What about BONUS incentives?

Feb. 1, 2005
The idea of staff bonuses evokes various responses from practitioners.

Don’t be surprised if you’ve mistaken myths for facts.

The idea of staff bonuses evokes various responses from practitioners. “Tried it, didn’t like it,” to “It works as a great motivator in my office!” Bonuses can be rewards for attaining a practice goal. After all, goal setting is meaningless if there is no reward.

Some dental practices use staff bonus incentives to motivate employees to perform better. Do incentives work? What are the advantages and disadvantages? Is a bonus incentive program right for your office?

Every doctor seriously considering a bonus program should evaluate why he or she thinks an incentive would be positive for the practice. Let’s explore some myths and facts about bonuses.

Myth No. 1 - Bonuses always motivate

Dr. Bennett’s practice has seen tremendous growth during the past two years, probably because several new industries have moved into the area. She has a loyal, hard-working, dedicated staff. So the doctor decides to start a bonus program based on the attainment of several goals: number of new patients, collections at or exceeding 98 percent of production, and production more than $50,000 per month.

Fact - At first, the staff members were excited about the possibility of extra pay. However, Dr. Bennett’s bonus incentive proved to be un-motivating because the bonus was payable only if all three goals were met - which proved impossible. The carrot always dangled in front of the staff members, but every time they reached for it, it was jerked away.

Any bonus incentive must be achievable to be a motivator. Bonus goals have to be re-evaluated and adjusted, either up or down, to be a continual motivator.

Myth No. 2 - Extra pay for extra work

Dr. Tolbert wants his staff members to “kick it up a notch.” He is the typical Type-A workaholic with boundless energy. He is driven to excel, and high production numbers excite him. Often he will do extra procedures that are not scheduled. This causes him to work into lunch and past quitting time on a daily basis. His staff members complain about not getting a full lunch, and staff turnover is high. He thinks if he pays his staff members a bonus, they will quit complaining.

Fact - Every doctor needs to remember that staff members do not feel the same way about the business as business owners. They have lives outside the office, and many have small or school-age children that demand a lot of energy. Staff members consider their lunch hour their time to do errands, shop, or just eat and relax. At day’s end, many female staff members leave their full-time office jobs for their full-time mom jobs at home.

Most dental staff members understand that dentistry is not an exact science and sometimes unexpected things occur that cause clinicians to work overtime. This should be the exception - not the rule. Most staff members resent infringement on their time, and a bonus incentive will not change this. Doctors who consistently work into lunch and after quitting time can expect staff frustration, resentment, and turnover - bonus or no bonus.

Myth No. 3 - Staff won’t expect the bonus because it has to be earned each month

Dr. Sanders has had a bonus system in place for a year. During the past 12 months, the bonus has been attained nine months. Staff members were disappointed the months they didn’t get their bonuses and chided the business assistant for not scheduling better. Actually, the bonus was missed twice because the doctor took time out of the office for vacation.

Also, Dr. Sanders knows that if she buys an expensive piece of equipment, the bonus will not be achieved for that month and possibly future months. She knows her staff members are not going to be happy.

Fact - Once a bonus plan is set in motion, staff members expect it. Unfortunately, many people live from paycheck to paycheck, and as long as the pay is moving upward, happiness prevails. However, if pay decreases because a bonus is not attained, many staff members feel disappointed and even cheated. If you were on the receiving end, would you want things such as vacations and equipment purchases to ruin your bonus opportunity?

Myth No. 4 - If I have a bonus plan, I won’t have to worry about raises

Dr. Davis was tired of giving raises, so he implemented a bonus system. This way, every time there was a fee increase, the staff members got an increase in their bonuses. He paid a minimal base pay and a bonus based on collections. The bonus was structured so that staff members got a bonus each month, but the amount varied.

Dr. Davis had a small group of staff members who had worked for him 10 years or more. However, when one staff member retired, he had a hard time finding a replacement, primarily because of his salary structure.

Fact- Propping up a weak pay scale with a bonus is not a good idea, especially when seeking new employees. Potential employees may be insulted by an inordinately low pay scale, even though the history with the bonus has been above average. Exceptional employees could be turned off by offers that seem low and unstable, especially when they learn the bonus varies month to month.

Bonus disadvantages -

Once the bonus is set, it needs to be attainable. Adjustments will need to be made along the way (probably quarterly) to keep the bonus motivating. Most bonus systems have to be carefully monitored.

  • Bonuses do not compensate for poor schedule control.

  • Staff members come to expect the bonus.

  • Bonus incentives should not be a way to prop up weak base pay.

  • Some doctors become unhappy when the financial impact of a bonus system becomes a reality.

  • When production, collections, or both are part of the bonus formula, scheduling coordinators may delay certain procedures or delay posting payments to the next month if the goal has been met.

  • Cause employees to police themselves and work for the common good. Slackers are not tolerated.

  • Bring immediate gratification for hard work.

