How Do Employee-Owned Veterinary Clinics Work?

It was a new challenge. That’s why Debbie Newhouse, winner of the VHMA Transforming the Practice Award, said she came to Ralston Veterinary Clinic nearly two years ago.

The clinic’s owner, Janine Jernigan, was looking for a way to take the 40-year-old practice from good to great and realized changes would need to be made. As a result, Jernigan brought in Debbie Newhouse as an administrator to initiate the process of becoming employee-owned.

Overview

• Operating since 1968 in Ralston, Nebraska, a suburb of Omaha
• Open Monday-Friday 7 am to 7 pm and Saturday 7 am- 3 pm
• Current staff:
   o 10 veterinarians
   o 14 technicians
   o 15 assistants
   o 9 client service staff
   o 5 upper managment, including a practice manager, operations manager
      and an administrator

What is an Employee-Owned Clinic?

Employee-owned organizations are common in bigger corporations, but not among veterinary practices, Newhouse said; mostly because small veterinary practices don’t have the financial means to support it.

“I was very interested in how that might work,” Newhouse said.

So how exactly does it work? “Employees receive shares of the company based on profit at the end of the year,” Newhouse said.

Each Employee Stock Ownership Plan (ESOP) is based on the employee’s wages and longevity with the clinic.

“They can’t sell those shares to outsiders; they can only sell them to the company when they leave or retire,” she explained.

Why Make the Transition to an Employee-Owned Clinic?

Transitioning to an employee-owned clinic has many advantages.

“The staff is personally and financially invested in the company,” Newhouse said. “Instead of just an employee, they now have personal ownership in it.”

Newhouse said the biggest disadvantage is turnover.

“As employees leave, the company has to buy back their shares. That can create a drain,” she added.

Changing and Growing: How to Achieve Both Successfully

For others looking to transition to an employee-owned clinic, Newhouse offers 3 suggestions:

1. Change to open-book management – focus on making employees aware of finances, such as where the revenue comes from and what expenses the clinic has.
2. Empower Employees – change the mindset of the management team to allow employees to make decisions.
3. Be open to change – be accepting of new ideas and be willing to try them.

In tough economic times, the Ralston Veterinary Clinic has seen continued success throughout its transition. One of the reasons behind the success is the continual focus on growth. That includes setting revenue goals.

“We looked at where the industry is and where it’s going, and what will be affecting us in the future,” Newhouse said.

For example, consider pharmacies.

“A pharmacy has always been huge revenue, but as more and more people choose the internet, that affects the amount of revenue dollars the pharmacy brings in,” she said. “What other things are you going to do to drive revenue?”

Those other things can include new services, new products, and creating a new marketing plan. For Ralston Veterinary Clinic, it was adding a new service.

“We added ultrasound to the list of services we provide,” Newhouse explained.

Advice for Others

Debbie Newhouse offers several pieces of advice for others trying to reach the same goals or implement change. She says making employees feel appreciated plays a huge role in whether a new plan succeeds or fails.

“Involving your team members in the transition is important,” she said. “Getting everyone to understand how each one of them can affect revenue or expenses is huge.”

Of course, any kind of change often comes with some kind of resistance. To help manage conflict, Newhouse suggests an important concept: coaching.

“Show appreciation when employees are doing it right, and coach them when they’re not quite meeting the expectations,” she said.

“Teach everyone how to help each other,” Newhouse added. “It’s not a one-time thing, it’s a process.”

Ralston Veterinary Clinic is still in the process of completing the employee-owned transition. Newhouse said the new management structure is expected to be in place at the end of 2012.