In the most recent issue of Private Duty Today we discussed the concept of limiting factor.  Essentially, your business will continue to grow, assuming you have effective management, until it reaches a limiting factor.  Your limiting factor could be caregiver recruitment, client recruitment, or operating efficiency.

In this issue we will focus on the most common factor that limits successful private duty companies today, their ability to recruit and retain caregivers.

People become the limiting factor when you can't recruit enough caregivers to balance turnover.  Again, you need to increase recruiting, or reduce turnover. 

Basically, there are three solutions -

1. Hire a better quality caregiver
2. Keep good caregivers longer
3. Throw money at the problem

Let's take a look at the third solution first, because it's what most home care agencies try.  They have a budget for advertising, and when they aren't recruiting enough new caregivers they increase the advertising budget.

Unfortunately, while improving recruitment overall is a good idea, it's only a stopgap.  It doesn't fix the problem, it simply prolongs it.

Frequently we hear from clients that, as they increase budgets, the cost per recruit goes up.  For example, let's say you're spending $2000 per month in recruiting an average of 10 caregivers.  If you want to increase that to 20 caregivers monthly, you will probably have to increase your budget to more than $4000, assuming you're using the same recruiting techniques.

The worst part is that even if you're successful at doubling caregiver recruitment with only double the budget, your cost per net caregiver increase still continues to climb.  As a total staff increases, generally speaking, your turnover rate will remain consistent.  Therefore, each month of growth means that the number of caregivers leaving next month will increase.  Your net growth continues to shrink and get more expensive.

One of the most effective ways to balance this is by increasing the Average Length of Service.

Increasing the Average Length of Service by improving selection or retention will lead to greater profitability over time.  While increasing recruitment can be important, we liken it to placing your thumb in a hole in the dam.

Take a look at this graph.  It emphasizes the long-term effects of Average Length of Service.

If you're successfully recruiting 10 caregivers per month, and the average length of service is eight months, in slightly over two years you will be losing as many caregivers as you're recruiting.  Now your caregiver recruitment budget is not used for growth, it's used for maintenance.

By increasing average length of service to 12 months you can see that three years later you're still growing, albeit gradually.

Two things will help you increase the average length of service.

Selection -- Many of you have caregivers who have been with you 5, 10, 15 or more years.  Chances are it's a small group of individuals, but as a highly profitable group finding more of them would dramatically improve your business.  If you'd like more information about recruiting individuals with high integrity, strong dependability, and low-risk, contact Diane in our office and ask her about the Caregiver Selection System.

Retention -- This industry has high turnover because of high competition.  However, if you asked any of your caregivers why they chose this career, almost none of them will say "I'm trying to get rich!"  Let's face it, this isn't a get rich quick career, nor is it one that would be satisfactory even if it was.  Your caregivers want to provide care.  They want to work for a company they trust, and one who treats them with dignity and respect.

A strong employee retention program with heavy emphasis on improving the quality of work, and life of the caregiver will dramatically increase your average length of service.

We find it's the little things that work best.  Create a family atmosphere.  Offer recognition when it is due, and reward good work.

You'll find that keeping a caregiver is far easier and less expensive than recruiting a replacement.  Plus, even if it wasn't, it's the right thing to do for the people who generate your profits.