Article Date: 4/1/2004

business advisor
How Productive is Your Staff?
Learn what's really involved in understanding your staff expenses.
By Jerry Hayes, O.D.

According to the American Optometric Association's (AOA's) most recent survey and my own consulting experience, the average optometrist invests 17% to 18% of his gross income on staff salaries and related expenses. But that number only tells part of the story. Don't you also need to know what you're getting for that investment? In other words, how productive is your staff?

Gauging productivity

If you want a general rule of thumb for staff productivity, it's my experience that a reasonably productive practice should gross about $125,000 for each non O.D. employee.

For example, four employees is about right for a practice that grosses $500,000. (That includes optometric assistants and clerical help, but excludes employed optometrists and the time any employee spends on cutting and edging lab work.)

An even better way to calculate staff productivity is to divide your collected gross income by the total number of hours that your staff actually worked. Again, exclude lab time from this calculation.

For example, let's assume that in one year, Dr. Worker collected gross revenues of $500,000 and employed four full-time employees who, after vacation, sick leave and paid holidays, worked 49 weeks each year. Therefore, his staff worked 49 weeks x 40 hours = 1,960 hours x 4 employees = 7,840 total hours.

Now divide $500,000/7,840 = $64 each hour. Based on the "Staff Productivity Scale" (below), we'd rate this doctor's staff as "fair to good" in terms of productivity.

 

Staff Productivity Scale

 

Excellent
More than $80/hour/employee

Good
$65 to $80/hour/employee

Fair
$50 to $64/hour/employee

Low
Less than $50/hour/employee

Understand by example

If Dr. Lowe grossed only $400,000 with four employees, then her staff productivity would be $400,000/7,840 = $51 per hour (49 weeks x 40 hours = 1,960 hours x 4 employees = 7,840 total hours worked). This tells us that Dr. Lowe needs to either increase her gross or reduce her staff hours. Otherwise, she's employing more people than she really needs.

On the other hand, if Dr. High grossed $600,000 with four employees, then his staff productivity would be $600,000/7,840 = $77 per hour. (49 weeks x 40 hours = 1,960 hours x 4 employees = 7,840 total hours worked). This is in the "good to excellent" range, which tells me that Dr. High is a good manager and likely has an above average net.

Variables to remember

Practice efficiency generally decreases as revenues increase. Therefore, you can expect an $800,000 practice to have slightly lower productivity per employee than a $400,000 practice.

Can staff productivity be too high? The answer is yes, anything more than $100 per hour is probably too high. We see that mostly in smaller practices that have one or two employees and where the doctor performs many duties that he could delegate if he had more staff.

Productivity in perspective

As the above figures show, understanding your staff expense category involves not only how much you pay them, but how much they help your practice produce. The ideal situation is to have staff costs fall around 18% of gross income and for staff productivity to equal more than $65 for each employee hour worked. Do that and you're well on your way to an efficient and profitable practice.

A frequent writer and speaker on practice management issues, Dr. Hayes is the founder and director of Hayes Consulting.  You can reach him at (800) 588-9636 or JHAYES@HAYESCONSULTING.NET.

 



Optometric Management, Issue: April 2004