Roger Levin, DDS, MBA
Staff labor costs are the single-largest expense in a dental practice. Almost all dentists view staff members as a positive investment, not only for the work they perform, but also as individuals. We want to grow and maximize the capabilities and talents of our staff members. I believe that staff should be trained to manage daily operations of the practice with little input from the dentist, whose main focus should be taking care of patients.
How should we pay them?
Over the last few years, I have seen many clients enter the Levin Group management-consulting program with very high staff-labor costs. Currently, the average labor cost in the general practice is approximately 26 to 28 percent. For the various specialties, it tends to range between 18 and 26 percent. This, alone, is not the problem.
The problem is that when many of our clients join our program, their staffs are paid at the highest reimbursement rates for their areas. In other words, the staff salaries and benefits packages have maxed out.
The dentists do not want to lose their staff. Their staff members are highly experienced. Some areas have significant shortages of qualified or trained individuals, and some areas do not even get responses to advertisements for new staff. Many dentists have invested heavily in staff training to maximize productivity. Unfor-tunately, there is a point where any job has reached its maximum level of value and, unless an individual can contribute to the bottom-line growth of the practice, the dentist must question increasing that person`s salary even more. This has no bearing on the appreciation or fondness that dentist has for that staff member. However, it does have a bearing on how much the practice ultimately can afford to pay.
I do believe that the staff should be well-treated and well-paid. However, I have seen many new clients continue to increase staff salaries when their practices are not growing. Typically, the staff receives a raise every year, regardless of the performance of the practice.
Incentive plans work
Once a team member or an entire team has reached maximum levels of salary for the area, a choice must be made. The dentist can continue to increase salaries, increase the percentage labor cost of the staff, and probably take home less ... or the practitioner can find another solution. The other solution is to grant a maximum, annual-salary increase for the staff equivalent to the cost of living. In other words, staff currently would receive approximately a 3-percent annual raise. After that, staff members should be reimbursed based on the growth of the practice.
Establishing a clear incentive program that is understood easily by the staff facilitates practice growth. This way, the dentist pays increased labor cost based only on a variable-expense methodology and only if the practice grows. This protects the dentist on the expense side, while creating opportunity and incentives for the team.
Summary
The only way to ultimately control labor costs is to create a system based on what you want people to do - i.e., grow the practice. As I`ve said many times, people will only do what you pay them to do. This reflects the understanding that team members will be highly motivated to grow the practice if they have an opportunity to share in that growth. The bonus system is one concept that is fair for everyone.
Roger P. Levin, DDS, MBA, president and CEO of the Levin Group and the Levin Advanced Learning Institute, provides worldwide leadership in dental management and marketing for general dentists, specialists, and dental-products companies.
