You are an HME business owner, but what business are you really in?
You are in the “profit business,” a bit redundant given that every business must be profitable in order to deliver products and services consistently to their customers.
You are in the “government business.” Every time Washington or your state legislators sneeze, your profits can get the flu.
It may sound cliché, but more than anything you are in the “people business.” The very nature of your products and services provide the means for people in depressing, distressing, often debilitating circumstances, to cope. By helping them, you're helping their families. When your assistance helps people remain independent and self-sufficient, you're lessening the burden on government, health care and, ultimately, taxpayers. If your assistance helps people enter the work force, you're contributing to the economic strength of other businesses, charitable organizations and the entire community.
And because you are in the business of “people helping people,” every one of your employees counts.
Short-Term Savings versus Long-Term Consequences
As the government continues to “improve” its system, your operations, your profits and your business' very existence is under assault. Every reimbursement adjustment means you must review costs, and an HME payroll can easily represent 20 percent to 30 percent of your business' overall costs. Are layoffs the answer?
Layoffs are a screaming statement of management failure. It is a failure to staff properly, to gauge market demand, to be knowledgeable of industry trends, to plan for proper product, service and payer mix, to be involved in legislative advocacy and to be committed to customers and communities.
There are significant, negative financial costs, including hard and soft costs, people costs, emotional costs, relationship costs and more. These may include legal fees, severance packages, increased unemployment insurance, damaged customer, supplier and lender relationships, loss of knowledge and experience with departing employees, projects or work being put on hold and negative public relations, not to mention competitor enthusiasm.
The employees leave, but the work stays and productivity declines. Work may get done, but not with the enthusiasm and caliber of dedication as before. Hiring temporary staff, training them, getting them acclimated to your company's culture and customer service expectations is expensive.
New product research and development, sales and service are critical, employee-driven components of every HME. Cutting employees in these vital areas can be “short smart/long stupid.” And in the wake of departed co-workers, surviving employees can take on a “me-first” attitude rather than focusing on team progress, customer satisfaction and the attention to details that can make or break a company's success.
Management mistrust, doubts about their competency and business savvy, even “management-as-the-enemy” attitude can result. Remaining employees are more apt to leave if they learn of another employment opportunity.
The ultimate message of layoffs is, no matter how hard you work, how dedicated you are, how responsible and dependable, you can lose your job this Friday.
As an HME owner, you can only cut so far before you've got nothing but overworked, disgruntled employees — the same employees who deal one-on-one with valuable referral sources, customers and potential customers. When that happens, the outcome is predictable: lousy service, lousy quality, lousy sales, lousy profits.
Seven Things to Consider Instead of a Layoff
- Shorter workweek
This requires tremendous employee schedule coordination to avoid jeopardizing customer service and smooth operation.
- Lease space and equipment versus buying for planned
growth
Anything that will provide flexibility with major-needs investments is crucial to riding unsteady waters.
- Contact creditors, suppliers and lenders for flexible
financing arrangements
No one wants to see your business fail (except perhaps your competitors), and those invested in your success will likely prefer extended minimum payments rather than defaulting altogether.
- Refinance to take advantage of lower interest rates
Attractive rates may extend your timeline, but this may drastically free up cash to support payroll and keep talented and enthusiastic workers.
- Contact customers
Assure them that while times are difficult, you are committed not to compromise your pledge to service, integrity and quality. Ask them for more business and more referrals. Don't forget to ask what you can do to help them as well.
- Share the situation with employees
Informing staff of a downturn or other business challenges should bring out three responses from employees. First, you'll gain their suggestions and insights from those in the trenches who are closest to customer issues (and perhaps even uncover a superstar in your midst). Second, you will trigger a fight-or-flight response, leading to departure of the weak and pledge of the committed. Third, you will teach your people a little bit more about what makes the enterprise work and what's important.
However, don't be too detailed about the misery and gory details behind your business problems. Remember, employees look to you for encouragement; the best of leaders know how to walk the thin line.
- Gain an outside perspective
Successful owners realize they can't do it all. Outside perspective can quicken the turnaround of a difficult situation. Sharing your ideas with HME professionals in non-competing markets can be a lasting legacy to improving your business.
People, Profits and Other Possibilities
Get more involved with membership services organizations, state and national industry associations. Take up the commitment of industry advocacy through local, state and national legislative action. Attend industry conferences and education opportunities. Read, learn and keep up with industry trends and practices. Get more involved with your local chamber, charities, and service clubs. The nature of the HME business is that people don't come to you until they're in trouble; make sure when the need arises, your name comes to mind first.
Explore alternative revenue streams. Are you able to capitalize on quick, high-margin, high-turnover, low-inventory, retail and cash transactions instead of paper-intensive, slow-pay, government-controlled reimbursements? Increased sales and cash flow make a lot of problems go away, especially staffing issues.
Some of the best tips may come from outside of the industry. Read general business publications for solid ideas on management, marketing and operations insights.
The health care provider world is under assault by fierce competition, confusing regulatory challenges, technology changes, changing work ethics, fraud and corruption. Some pressures are within an HME owner's control, others are not. But Prosperity comes with strategic growth, and growth in this industry can only come with having the right people in the right positions, with the right resources. “Right” doesn't necessarily mean expensive, but it does take strategic thinking.
Vince Crew is a strategic business growth adviser and founder of REACH Development Services, Naples, Fla., and the author of Keeping the Very BEST (Lighthouse, 2003). He speaks and consults with health care providers and related professionals on competing successfully in crowded markets. He may be reached at Vince@REACHdevelopment.com or by phone at 239/455-0816.
Layoffs as a Last Resort
If, after exhausting all other possibilities, you feel a layoff is the only thing left to keep your business afloat, remember:
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Always consult legal and human resource professional before any layoff plan.
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Consider hiring an outside professional manager and relinquish your day-to-day staffing decisions.
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The only thing worse than a layoff is “nibbling away” at the decision. Anything short of a 10 perent to 15 percent reduction in staff is probably not going to have any long-term impact on improving bottom line results.
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Be open with remaining staff. Don't pretend it's not a big deal. Hold face-to-face employee gatherings about the layoffs.
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Rally the troops and give direction and encouragement. Remaining workers will want to hear a re-affirmation about the direction and strength of the company. Now is the time for words of, “So-and-so will be missed, but we've all got to keep going because our families and customers are depending on us to produce a good product or provide a valuable service.”
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Provide guidelines for severance that must include “parting decorum” to the departing employee, outlining the typical legalese necessary to foster a severance package and clean exit. Go one step further to ensure employees understand there is to be no sabotage, conversation or actions to undermine the business in their final days-or they may forfeit their severance package.
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Make layoffs quickly. Don't wait for a “good time.” There isn't one. If feasible, make the departure effective the same day. This minimizes hallway conversations, griping to customers and opportunities for business disruption.
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Avoid Fridays for layoffs. It puts the employee at the greatest risk of self- and public-destructive behavior, providing a weekend of anger, frustration and depression. An early weekday severance allows the departing employee to deal with feelings, make some calls and get the job-hunting process under way sooner rather than later.
Dealing with the people side of any operation is one of the ultimate challenges of a leader. When there is any staffing disruption, it should be the leader's primary objective to transition the loss, encourage those remaining and fill the void with the best strategy available.
A Staff How Big?
The only three people an HME business really needs:
- You, the owner
- Someone to do the things you can't do
- Someone to do the things you don't want to do
Realize that for every addition or reduction in staffing, the closer every task comes to being your responsibility.
