8.23.13 Issue #598 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter
 

The Family Practice: Plunder or Profit?
By Sally McKenzie, CEO

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“The family” has a profound impact in shaping our decisions, our values, and our culture. As we know from personal experience, families are comprised of varying personalities, opinions, styles, problems, and issues, all of which can wreak havoc on efforts to simply get along, let alone work together. There’s no question that dentistry is commonly a “family” business.

Family businesses are widespread, and so too are the issues and challenges they must deal with. According to the Small Business Administration, family businesses make up 90% of all business enterprises in North America, and 62% of all US employment. And as prolific as their numbers are, so too are their problems.

A 2012 survey of family-owned businesses found that nearly 50% did not use any other outside sources to determine appropriate salaries for staff. In other words, when it comes to deciding how much to pay staff, many are simply guessing. Similarly, nearly half lacked procedures for performance reviews or written job descriptions that outline responsibilities, minimum qualifications, and reporting structure for the positions in their businesses. Translation: No job descriptions or performance reviews means little to no staff accountability, which most assuredly means lower revenues and reduced profits.

Nearly 70% had no system for determining salary increases. The result: Employees corner the business owner and assert they deserve a raise, and the business owner buckles hoping that a “little raise” won’t have much of an impact. Any of this sound familiar?

Countless dentists or their spouses are running dental offices but don’t understand what it takes to manage the business side of a practice. They are incapable of reading and understanding practice reports and business statements. They don’t comprehend the impact of overhead or how something as seemingly innocuous as a little pay raise can cause salaries to spiral off the charts. Yet because they “own the business” they make decisions based on what they feel is right. These decisions affect their long-term financial health as well as the fiscal health of the practice.

For the lucky ones, the family members settle into their roles and are able to understand and compensate for each other’s strengths and weaknesses. If the individuals take responsibility for their roles and the rest of the family can let them do their jobs, these informal arrangements become formal without the practice ever having to spell them out. What typically makes these situations work is that the family members all have the same philosophy of care and business. However, the success of such informal arrangements is rare.   

In other cases, family members are in the wrong jobs and would be much more effective in another position. It’s often necessary to bring in outside help to navigate the players through the process of developing job descriptions and identifying who will work best in which positions. The fact is that family members are simply too close to the issue…literally. Most successful business arrangements require a more formal organization. Dental practices are no different. There needs to be a clear designation of exactly who is responsible for what and what the family wants to get out of the practice.

Do you want it to grow? Do you want to keep it where it is? What’s more important to you, giving up some control and growing, or keeping control and staying where you are? What’s your vision of the practice? What if it’s different than your spouse’s or your brother’s or your dad’s? Whose vision gets priority? What steps will the practice take to achieve that vision and those goals? Who will be responsible for which areas? How will the practice measure its success? It’s those issues – where you want to take the practice – that require open and honest communication but can cause significant friction. Yet all the players in the family practice must be on the same page.

Before you decide to partner with a family member, evaluate the decision carefully. We all have relatives whose company we enjoy, but we wouldn’t want to spend 40 hours a week with them. Certainly, for some, working with your spouse, Mom, Dad, brother, sister, etc. can feel more like a life sentence than the opportunity of a lifetime. However, for many who choose this road it can and does work - if the systems are in place, the roles are clearly defined, and communication is open. And, most importantly, everyone understands that when it comes to the family practice, it’s business first and family second.

For more information on this topic, visit my blog: The Lighter Side

Interested in speaking to me about your practice concerns? Email sallymck@mckenziemgmt.com
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