The Dentist's Network #84

Sally McKenzie, CEO
McKenzie Management
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Inheriting a New Team? Avoid the Pitfalls

Congratulations! You just took over a practice from a retiring dentist. You are the leader of your new team, the owner of your new practice, the go-to gal or guy. But now what? First, steer clear of the most common pitfall when inheriting employees: assuming that your staff knows what you want. Spell out your expectations and the employees’ responsibilities in black and white for every member of your team from the beginning. Do NOT convince yourself that because they’ve worked in this dental practice for X number of years that they know how you want things done. They don’t, and they will simply keep performing their responsibilities according to the previous doctor’s protocols unless they are directed otherwise.

For example, your newly inherited scheduling coordinator may have held her position for a long time. She’s very experienced in scheduling to the previous doctor’s likes, which may be very different from yours. She doesn’t have any idea how you want your day scheduled, or if you want to meet specific production goals, etc. unless you tell her.

Recognize the strengths and weaknesses among your team members. Every employee will bring both to their positions. However, some employees are much better suited for certain responsibilities than others. Just because Rebecca has been handling insurance and collections for the practice doesn’t mean she’s effective in those areas. Look at results. Rebecca may be much more successful at scheduling and recall and thus a more valuable employee if she were assigned those duties. Don’t be afraid to restructure responsibilities to make the most of team strengths. In addition, be open to maximizing those strengths through professional training.

Give ongoing direction, guidance, and feedback to your team so that they know where they stand. Don’t be stingy. Give praise often and appraise performance regularly. Verbal feedback can be given at any time but it is most effective at the moment the employee is engaging in the behavior that you either want to praise or correct.

If the scheduling coordinator emphasizes to Mrs. Patient just how much she is going to absolutely LOVE her new veneers and steers the patient clear of the buyer’s remorse that is threatening to sink the doctor’s treatment plan, tell her! Explain to the employee what she/he did to deserve your praise. Express your sincere appreciation and emphasize the value of her contribution to the practice. Similarly, if employees need constructive feedback, don’t be shy with that either. If the front desk helper is talking about how “gross” she/he thinks “that whole implant thing is,” she/he needs education and constructive direction.

Nip problems in the bud and you’ll avoid numerous thorns in your side. If an employee is not fulfilling her/his responsibilities, address the issue privately and directly with them. Be prepared to discuss the key points of the problem as you see it as well as possible resolutions. Give the employee a chance to express her/his view of the problem and offer possible solutions. If the employee has a voice in how the situation can be addressed she/he is likely to be more vested in making the solution actually work, rather than just carrying out your “orders” to fix it.

Monitor the situation and provide ongoing feedback and guidance. One conversation likely will not eliminate the problem entirely. In fact, you may find that the issue reveals shortcomings in other areas that need to be addressed. Don’t ignore problems and hope that they will just work themselves out, because they don’t.

Use performance reviews to motivate and encourage your team to thrive in their positions. Base your performance measurements on individual jobs. Focus on specific job-related goals and how those relate to improving the total practice. Used effectively, employee performance measurements and reviews offer critical information that is essential in your efforts to make major decisions regarding patients, financial concerns, management systems, productivity, and staff in your new practice.

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 solutions that have propelled thousands of general and specialty practices to realize their potential.

Interested in speaking to Sally about your practice concerns? Email her at sally@thedentistsnetwork.net or call 1.877.777.6151.

Interested in having Sally speak to your dental society or study club? Click here.

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Thomas L. Snyder, DMD, MBA
Managing Partner
The Snyder Group, LLC
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Establishing a Baseline Value for a Partner Buy In

We are often asked the question “when hiring an associate who will become a partner in several years, when is the best time to value the practice?” There are two schools of thought. One is to establish a baseline value within the first year of the associate’s employment, or secondly, value the practice immediately prior to the partnership commencing. We prefer the first approach. Some would argue that valuing the practice later, particularly if you have a “gold mine of a practice,” will cost you many dollars of appreciated value if you value the practice at the outset.

However, in our experience we have found most associates do not like paying for the growth that they contribute. This is particularly true in markets where there is a good deal of competition for qualified associates for transition purposes. Associates with some business savvy will not enter into a relationship without knowing the economics of the transaction. Nothing is worse than valuing your practice before your partnership is supposed to begin, only to find out that your associate balks at the price and decides to pursue another opportunity. If you are in the later stages of your career, this can have a devastating impact on your practice transition plans. We feel that a measured approach of establishing the value within the first year of employment makes the most sense.

Human nature as it is may cause some associates to “under perform” if they realize that the valuation period is postponed, and extraordinary effort may cost them at the buy in time. Let’s look at both approaches and let’s assume that practice revenue preceding the associate is $600,000. Assume your practice is valued, for informational purposes, prior to the associate joining the office, and the value of the practice equals 65% of last year’s gross receipts. So, this “pre-employment value” would be $390,000. The associate joins the practice in July of 2006 and he/she generates $80,000 of revenue for the remainder of that year. The practice is then revalued using the same multiple of 65% with a current revenue total of $680,000. Therefore, your baseline practice value would be $442,000 as of December 31, 2006.

