The Financial Costs Associated With Staffing
Turnover, Staffing, Hiring and Retention Cost Relationships
The council of Saudi chambers has reported that healthcare turnover has been rampant in the kingdom of Saudi Arabia over a number of years now. Many hospitals have had financial uncertainties due to low compensations from payers, higher acuity patients and the looming rivalry from other organizations and due to this, hospitals are always seeking for an alternative to reduce costs. The wage and benefits of the registered nurses comprise of a large amount of total hospital costs. This has proved to be a great challenge to the hospitals and in order to avert this, hospitals have tried to reduce nurses and cut their pay so as to increase profit and reduce cost. If nurse staffing leads to higher profitability, reducing nurse-to-patient ratio can cause low quality of care and negatively impact the overall profitability of the hospital. However, adequate staffing of nurses results to satisfaction both for the patients and nurses without severely interfering with financial flow of the hospitals.
According to McCue (2003), his study found out that high operational cost was associated with high levels of registered nurses. Although this was the case, there was not substantial effects of nurse staffing on profit differences and this questioned the hospitals decision to reduce nurses during times of financial hardships. A cost effectiveness analysis on patient-to-nurse ratio was carried out by Rothberg et al., (2005) which proved that reducing the work given to nurses lead to low death rates which boosted the general cost savings of the hospitals. In order to increase cost savings and achieve high productivity, shortened lengths of stay in hospitals and to reduce hospital acquired infections, greater nurse staffing levels is a key determiner.
When a person departs from an organization, the quality and safety of that particular organization is compromised and this risks malpractice claims and brings up attitudes that other staffs may find aggressive. A sudden unexplained departure either announced or not, leads to a great loss to the both the staff and the management. The cost of turnover which does not add any value in the organizational budget forces the hospital management to go for staffing. According to Akingbola, K. (2004), an organization that goes through a consistence high turnover especially from top priced staffs, the situation needs another look. When there is a consistence departure of high experienced health care providers who have served in a particular organization for a long time, it causes unlimited recurrence of the high cost of turnover. (North, N. et al, 2013). This expense makes the management shift their attention to improvement of employee satisfaction, improve the quality of their working conditions and also, they try to cut the turnover cost by channeling their attention to staffing. Staffing helps save time and money as they look for a permanent solution. Staffing is a swift process that allows the organization to hold up as they search for a good and experienced personnel after a turnover. The cost of staffing is not much as it remedies the situation for the time being.
When an employee has left the organization is left with few options at hand, either to hire new staff or encourage retention. These two options come with their own costs which the management has to examine with great care so that they can come up with a cost-effective long-lasting solution. The cost of hiring a new employee can cost up to three times the employees annual salary depending on the time he takes to own the position. Hayes, L. J. et al (2006) The cost of hiring employee includes advertising for the vacant position, training, and even increase in salary. When a department has less staff, this means that production is reduced and this brings so many loses to the company. If the employee left because of a management issue, it may lead to decline of morale within the other workers and even loss of another employee.
After the management ha examined the morale of workers and the cost of hiring, it may consider retention as opposed to replacement. Retention includes incentives both monetary and non-cash. This may cost the company money but it may be less than that for hiring depending on how it is spent. The company may decide to add a certain percentage on top of the employee’s salary as an incentive. Promotion to higher ranks may also be a good strategy of enabling retention without much cost. For a company that likes keeping their profits maximum with high less costs, they might decide to give incentives quarterly to their employees without adding any permanent amount on top of their salaries. (Hinkin, T. R. et al, 2000).
Finally, the costs associated with turnover and employee retention is very high whenever this happens to an organization. Employee turnover means loss of expertise and this leaves a gap that may take time to fill or even it may never get someone to fill it. Retention comes as a result of turnover. When there is so much turnover in an organization the management shifts its attention to method of retention that will help maintain other workers and their morale too. Staffing, hiring and retention all come as a result of turnover.
Hinkin, T. R., & Tracey, J. B. (2000). The cost of turnover: Putting a price on the learning curve. Cornell hotel and restaurant administration quarterly, 41(3), 14-21.
North, N., Leung, W., Ashton, T., Rasmussen, E., Hughes, F., & Finlayson, M. (2013). Nurse turnover in New Zealand: costs and relationships with staffing practices and patient outcomes. Journal of Nursing Management, 21(3), 419-428.
Akingbola, K. (2004). Staffing, retention, and government funding: A case study. Nonprofit Management and Leadership, 14(4), 453-465.
Hayes, L. J., O’Brien-Pallas, L., Duffield, C., Shamian, J., Buchan, J., Hughes, F., … & Stone, P. W. (2006). Nurse turnover: a literature review. International journal of nursing studies, 43(2), 237-263.