Practice Economics 101
by Sally McKenzie CEO
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Perceptions are a funny thing. The divide that can occur between what is real and what people perceive is often remarkable. Take staff compensation as an issue rife with misperceptions in many offices.
For example, it is not uncommon for dental practice employees to be utterly convinced that the doctor is swimming in cash. The business employee, for instance, knows her salary and how much the practice brings in. “The doctor is making so much money, he’s probably papering his walls with it. But come time for a pay raise, I’m sure he’ll say the practice is hurting for money.” That little detail known as overhead doesn’t necessarily factor into her mathematical equation. Then there are the dental assistants; as far as they’re concerned, the practice is darn lucky they’ve stuck around. “We have been with the doctor for TWO YEARS. That’s practically a lifetime! Surely we deserve a pay raise for that kind of drive.” Longevity equals more money in their minds.
And let us not forget the hygienist. In her view, she’s the one who built the relationships with the patients. Like the assistants and the business employee, she doesn’t feel that she is compensated fairly for her role in the practice because she perceives other staff are not as important as she is. “The patients are coming to see me. They know me and they like me. That has to be worthmore than I’m getting.”
Clearly, misperceptions and a strong sense of entitlement among the staff are rampant in this hypothetical practice. Each employee is out for him/herself. But don’t be too quick to point a condemning finger at the staff. The doctor, it appears, is not exactly forthcoming with information. And in the absence of clear information and leadership, teams simply fill in the gaps with what they perceive to be reality. The result is mistrust, resentment and discontent—all of which are common indicators of salary system shortfalls.
Money matters can definitely make for messy business in any workplace that is dependent upon teamwork and trust (which would be virtually every dental practice). But with clear leadership and specific salary guidelines, the issue doesn’t have to be a sore subject.
Start with Practice Economics 101. Spell out the status of overhead and practice expenses to employees routinely during regularly scheduled monthly meetings. They’re your team, so treat them as such. They need to know each month how the practice is doing. No employee should learn at her/his annual salary review meeting that practice revenues are down 5%, 7% or 10% and that the office cannot afford to give raises. If revenues are down, it’s the responsibility of entire dental team to evaluate and actively address what is causing the decrease. During this upside down economy, some practices are hurting more than others. It might be necessary to announce a raise freeze for 6 months to 1 year or if raises can still be given, many businesses are giving modest increases such as 2% rather than 5% historically taking a conservative approach for the moment.
Design the monthly meetings to enable doctor and team to discuss all areas that impact the profitability/success of the practice. For example: numbers of new patients, recall patients, collections, treatment acceptance, production, accounts receivables, unscheduled time units for doctor and hygiene, uncollected insurance revenues over 60 days, overhead, etc.
But this isn’t solely the doctor’s responsibility. Each staff member should be prepared to report on the area for which he/she is accountable. For example, the scheduling coordinator would report on the actual monthly production as compared to the goal, the number of unscheduled time units for the doctor and the doctor’s daily average production.
The meetings also should be opportunities to collectively address areas of concern. For instance, if the doctor has a higher number of unscheduled time units than desired, the team can discuss contacting patients with unscheduled treatment, encouraging hygiene patients with unscheduled treatment to move forward on recommended care, identifying patients with unused insurance benefits, evaluating the practice’s treatment financing options, etc.
Salaries, including benefits, bonuses and special perks, account for the largest percentage of practice overhead. Where real information is lacking, misperception and gossip prevail, as do resentment and discontent. If the employees do not understand the big picture of practice revenues and expenses they will not only resent you, they will also never believe you when you tell them that the practice cannot afford to increase salaries, or give bonuses or pay for special perks. Unless employees are watching the profits and the losses with you, they will never feel you are paying them what they believe they deserve.
Next week: They deserve a pay raise, but can you afford it?
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