FREQUENTLY ASKED QUESTIONS ABOUT BONUSES
Just when I thought I had bonuses in the form of profit sharing covered for our journey, the phone rings, the texts pile up, and my email exploded. This is great. I want your questions, but I now realize I need to make one more pass at whether you should start or fix a bonus system. I have dumbed down the questions into about 10 topics and I will try to answer these one by one. If you don’t get your specific question answered, call or write and I will get right back to you. Come on, where have you ever been encouraged to call or write the author from anything you have studied? This is your opportunity to learn and make suggestions. Give me a call.
- “I’ve tried them all and nothing works.” Reminds me of the guy outside his small town at a filling station rocking in the shade as someone pulls up and asks him about the town and the people in it. His response to the question, was another question. He asked: “How were the people from the town you just came from?” To which, the stranger answered: “They were terrible, closed minded, snoops and I can’t think of anything good about the place.” The man then said: “You’re going to find the same things here.” So, the guy drove on down the road to the next town. Not long after that, a second driver stopped, got gas, and asked the guy in the rocker about this small town. As before, the rocking chair man just asked how the inhabitants were from the town she came from. She said: “They were some of friendliest, nicest people I have ever seen. In fact, I’m going to miss them.” His comment now was quite different: “You are lucky, you are going to find that this town is filled with exactly those types of people.” I find this “parable” of expectation no truer than just about any question or statement I hear from a dentist. I would lay money that no matter what this doctor tries or does, he will have an under whelming result. Secondly, this office and certainly this doctor is ill prepared, based on his current numbers, to even consider this strategy: High overhead, high turnover, low culture, average clinical dentistry, few direct referrals, lots of cancellations and no-shows, etc. Not knowing what they had tried in the past, or why they failed, I must assume that if they were ready for a bonus system, they failed to execute it well or the systems they tried were flawed. I am having you look at a system that has passed the test of time for over 40 years. The brilliance of this system is that it does away with cost of living or longevity based raises and creates long-term team members while paying them more and actually reducing the percentage of your collections that you spend on employee costs. In the process of creating this ownership culture with your team, the overhead drops, the staff become committed to the success of the practice, and the competence and confidence of you team soars.
- “The staff is not appreciative, and a “bonus” just becomes an expectation”.
So this is not really a bonus. There is a cause and effect. It is and always will be “profit-sharing” when they own it and understand it is based on the success and profitability of their work. This profit-sharing protocol feeds the culture of employee ownership. That is why we pay them in a completely different check from their salaries or hourly pay. I even had one doctor that commented on Facebook that he would never pay a bonus because the staff would just go out and buy things that they couldn’t afford, and it would ruin them financially. Pretty short-sighted comment, not stupid. If he had said this about doctors, I probably could agree with him. I have seen that behavior from doctors’ way too often. Isn’t it strange that you never get push back from people that are doing better than you are? My team was proud of their bonus and when your culture creates an ownership mentality in your team, you also will have a highly educated employee that understands the business of dentistry. I would love to see the comments from his staff after reading his opinion of a “bonus” system, given the option to participate in profit-sharing as we have described it. His estimation of the commitment and intelligence of his team is extremely low. I would also predict his profit and consistent growth was pretty unimpressive, too. I would agree that giving team members money at Christmas or doing a one-time trip or some other ditty might create expectations that are unrealistic, but that is the leader’s fault. Working towards these things with clear rules and no way for the doctor to manipulate the formula is a wise effort at engaging your team in a common purpose.
- 3. “I can’t afford it.” I couldn’t afford it either when I didn’t believe I deserved it. This profit-sharing came after years of striving and dealing with human nature as well as common practices in a dental office that didn’t and will never make sense. The overhead creep you feel, the anxiety of not knowing, and the lack luster business results most practices accept are limiting beliefs that can be turned around by not “thinking like a dentist”. Go to summitpracticesolutions.com/blog and type in Stop Thinking Like a Dentist to the Search box and read each of these articles. They spring from the procrastinators and sheeple that tend to follow the crowd like a stampede of buffaloes off a cliff to their deaths. It is time to stand up, start thinking, stop procrastinating, embrace change and accountability, and begin doing each hour of each day along this journey. Like any trip, you are limited by your maps and how far down the highway you can see. You will pass stop signs, yields, detours, closed roads and traffic jams. You need to take the road less traveled and leave “average” in your rear-view mirror. I would say you can’t afford not to embrace this. It takes very little to set up and yields a huge return on your investment.
- “I’m already on a “good” system but my practice and/or profits are not growing. We have defined “good” in the last comment but just in case you missed it, here it is again. A history of diminishing profits and growth is not the type of practice that would benefit from just doing a “bonus” system. You don’t have profit and you probably have a few dozen things you need to take care of first. Remember that a bonus will not fix a broken practice. Profit-sharing is an adjunct to an already good practice that wishes to take their business model to another level of excellence with our Purpose Driven, Doctor Led, Staff Owned culture. Actual good bonus systems stimulate growth, profits, and culture. Good is not a term you can use with an unsuccessful result and poor KPI’s.
