Compensation is to recruitment as culture is to retention

If you’re spending more time and effort on recruitment recently, you wouldn’t be the only one. A recent MGMA Stat poll found 78% of medical group leaders spent more time on recruitment and interviewing in 2023 than they did the previous year.¹ Across the industry, more job openings and fewer candidates means it takes more time, effort and, of course, money to recruit physicians. Knowing this, medical groups are not only focused on recruitment — they are also increasing efforts to retain the physicians they already have.

As President of the nation’s largest privately held permanent physician recruitment firm, I spend a lot of time thinking about recruitment and retention and, specifically, the role of compensation and culture in both. Each is a significant factor, and yet, compensation carries far more weight in recruitment, while a positive culture is the key to retention. Compensation is to recruitment as culture is to retention. To focus on one without the other is counterproductive. Competitive compensation is a must-have for recruitment, but if you want that new hire to stay, cultural alignment is critical.

In this article, I will walk you through the importance of both compensation and culture, focusing on 1) why you must use competitive compensation as a “carrot” to attract candidates, and 2) why and how to evaluate candidates for cultural alignment.

Compensation is King

A recent publication from MGMA and Jackson Physician Search, Early-Career Physician Recruiting Playbook, documents the results of a joint study tracking, among other things, the factors motivating early-career physicians in their job searches. The research overwhelmingly confirms that compensation is the number one factor driving first-job decisions, followed by location, work-life balance and then culture. Beyond the initial job search, a 2022 joint study found compensation to be “very important” or “somewhat important” to the job satisfaction of 89% of physicians.2 We know that competitive compensation is imperative for both recruitment and retention, and healthcare organizations are offering more and more, but how is it working out long term? 

Research suggests that while recruitment incentives may be working to attract talent, tenure is shrinking, at least among early-career physicians. One of the key findings in the aforementioned early-career physician study was that physicians who completed training in the last six years stayed in their first jobs for an average of just two years. To put that in perspective, when the same question was asked of physicians of all ages, the average first-job tenure was six years. What’s causing the shift? Generational differences, lingering effects of the pandemic, increased prevalence of recruitment bonuses — these are all likely factors, but whatever the reason, today’s newly trained physicians are spending significantly less time in their first jobs than their older peers once did.

Show Them the Money

Some administrators may use this data point as a justification for not offering big recruitment incentives or sharing the high end of a compensation range. They argue that using big incentives as a “carrot” in the job ad will attract physicians who are there for the wrong reasons. Instead, they believe their group’s unique culture will be the key to winning over physicians who are more aligned with the group. They may be right — a strong culture could be the deciding factor for the right physician, but without first advertising an impressive salary and recruitment incentives, those physicians will likely never have the chance to experience the culture at all. More often than not, compensation is the first point of evaluation for physicians, and they are far less likely to apply if compensation doesn’t stand out. Does this mean they are motivated by money? Yes, of course. However, this is a logical way for any working professional to narrow down a high volume of job ads.

Many leaders still hesitate to put their best offer in the headline of a job ad, but I would remind them that the advertisement is not a promise of compensation, but rather, an indication of how high they are willing to go for the right candidate. Once the job ad effectively attracts applicants, then the process of determining if a candidate is worth the high end of the range can begin. But without advertising how high you are willing to go, the number of candidates you have the opportunity to share your culture with will be slim.

This doesn’t mean culture isn’t important in recruitment, but it doesn’t usually come into play until the on-site interview stage. Compensation is necessary to get them to this point in the process, but if it is the only reason a candidate takes the job, retention will suffer. That said, physicians — especially those starting out or in the early stages of their careers — may not have enough experience to evaluate how other factors (such as culture) will impact their job satisfaction. Thus, it is up to administrators and hiring managers to discern the degree to which a candidate is likely to be happy with the organization. This component of the hiring process, evaluating candidates for cultural alignment, is the key to improving physician retention.  

