According to a PwC Saratoga report on human capital effectiveness in the United States, organizations across a variety of industries, including the hospitals sector, continued to control costs and manage an evolving workforce in 2011. Organizations also experienced increases in turnover and continue to struggle with quality of hire and high performer retention.
PwC Saratoga’s 2012/2013 US Human Capital Effectiveness Report includes 2011 data from more than 300 organizations representing 12 industry sectors. This includes benchmarking data from nearly 60 hospital systems representing over 1 million employees, including 175,000 bedside nurses, from all over the country.
Human resources within hospitals used to be more focused on the transactions within the workforce, but are shifting their focuses to the strategic elements of the workforce, one of several emerging trends in the hospitals sector that was revealed in the report, said Shebani Patel, a director with PwC’s consulting practice.
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“It used to be more about how to get people hired, paid and exited. This has changed in the past 24 months,” she said. “There’s more emphasis on strategic workforce planning, like the human resources spend and cost per employee. What will we need in the next year or next five years? What are the barriers that might exist for getting the talent than we need?”
According to the report, one trend that can be seen in the hospitals sector is that the quality of hires has weakened. More specifically, first year turnover increased in 2011, with a much higher turnover rate for hospitals in comparison to other industries.
“This is a really hot topic in the healthcare arena because the percentage of employees that leave their jobs in the first 90 days tends to be really high,” she said. “This is a concern because it’s very costly to recruit people, get them hired, orientation costs and general training. It’s a lot of dollars walking out the door.”
Along the same lines, as the economy improves, voluntary turnover rates have been increasing, according to the report. Specifically, high performers and employees in key/pivotal roles are departing at increasing rates, compared with the rates over the past two years.
“As the economy heats up and there are more job opportunities, employees are going to go,” she said. “There’re more opportunities to consider, more additional options.”
Executive retirement has also become an issue, and many hospitals will begin to direct more of their attention to succession planning and knowledge transfer, according to the report.
“There will be a lot of eligible people for retirement in the coming years,” Patel said. “In the past years, the eligible people may not have taken on that next chapter of retirement with such a bad economy, but as things start to heat up, people are starting to think about how much longer they want to work.”
Another trend in the hospital sector is that the return on workforce investment has diminished. Like many other industries, the investment in workforce compensation and benefits for hospitals has risen over the past year, and while revenues are also growing, the rate of growth is lagging behind labor cost increases for numerous organizations, according to the report.
In addition, the human resources costs per employee in the hospital sector rose but still remain well below many other industries, which is a continuing trend. According to the report, the median human resources head count ratio in the hospital sector has remained about the same as last year and continues to be significantly higher when compared with the all-industry benchmarks.