The cost of inadequate leadership: ineffective management carries a hefty price tag for the typical 120-bed nursing home.

Why do America's corporate giants invest many hours annually in supervisory and management development? Simply because they recognize that competent and consistent staff supervision is the principal ingredient of an effective and efficient organization. To achieve this, supervisors and managers need to be skilled in communications, planning, scheduling, evaluating job performance, coaching, counseling, team building, handling employee problems and problem employees, resources allocation, and conflict management.

Effective management and supervision are key to achieving a competent and committed workforce. Because staff are an organization's most valuable asset, it is important to help them become as productive as possible. Managers and supervisors have a pivotal role in positioning your organization as a facility of choice. However, most managers and supervisors cannot achieve this goal on their own. Nursing home administration must provide training to assist managers and supervisors in developing the skills needed to be effective and efficient leaders.

Most nursing home supervisors and managers are selected based on their performance in nonsupervisory positions in their respective disciplines. Typically, they have little or no training in fundamental management skills such as budgeting, motivating staff, handling complaints and grievances, problem solving and decision making, and constructively handling staff absenteeism, tardiness, low productivity, etc. Supervisors and managers who lack these basic management skills can have a costly impact on an organization.

The Administrator's Role

It is essential that nursing home administrators provide their supervisors and managers with the management and leadership skills needed to establish a healthy workplace that contributes to the mental health, high morale, and productivity of its employees. When good management practices are in place and employees are valued and respected, productivity goes up, along with resident and family satisfaction rates. As a result, it becomes easier to attract new residents, employee retention improves, and the cost of staff turnover, agency personnel, and overtime goes down significantly.

The nursing home administrator is responsible for ensuring that managers are properly trained and motivated. In a Gallup poll conducted in the United States, 36% of all executives surveyed identified "insufficient management training and control" as a top cause for poor productivity in their respective organizations.

According to the same Gallup survey, inadequate supervision is the second most frequently observed productivity barrier. In this poll, supervisory skill and behavior problems observed included:

* Absence of people skills

* Insufficient time spent anticipating and preventing problems

* Too much involvement in hands-on operations and personally dealing with detail

* Lack of understanding the supervisor's role as coach and facilitator

* Poor communication skills

* Giving unclear instructions

* Accepting slack work ethics 

* Lack of urgency

* Inadequate management training

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Over 30 years of staff development and consulting in nursing homes, our staff at The Center to Promote Health Care Studies have observed the same results as the Gallup poll did concerning staff morale. In those institutions with the highest productivity, it is generally a result of the CEO, upper management, and middle management developing their own management and leadership skills.

The Cost of Poor Leadership--in Dollars and Sense

The lack of supervisory, management, and leadership skills are a major contributor to high nursing home employee turnover. According to a 2003 study by the American Health Care Association cited by Lynn Wallis ("Is the Long-Term Health Care Industry in Crisis?" Oregon Labor Market Information System, 2004), there were 52,000 vacant CNA positions nationwide, with annual nurse aide turnover rates exceeding 60% in 32 states, and exceeding 100% in 10 states.

According to PayScale, Inc., an online compensation information firm, the national average salary plus benefits package of a CNA is $33,120, which includes base salary, Social Security, 401(k)/403(b), disability and healthcare insurance, pension, and time-off expenses. Several studies suggest that staff turnover and vacancy costs for recruitment, training, increased management expenses, and lost productivity have been estimated at four times the employee's monthly salary. Consequently, the turnover of a single CNA will cost the nursing home approximately $11,040. A typical 120-bed nursing home employs 36 to 54 CNAs. Since the national turnover rate for CNAs is approximately 65%, the turnover rate cost of CNAs alone for a 120-bed facility ranges from $258,336 to $387,504 annually. In comparison, the cost of turnover for an LPN is $15,410, and for a housekeeper $8,134. Consequently, even losing two or three CNAs becomes a significant financial loss (see sidebar, "Determine Your Turnover Cost").

What Causes Turnover?

In healthcare, stress is a major contributing factor to turnover. It leads to serious impairment that might cause a staff member to make big mistakes, which could lead to serious injuries. Stress also can cost the nursing home in the form of clinical errors, accidents, absenteeism, and low employee retention. In fact, according to the Bureau of Labor Statistics, the incidence of occupational injury and illness in private industry is 5.3% overall, whereas the nursing home rate is 12.6%.

In facilities where poor management practices are the norm, where workplace harassment is tolerated, where employees feel undervalued and treated with disrespect, productivity suffers and turnover rates are high.

The following factors compound this situation:

* a projected doubling of the population age 65 and older by 2020

* a lower growth rate in the population segment that traditionally cares for seniors

* retirement of aging experienced caregivers

* increasing costs of long-term care, especially in nursing homes

Summary

Remember, your staff are your organization's most valuable asset. Like any valuable asset, it is essential to keep them in the best possible condition. A smart business decision is to invest in the development of your supervisors and managers. Expose them to leadership training. What is the cost of a meaningful and effective leadership development program for a 120-bed nursing home? In a word, it is approximately the cost of the turnover rate of one or two CNAs.

John E. Baer, DPA, has served as a healthcare leader both as a practicing administrator and as a consultant. In addition to having been the CEO of a major healthcare facility, he has also served as a consultant at Booz, Allen and Hamilton, and as Assistant Bureau Director for Occupational Health in charge of a nationwide federal healthcare program administered by the U.S. Civil Service Commission (now known as the Office of Personnel Management). Thirty years ago, he founded The Center to Promote Health Care Studies, a training center for healthcare leaders, professionals, and caregivers. He is an Adjunct Assistant Professor in Health Policy and Management at Columbia University and a licensed nursing home administrator in New York State. For more information, call [phone] or visit www.centerfortraining.com. To send your comments to the author and editors, e-mail [e-mail].

BY JOHN E. BAER, DPA

RELATED ARTICLE: Determine Your Turnover Cost

To approximate your facility's turnover cost, take the total annual personnel salaries plus the cost of all fringe benefits, and divide that total by 3. Then, multiply that number by the facility's turnover rate. For example, a typical 120-bed nursing home may have 150 employees. If the average salary plus fringe benefits equals $35,000 per employee (which is probably low), total personnel expenses will amount to $5,250,000 annually. Based on this assumption, turnover and vacancy costs for recruitment, training, increased management expenses, and lost productivity for this 120-bed facility will be $1,137,500 annually.