8.21.15 Issue #702 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter

3 More Reasons Not To Give Out Bonuses
By Sally McKenzie, CEO

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Many dentists develop a bonus plan because they see it as an easy way to reward their team members. If certain goals are met, everyone gets the same reward – no matter how much or how little they contributed. In last week’s article, I outlined four reasons bonus plans just don’t work, including the fact that they turn dentists and their employees into financial adversaries, while putting the focus on money rather than performance metrics. Bonus plans simply don’t motivate employees to improve their performance. In fact, they usually have the opposite effect, ultimately hurting the practice.

This week I want to give you even more insight as to why bonus plans do more harm than good. Here are three more reasons you should consider dropping your bonus system, and reward your team members for individual performance instead.

1. Bonus plans allow you to be lazy. The best way to encourage your employees to excel in their roles is to develop detailed job descriptions that include performance measurements. These job descriptions outline your expectations, and tell employees exactly what they need to do to earn more money.

Many dentists don’t want to take the time to create detailed job descriptions, and bonus plans seem like an easy way to reward team members without actually giving them permanent raises. The truth is, it’s much better to define the maximum fixed amount a particular job is worth. Make it clear that compensation is based on performance measurements outlined in the job description, and is not to exceed that maximum.

Remember, job descriptions serve as a roadmap to your employees’ success. They not only reduce stress and confusion, they lead to improved performance, increased production and a healthier bottom line. Bonus plans don’t offer any of those benefits.  

3. Bonus plans don’t encourage employees to take ownership. Many business owners think if they create a bonus plan, their employees will develop an ownership attitude. Let them share in the business, or rather let them pretend they’re sharing, and they’ll be more vested in said business’ success. The problem is, this typically turns out one-sided in the end. Why? While employees are rewarded for practice successes, they put nothing at risk.

As much as you’d like to, you can’t make employees develop an ownership attitude. Implementing a bonus plan isn’t going to change how they approach their job or view your practice. If you want employees with that ownership attitude working in your practice, you have to hire the right people from the beginning.

4. Team members usually don’t understand how bonus plans work. I often get feedback from team members who can’t figure out why they received more bonuses last year than this year. They’ll say something like, “We’re supposed to get 10% of production over $50,000 a month. I received six separate bonuses last year. I've only received one through the first six months of this year. I don't understand why we can't do more than $50,000 a month.”

If team members don’t understand how to increase production, they don’t understand how their efforts and contributions put the practice above the $50,000 mark. So these team members do everything exactly the same as the year before, making no extra effort to improve production. Bottom line: Most employees aren't knowledgeable enough to handle the financial information needed to justify a bonus plan.

If you’re still not convinced it’s time to nix your bonus plan, think about this: If your practice loses money, do your employees’ paychecks take a hit? Of course not. But if you’re going to stick with your bonus plan, maybe they should. To make it fair, your team members should know if they want to share in the profits, they also have to take on some of the risks.

I’m guessing your employees wouldn’t be too fond of this idea, but if you have bonus systems in place, you’re essentially making every employee a working owner. Your employees might not realize this, but bonus plans hurt everyone involved, especially if your practice can’t really afford to hand out bonus checks.

There are much better ways to reward your employees, both monetarily and non-monetarily, without hurting your practice and putting your employees’ jobs in jeopardy. Over the next two weeks I’ll give you tips to develop a rewards program that will actually encourage your team members to excel at their jobs, ultimately increasing production numbers and growing your bottom line.

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

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