may reduce costs, promote efficiency, improve staff performance and sharpen your competitive edge.

Overstaffing results in idle time and is costly in terms of payroll and benefits, while understaffing may lead to excessive overtime, absenteeism and burnout among employees. Even worse, it can lead to dissatisfied patients and reduced retention. A beneficial staffing assessment requires striking a balance between adequate staffing and economic reality.

Performance Metrics

To determine if you have an optimal workforce, you can use performance metrics. Metrics are defined as quantifiable measurements that can be compared to established benchmarks. Frequently, the act of benchmarking alone encourages positive performance and efficient behavior among the staff.

Typical staffing requirements should be determined by evaluating direct labor costs—as a percentage—to adjusted sales. Direct labor costs include all expenditures related to employees, including but not limited to: uniforms, retirement plans, medical insurance, continuing education, bonuses and payroll taxes. Your adjusted sales should reflect your anticipated net income, after factoring in any “losses” related to Medicare or other programs that will not pay you the full, billed cost for services.

You Get What You Pay For

Neil Gailmard, OD, author of Optometric Management Tips and host of New OD on Facebook, believes the often-quoted payroll percentage of 16-19% of gross sales is too low to attract and retain high-quality people. Dr. Gailmard says that “in order to properly staff a high-service, high-fee practice, we should look for the percentage to be 20 to 23%.” He says that if you go beyond 23%, you may be overstaffed or paying too much.”

Richard C. Edlow, OD, co-author of the American Optometric Association's State of the Profession document says “20% is typically a good payroll percentage for an experienced and well-trained staff.”

The Management Business Academy (MBA) study, sponsored by Ciba and Essilor, including over 1,600 established optometric practices, states the average cost of staff to be 20% of the adjusted gross income.

A second metric used to evaluate staffing is income per staff hour. Brad Williams, OD, FAAO, president of The Williams Consulting Group, states “a rule-of-thumb benchmark for staff production per staff hour is $70-$90. An example would be a that a practice with four full-time staff members and one part-time staff member working half time would generate 9,360 annual hours. If, for example, your practice production is $700K divided by 9,360 staff hours that equals $74.78/hour. If that number goes below $70/hour, it usually means the practice needs to increase productivity or consider letting someone go.”

Dr. Williams says “a good number to shoot for here is $80 per staff hour, or higher. To calculate your current number, take your gross revenue for a month and divide it by the total number of staff hours worked during that month. Don't include doctors or optical lab technicians.”

Dr. Gailmard says, “If your sales per staff hour are lower than $80 per staff hour, there could be several factors to examine, including:

• Low fees (or your practice is heavily dominated by vision plans, which results in low fees)
• Not seeing enough patients per day
• Not selling enough high-end options in optical
• Having too many patients who take their eyeglass and contact lens prescriptions elsewhere
• Having too many staff members.”

The Management Business Academy reports the median hourly revenue of the practices they track generated per staff member is $82.

A third way to evaluate staffing is adjusted sales per full-time staff. Dr. Williams says, “… for every staff member, the practice should generate $140-150K adjusted gross. When approaching $170K/staff person, the practice is approaching full capacity.”

Dwight Akerman, OD, Director of Professional Programs at Ciba Vision, reports annual gross revenue per non-OD staff in the MBA study to be $130K per full-time employee.

“I use an adjusted gross of $125,000 per FTE staff member as a very rough rule of thumb. I tend to favor more staff due to a heavy emphasis on delegation and customer service in my practice model,” Dr. Gailmard states.

Every Practice Is Different

Of course, these numbers are to be considered as guidelines as each region or location may vary significantly, depending on availability of the workforce or cost of living. Perhaps the best comparison is with your own office. Comparing your current metrics to previous quarters and years is the practical and realistic way to evaluate your practice. You should also look for trends that may be helpful in determining the most cost-efficient workload for your current demand.

Goals for the Greater Good of the Practice

Staffing has a major impact on your bottom line. Tracking key data will help you understand your present situation, set targets and measure success. Adjusting individual workloads can be difficult. However, this process gives you a simple way to judge the efficiency of your staff by evaluating the collective production of your team over a given period of time. nOD