How Much Should I Pay an Employee?
I had a call the other day with a Doctor and his wife, who works in the office, concerning staffing. It was a nice, twelve year old office, with average production, slightly below average new patient numbers, with about 3-4 employees. I had met each of the employees and interviewed them, along with allowing them to give us feedback thru a “Staff Quiz” form that addresses how the staff feels about the practice. This office, like so many others, had at least one employee who was marginal on several fronts. In this case it was a front desk person who, while being an “older nice person” (these are the doctors exact words when asked why she is still working there), was totally incompetent in her current position. She had worked there 15 years, and was the oldest staff member. The doctor, being non-confrontational, called me about several instances of patient problems that were a direct result of actions taken or systems not followed by this particular staff person. The Doctor, being a great guy but a soft hearted boss, has just not found it possible to let her go because of problems he knew she was having at home concerning finances, age, and a general lack of options if he terminated her. By his own admission he felt like she was the cause of 90% of all the stress in his life, and was running off a lot of patients. In addition she was being paid 32% higher salary than the going rate in his area plus benefits for a job that she could not perform properly. The worst thing was that she was the person who answered the phone and interacted with all of the patients on finances and scheduling. Here we have the most important position in the entire office being held by someone who is crashing the office and making the Doctor’s life miserable. You know the answer. It’s time to free up her future. Luckily it’s not a family member, but he has still failed to act.
Whether it’s an assistant, front desk, hygienist, or any other position in the office, there will come a time when you must make the difficult decisions on hiring and firing. With that goes the business decision of what to pay and how to set up the employee/owner relationship. Let’s talk philosophically about where you should start, and how we could avoid this doctors’ current problems.
- Are there times when a current staff person is unsalvageable? YES — There are only two types of employees. The first is the good employee simply needing some more training. The second type of employee is one that needs to have their future freed up. Give them an opportunity to excel somewhere else. In my office, staff averaged over 14 years of employment during my three decades of practice. I am a huge fan of hiring the right people the first time, and for the right position. We spend the time to train them well, measure their results, and create consequences when they fail to perform. With this said the time line for this would be a matter of a few weeks, not months. As most of you know, in our offices we have always stressed a “Purpose Driven, Doctor Led, Staff Owned” model. This ownership mentality for the staff includes having them involved and even having the final word on staff and doctor hiring. Hire slowly, and fire quickly. Make the right decisions the first time and you’ll minimize having to correct those hiring mistakes. This is a huge part of great leadership. In today’s economy, you can ill afford marginal staff. As I told the doctor over the phone: I would never keep an employee and continue to pay them to make my life miserable. Regardless of how difficult it is making the decision to terminate someone, you will never regret doing it. You will only regret taking so long to do it.
- How much should I spend on compensation for staff? We find that an overall expense of about 25% of your total collections should be spent towards staff compensation. This would include associates, as well as all other staff including any benefits, taxes, continuing education, staff meals, presents, etc. Anything other than what the owner Doctor makes. The first place to look is your P&L. Add up what your average monthly expenditures are for staff compensation. This is the area in most offices that is holding back profitability. We will encourage our clients to push the area of production, staffing, and overhead to a point of a 50-60% total overhead average. We expect a well-run general dental practice to produce about $20,000-$25,000 of production per month per employee. That would mean that if you had 5 employees plus the owner doctor you would be producing about $100K-$125K per month. The average office will do only about $12,000 per employee. If your current cost percentage for staff is in excess of 25%, you will need to work at better utilizing your office and staff to bring this into line. Profit is everything: Only net counts. It doesn’t matter what you produce, it is all about what you take home.
- How do I know what a fair income package is for any staff position in my office? Go to www.indeed.com . This is a great place to look at salaries anywhere in the US. Open the site and click on salaries at the top left of the landing page. Type in the position and the zip code for your office. It will give you the average salary along with a range in your area. This gives you a starting place. Consider that the dollar amount shown includes the total pay package of taxes, pay, and benefits, not just what they take home in their checks. Next call a temp service and find out what it costs on a daily basis to hire someone for a particular position. This will be about 25% higher than a permanent employee for that position due to the fees turned over to the agency. The worst place to get information is from another dentist who is overpaying their staff with poor results and a marginal practice.
