Bonus systems: Yes or no?

June 1, 1998
In each of the 100+ seminars that I present annually, at least one person in every seminar asks me about bonus systems. It is a topic that interests dentists throughout the country and one that should be covered in detail in any comprehensive and worthwhile consulting program.

Roger Levin, DDS, MBA

In each of the 100+ seminars that I present annually, at least one person in every seminar asks me about bonus systems. It is a topic that interests dentists throughout the country and one that should be covered in detail in any comprehensive and worthwhile consulting program.

I am a fan of bonus systems because I believe that people focus on the tasks for which you pay them. If you only pay straight salaries, people often will do their jobs, but will not spend time or focus on ways to build the practice.

If you simply give raises every year, people come to expect them automatically and depend on them. The Christmas bonus is one of those items that I find to be extremely ineffective. Christmas bonuses are seen as an additional part of the salary that is given every year, without question.

You will begin to notice over the years that many of your staff members do not even thank you, as they have come to view this as a normal expectation.

Bonus systems work

After working with more than 3,000 practices, I have seen the tremendously positive impact of bonus systems. Naturally, we want our staff members to have an excellent base salary so that they can feel properly compensated, but why would anyone go the extra mile? Why would someone work extra hours without complaining, push farther and retain a strong commitment to your practice? After all, most staff members can never be promoted to vice president or president of the practice nor are they actually owners of the dental practice.

Another situation that will occur is that if your staff remains with you, you will be paying them at the top-market rates or even higher. You eventually will reach a point where, if you continue to increase salaries without practice growth, your labor costs will skyrocket out of control. This increased overhead will begin to cut severely into your profits.

Instead, you should reach a point where you do not increase staff salaries other than by cost-of-living adjustments. You then explain to your team members that if the practice grows, you want them to share in that growth.

Let them know that you feel they can help the practice grow and that is why you are instituting a bonus system - to reward them when their efforts pay off. It also is important for the team to recognize that the practice simply cannot continue to give raises once salaries reach the top rates, but that the bonus will compensate for hard work and the growth of the practice.

Be sure not to pay someone a bonus simply for doing the same as what he or she did last year. We have an expression at The Levin Group that "flat is declining." This means that if you think your practice is flat because your numbers are similar to those of the previous year`s, you are declining.

Every year, the buying power that you have decreases because you do not increase your earnings. Therefore, your practice is in decline. When implementing a bonus system, include a certain amount of growth that must occur before the bonus kicks in. Not including some level of growth is as financially ineffective as giving raises indefinitely.

Bonus systems do make a difference. I have seen practices using bonus systems increase by 30 to 50 percent simply through staff effort and innovation. An excited and motivated team can make a tremendous difference, and bonus systems can lead to an excited and motivated team.

Dr. Roger Levin is founder and president of The Levin Group, a national, dental-management and marketing-consulting firm. He can be reached at (410) 654-1234.