In a previous Tip of the Month, we talked about giving raises to your team members, and what you should consider before deciding to do so. This month we’ll look at a related topic that also seems to be pop up frequently toward the end of the year – bonuses.
Linda Miles, a colleague of mine and a legendary figure in the dental consulting industry, shared her thoughts on bonuses with me years ago, and I am in total agreement with her: “Bonuses are extra dollars for extra work.”
So, before we look at when bonuses are appropriate, and how to structure them, let’s look at what bonuses are not. They are not:
- an incentive for anyone to work harder, especially if they are not doing their job now.
- a way to placate your team, or to get them ‘off your back’.
- a way to get your team to like you.
- a thank you for doing the jobs they were hired to do.
- permanent, or to be expected.
In my experience, doctors often use bonuses as an emotional crutch, or as a substitute for team building. Instead of spending time working on their business, and mentoring their team, they use a bonus as a way of trying to ‘bribe’ more work out of their employees. While this may have a positive short-term effect, throwing money at a problem does not fix it.
Any good that comes from an unjustified pay raise or a bonus used solely to motivate burns out quickly.
Giving bonuses to a select few is also common, and equally problematic. For instance, I frequently have doctors tell me they reward their hygiene team for increased production, product sales, etc, or their financial team for meeting collection goals. This is a mistake.
If a bonus is offered, it must be equal for the entire team, not just one group. Remember, there would be no A/R, or hygiene appointments, or even routine appointments at all if the entire team was not doing their part to schedule patients, present treatment, offer financial options, schedule re-care, order supplies, answer the phone -- and on and on and on. No one does it alone.
Once you recognize these common mistakes, you can move forward with a good plan for everyone. Not surprisingly, Doctor, this plan starts with you, and with the answer to one simple question: do you know what it costs you to run your practice each month? You cannot simply pull a number out of a hat. You must know your bottom line, and it must be ‘in play’ for a minimum of three months before you can confidently use that number to establish a basis for bonuses.
You must also make sure your team is functioning effectively and productively. Each team member needs to know, individually and as a team, what they are accountable for, and how they will be held to this standard. It is your responsibility to help out here. Do they need additional training, or cross-training, for instance? Do they know the practice goals, and do you meet with them on a regular basis to discuss their progress? Do they understand that productivity is a team effort and is directly responsible for “more”… in this case more money for bonuses.
When everyone is on the same page in terms of what is required to offer bonuses, and you have been producing at your monthly goal for at least three months, you can move forward.
The four simple steps to follow in a standard bonus scenario
Keep in mind these numbers and goals are for illustration purposes only. Yours may be very different.
1. Set your new production level. For this example, we’ll use $100,000 as our base, and 10% as our increase, so our required production level to pay bonuses is $110,000.
2. Decide what method you will use to determine each employee’s bonus amount. This varies greatly from practice to practice, most often based on salary, hours worked, years worked, or combinations thereof. There is no one ‘right’ way, as long as it’s fair and equitable.
3. Set goals for each job position to help reach this new level. For example, we must:
- collect X.
- produce X from follow-up on recommended treatment.
- re-activate X number of patients.
- produce X in accepted treatment.
- keep lost production from cancellations and no-shows to X.
4. Monitor your numbers on a monthly basis, and make adjustments as necessary.
For instance, after two months you are meeting your new production goal, but you have one team member who is not pulling her weight. You have paid her bonus for the past two months, but now you must take her aside and address this issue.
“Susie, I need to see you doing more.” (Be specific about what ‘more’ means.) “If I don’t see improvement at the end of this month I will 1) be taking you off the bonus program; or 2) have to let you go.”
While ideally the entire team benefits from the bonus plan, it is not fair to those who are going above and beyond to continue to reward those who are not. Be prepared for this when you implement your plan. It is the norm and also one of the most difficult issues many doctors – who tend to dread confrontation of any kind – have to deal with.
What if I can't afford bonuses?
And finally, know what, and what not, to do if your practice is not in a position to offer bonuses. First, don’t feel guilty. Don’t hand out bonuses ‘just because’. Don’t work on the ‘buy now, pay later’ plan. That is particularly true at this time of year. While holiday parties, presents and bonuses are nice, they are not mandatory, and they certainly don’t have to be extravagant. You must put the financial health of your practice ahead of the emotional pull to be the ‘good guy’. You can still reward exceptional employees with other occasional perks, such as gift certificates, dining reservations, tickets to the theater or sporting events.
Whatever you do, do it knowingly, and involve your team in the decision-making process. Call my office if you need help. Setting up a bonus plan that is right for you, your team and your practice should be reward for a job well done, not a headache.