Support staff — Asset or liability?

As many of you know, the wages and benefits expense category on our income (profit and loss) statements represents the largest expense incurred in operating a veterinary facility. Why then do we spend the least amount of time and resources in managing it? Why do we think it will all take care of itself while we choose to micromanage a much less significant expense in the hopes of reducing that by a few hundred dollars in the next year!

As the title of this article suggests, it must first be decided whether support staff are an asset or a liability to the practice. An asset is defined as something of value, such as cash, equipment, inventory, or buildings, while a liability is defined as something that has a negative effect on the value of the practice, such as accounts payable. The simple question that needs to be answered is “Do the support staff contribute to or take away from the value of the practice”? Since wages and benefits are an expense, support staff could be considered a liability, as they do have a negative effect on net income. Finely tuned and motivated support staff, however, contribute to the revenue stream of the practice in many ways, and the practice would quickly grind to a stop without them. Given the above options, the staff’s assets definitely outweigh their liabilities to the practice.

The following scenario is an example of how support staff may affect the practice’s costs. Assume that your practice employs 3 animal health technologists (AHTs) at an hourly rate of $15.00. One of them, an average AHT in the practice, has asked you for a $0.50/h raise. She has been offered $16.00/h elsewhere but, because she loves working in your practice, she will stay if she is paid $15.50. If it wasn’t for the fact that her expenses are rising, she wouldn’t have even considered asking for a raise at this time.

You are faced with 2 alternatives: either pay her the additional $0.50/h that she is requesting, or suggest that she leave and work in the other practice. Before you make an uninformed and potentially wrong choice, you should consider all of the consequences of your decision.

If you decide to pay her the additional $0.50/h and retain her as a valued asset, the incremental increase in her wages for the next year can be calculated as follows:

Hourly rate increase	Hours worked per year	Incremental increase
$0.50	×2000	=$1000.00

Now let us consider the alternative decision: she is a liability to the practice and you want to reduce that liability. You have decided to let her go to the other practice and you will replace her with an AHT of equal ability for $15.00/h. On the surface, it looks like a savings of $1000.00 for your practice. But is it? A more detailed analysis of this alternative decision follows.

There are many hidden costs associated with replacing the existing AHT with someone new; a few of the direct costs include: 1) recruitment and advertising costs, 2) selection costs, 3) interviewing costs, 4) hiring costs, and 5) training costs.

Recruitment and advertising costs

You may choose to advertise in the local newspapers, provincial veterinary newsletter or Web site, AHT colleges, The Canadian Veterinary Journal, or an AHT publication. The costs associated with this phase of the hiring process can be as low as $250.00 or as high as $1000.00; $500.00 is a reasonable amount for recruitment and advertising costs.

Selection costs

Applications received for the AHT position must be individually reviewed and sorted, usually by either the veterinary owner or the office manager. The time spent depends on the number of applications received, but let us assume that it will take the office manager, who is paid $25.00/h, up to 6 h to read, assess, and sort all of the applications. This translates into $150.00 for this phase of the process.

Interviewing costs

A number of the applicants will be selected for a personal interview. Interviewers usually include the owner veterinarian, the office manager, and/or a currently employed technician. Assuming that there are 4 candidates, and each interview takes at least 2 hours, and assuming an hourly rate of $25.00 for the office manager and $15.00 for the technician, the cost is $320.00.

Hiring costs

Once the successful candidate has been chosen, there are some potential additional hidden costs associated with hiring the candidate. These costs could be relocation costs, signing bonuses, or other negotiated perks. It would not be unusual for these additional costs to be $500.00

Training costs

Once the new AHT staff member has been hired, there is an obvious training period. Animal health technicians are professionally trained in their chosen field at a post secondary institution, and there is usually little requirement for training in the skills necessary to function as an AHT. Other aspects of the new position that will require training, however, may include: veterinary software program, standard operating procedures for the hospital, hospital policies, individual preferences of the veterinarians, and operation of the laboratory equipment. In addition to the new AHT being less productive during training, the productivity of the individual providing the training must also be considered. The trainer is often another staff member, possibly an AHT, who will be less productive as an AHT while he/she is training the new individual. For the purposes of this example, let us assume that the AHT trainer is making $15.00/h. Under training costs, assuming that the new AHT will require a total of 40 hours of training and the trainer (also an AHT) will be only 50% useful as an AHT during this training time, the calculated total training costs will be:

New AHT	Trainer AHT	Total training costs
40 × 15.00 = $600.00 + 20 × 15.00 = $300.00		=$900.00

The direct costs associated with hiring a new AHT are:

Recruitment and advertising	$500.00
Selection	$150.00
Interviewing	$320.00
Hiring	$500.00
Training	$900.00
Total costs	$2370.00

In essence, an expense of $2370.00 would be generated in hiring the new AHT, whereas an expense of only $1000.00 would be generated to retain the existing AHT at her new hourly rate. The numbers indicate that retaining the current AHT and increasing her rate by $0.50 would be the prudent decision under these circumstances. If the existing AHT was asking for a $1.00/h increase, then the decision is not so clear-cut. The cost to retain the AHT would then be $2000.00, while the cost to replace the AHT would be $2370.00. A $2.00/h increase would cost the practice $4000.00. Now, it is more beneficial to the practice balance sheet to replace the AHT.

To return to the initial question of whether support staff are assets or liabilities to the practice. If we look simply at the numbers identified above as the sole parameters when making decisions regarding staff, we are considering our staff as an expense or a liability. If, on the other hand, we weigh and consider such intangible qualities as dedication, work ethic, love for the job, being a team player, practice builder, and devotion and commitment to the job, then we are considering our staff as an asset or something of value and worth to the practice.

In reality, both sides of the ledger must be considered when making decisions concerning staff. All expenses affect the ability to generate revenue; and wages and benefits are no exception. But unlike other expenses, wages and benefits are the only true human expenses and, after all, it is the staff that makes a practice successful. Consider the intangible valuable assets that staff contribute and not simply the expenses that are being incurred by them when making decisions concerning staff. Staff contribute considerable value to any practice and, as such, are an asset to that practice. Remember, in business management jargon, support staff are often referred to as human resources, and resources of any kind, in any business, are definitely assets. Let us treat them as such!