How to Evaluate for Cultural Alignment

When we say, “retention begins with recruitment,” we’re specifically referring to assessing a candidate beyond just their job skills. It involves evaluating their potential for success in the role and their overall satisfaction with the organization. However, this process isn’t straightforward. Assessing candidates for cultural alignment goes beyond checking skills and credentials off a list. How can leaders and recruitment professionals improve in this area? One way is through asking behavioral interview questions that uncover a candidate’s values. Additionally, observing how candidates engage with different groups in specific settings can provide valuable insights. However, I think finding the right match ultimately comes down to the following:

Be clear about the organization’s mission and values from day one. From the job ad to the website to the social media presence, your organization’s mission and values should be front and center so that candidates know what the organization is all about before they apply. Then, everyone involved in the recruitment process should embody these values. They must also have a clear vision of what cultural alignment looks like in candidates. Come to a consensus about the traits you are seeking and instruct all interviewers to evaluate for those qualities.

Know the difference between cultural fit and cultural add. While it’s important to identify the values and beliefs you want candidates to hold and even the characteristics they might demonstrate, be wary of hiring clones of the physicians already working for you. Though they may not seem like an obvious fit, candidates with different backgrounds, unique experiences or even quirky personalities will add to the culture of your organization as long as their values align. Keeping an open mind and embracing differences will move the organization in a positive direction.

Be transparent about what it’s like to work at your organization. The early-career physician recruitment study found that while money is the primary reason for accepting a job, the number one reason for leaving is the practice ownership/governance model. The report concludes that new physicians often don’t understand how their new organization will be managed, so make sure candidates understand the implications of joining a medical group versus a large health system or community-based hospital. Be clear about how decisions are made and to what degree, if any, physician input is considered. Avoid misunderstandings by painting a clear picture of everything from the patient population and average case volumes, to the typical physician career path and income potential. Don’t avoid topics for fear of scaring candidates away. Physicians making a fully informed decision will be more likely to stay beyond the average two-year time frame.

Ask about their experiences of the pandemic. Regardless of where they were during the pandemic — in training, private practice, a hospital — every physician has a story to tell and a perspective to share. Did it surface any moments of clarity? Get them to open up about that time — what was frustrating, what was inspiring, what they wish had been handled differently. Their answers may reveal what they prioritize in a professional environment.

Listen and observe. Pay attention not only to what candidates say but how they say it. Do they seem generally positive and at ease with everyone they meet, regardless of job title or status? Do they listen to others before responding? Can they articulate a point clearly? Are they respectful when discussing former colleagues, managers and patients? Can they discuss topics outside of medicine? Do they ask thoughtful questions about topics beyond compensation and time off? How you answer these questions may or may not rule someone out — this will depend on your organization’s values.

Compensations or Culture? Both

The process of evaluating candidates for cultural fit can only take place if you do, in fact, have candidates. So first and foremost, in order to ensure an adequate pool, the job ad must highlight competitive compensation as well as other attractive job attributes such as flexible schedules, additional time off, leadership opportunities and more. Once your job ad has served to attract candidates, the process of evaluating them for cultural fit begins. This requires hiring managers to know what cultural alignment looks like and be willing to hold out for a candidate who meets that criteria. This could mean a longer search on the front end, but when you do make the hire, the physician who is culturally aligned is far more likely to stay beyond the average tenure. So, if retention is a priority, the organization must be committed to transparency and willing to show the candidate not only the values and mission of the organization, but also how the organization is managed, how physicians are developed, and how they get paid. These are the details physicians need in order to make informed decisions that will lead to lasting careers with your medical group.

Notes:

1. “More job openings, fewer candidates means more time spent by medical group leaders on recruitment.” MGMA. Oct. 18, 2023. Available from: https://www.mgma.com/stat-101723.
2. Jackson Physician Search and MGMA. Early-Career Physician Recruiting Playbook. October 2023. Available from: https://www.mgma.com/jps23.