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Why you should ditch your bonus plan

Nov. 15, 2021
Money solves a lot of problems, right? But more money via a bonus system may not be the answer to motivate your team. What will?

If you’re faced with an undermotivated, stressed team, it may be tempting to believe you can renew their spirits and increase your production by introducing a bonus plan. It seems to make sense because people are motivated by money, right? And plenty of dental consultants and dentists swear by their bonus models. So, what’s not to like about a bonus plan?

Let’s slow down a bit and closely examine bonus plans. Let’s look at whether they truly increase motivation and performance for the long-term. We’ll also look at an even more essential issue: is it ethical to base bonus plans based on production or collections?

Seven problems with bonus plans

1. The ethical problem is a troubling one. When you link employees’ compensation to how much dentistry they produce or collect, you are potentially incentivizing them to push medical intervention to patients who could be treated more conservatively. Think about how a patient would feel if she knew her hygienist was recommending veneers instead of bonding not because it’s the better treatment option, but because the hygienist’s paycheck will be bigger. Would you want to go to a doctor whose team viewed you as the means to get more money? Ultimately, I don’t think it’s in the best interest of patients to work with a team who receives a bonus through treatment plans.

2. Bonus plans based on collections (which is what many consultants suggest) seem to make sense, but the only person on the team who actually collects is the front desk person. So, how would the dental assistant, for instance, influence collections? Sure, she can be extra nice to patients, but what specific behaviors can she take on that would directly affect collections?

3. Whether they’re based on production, collections, or savings in payroll, many bonus plans are often too complex for the team to track by themselves. They don’t know from one day to the next if they qualify for the bonus. Therefore, it doesn’t lead to greater motivation, but to confusion. Fueling that confusion is a vagueness about what behaviors are really being rewarded. If I’m a hygiene assistant, for example, what exactly am I supposed to do differently to merit the bonus?

4. Due to this vagueness, bonus plans often lead to more tension in the office. You might hope that the plan will bring the team together, but what frequently happens is increased resentment that some staff members don’t deserve the bonus because they didn’t exert as much energy as others. The team may feel cynical and unmotivated because the bonus goal is too high, and they can never reach it. This is one of the reasons bonus plans designed to build morale and motivation often backfire.

5. The opposite may happen, and the team may earn bonuses every month. I know of one practice where employees can earn an extra $350 per month. That’s great for the employees but terrible for a dentist who must plan for cash flow. If every employee earns hundreds of extra dollars per month, the dentist has no way of controlling employee costs. As a consultant who analyzes clients’ numbers each month, I would not recommend that any business owner have huge and unpredictable payroll costs.

6. Employees really value and appreciate the bonus money, don’t they? Nope. Employees quickly view their bonuses as entitlements and fail to think of the extra money as part of their compensation. So, they can still demand raises because they believe they’re underpaid, without appreciating how much they’ve really earned.

7. Employees who are continually bribed to do things because they receive an incentive become trained not to take on any new tasks or responsibilities unless an incentive is attached. Dentists can get into an absurd situation where employees demand payment for taking x-rays. Paying extra for things employees should be doing anyway means the dentist is devaluing intrinsic motivation in favor of extrinsic rewards. This will be a big-time problem for long-term motivation.

An unusual but highly effective bonus system

What does the research say?

If the whole purpose of implementing bonus plans is to increase team motivation, then it’s important to understand what the social scientists have to say about motivation. Study after study, beginning in the 1940s, tell us that external rewards do not increase motivation; in fact, they decrease it. In his book Drive, Daniel Pink summarizes these studies. “Rewards deliver a short-term boost just as a jolt of caffeine can keep you cranking for a few more hours. But the effect wears off, and worse, can reduce the person’s longer-term motivation to continue the project.”1 You want to know something else surprising? Every study determined that the larger the reward, the worse the performance!

Let’s go back to my point that bonus plans inadvertently encourage unethical behavior. Just think about some companies that instituted bonus programs tied to performance. Wells Fargo set up bonus plans that led to fraudulent bank accounts and overcharges for millions of customers.2 Sears had a bonus plan in its car service stations that led to a big scandal.3 A bonus plan in your dental office can lead to the same behaviors of enriching oneself at the expense of the customers. Bonus plans do not increase motivation to do a good job; they increase motivation to win the reward.

Can you reward employees for a job well done? Yes, but the reward must be unexpected and should come after the behavior. It cannot be transactional: “If you do this, I’ll give you something.” BF Skinner’s philosophy of behaviorism did indeed train dogs to salivate on command, but your team is not comprised of dogs and this type of if/then reward structure only creates addiction to the reward and not to creative thinking or long-term motivation.4

What if you already have a bonus plan?

If I’ve convinced you that you need to stop your bonus plan, there is a way to do it so that your employees feel fairly treated. Calculate the average amount each employee made from the bonus plan during the last year and incorporate that into their new base salaries. This is a win for employees because they’re guaranteed that amount, it’s a win for you because you can predict payroll, and it’s a win for the practice because you’ll be able to look for healthy ways to motivate your team.

If not a bonus, how do you increase motivation?

I wish I could give you an easy answer to this. But the bottom line is that the dentist must create a practice environment where employees feel motivated by intrinsic rewards and the fulfillment of their own values.

People are generally motivated when:

  • They believe in your mission.
  • They align with your philosophy.
  • They feel recognized for their contributions.
  • They’re able to do the jobs that use their skills.
  • They can learn new skills.
  • They have good relationships with their coworkers.

All these are less sexy than a bonus plan, but ultimately, they are what creates a learning organization where employees feel motivated to do the right things at the right times. You absolutely must pay your employees fairly and well so that they can live in the community where you practice. Hoping a bonus plan will lead your employees to feel more loyal or motivated to your practice will not get that result.

What will get results is a fair compensation system that is tied to the culture you want to create, as well as finding what motivates each team member and creating more opportunities for them.

What also works is acknowledging each team member’s contributions and linking those to the ultimate goal of serving patients. That is how you create a cohesive team committed to your practice.

Editor's note: This article appeared in the November 2021 print edition of Dental Economics.

References

    1. Pink D. Drive: The Surprising Truth of About What Motivates Us. 2009. Riverhead Books.

  1. Zoltners AA, Sinha PK, Lorimer SE. Wells Fargo and the slippery slope of sales incentives. Harvard Business Review. September 30, 2018. https://hbr.org/2016/09/wells-fargo-and-the-slippery-slope-of-sales-incentives
  2. Sears scandal of ‘90s. Study Mode. July 12, 2010. https://www.studymode.com/essays/Sears-Scandal-Of-90%27s-354071.html
  3. Famous psychologists. Psychologist anywhere anytime. 2008. https://www.psychologistanywhereanytime.com/famous_psychologist_and_psychologists/psychologist_famous_b_f_skinner.htm

Sharyn Weiss, MA, is the CEO at Weiss Practice Enhancement, a practice management firm serving dentists nationwide. Weiss was the curriculum director and a senior consultant at Pride Institute for 17 years and is the author of multiple books for dentists on topics such as how to compensate employees, how to hire, and how to lead great team meetings. Contact her at [email protected] or weisspractice.com.

About the Author

Sharyn Weiss, MA

Sharyn Weiss, MA, is the CEO at Weiss Practice Enhancement, a Bay Area practice management firm serving dentists nationwide. She has worked with hundreds of dentists during the last 20 years with a focus on patient and team motivation. Her mission is to help dentists become confident leaders of a profitable practice. If that’s your goal too, contact Weiss at [email protected] or weisspractice.com.

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