Exorcising The Demons

Sept. 1, 2004
How do you feel when a staff member knocks on your office door and says, "I need to talk to you. I want a raise." If you're like many dentists, you're about to reach for the aspirin and antacid tablets.

By Amy Morgan, Pride Institute CEO

How do you feel when a staff member knocks on your office door and says, "I need to talk to you. I want a raise." If you're like many dentists, you're about to reach for the aspirin and antacid tablets.

The No. 1 question we hear from dentists is, "How should I motivate and pay my staff?" Apparently possessed by demons, many dentists give staff pay raises or other benefits without knowing whether they are affordable for the practice, competitive with the market place, or based on any significant, tangible achievements. There is no way to know if your pay is competitive or inspiring without doing your homework. And unless there's an increase in production to pay for these perks and raises, there's only one way to pay for them — out of your compensation. It's time to exorcise the demons from your compensation policy and replace them with scientifically sound business principles.

By compensation, I mean the salary, bonuses, insurance, pension, paid vacation, and other perks that are given to the staff and paid for by the practice. Because of this compensation confusion, Pride Institute is publishing a book on the subject, "Take Pride in What You Pay," based on our 11 years of teaching this material in our flagship course on operational management, System, Staff & Numbers.

Although staff compensation has always been a topic for dentists, in recent years, with the dramatic rises and falls of the economy, doctors have become even more concerned with maintaining stability in their practices, which includes attracting and retaining long-term employees by compensating them in a fair and financially sound manner. Therefore, the inquiries we get about compensation have picked up significantly. This has prompted us to campaign for a new approach to compensation, which results in enhanced motivation of the staff, greater control for doctor and team, increased staff retention, and reduced stress for everyone. This model — if used effectively — is guaranteed to lead to increased production and efficiency that makes possible even greater compensation for you and your staff — definitely a better solution than the demon policy.

The way in which you compensate employees sends a potent message about the goals, vision, and culture of your practice. Giving out raises indiscriminately conveys that employees are rewarded without having to work toward new levels of personal and professional excellence. Never giving raises without explaining why they weren't received or how they could be earned tells your staff it's useless to work harder because their efforts go unrewarded and they have no control of future rewards. Both of these faulty approaches encourage lack of accountability. In contrast, the compensation model that expects, recognizes, and rewards achievement makes a different statement about the kind of employees you want (hard-working), the behaviors you value (excellence), and the goals you strive for (improving the practice).

A sound compensation system creates a climate in which employees are more enthusiastic and motivated because they know they are treated fairly and can exercise much more control over their futures. If you have established objective standards for giving pay increases that are understood and agreed to in advance by the staff, you will target your employees to the specific behaviors that will earn them raises. If your financial administrator understands the importance of suggesting a new payment option to patients to improve collections, and she does so consistently, she will know why she has earned an increase. If she doesn't become comfortable with the new payment option and fails to offer it to patients, she will not be surprised when collections do not improve and therefore there is no salary increase. And through your coaching, she will know what to do to correct the situation to ensure that an increase is in her future. Knowing where she stands reduces resentment, cynicism, anger, or other emotionally charged reactions that likely would have been triggered if you had made a decision about her compensation arbitrarily based on mood or gut feeling, without standards, evidence, and facts to justify the decision.

With all this sanity to gain and insanity to lose, you should be eager to shake off your demon-compensation model. Ready to step away from the dark side and into the light?

Pride's Compensation and Recognition Model is guaranteed to send the demons running. It is grounded in three tenets:

1) Compensation must be competitive with what the market pays.
2) Compensation must be affordable for the practice.
3) Most important, compensation and recognition of individual staff members must be based on demonstrated knowledge, skills, and abilities.

These tenets help foster a practice environment in which employees know your expectations, know they are treated fairly, and have the opportunity to co-create their goals and influence their salaries through their performances.

Tenet 1)

Compensation must be competitive with what the market pays. If you pay below-average salaries compared to dental staff in comparable practices and jobs in your area, you will never get above-average employees. You will not create staff motivation, loyalty, and innovation when you are under-compensating your team, whether knowingly or unknowingly.

In determining a competitive market wage, compare your practice to similar practices. Consider the case of the appointment coordinator who threatened to quit her job because she was not making as much money as her friend who held a front desk position in a nearby practice. Seized by the compensation demons, the dentist caved in and gave her a substantial raise, not stopping to realize — much less explain to her — that he had a solo general practice, while her friend was working in a four-dentist specialty practice in which the scope of duties, fee structure, and volume of work were different. The dentist also failed to take into account other benefits. He was offering a pension plan, CE courses, and more vacation time, while the other practice was not.

Consider the job position, as well. The appointment coordinator in our example was unhappy because she also discovered that she was making $3 less per hour than the financial administrator, who had been with the practice a shorter time. To be competitive, we need to compare apples to apples. The appointment coordinator's position did not carry the same job description, experience level, or qualifications as the financial coordinator's. The appointment coordinator had joined the practice straight out of high school, whereas the financial coordinator had a college degree, prior experience as a bookkeeper, and computer skills. The appointment coordinator had done an amazing job, but had a different level of knowledge, skills, and experience.

