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How to attract and retain associates

June 2, 2022
Associate dentists are important to the success of your practice. But how do you get them to want to become, and stay, a part of it?

Owning and operating a group dental practice brings a myriad of challenges, but arguably the greatest centers around associates. Success often means creating and executing a plan to minimize associate turnover. Too many—from enterprise-level dental service organizations to emerging, doctor-founded groups—seem to be a revolving door with dramatic turnover rates. Where do you even start? 

The state of associates

Most of us have seen the statistics from the American Dental Association (ADA) and other agencies. The American Dental Education Association (ADEA) research for 2020 states that 82% of dental school seniors graduate carrying an average of almost $305,000 in educational debt. That’s staggering, and probably accounts for why “30% of the graduating seniors plan to join a DSO” (ADA HPI), up from 12% five years ago. I don’t blame them for not wanting to buy their own practice and add a significant amount to their already sizeable debt. 

Since 1997, the US has added 13 new dental schools, and 2020 saw a record of first-year enrollments with over 6,300. Couple that with the fact that, for the first time ever, less than half of dentists now own a solo private practice. The conclusion is inescapable: for those building group practices, they’re going to have a lot of associates to potentially hire.

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Becoming a recruiter 

Is recruiting one of your top three priories, or is it an afterthought until you’re in need? Be honest with yourself. The best companies, be they corporate America or group dental practices, make recruiting a priority. They realize it’s a never-ending process. The goal is to always have more viable candidates than there are openings. Those candidates must come from a variety of sources: referrals from current associates, study clubs and dental societies, the military, dental schools beyond the one closest to you, third-party advisors, recruiting agencies, social media, and more. How many sources do you have? 

Creating certainty 

Young associates are in high demand, and they know it. Why should they choose you? Most professionals don’t react well to uncertainty, so here’s how to create clarity for them.

  1. Clear compensation plans—You pay 30% of collections and the other group is offering 35%. But if your first-year associates average $800,000 in collections compared to the other group’s $600,000 average, where will they make more income? Back up your comp plan with take-home income data.
  2. Clear onboarding plans—What happens during their first 12 weeks on the job? Who is their mentor, and what is the skill and experience of their dental support team? Show them how quickly you will integrate them into the team.
  3. Clear clinical development plans—Beyond onboarding, what is your clinical development plan for them over their first two to three years? Most want to master their craft, so lay out what that path looks like in terms of advanced skill development, along with time frames and investment from both sides. They’re not too far out of school, so think “curriculum” here.
  4. A clear vision for the future—We all want to be part of a winning team, so share your vision for where you want the business to be in three to five years, then relate it in terms of how you see the associate being a part of it.
  5. Clear core values—Do you really want to hire someone who doesn’t care about your core values? Peter Drucker’s quote, “Culture eats strategy for breakfast,” has never been truer. If it doesn’t matter to you, don’t expect it to matter to them.
  6. A clear plan to becoming a partner—Most dentists are entrepreneurs at heart, and they want to be business owners. They want to have a stake in the future they’re helping create, so you’re at a decided disadvantage if you don’t have a structure that facilitates them earning in or buying in to your business. 

There’s much more than what I’ve outlined here, but the key is that you want them to want to be part of what you’re building. Help them see themselves as part of it. Create an atmosphere where they can’t imagine working anywhere else. At a minimum, follow a “defining success” document, such as the one we created at Polaris for recruiting. You can download a copy here. 

Look like a professional 

If you’re building a group practice, you’re competing against seasoned HR professionals at the top of their game. Verbally walking a candidate through everything about your business, then giving them a copy of the comp plan with an employment contract, isn’t going to cut it. 

Lay out everything about your business in a 10-plus page presentation that answers the question, why you? Print it with a clear cover and spiral binding. Then give candidates a copy to take with them so they can refer to it. Building this presentation is one of the most fun aspects of working with clients for me because it brings to life aspects of their business that are special, but that they often take for granted. 

Pathways to partnership 

I noted how much debt typical new dentists carry and that they probably don’t want to add more to it by buying their own business; however, that doesn’t mean they don’t want to become an owner. Quite the contrary. And they will, just maybe not with you if you don’t have a way to make that happen. There are three ways to crack the associate equity nut: traditional buy-in, earn-in through restricted stock units, or earn-in through profits interest units. 

Traditional buy-in—This is pretty straightforward. Your business is valued at $10 million. You offer the associate the opportunity to become a 10% partner. The associate borrows $1 million from a bank to buy in. Depending on the loan covenants on your existing debt, you may have to use those proceeds to pay down existing debt. Also, while the associate personally guarantees the loan, the business ultimately back-stops it, which could create complications on the overall amount of debt you could borrow for future expansion. This is something to think about, depending on how quickly you intend to grow and your current leverage scenario. 

Restricted stock units (RSUs)I was the beneficiary of these during my time in corporate America, and they’re popular in publicly traded companies. RSUs are real equity and not phantom equity. They’re performance-based and have a vesting schedule (golden handcuffs). 

In a group practice, the concept is that the associate has a collection goal and for every dollar above that goal, they earn some percentage in company stock. The goal goes up every year, so they can’t “ring the bell and coast.” Every share of stock they earn has a vesting schedule, so it gradually becomes theirs over time (usually three to five years). If they leave, they forfeit the unvested shares, which is the built-in retention mechanism. The founder ultimately takes dilution, but the increase in the value of the shares should offset any dilutive impact. Think of it this way: “Would you rather be the 100% owner of a business valued at $5 million, or the 80% owner of a business valued at $10 million?” There are a lot more details, but you get the idea. These models work well for growing groups with established practices.   

Profits interest units (PIUs)—These are like RSUs in terms of a goal and the vesting concept but are arguably better suited to a de novo model. The goal is more of a threshold of EBITDA and valuation. Every dollar of value below the goal accrues to the founder, but they split any dollars above the threshold with the associate. The split percentages are a variable in the model, as are the thresholds. Again, a vesting schedule ensures you retain the associate for the long haul. The overall point is that in today’s world of associate turnover, you must have a partnership solution in place. It won’t cure your turnover 100%, but you’ll arguably be able to recruit a higher level of candidate who will work harder and stay longer. If you can do that, it’s better for patient care, continuity of the business. and your sanity.

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Editor's note: This article originally appeared in DE Weekend, the newsletter that will elevate your Sunday mornings with practical and innovative practice management and clinical content from experts across the field.. Subscribe here. 

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