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4.28.06 Issue #216

"They All Want Raises!"
A McKenzie Management Case Study

Nancy Caudill
McKenzie Management
Senior Consultant

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This case study is an illustration of a dental practice that may be similar to yours. The names have been change to protect the guilty!

Case Study #66
Dr. Dan Goforth

“Revolt! Revolt!”  Dr. Goforth was in a panic.  It appeared that his staff of four conspired to hold him hostage and demand raises or they were all going to walk out the door.  My first instinctive reaction was to protect the doctor.  “How dare they?  After all you do for them?” I questioned.  But then, experience took over and I reminded myself that there are always two sides to every revolt.

Dr. Goforth Facts:

He has no protocols for annual salary or performance reviews.
He hasn’t given an increase in wages to any employees in two years.
There are no job descriptions or accountability for his staff.
He is unaware of his practice overhead percentages compared to collections.
His practice has experienced steady growth.

My question to Dr. Goforth at this point was:
“Why did you give them a raise two years ago?”

“Because they threatened to leave me at that time too!” he responded defensively.

Okay, we have a pattern now.  Dr. Goforth needs some education on how to avoid his confrontation in the future and tools to put out his immediate fire now.

Immediate Action:

Retrieve and review the Profit & Loss report for the past 12 months to determine what percentage of his collections is going toward salaries and benefits.  A healthy practice guideline is 19-22% for gross salaries and 3-5% for benefits (this includes matching social security, workers compensations, healthcare, retirement etc.)

If the percentages are below the “industry guidelines”, the practice could afford to provide salary increases NOT to exceed the 22% maximum. Dr. Goforth was presented with McKenzie’s Salary Review work form in order to determine how much of a raise he could give.

Use performance measurements that are geared toward each employee’s job description to determine each person’s contributions to the practice.  Not all employees are created equally so it is not necessary to apply an increase to each employee equally.  Base any raise decision on their performance.

Interview each employee individually and express your regret that they brought this to your attention before you did.  They have helped you to recognize that you need to implement an annual review of performance and salary (not to be confused as one of the same).  From “this day forward” these reviews will be conducted on an annual basis and it will not be necessary for them to come to you to seek evaluation and consideration.

Present each employee with their performance review and because of their hard work and dedication, the practice collection number has increased in order to allow you to offer a $_____/hour increase.  

Future Action:

At the next monthly staff meeting, share with your staff the seven overhead categories that you use to determine the health of the practice.  Educate your staff about the practice as a business.  Did you know that your staff thinks that all those deposits that are made each day go directly to your wallet?

Help them to understand that salary increases aren’t automatic – the decision to increase payroll is all predicated on the collections vs. payroll percentage and they can have a direct effect on this statistic.  This will also allow them to accept a possible year without a raise because the collections for the year were not sufficient to warrant the 22-27% total salary and benefit goal.

Good employees are hard to find and can be harder to keep because they are aware of their value to the practice.  Don’t let the good ones get away because you fail to stay on top of timely reviews and potential salary increases. You will gain their respect and appreciation and will continue to work hard.  They now realize that they do have the power to control their financial future with you!

Forward this article to a friend .

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