To set compensation competitively, develop a practice philosophy, job descriptions and expectations, and individual training charts and action plans that allow employees to co-establish benchmarks for success that result in increased compensation. Don't keep these standards a secret from your staff. Be sure everyone understands the benchmarks for excellence and the positive rewards to be derived through the accomplishment of these new standards.

Tenet 2)

The practice must be able to afford the compensation it offers.

Dentists often create affordability problems for themselves when they give raises, establish new positions, purchase new equipment, and otherwise spend money based on emotion, without analyzing the costs or expected return on investment. Because of the demand for their skills, dentists often get away with making business mistakes that would bankrupt other small companies, including unsound compensation policies. While most dentists may earn good livings despite making financial mistakes, there is still a price to pay. Many dentists have not accumulated the savings they need to retire when they choose to, and futurists predict that by the year 2012, only four of 100 dentists will be able to fully fund retirement through their practice earnings. When spending is demon-driven, employees suffer, as well. For example, pity the poor dental staff who can't meet their profitability goals because the dentist must purchase every gadget known to mankind. That's an un-winnable game for the staff to play — and they won't. There needs to be soundness and agreement between you and your staff on what spending is affordable, with money set aside for staff increases should the team meet its objectives. Set a black-and-white standard for increased compensation that the staff can attain and a clear plan to do it.

Pride Institute uses the standard of increased collections, or collectible production, during the prior year to award compensation increases. Other parameters may be used, provided they are clearly defined, challenging, achievable, and agreed upon by the staff. Using our model, dentists set aside a portion usually ranging from 10 percent to 20 percent of the increased collections to pay for compensation increases. Then, the increases are awarded to deserving staff members based on their individual achievements toward meeting pre-set expectations for their jobs, as we describe in Tenet 3.

Tenet 3)

Individual compensation must be based on demonstrated knowledge, skills, and abilities.

This is probably the hardest tenet to practice because dentists are notoriously seized by the demons when it comes to setting clear expectations of job performance, as well as providing the staff with training and feedback so they can meet those expectations. If you want your team to go postal, wait until a salary review to tell them that because they have demonstrated no additional (undisclosed) skills or abilities, they haven't met your (unstated) expectations. This third tenet is the most difficult one to implement because it requires the "L word" — leadership.

During the past 20 years, corporations have significantly changed their compensation models because economic conditions make it more challenging to meet profitability goals. There are fewer safe havens where employees get automatic cost-of-living adjustments, annual guaranteed wage increases irrespective of profitability, or entitlement to a job based on seniority instead of performance. Indeed, some major corporations have even asked their employees to take salary cuts because of economic downtrends. Pride's compensation model encourages staffs to build their skills and merit salary increases by their performances. Employees love this because the prevalent theme is control. They are inspired to be as good as possible and know they will be acknowledged and compensated for their performances. This model drives people to be self-motivated, which is the trait you want your staff to have.

Notice that our focus in this last tenet is "demonstrated" — not "wished for" or "hoped for" — performance. We measure performance through competencies, or the specific kinds of knowledge, skills, and abilities employees need to do their jobs.

Employees need to understand the competencies you expect them to meet, co-design their own specific goals for growth, and create action steps to achieve these new benchmarks. Throughout the year, they must get your consistent feedback and support on accomplishing their benchmarks so they know how well they are doing long before their salary reviews.

There are three categories of competencies by which you can evaluate every job in your dental practice:

1) Job-specific competencies are the knowledge, skills, and abilities associated with the particular job. They include technical, procedural, communication, and problem-solving skills. For example, a dental assistant must demonstrate competencies associated with taking radiographs, entering notations in the patient's chart, greeting the patient, handling an anxious patient, etc.

2) Practice-management competencies support the practice's clinical, philosophical, and financial goals. These include statistical analysis, goal-setting, action planning, organizing, and coordinating activities either independently or as part of the team. For example, each staff member must be able to understand and support the practice's production and expense goals through his or her actions. The appointment coordinator, for instance, must be able to arrange the schedule to meet goals for quality care and daily production.

3) Teamwork competencies include collaborative problem solving, participation at staff meetings, interpersonal conflict resolution with other staff members, serving as a facilitator at staff meetings, etc. For example, staff members must attend and actively participate in all team meetings and take initiative in helping other team members when the practice is understaffed.

Based on the specific competencies for a job position, you and your team can easily create an action plan that challenges each staff member to aspire to new achievements under the three categories. You reward them for achieving those skills with a merit increase.

This is the scientific model: Give staff members specific skills to aim at, and when they are achieved, give a merit increase. For example, an assistant may be expected to learn a new digital system for taking X-rays and to acquaint other team members with the new technique. Or an appointment coordinator may be given an incentive to learn new models for customer service by reading the book "Knock-Your-Socks-Off Service," designing a plan for implementing the teachings in the practice and presenting the plan to the doctor and team.

By paying staff salaries comparable to your practice's level of excellence in your area, ensuring that compensation increases are based on affordability, and challenging your staff to earn their raises by specific, demonstrated growth of their skills, you will have created a means of motivating and rewarding you and your team. Then you'll be in control of your practice, your staff will be in control of their futures, and the demons will be put to rest.

Order your copy of "Take Pride in What You Pay," Pride's handbook on compensation. Call (800) 925-2600 for more information or to enroll in an AGD-accredited seminar. See our ad in this issue for topics, cities, and dates.

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