- I always want to pay my staff more than they could make at any other office in town. Human resource experts will tell you that the money that is paid for staff is the last thing that is important to them. Not in my offices. Money is always important. Remember that “Staff Owned” mentality that we try to instill in our team? My staff is given a competitive salary, trained in the business of dentistry, and rewarded with a bonus that makes the total compensation well above any other profession they could work in. Our bonus is the core to incentivizing your staff. We have the perfect profit sharing plan that has worked well for over three decades without alteration. You will notice that I said profit sharing. The name “bonus system” should be changed to profit sharing system. If the office makes more and controls its overhead, the staff should share in the increase. It is like we are on a lake with each of us having a boat. Our boat is larger than the rest of the staff but when the water level rises (profit), all the boats rise. When done correctly, this lowers the percentage spent on staff while actually paying them more. Giving staff a way to influence and ultimately control what they take home makes everything work. The good staff (the one who “get it”) will force unproductive, marginal staff out. They won’t allow that type of employee to jeopardize their earning capacity. They treat the patient great no matter how the patient acts or what day they come in. They understand the subtle nuances of a “consumer driven business”. They know that nothing happens until the patient says yes, and in our practices they say yes 90% of the time.
- What type of pay package should I strive for? I like to call the perfect pay package being in the “pay zone”. This is the perfect balance of security for the staff member: Good salary and unlimited potential thru profit sharing: A bonus, along with an ideal overall overhead of 50-60%: Good financial positioning. You are in the zone for profitability, overhead, and management control. This is a win/win for staff, Doctor, and patients. Enjoy the security of a great financial future, along with a decrease in stress while positioning your team and office for unlimited growth.
Summit excels in bringing together the staff, doctor, purpose and systems to get a predictably consistent product that insures a career of growth and profitability. Give me a call and let me do a free Growth Strategy Analysis in order to point out your blockages and how to overcome them. You have nothing to lose, nothing to buy, just an hour or so discussing how to make this year different than all the others.
Michael Abernathy DDS
PS — How should you conduct an employee termination meeting?
Though extremely stressful, this type of meeting is best conducted in a concise and straightforward fashion focusing on three goals:
1. Presenting documented evidence that warrants employee termination.
2. Minimizing the likelihood of a wrongful termination claim.
3. Showing appropriate respect to the employee during this difficult event.
The following sequence outlines the basic process to help ensure a successful employee termination meeting.
1. Meeting preparation. Never conduct a termination alone. Always have a witness in the room with you at all times. Have all administrative forms and documentation at the meeting. Do not lie to the employee or stretch the truth. Always show the employee respect. The meeting should not exceed 20 minutes.
2. The decision. Remain calm and confident and maintain appropriate eye contact with the employee. The less said, the better the result will be. Once the employee arrives, explain the purpose of the meeting. Following are two examples of statements you can use.
3. Statement 1 (for a chronic performance problem). “As you know, you and I have had several meetings over the past several weeks/months to discuss your performance<related issues (e.g., interpersonal skills, accuracy of work). Despite that coaching, your performance has not improved to the required level of your position. As a result, today will be your last day of employment with this office.”
4. Statement 2 (for a major policy violation). “An investigation has provided us with evidence that you violated company policy (e.g., sexual harassment, alcohol use, timecard fraud) on (specify date). As stated in the employee handbook that you signed on (specify date), that policy violation has the consequence of employee termination. As a result, today will be your last day of employment with this office.”
5. Finally my recommendation would be to do it as soon during the day as you decide to free up their future. There is nothing to be gained by waiting until the end of the day. You will be under stress and in a bad mood until you pull the trigger. Decide, prepare, and do it. Don’t wait.