Optometric Management Tip # 385   -   Wednesday, June 24, 2009
The Economy: Laying Off Staff?

The economic recession is affecting some eye care practices differently than others. I see many practices that are still showing revenue growth compared to the same period last year, while others are suffering a financial downturn. Some practice owners who are experiencing a decline in gross revenue are facing the possibility that they have too many staff members.

Is it better to layoff one staff person or to cut each employee's hours slightly?

Downward cycle?

Of course, I would strongly prefer to not take either action if at all possible. I would try to hold on and weather the tough business climate, if possible, and try to find ways to increase patient flow and spending.

The decision to cut employee hours in any form is dangerous because it will hurt staff morale and it can initiate a downward business cycle. When employees are reduced, customer service usually declines and that can cause a poor patient experience, which results in reduced spending and fewer referrals of others. Since revenue is continuing to decline, management may feel the need to cut staffing further. Services decrease even more and you get the picture.

Tough economic times call for better service than ever. For most eye care practices, the most important marketing effort is the one-on-one service with each patient you see in your office. That effort is the key to word of mouth referrals. I want to create an upward business cycle where the practice gets better at customer service and fees can be raised.

Back to the question

Assuming my practice was experiencing really tough times and I had to reduce payroll costs, my preference would be to layoff or dismiss one person rather than cut the hours of all staff members. I would select the weakest person, of course, and dismiss him or her. A layoff may be temporary or permanent, but it implies that the action was not related to poor performance but rather to economic requirements. A furlough is always temporary and could involve a reduction of hours or a complete leave of absence. It is very likely that the removal of a weak staff member may actually be good for the practice.

To issue a mandatory decrease in hours (and pay) is almost sure to cause a problem with staff morale, even if it is stated to be temporary. The practice would suffer in two ways: a drop in customer service and a poor attitude by all the employees.

Editor's note

I wrote about the idea of providing an annual employee compensation summary in Tip 383 and I had some requests to provide a sample form. This form was published in Tip #21, http://www.optometric.com/mtotw/tip.asp?tip=21.

Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management