Our rationale for establishing a baseline value within the first year of employment, (versus valuing the practice before the associate joins the practice) is to account for the additional time that you may invest with your new doctor, as well as the financial risk you may be taking at the outset, particularly if you pay the associate a guaranteed salary. Now let’s “fast forward” to 2010 and it’s time for the buy in. Over these thirty months, 2009 year end revenue is now $810,000. If you waited until 2009 to determine a value using the same 65% multiple, the practice’s value would be $526,500. Your associate may take issue with this value!

Using our approach, if we take our baseline value and adjust that value to account for inflation and depreciation, we would arrive at a current value of $460,500. One could argue that by establishing a baseline value, the owner gave up over $66,000 in value. From a valuation point of view, that is correct. However, from a practical point of view that is only part of the picture. If you have a truly motivated associate who knows that he/she will not be penalized for their contribution, you will reap the reward of additional net profit over the employment phase. If you establish your associate economics properly, you should generate a profit margin between 30-35% per year from your associate’s efforts. Let’s see how these numbers may look if we use a 33% associate profit margin.

	Associate Contribution	Profit Margin at 33%
2007 (6 mos.)	$ 80,000	$ 26,400
2008	$180,000	$ 59,400
2009	$210,000	$ 69,300
TOTAL:	$470,000	$155,100

From this example, you earned net profit of over $150,000 in thirty months, so that does offset the loss of value appreciation. If the associate knew they had to pay for their efforts then your net profit may not have been as high, so it is a trade-off. We believe that creating win/win relationships is the way to go. Establishing a baseline value after the first year clearly is the best way to motivate an associate and provide them every opportunity to succeed. And if they succeed, you will succeed financially as well.

Dr. Thomas L. Snyder is Managing Partner of The Snyder Group, LLC, a nationwide practice transition and financial management consulting firm. With more than 75 years of experience in the field, The Snyder Group can provide you a full range of services relating to practice transition matters and retirement planning. They can be reached directly at 1.800.988.5674.

If you would like additional help, email Dr. Snyder at drsnyder@thedentistsnetwork.net.

Interested in having Dr. Snyder speak to your dental society or study club? Click here.

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Michael Moore, Esq.
Director McKenzie
HR Solutions
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Separating Yourself From A Bad Employee, Part IV

All too often in terminations you are hit by the employee with “I’ve already talked to an attorney, and the attorney says I can sue the hell out of you!” You may already have been told that, or you may have heard through the grapevine that the employee has been going around saying that. You should not take the bait in getting into a Q&A with the employee, nor do you need to feel any fear. If you’ve done your homework and documented what you need to, you have nothing to fear but fear itself.

Caveat: Never use as a reason for a termination that the employee has threatened litigation. Depending upon coverage of the anti-discrimination laws, you may be creating a cause of action for retaliation that would not exist absent the express basis for the termination.

Employee entreaties
The second type of response is the employee who breaks down and begs for another chance. You must not agree to do so. Once you reverse the termination, you will never be able to terminate that employee – and it will set a terrible example for any other employees. Don’t give into it, and don’t say you are sorry. Your words during a termination are critical – which is why we counsel to use so few. You may certainly say, “I’m sorry you feel this way,” and hand the employee a tissue. Say no more than that. Likewise, do not agree to give any reference, nor to assist the employee in finding work. Any offer or agreement to do so commits you to do something, and you want to end that relationship. Moreover, any statement can be construed – particularly in unemployment proceedings – as an admission that the employee was not as bad as your letter says.

Finalizing the termination
At this point, if the employee has personal items that he or she wants to remove, facilitate that in every way. You should consider having a box ready to give to the employee. Do not pack up the employee’s things before the meeting – you may be subject to a claim that you lost or stole something valuable. You, or someone else, should accompany the employee to the work station, and if you are recording, continue the recording during the packing and leaving. Make sure the employee returns any property of the practice. You may need to change passwords or pass codes, or even re-key the premises.

Announcing the termination to staff
When you inform staff of the termination – best the next working day – limit your statement to the fact that he or she has been terminated. Make no statements as to why. It is likely the staff already know why, given the behavior or performance issues. Assure the staff, however, that you believe the policies worked in this case, and you are open to any questions that anyone may have if they ask for time in private.

Final thoughts
Do not forget to have a copy of the recording made and delivered to the employee by certified mail. Keep a copy of the cover letter and certified mail receipt in the confidential file for this employee’s termination. If you receive communication from a lawyer, do not hesitate to respond and provide him or her with everything you have in the file. Holding out only looks like concealment to a plaintiff’s lawyer – and he or she can always get the documents by filing suit and issuing a subpoena. In a number of states, the employer is required by statute to give up the files.

Be confident that you have done all you need to do, and can do.

Mike Moore is ranked among the best in employment law and has been named one of the top 10 lawyers in Ohio. As Director of McKenzie's HR Solutions, Mike is the creator of the Employment Policy and Handbook, geared to providing dentists who are unsophisticated in the legal arena with a step-by-step policy manual.

Click here to hear Mike present “7 Elements of an Effective Employment Policy.” Email Mike at mike@thedentistsnetwork.net.

Interested in having Mike speak to your dental society or study club? Click here.

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