Thoughts on the people that allow your business to grow
Excess human resources (employees) offer advantages to performance and should on a long-term basis increase operational excellence. Fonseka, Wang, and Manzoor describe three ways to deal with excess human resources; (1) downsize (2) retain the excess, (3) increase production. Fonseka illustrates the effect of continued downsizing as “having an adverse effect on performance.” Cascio & Young, 2003; Chadwick, et al., 2004 and others describe the effect on the “survivors.” They explain that the survivors suffer decreased morale, become less productive, begin to distrust management and take on an excessively cautious approach to work all within the confines of being overworked. Tommy Newberry has a simpler description “Scattered, Smothered and Covered” as he borrows a marketing theme from Waffle House.
The term survivor is interesting and relates to the concept of downsizing, but in dentistry, downsizing is less frequent than in other industries. In dentistry, the same effect can and does take place but it is not due to the loss of an employee but rather the trepidation in hiring another employee. The term for an excess of anything in business is “slack.” In retail, a certain amount of excess inventory must be on the shelf or in the store to accommodate a temporary increase in demand. Slack is tricky, too much excess and you can waste a lot of capital, too little, and you can drive customers away as they become frustrated and look for the product or assistance in obtaining the product at a competitor.
Dentists have zero formal education in business operations from experts in business operations. Dentists are generally speaking smart, and many good business practices are intuitive, and thus most private practice providers stumble upon a working system of operations despite their lack of training. The difficulty with improving the slack problem is it is often hidden from view and does not present as a problem to the dentists, but rather as a sign of success.
Most dentists are proud of how far booked out appointments are on their schedule or their hygienist’s schedule. The argument is simple enough, “I only have so many hours available to see patients (Capacity) and if those slots are full (Demand,) I must be doing fine.” In basic economics, if you have excess demand you should do one of two things: raise fees or increase capacity. Third party payors (dental insurers) control 90% of dentists fees, and thus the dentist does not have the ability to charge more per procedure, so the only lever they have to meet customer demand is through increasing capacity. The single lever of increasing capacity contrasts in a challenging way with the multiple levers that exist to influence profit margin. The profit margin levers are chiefly: 1.) increase the speed at which providers complete procedures, 2.) delegate the work to the least expensive labor, 3.) decrease overhead by negotiating a lower fee for supplies, materials and in dentistry laboratory functionality–or attempt to do without some of these items 4.) minimize overhead by maximizing the utilization of the facility which will drive down the relative occupancy costs, and 5.) decrease labor and or hire the least expensive labor available in the name of efficiency. But in general, dentists aren’t business professionals, and thus they instinctively try to do more with less and create a slack problem for their patients and their employees. Here the problems result from having too much work for too few people. Too much work increases employee stress and job satisfaction will decrease (this is an employee effect), or patients get frustrated and vote with their feet (this is a client effect.) This patient frustration initially presents as short notice cancellations and unkept appointments. But the dentist may not be aware of the problem because they have excess capacity, and often the staff (if efficient and not too overworked) can fill the appointment with the excess capacity.
Some analysts will view having employee slack in a service industry as inefficient. This analysis makes sense on the surface especially in the presence of excess demand. Excess demand masks the effect of stress on the employees and negative experiences for the patient because the loss is always easily replaced. In an excess demand marketplace, an analyst separated from the practice will see higher labor costs and no increase in tangible results–profit. For the advantage of slack to demonstrate a positive effect, the business must convert some of the excess capacity of employees into an increase in dentistry purchased by the client. For there to be an increase in dentistry purchased the employees must have the physical (facility) capacity and emotional capacity to produce more dentistry. Excess employee capacity will fail to generate results if physical (facility) capacity is not available and the employees and providers are not driven to take advantage of the increased capacity.
Zeynep Ton in her book “The Good Jobs Strategy” describes how not having slack in the workforce can have the unintentional effect of creating a “Bad Job” for the employee. Zeynep Ton gives many well-researched examples of “Good Jobs Strategies vs. Bad jobs Strategies” In many markets dentistry has excess demand. In these markets employing a “Good Jobs Strategy” will help normalize the capacity (Supply) vs. demand equation. In most dental practices having a better, more engaged workforce will increase the ultimate measure of success for a dental office–the percentage of the diagnosed dentistry that gets completed. When an office is either content or scattered smothered and covered, fewer patient appointment occurs, and less of the dentistry diagnosed gets completed. So, the upside of having human resources slack is tremendous. The downside is real if and when the addition of HR Slack is not intentional and accompanied with adequate training, real-time feedback from both trainers and clients as well as clear, measurable goals associated with the utilization of slack. If you are experiencing some of the symptoms of not having adequate slack in your workforce; employee disengagement, employee turnover, flat to negative growth, low patient retention or poor social media ratings, then perhaps it is time to consider another strategy. “The Good Jobs Strategy” is a good place to begin.