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Is Your Pharmacy “Right-Staffed”?

February 5, 2024

Pharmacy consulting As a pharmacy grows, so does its staff. That sounds reasonable, right? After all, somebody has to serve all those new customers and fill all those prescriptions, and having adequate staff is vital to efficient pharmacy operations. In our work advising independent pharmacist-owners, however, we have found that achieving that “right-staffing” can be a big challenge. In fact, over time, many pharmacies trend toward being overstaffed. Often, that happens because the pharmacist-owner is not really thinking about efficiency when they are making staffing decisions. As businesses mature, an owner’s priorities can change. Maybe they want to step away from the day-to-day a bit and need someone to fill in. Maybe they want to hire to make life a bit easier for long-time employees (and to help retain those employees). Maybe they really, really like their current employees and can’t bear to have hard conversations about job performance. Or maybe – and this happens a lot – they have simply taken their eye of the ball when it comes to their staffing level. In the end, what often happens is that the pharmacy’s staffing is built for comfort, not for efficiency. Of course, a pharmacy built for comfort can do just fine, depending on the business owner’s goals and expectations. It can become a big problem, however, when the pharmacist-owner wants to sell. Most buyers will be looking at efficiency as a major consideration, often because they have to take on significant debt to make the transaction. And if they see a store spending far more on wages than efficiency requires, they may very well not be able to make the numbers work. So, if you are thinking about selling your pharmacy, right-staffing your business can go a long way toward attracting buyers and completing the sale at a competitive price. The process of re-engineering your staffing level for efficiency can be difficult, and it can be time-consuming, but it does not have to be painful – for you or your employees. If, that is, you do it the right way. Here are some tips:
  • Know the signs of inefficiency.
One common issue in dispensary staffing is the amount of pharmacist overlap that just isn’t justified by the workload. As well, we often see highly paid pharmacists doing jobs that technicians or assistants could handle just as capably, and at lower cost. In the front of store, the situation is a little different, especially for many independent pharmacies. We’ll often see full-time staff or a host of part-timers manning the aisles and front-store registers with very little revenue to show for all that person-power. One solution is to overlap front-store duties with those of a pharmacy assistant or pharmacy cashier. Sometimes you can find inefficiencies with a simple eye test. Look at your staff in the dispensary and front of store. If they’re on their phones a lot, talking about the big game last night or otherwise not doing very much of anything, chances are pretty good that you have a staffing issue on your hands.
  • Use benchmarks.
How do you know for sure whether you are spending too much on staffing? Simple answer: measure and benchmark. For the dispensary, one common metric we use is wages as a percentage of gross margin (WPGM). Industry-wide, the average WPGM is 45%. Another good metric for dispensary is prescriptions filled per labour hour. An average dispensary should fill about six prescriptions per the total of pharmacist, technician, and assistant hours worked. It’s important to note, however, that averages are not necessarily benchmarks. Your pharmacy’s location, automation,  prescription volumes and local labour force pressures, among other factors, can mean higher or lower than average wage costs and efficiencies, and they are not totally within your zone of control. So work with an experienced advisor who can help you come up with relevant industry comparators to develop achievable, realistic benchmarks. For the front of store, a simple benchmark is also a good one: Does your non-dispensary business contribute to profit when considering its proportionate share of expenses? If not, it might be time to rethink staffing.
  • You don’t have to be a jerk.
Sometimes, maybe often, pharmacist-owners put off addressing staffing issues because they simply cannot bring themselves to have hard conversations with their employees, who might also be their friends. That is an understandable and perhaps commendable quality. But the fact is, spending too much on wages is undermining your pharmacy’s profitability and long-term health, which is putting your employees’ jobs in jeopardy anyway. Also, an efficiency-minded new owner is very likely to come in and clean house if you weren’t able to – and they might not do it in as compassionate and patient a way as you would have. And the truth is, you usually don’t have to be a jerk about it. There are ways to right-size a pharmacy staff without resorting to layoffs. If you give yourself enough time (see below), natural attrition through retirements, employee departures and so on, can help you reduce hours and/or combine roles. Just because it’s easier doesn’t make it wrong.
  • Start early.
Giving yourself enough time to implement changes can substantially enhance the effectiveness of right-staffing and make it easier on everybody. That’s why we advise pharmacist-owners who are planning to sell to start planning and implementing a staffing program years before their intended departure. That way, you can reduce staff or hire the right staff over time, minimizing the need to resort to drastic measures like cutting hours or laying people off. When you want to sell your pharmacy, remember that any would-be buyer is likely to look at staffing levels and expenses very closely. If you want to maximize the market value of your business, therefore, getting the right staff working the right amount of time in the right roles can make a big difference. Our advice: Start early, and get help if you need it.
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