5 Leadership Strategies to Increase Employee Retention in Healthcare

Last Updated on September 22, 2023

How to Increase Employee Retention in Healthcare with a New Leadership Strategy

Turnover has become alarmingly high in the healthcare industry, posing a serious threat patient care. This surge in turnover is also causing a major spike in spending by inflating the cost of staying fully staffed. Amid these challenges, leaders are discovering that the question of how to increase healthcare employee retention depends largely upon their strategy and style of leadership.

Here is a closer examination on how leadership style impacts healthcare employee retention and which leadership strategies are most effective.

Challenges Facing Healthcare Employers & Leadership

“A high employee turnover rate can be equated with the style of leadership implemented in an organization,” write the authors of a 2022 study published in Frontiers in Psychology. And an analysis of leadership styles from Advent Health University argues that leadership is key to “shaping the culture of a healthcare organization and ensuring its ability to tackle complex issues related to healthcare delivery.”

At a time when labor is scarcer and costlier than ever, ensuring optimal staffing for a facility can be considered chief among those complex issues. In addition, healthcare facilities are no stranger to issues ranging from labor shortages to burnout.

Healthcare Labor Shortages and Cost

“Significant labor costs and the ongoing clinical labor shortage are the main contributors to the projected $370 billion increase in healthcare expenditures by 2027,” notes Victoria Bailey in a report on healthcare spending at RevCycleIntelligence. Citing a 2022 McKinsey report, she adds that the industry is looking at a shortage of “200,000 to 450,000 registered nurses” by 2025.

“In addition, clinical labor costs are expected to grow by 6 to 10 percent over the next two years, which is 3 to 7 percentage points higher than the prevailing inflation rate,” she adds. “Workforce shortages will likely get worse due to increasing demand and decreasing supply … The annual demand for registered nurses may increase by 7 to 10 percent between 2021 and 2025.”

Even when healthcare facilities can easily replace nurses and clinical workers, it typically incurs significant expenses. Moreover, calculating the cost of “lost revenue caused by clinician vacancies and the expense of recruiting new personnel,” the authors of a 2019 cohort study on clinical burnout and turnover published in the Annals of Family Medicine estimated the specific cost of turnover “at upward of $500,000 per clinician.”

Nurse Burnout and Compassion Fatigue

Research shows that burnout, exhaustion and compassion fatigue are key drivers for this employee turnover, especially since Covid-19 struck. This isn’t new. Among nurses and other clinical workers, burnout has been an area of intense concern for decades. But it’s only gotten worse since the spring of 2020, as a record number of workers either retired early or left the profession altogether.

> In Case You Missed It: 7 Tips to Help Prevent Nurse Burnout & Compassion Fatigue from CareerStaff

While there may be no silver-bullet solution to the challenge of burnout and exhaustion, there are ways to alleviate it. A healthcare leader’s unique approach can greatly influence the issue of employee retention in healthcare. Additionally, it’s key to address both the immediate problem and the underlying structural and cultural factors contributing to burnout.

Healthcare Employee Retention: 5 Leadership Styles and Strategies

“Although reducing clinician burnout may help to decrease rates of turnover, health care organizations and policymakers concerned about employee turnover in primary care need to understand the multifactorial causes of turnover to develop effective retention strategies for clinicians and staff,” the Annals of Family Medicine study authors point out.

These causes are often well understood, with some basic principles to follow to help offset them. Working to build a positive, non-toxic culture. Emphasizing safety and support for staff. Ensuring plenty of personal leave time. Offering availability of mental health interventions like counseling for any worker who should request it, as well as the time to do so. Allocated space for self-care sessions.

These are all important action items, but they should be done in the context of a larger plan. There are a number of specific leadership strategies in healthcare for doing so. The most predominant include transactional/reward leadership, democratic leadership, innovative leadership, situational leadership and transformational leadership styles.

#1: Transactional Leadership

Transactional leadership encourages workers to meet specific goals by offering them special distinctions or awards for doing so. Emphasizing respect for rules and procedures, clearly defined tasks and close supervision, this leadership model helps to monitor performance and motivate workers to achieve continuous improvement. It usually includes penalties for underperformance, as well.

Also known as reward leadership, transactional leadership may not “encourage creativity or inspire problem-solving,” the AHU notes, but can “prove very beneficial when addressing straightforward problems. In situations that require focus on achieving specific tasks, as may be the case in crises, a transactional leadership approach can effectively get things done and keep everything afloat.”

#2: Democratic Leadership

Democratic leadership is a model that emphasizes team-oriented decision making. This provides staff members with greater control over their day-to-day activities, as well as during any crisis or other situation. As with any democracy, it also requires keeping staff fully informed and engaged. This model may also include mentoring programs, which can further promote job satisfaction.

#3: Innovative Leadership

As the AHU authors define it, innovative leadership “focuses on how to succeed in unpredictable circumstances and how to foster an environment conducive to innovation in a healthcare organization.” This means establishing a culture in which people expect to employ innovative thinking to tackle challenges and receive support.

“Because this style of leadership invites staff members to explore their own ideas, people tend to feel more intrinsically motivated under innovative leaders. Intrinsic motivation often produces people’s best work,” the AHU notes. “It can also result in high job satisfaction and reduced turnover.”

#4: Situational Leadership

The strategies behind the situational leadership model involves embracing the idea that different situations call for different approaches in healthcare. In this system, leaders examine each task that comes before them and come up with the leadership style that best tackles each. Sometimes, the solution may lie in delegating; other times, a hands-on, direct approach may be more appropriate.

#5: Transformational Leadership

By far, people most professionals mention transformational leadership as a strategy when seeking ways to enhance employee retention in healthcare. Combining the concepts of inspirational motivation, idealized influence, and individualized consideration, this system emphasizes unselfishness. The idea is to transform and channel the leader’s natural influence in a way that nurtures trust and respect.

Under this model, leaders “care about their subordinates’ personal development and help their subordinates by having an open communication style and offering support,” write the Frontiers in Psychology authors. Workers are motivated to feel “optimistic about the future, their work, and work progress rather than pessimistic which can lead to feelings of demotivation.”

“Transformational leaders motivate and inspire staff members to work toward the betterment of a healthcare organization,” the AHU authors note. “While transformational leaders care about achieving goals, they also focus on the individuals they lead — committed to their growth, development, and success as well.”

Which Leadership Style is Best for Healthcare Employee Retention?

When it comes to figuring out how to increase employee retention in healthcare, the transformational model seems to best fit the bill. This is due to its emphasis on culture and the wellbeing of workers. The Frontiers in Psychology study authors come to a similar conclusion, writing that, “transformational and democratic leadership should be implemented… to have the most effective working relationships.”

Of course, each leader should use the style that works best for them, weighing each against the specific needs of the facilities under their watch. As with any aspect of leadership, that means making the best choices with the resources available. Even so, an informed rethinking of healthcare leadership strategies could help put some important goals within reach — like how to increase employee retention in healthcare, for starters.

CareerStaff Can Help Meet Your Healthcare Leadership Strategies & Retention

If you’re looking for leadership strategies or are wondering how to increase employee retention in healthcare, we’re here to help! At CareerStaff, we provide a comprehensive range of solutions to empower healthcare employers in achieving a healthy and productive workforce.

Our offerings include backup clinical staff and turnkey workforce solutions for hiring, interviewing, invoicing, and much more. Count on us to help you take your healthcare business to the next level. Contact us today to learn more!

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