Managing labor costs effectively requires more than just counting employees. Behavioral health organizations, with their tight budgets and complex funding sources, often face financial risks by relying solely on headcount tracking. Here’s why:

• Headcount tracking tells you how many people are employed but misses critical details, like how roles tie to funding or program budgets. It often leads to budget overruns and compliance issues.
• Funded position governance focuses on positions as financial assets, tracking budgeted roles (filled or vacant) and aligning them with funding sources. This approach provides better financial oversight and prevents unbudgeted hires.

For organizations juggling multiple funding streams, headcount tracking alone isn’t enough. Funded position governance offers a clearer way to manage labor costs, avoid financial risks, and align staffing with revenue models. Let’s break it down.

1. Headcount Tracking

Traditional headcount tracking, as outlined earlier, falls short when it comes to capturing the complexities of labor data in today’s organizations.

Dimensionality

At its core, traditional headcount tracking answers a basic question: How many people work here? But it stops short of revealing how employees actually contribute within the organization. In behavioral health settings, this gap becomes especially apparent. Staff often divide their time across multiple programs, cost centers, or funding streams. Take a clinician, for example, who might allocate 60% of their time to fee-for-service encounters, 30% to a state-funded contract, and 10% to administrative duties. While headcount tracking would simply record “1 employee”, it fails to show how that person’s time – and costs – are distributed. This lack of visibility can be a major issue in environments where every dollar must be accurately tied to its funding source. By focusing solely on employee counts, organizations miss critical insights into resource allocation, which directly impacts financial transparency.

Financial Transparency

Another major flaw in traditional headcount tracking is its reliance on manual tools like Excel. These methods are prone to human error and create what Dylan Souza, Vice President of Marketing at ContinuumCloud, describes as “budgeting blind spots”. Often, organizations only discover significant cost overruns or cash flow issues at the end of the fiscal year. Because this approach ties data to employees rather than positions, vacancies can disappear from forecasts entirely when someone leaves or transfers. This makes it difficult to track budgeted salaries accurately, leading to unreliable staffing cost projections. These blind spots can result in poor financial planning and hiring decisions, compounding risk.

Risk Management

Without a system to govern positions at the role level, organizations face constant risks, particularly overhiring. There’s often no automated process to confirm whether a role is approved and budgeted before recruitment begins. Hiring managers may act on immediate operational needs, unaware that a position wasn’t part of the approved budget or that its funding has already expired. These issues typically come to light only after payroll is processed, increasing financial exposure. In high-turnover environments, such as behavioral health organizations where annual staff churn can reach 40%, this lack of oversight can quickly spiral. Every hire made outside the budget framework adds to the organization’s financial risks.

Revenue Model Alignment

The limitations of headcount tracking also make it harder to align staffing with revenue models. For instance, contract-based positions are supported by upfront funding through grants or agreements, while fee-for-service roles depend on billable hours. Traditional tracking doesn’t distinguish between these models, creating a disconnect. In fee-for-service scenarios, a vacant position translates directly into lost revenue – every unfilled clinical hour represents a missed billing opportunity.

These challenges highlight why traditional headcount tracking falls short in addressing the multi-dimensional labor complexities of behavioral health organizations. It’s clear that a more nuanced approach is needed to ensure operational and financial efficiency.

2. Funded Position Governance

Funded position governance takes a fresh approach to labor management by focusing on positions as financial assets rather than merely counting employees. This method attaches critical attributes – like budgeted salary, location, department, credentials, and funding source – directly to each position instead of the individual. The result? Even if a clinician leaves or transfers, the position remains intact in the system, complete with its budget and requirements. This provides a more stable foundation for financial planning compared to traditional employee-based tracking.

Dimensionality

This approach allows labor data to be analyzed across various dimensions, such as program, job code, funding source, or cost center. For example, a therapist splitting their time among multiple programs funded by different contracts can be accurately tracked. Position governance ensures that labor costs are clearly mapped to each dimension, giving a detailed view of how resources are allocated. This clarity naturally supports better financial oversight, as every role’s budgeted costs are directly monitored.

