It really should be good enough to set a fair wage for your team members and expect a fair day’s work in return. However, human nature being what it is, this is simply not a realistic expectation in dentistry today.
So, what are practice owners to do? If you are in the camp who thinks bonuses for your staff members are frivolous and are determined to never offer them, more power to you. You have chosen a very ‘safe’ business model. I expect that you will reach a plateau and find it very difficult to grow your practice from where you are now to whatever next level you desire.
For those of you who know that incentives are a prominent part of any good growth strategy for any business, including dentistry, there are some serious pitfalls you must navigate to keep your practice away from the the edge of a very dangerous cliff and certain destruction.
There are two very common Bonus Programs that have found their way into our profession that, unchecked, can and will wreak havoc with your practice in the long term. Let’s name them.
1. Shared Bonus Pool
This system usually requires that you set a baseline number for the practice that is the minimum amount of collections you need for the practice to be profitable. The idea is that a percentage of any money collected above that baseline number is put into a bonus pool and that pool is evenly split between all workers each month. The good things about this bonus are that it protects the profits of the practice by capping the bonus pool by the agreed upon percentage and that the equal splitting of the profits between team members creates a true team effort in theory. It usually works great in the short term.
The reason why this won’t work long term is that when the bonus is established, the staff is usually smaller. As the practice grows, the addition of more staff is likely required, but there’s a problem. A team that is used to splitting the bonus pool in four pieces, despises the idea of splitting it in five or more pieces.
This leads to lots of pushback from the team whenever the doctor suggests hiring additional staff to help lessen the workload on the current team. The team will likely tell the doctor that ‘they don’t need any more help,’ and ‘we like being busy.’ If the doctor hires new people without getting the current team onboard with the hires, the new staff members are walking into a hornet’s nest and likely won’t last long. This bonus caps growth — there’s no doubt about it.
2. Individual Hourly Wage Bumps
This bonus system was likely designed as a way to remove the invisible growth caps that bonus pools create. In this system, a practice baseline is set from production or collections whenever a team member is hired, and as the practice grows, the team member’s hourly rate of pay increases accordingly. The idea is that if the practice is making ‘X’ amount of money when the new person is hired, any upward growth is a direct result of their additional efforts to the cause. Therefore, they should share in that increase as the tide rises.
The good thing about this bonus is that the addition of team members is usually welcome to the current staff because it doesn’t affect their income at all. In theory, this gives the practice unlimited growth potential because there’s no friction for hiring new people who can help grow the practice.
The reason why this bonus never works for long is the profitability problem. The bonus works great when a practice is just starting out. As the practice grows, the team begins to make more and more money for basically the same work. The original team is also glad to see new employees because that gives them more people to share their current workload. That stifles growth because the practice really sees no measurable growth from the latest hires, but has extra payroll costs.
It also sets a practice hierarchy, where the original employees will always make more money than new people, sometimes with huge gaps in pay between comparable positions in the practice. The payroll costs in practices with these bonus types always runs higher than profession norms. Sometimes, doctors eventually try to cap the hourly increases of the original employees, but that only causes resentment
and usually loss of those employees. It also makes paying competitive rates to prospective new workers very difficult. Eventually, this bonus kills practice profitability.
So, if bonuses are so dangerous for practices, why do so many dentists try to make them work?
I think it is because we like the idea of our beloved teams being rewarded for helping make the practice a success. The problem is that no one in dentistry has ever discovered a magic bullet bonus system that solves most, if not all, of the problems listed above.
If we look outside our dental universe for a moment, I think we might find the answer to our team motivation and reward dilemma.
The good people running software companies in Silicon Valley have been using a system of implementation for decades that drives innovation and rewards team members for their efforts and ingenuity. They have many names for this process, including Scrum, Agile, and Kanban. Team members are tasked to accomplish projects and meet goals by attacking projects a little bit at a time. As each milestone is achieved, the team members are rewarded. Ambitious players who achieve more are rewarded more, but the entire process is very team oriented and builds camaraderie as projects are completed and goals are achieved.
The best part is that this system is self-regulated by the team and the CEO doesn’t have to concern themselves with the day-to-day activity, only the end result. That works out very well inside a dental practice, because asking the doctor to monitor practice minutia is a losing proposition at best.
This Silicon Valley System can be easily converted for use in dental practices and integrates nicely. The biggest bonus is for the practice, because once it is up and running, it gives the team a nice incentive to make the practice the best it can be.
The only limit to practice growth with this type of bonus structure is the imagination of the doctor and team. Once you tap into the power of team driven practice growth, you have started down the path toward the practice of your dreams. The sky is truly the limit.
If you would like to learn more about this new motivating bonus system, go to www.siliconvalleysystem.com and register for our webinar, “How to Motivate and Reward Your Team Without Creating a Monster Bonus System that will Eventually Drain the Life Out of Your Practice.”