Issue #41-3.18.08

Sally McKenzie, CEO McKenzie Management Printer Friendly Version

Bonuses Have You Backed into a Corner?

In certain parts of the country, this winter has become one of the longest and wettest on record. The snows, rains and gray clouds seem utterly uncompromising, refusing to give way to spring. The expectation for many is that by this time of year they should be enjoying warmer days and more sunshine. You deserve it. After all, haven’t you suffered enough this long winter?

But that’s the problem with expectations. When we don’t get what we expect, when people don’t behave as we expect, when situations don’t turn out as we expect, we become frustrated and resentful. Take practice bonus plans, for example. The dentist wants to motivate the employees to be more productive, to put their creative problem-solving skills to work, to address shortcomings in systems so that the practice can grow. The doctor decides it would be a good idea to institute a bonus plan contingent upon increases in production.

Within a few months, employees are excited to see a few extra bucks coming their way. Yep, they definitely like this new approach to compensation. Meanwhile, the doctor is thinking What have I done and how can I undo this?  The doctor expected employees to be more productive and to focus on problem-solving and improving key systems. That hasn’t happened. The money wasn’t a motivator.

Yes, the practice has produced more. But that’s because the doctor has expanded services and is selling more cases. However, it’s costing more to provide those services and collections aren’t making up for it, largely because the individual responsible for that system isn’t stepping up to the plate.

And that is the classic example of a bonus system that simply doesn’t work. Bonuses do not guarantee that employees will improve performance. In fact, oftentimes in practices in which bonuses have become a routine part of the compensation package, employees don’t see them as a reward for going the extra mile. Rather they become an entitlement. Then when the economy takes a hit, as we are seeing now, many doctors feel trapped. They instituted this bonus system when the practice was riding the economic wave and now they are drowning beneath it. But how do they take the money away?

If you are set on establishing or maintaining a bonus system in your practice, you must spell out the criteria for giving and suspending bonuses. Under no circumstances can your practice hand over more money unless you are bringing in more. It’s that simple and it must be clear to staff.

That being said, I do not recommend bonuses. Instead, create a fair compensation package that gives raises annually, provided that two criteria are met: 1. The employee’s performance warrants a salary hike. 2. The increase will not tip staff wages beyond 19% to 22% of collections, not including taxes and benefits, which account for an additional 3% to 5%.

Spell out exactly how increases in compensation are achieved. Employees should understand from day one that salary increases are performance-based and according to specific criteria, which the employees are fully aware of. Compensation should be increased based on measurable goals and tasks employees perform to improve overall production, collections and reductions in overhead, to name a few. And just because Mary decided to stick around another year doesn’t mean she can expect more money.

Develop practice goals and individual objectives that support those goals. If the practice aims to increase treatment acceptance of implant cases by 15%, discuss how the entire team can contribute to that goal, from improving patient education, to ensuring that front desk staff understand the benefits of the procedure and can reiterate that information in casual conversations with patients, and to follow up with those who have unscheduled treatment in their records. The staff must understand that the success of the practice is dependent upon everyone’s contribution and commitment not just the doctor’s.

Educate your team on the real costs of running a dental practice. In many offices, most employees have absolutely no concept of the multitude of financial obligations facing the doctor. All they see is money coming in and think that they’re not getting enough of it. However, if they understand how their responsibilities directly impact the bottom-line, they are far more likely to take responsibility and ownership of their systems. Only then can they begin to understand the importance of continuously looking for ways to improve those systems. And you, in turn, can expect a sunnier financial outlook in the days ahead.

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