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Issue #25-7.31.07
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Raises Earned or Assumed
On the list of leading causes of high overhead, right after too many employees, is salaries too high. And doctor after doctor will tell me that they feel like they are just working to meet payroll. While I don’t want you to shortchange the power players on your team, I do want you to take a close look at whether you routinely increase wages based on longevity rather than productivity/performance.
For example, long-term employee Margaret logs another year at the front desk and automatically gets another 3% increase in salary – not that she’s increased practice profitability by 3%, but the office standard is that she’ll receive a larger share of the pie just for sticking around another year. The result: increased overhead and decreased practice profit.
Employees go along thinking they are performing just fine. There’s no reason for them to assume otherwise. And long-term employees, like Margaret, simply expect that pay raise because it’s always been there. Meanwhile, the doctor, who is often emotionally attached to the employee, feels obligated to deliver on that expectation.
It’s time to manage employee expectations and take a big step toward controlling practice overhead. Tie raises to performance, and raise – or perhaps establish - performance standards.
First step, take the emotion out of giving raises. Never give raises because you feel sorry for an employee or are afraid they won’t like you if you don’t give them a raise or it will keep them from quitting. This decision isn’t about how much you like someone; it’s about how profitable your business is. You can still recognize employee dedication and hard work without compromising the bottom line.
If an employee comes to you asking for a raise, don’t panic. Don’t respond with comments such as: “I can’t afford it right now.” “You haven’t been here long enough.” “I need to be fair to the others.” And don’t hand over more money without careful consideration.
Rather, establish a compensation policy. The policy spells out when raises can be discussed and under what conditions they are given. For example, if production decreases or remains flat, the practice cannot afford to increase salaries – plain and simple. Conversely, if the team develops a system for increased treatment acceptance and production/collections increases, the doctor may want to reward employees financially. Whatever the specifics of the policy, they are explained up front to new employees as well as existing staff.
In addition, the policy should make it clear that performance measurements will be used to determine raises. Performance measurements provide an objective and neutral means of leveling the playing field for the entire staff. While employees tend to resist the idea initially, they quickly come to realize that they have far more trust in the process when they are rated against objective measures. Most importantly, they see the direct relationship between their performance, the success of the practice, and ultimately their potential for individual achievement – a pay raise.
To establish the performance measurements, sit down with each employee and identify individual performance goals that complement practice goals, such as increasing collection ratios, improving accounts receivables, expanding production, reducing time to prepare treatment rooms, and increasing clinical skills. These are the job expectations and they should be provided to the employee in writing. In addition, the employee should be given the tools and training necessary to achieve the goals. For example, if you expect collections to be at 98%, help front desk staff to develop a strategy to achieve that rate, including collections training if necessary. Then hold them accountable. In other words, measure their progress on achieving that goal.
During the performance review, evaluate the employee’s success in establishing and carrying out the new policy and achieving the 98% collections rate. In addition, review other contributions they’ve made to the practice, such as cutting costs, increasing revenues, saving time, improving efficiency, new patients etc. Discuss problems/issues they have addressed or new responsibilities they’ve taken on since their last raise. If the employee successfully implemented a new system and improved practice productivity, that is an important factor in determining a salary increase.
Bottom line: Pay raises should be earned, not assumed.
Sally McKenzie is CEO of McKenzie Management. a nationwide dental management, practice development and educational consulting firm. Working “on-site” with dentists since 1980, McKenzie Management provides knowledge, guidance and personalized systems that have propelled thousands of general and specialty practices to realize their potential. Sally can be reached directly at 1.877.777.6151
Interested in speaking to Sally McKenzie about your management concerns? Email her at Sally@thedentistsnetwork.net