Vested interest: When staff take ownership
By Stephen W. Earnhart, MS
President and CEO
Earnhart & Associates, Dallas
We discussed physician ownership mentality last month. Now, let’s talk about staff ownership issues.
A huge advantage the for-profit industry has over the not-for-profit surgery industry is the ability to offer financial incentives for increasing profitability within the business model. I say "increasing profitability" because these plans, like the physician incentives, are based upon increasing the profits from quarter to quarter and year to year. Whether managers like it or not, most of us, myself included, like financial recognition for services over and above the expected.
This is not to discount the value of "Well done, Steve! You have made a difference." That is great to hear and definitely strokes my ego, increases my sense of worth and purpose, and increases my morale and love for my job — but it doesn’t pay the rent. Give me a financial incentive that is obtainable, and I can go far beyond what I was hired to do — joyfully!
How do you give your staff a vested interest in the profitability of your operations? With the physicians it is relatively easy. They purchased stock in the company, much like buying stock in a publicly traded company such as Mobil Oil, and are paid a dividend based upon the number of shares they own in the venture. There can be a number of ways to offer a bonus to staff, to provide them with a vested interest in the success of the center. My proposal is this: The current shareholders (physicians, corporate chair, hospital, management company, or others) purchase a block of shares for the staff. The current owners of the center can purchase X% of the operating entity for staff. When distributions are made to the physician and corporate owners, staff also have a pool of "cash" to distribute.
The method of distribution or determining which staff member gets what amount is up to each facility. I favor an equal distribution based on the number of staff members. After all, each should be contributing equally to the success of the center, or why would they still be there? This might be a good time (and excuse) to yank non-productive staff. Handling of part-time individuals can be done on a prorata basis on number of hours worked.
Physicians or corporate owners of surgery centers might cringe at giving up equity in their centers, but by doing it this way, staff have an incentive to work closer and you avoid hiring new staff members who only will dilute the distribution to all. Can it be done? Yes, it might take some effort on the part of the partnership, but as an owner of surgery centers, I know the value of a well-trained staff and the cost savings minimal staff turnover can afford.
Do not discount the effect on a staff member who now actually "owns" a piece of the center. Wait until you see the attention that staff will pay to cost containment. After all, it is now their money they are spending. As a further carrot, imagine your recruiting power when you can offer "shares" in the surgery center to that nurse you are trying to recruit.
What will kill this concept is one of the same issues that kills so many surgery centers out there: greed. Management typically will try to keep as much of the distribution as it can and find excuses not to share it with all staff members. The potential for favoritism is very high. Then you end up with infighting and disgruntled employees and have accomplished just the reverse of your goal. Take the high path and distribute fairly to all.
For all you not-for-profit folks out there — you should not be left out. Many hospitals have found ways to keep you tied to them via incentives as well. Benefit packages and sign-on bonuses are only a few. However, more and more, we are finding not-for-profit hospitals spinning off their own surgery centers as a lower cost provider of outpatient surgery. Depending upon how those entities are established, you could qualify for the same opportunities. There is some great talent out there. Let’s find a way to retain them.
(Editor’s note: Contact Earnhart at 5905 Tree Shadow Place, Suite 1200, Dallas, TX 75252. E-mail: firstname.lastname@example.org. Web: www.earnhart.com. Earnhart and Associates is an ambulatory surgery consulting firm specializing in all aspects of surgery center development and management.)