Financial Transparency

With position governance, organizations can compare budgeted versus actual labor costs in real time, providing reliable data for internal reports and accountability to funders. Dylan Souza, Vice President of Marketing at ContinuumCloud, highlights the importance of this practice:

“Using Position Control is a best practice for financial planning, as it enables you to budget by position regardless of whether the position is filled, open, or divided between different employees”.

This real-time tracking ensures that financial planning remains accurate and adaptable.

Risk Management

Built-in approval workflows make it easier to avoid unbudgeted hires, ensuring all roles align with the approved budget. This helps prevent cash flow problems that might arise from unplanned staffing decisions. Unlike headcount metrics, which can obscure funding risks, position governance ties every role directly to its financial impact.

Revenue Model Alignment

Position governance also adapts to different revenue models, whether contract-based or fee-for-service. For fee-for-service organizations, unfilled positions translate directly into lost billable hours. With this system, daily reports on lost revenue can highlight the most financially impactful vacancies, guiding recruitment priorities. In contract-based setups funded by grants or agreements, linking positions to specific funding sources ensures clear accountability and better alignment with revenue strategies. This makes staffing decisions more deliberate and financially sound.

Advantages and Disadvantages

Headcount tracking and funded position governance each bring their own strengths and challenges to managing labor in complex, multi-funder behavioral health settings. By understanding where each approach thrives – and where it struggles – finance leaders can make better decisions about labor governance. Here’s a breakdown of the trade-offs for both methods.

Headcount tracking provides a straightforward overview of total staff, which is handy for meeting basic compliance needs like ACA and WARN Act notifications. It’s also easy to set up, making it a good fit for simpler tasks like benefits administration or facility planning. But this simplicity has its downsides. Headcount tracking is one-dimensional and doesn’t show how positions are tied to specific programs, funding sources, or cost centers. This means multi-funder allocations remain hidden when relying solely on headcount metrics.

On the other hand, funded position governance offers a more detailed and multi-dimensional view. It treats positions as financial assets and tracks them across programs, funders, departments, and cost centers. This enables precise monitoring of approved, funded, and filled statuses, improving forecasting even in high-turnover environments. It also creates clear audit trails for contract compliance. The trade-off? Greater complexity. Implementing this approach requires advanced HR technology capable of handling configurable dimensions and close coordination between Finance and HR teams.

Without position governance, finance teams lack visibility into funded FTEs, leaving risks buried and audit documentation manual. Issues like untracked vacancies, employees shifting across cost centers, and labor variances often only surface after payroll. For example, one behavioral health organization uncovered 9,000 “ghost positions” within a workforce of 20,000 employees – representing approximately $450 million in untracked costs if each position had a $50,000 budget.

This comparison highlights why a multi-dimensional approach like funded position governance is critical for reducing financial risks and ensuring transparency in behavioral health operations.

Conclusion

Headcount tracking can show how many employees an organization has, but it falls short when it comes to revealing the financial complexities behind funded positions. This is especially true in behavioral health organizations, where staff often work across multiple programs, funding sources shift, and turnover rates are high. Relying solely on headcount hides critical risks and makes it harder to manage resources effectively. What’s needed is a governance framework that connects positions to precise financial data.

By treating positions as financial assets tied to programs, funding sources, and cost centers, organizations can achieve better control over labor costs. This perspective shifts the focus from simply managing costs reactively to planning finances proactively. For instance, position control allows for budgets that account for all roles – whether they’re filled, vacant, or shared. This approach helps prevent overhiring, tracks revenue lost from unfilled billable positions, and ensures compliance with grant and contract requirements.

Understanding the differences between contract-based and fee-for-service revenue models is also crucial. Contract-funded positions carry the risk of overstaffing, while fee-for-service roles depend on careful allocation of service hours. A multi-dimensional approach to position governance not only clarifies how funding flows through these models but also establishes a clear audit trail for managing program-level finances.

For CFOs and finance leaders, the real question isn’t whether to track headcount – it’s whether headcount alone provides enough insight to manage financial risks. In environments with multiple funders and services, the answer is simple: it doesn’t. Position governance bridges this gap by offering the transparency and control needed to align labor costs with budgets, contracts, and strategic goals. This clarity lays the groundwork for a Position Governance Audit, a critical step in ensuring labor costs stay in sync with financial strategies.

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