  • Ease difficulty in establishing raises each year.

  • Keep the schedule full.

  • the bonus is attainable

  • the bonus is fair

  • the bonus is understandable and simple
  • the reason for having the bonus allows staff members to share the wealth when a practice is financially healthy, since they are such an integral part of a practice’s success.

Bonus incentives can motivate if:

Here are several methods for establishing a bonus system. Bonus plans abound, but these are several of my favorites. They’re easy to understand!

Bonus idea No 1.

This is my favorite bonus plan because it depends on collections. You cannot pay out what you do not collect. When you have a good month, the staff members share the bounty.

Bonus Idea No. 1
June collections$90,000
Staff % of overhead$18,000
Collections $90,000
Ceiling % x .24
Bonus amount to be divided: $ 3,600
Set a goal for the total amount of staff salary overhead you wish to maintain. For example, say your staff salary overhead is anywhere from 19 to 24 percent of your total overhead during a 12-month period. Set your ceiling at 24 percent. June was a great month with high collections, and staff overhead was 20 percent. Take the extra 4 percent and divide it among the staff. Part-time employees get a share commensurate with the amount of time they work.

Bonus idea No. 2

Bonus Idea No. 2
Daily goal$2,000
Bonus$ 100/staff member
Mo. 1 production av.$2,150
Mo. 2 poduction av.$2,345
Mo. 3 production av.$2,210
Next goal> $ 2,335
Bonus> $125/staff member
Figure out your average production per day for the past three months. Set your dollars-per-day goal at slightly higher than the average, approximately $100 per doctor. (Two full-time doctors and one part-time doctor would be $250.) If your average production per day is $1,900, make the goal $2,000. At the end of the month, multiply the number of days worked by the daily goal. This should be the target. If your production exceeds that target, each staff member gets a $100 bonus.

After reaching the goal for three consectuve months, increase the goal for another $100.

The bonus amount should be increased by $25 when the goal is increased.

Bonus idea No. 3

Bonus Idea No. 3
Surprise bonuses are powerful motivators.
Unexpected bonuses given by the boss
out of appreciation for hard work and a job
well done generally have more positive impact
than a formal bonus system. Formal bonus plans
can be impersonal and have the potential
to disappoint. Giving a short thank-you note
with the bonus is a nice touch.

This one is called Random Acts of Kindness. Research by behaviorists reveals random reinforcement is a stronger motivator than any automatic-reinforcement program. Chimps do better if they are not sure they will get a reward after a number of correct responses.

Bonus idea No. 4

Bonus Idea No. 4
1. Calculate the true cost of each employee (salary + employers taxes paid, benefits dollar amount, etc.)
2. Add this number for each employee for total.
3. Multiply total number by five (so employee overhead is 20 percent).
4. This is your cycle goal.
5. Split evenly among the staff 20 percent of all collections beyond your goal.

Key Points

One of the problems with monthly bonuses is that all months are not the same length. February is short. July is long, and vacation time must be considered. It is unfair to base the bonus on a standard month.

To address this disparity, determine a number of production days you will work this year (180 is standard). Divide that by 12 (number of months). The number of days (15 in this case) is your cycle.

The first 15 production days of the year are your first cycle. this creates a fair incentive system with equal days.

Find and write down each employee's true cost. Too often, staff members thing they are paid too little (and often they are). However, it is critical for them to understand what they truly cost a business. The true compensation for an employee is the hourly wage, benefits dollars, pension, matching taxes, etc.

Pay the bonus on collections, since you can’t pay what you don’t collect. This gives the staff an incentive to collect the money.

Keep staff numbers realistic. Make sure you are properly staffed - not tool large or too small for the size of your practice.

Bonus idea No. 5

Dr. Kent Smith of Irving, Texas, uses a unique bonus system called the Grab Bag bonus. He has a cloth bag filled with yellow envelopes.

Bonus Idea No. 5
Each envelope contains $10, $20 or $50 bills.
It is an immediate gratification bonus
that has been in place more than 10 years.
When the goal has been met,
employees reach in the bag and pull
out an envelope.
There is a daily grab goal.

Things get interesting when the staff gets a string of grab days because on the second day in a row, each team member grabs twice. On the third consecutive day, they grab three times, Dr. Smith says.

To learn more, contact Dr. Smith at [email protected].

Our record is 13 days in a row, and if you think that’s expensive for the boss, just think how much production was rocking during that streak,” he says.

Final thoughts

Bonus incentives can be positive or negative. Know what your goals are before any bonus plan is set in motion, and carefully consider financial impacts. Bonuses - given with the right motives - should reward excellent employees for diligent and dedicated service to you and your patients.

Ms. Glasscoe is a speaker, consultant, and writer for the dental industry with more than 30 years experience. She is CEO of Professional Dental Management, Inc. in Frederick, Md. Reach her at (301) 874-5240, d[email protected], or visitwww.professionaldentalmgmt.com.