- “I’m fearful of removing my present “individual” bonuses. Funny anyone should have this fear. I just spent time in an office with precisely that situation. What many offices do is some form of individual monetary reward for a particular position or group of people in the same position. In a Super General Dental Practice, individual rewards, titles, or bonuses diminish the culture of a team and instead create competition and just meager compliance. It demotivates the culture, while creating an attitude of every man (or woman) for themselves. In the short haul this works, in the long run it will not replace cost of living or longevity-based raises or base salaries. It certainly does not lower the percentage of collections spent on salaries and benefits. I understand the fear of taking something away from someone after having it in place for a long time. That’s why each of you need to run these numbers, go back a few months and pretend you are doing the profit-sharing system and see how is affects your overhead. Keep in mind that we are not looking for compliance, we are seeking commitment to our leadership and vision for the entire team. Maybe in this case you could consider a period of time in which you are making the transition to this new system. I did this when I took my hygienist from hourly pay to commission, and I guarantee that they would never go back to a salary or hourly pay. They understand and want to be in control of their “careers”, rather than being paid for just a job. Everything hinges on your ability to “stage” this transition in a way that both you and they win. Ultimately, even the patients win when the new enthusiasm permeates your culture because of this new commitment by your team.
- “Some of my employees don’t deserve a bonus.” Often the “truth can be offensive”. Like this doctor, I am very nonconfrontational. The difference is that I act quickly to do away with confrontation before it seems so large that I feel overwhelmed at the idea of fixing it. Which raises the fact that the doctor is the number one reason the practice does well, and the number one reason it struggles. By omission or commission, you are responsible for your actions. You hired them, onboarded them, trained them, have a great policy manual, and have created reviews and additional training for each team member and consequences for not performing well – or you did not. Right after asking this question, you should have realized that you did this to yourself. Why would any practice hire or even keep a marginal team member and then use this excuse as a reason not to institute a profit-sharing strategy? One of the rules of a successful bonus system is that the doctor must act quickly to remove any obstacle that might hold your office back from the success it deserves. This means systems, facility, or even a team member or members. The weakest link law applies here: You will never go any further in your business than the weakest employee’s ability or commitment. It is time to bite the bullet and free up their future. In the 180 Degree Dental Journey, this person is a smelly, rude hitchhiker that is eating your snack and talking about how great socialism is. Let them out at the next intersection and get on down the road.
- “When do I need to change the base?” Awesome intuitive question because that time will always come. If you have read and reread everything about the bonus, I know you have come up with a doable number for a BAM. Because we seek consistent growth, part of that growth will be in the form of additional team members. Since great bonus systems stimulate growth and because the BAM or base was calculated on a goal of having your cost for compensation at or about 25%-27%, the base will need to be raised if we hire another employee. NOTE: It would not change if you just replaced an existing position with a different person. Since our goal is an overhead for compensation of about 25%, your goal and expectation would be that a new hire would increase your production by at least 4 times what they are being paid. Example: We hire someone that is paid $3,000/month including pay, taxes, benefits, workman’s comp, uniforms, continuing education, everything. Then the base would rise 4 X $3,000 = $12,000. If you have made a wise choice at the right time, I would expect that increase in production within the first 4-8 weeks. If not, you have made a mistake, or your protocol for onboarding and training is flawed. This formula would also be applied to an associate and their pay. If they are on commission then it would fluctuate from month-to-month based on their production and percentage pay.
NOTE: Hopefully you have read and understand the staffing part of a “staff owned practice”, because once you have a viable profit-sharing strategy you will find that the team will be unlikely to want unnecessary additional team members. In fact, they will tend to self-police their ranks by eliminating marginal team members. Their culture is one of: You, as a member of this team, are either part of the solution and carrying the weight of your position or you are not. As an aside, keep in mind that the doctor or doctors are also team members even if they are also owners. My hope is that during this journey, you don’t come to the realization that you are that weakest link. Literally, I have seen teams that were sent to one of my seminars without the doctor and go back and, in a sense, fire the owner doctor. They told the doctor that he would need to change, or they would work for someone else, and it worked. Sometimes it won’t, so if you are a team member reading this, know that you don’t have to work in a poor culture for an ungrateful doctor. There is always some place that is a better match for your commitment.
- “What happens in a month when there is an unexpected expense?” (New vacuum pump; new A/C system; etc.). Since these are really items that should be expected, they should simply be budgeted for. All your equipment, even if maintained vigorously, will eventually fail. These are just “cost of doing business” items, and the staff should not be punished for the replacement costs.
- “What happens in a month when there is periodic large expense?”(New computers; new server; new carpet; etc.). Again, these items should be budgeted for. None of these type things last forever. You should plan and prepare for the fact that the carpet might only last 5-7 years. Same for computers and servers. If you moved to a newer and larger facility, it would change because your facility costs will change: Higher rent or bank payment, extra ops and equipment, land cost, etc. In this case it would raise the base by just the exact increase in cost over the previous facility. But the only logical reason why you would ever do this is to have the ability to produce more. The increase in production will cover the cost. If not, you made a mistake in expanding or moving. One last thing to consider: When and under what circumstance would it not increase? Let’s say the office flooded and you had to replace the carpet or flooring. It would not increase. Nor would it increase with the need to update, replace, or fix anything in the office currently. This unknown is already factored into the original base by taking a multi-year look at the overhead which already include these types of expenses.
- “How do I change the base?” That’s why we have been so meticulous in designing the steps to create this system. There is no way for you to muddle with the bonus or alter it to favor you. It is designed and put in place and the team will be the guardians of the formula. Their ownership of this system means that you must be proactive in your approach and remind them of the rules and regulations and that the base will occasionally increase and how it will be factored in. One thing to remember is that because we pay this monthly but is the average of the current and last two months (a three-month rolling average), the impact of the increase will be mitigated by the fact that the previous months, which had the old formula and numbers, will tend to smooth out the ups and downs of their pay.
Sorry for the length of these explanations, but my profit-sharing protocol is an integral part in a successful culture change to the Purpose Driven, Doctor Led, Staff Owned culture. This is how you Summit.
Michael Abernathy, DDS