Most likely, you already know about the benefits of production-based compensation for associates: Higher earning potential almost always equals better performance. And when you combine a guaranteed base salary with a percentage of production—a system I call ProSal—it’s truly a win-win situation. The associate can’t be paid any less than the guaranteed base but has a strong incentive to offer a full-service approach—generating more income and providing a higher level of care.
Well, why not apply this principle to your entire healthcare team? Everyone would be vested in the success of the practice, and everyone would share in the economic rewards of that success.
A reason to succeed
One of the biggest challenges facing the veterinary profession is appropriate compensation for the support team. How can we expect to recruit and retain these most-important assets if we pay them a paltry salary? Part of the problem is the fees we charge—they’re too low and frequently discounted—but what motivation do team members have to make sure fees get charged? None! However, if you involve employees in the financial success of the practice, you enhance their compensation as well as yours – now that’s motivating!
Most employee incentive programs I’ve seen over the years have some flaws. Take bonuses, for example—even bonuses based on increased gross revenue. Were all employees equally involved in achieving this increase? Probably not. So, if you pay everyone the same amount, you’re rewarding some team members who don’t deserve it. This naturally leads to disharmony and discontentment.
In order for an incentive program to work for the non-doctor team, you must:
- Establish specific evaluation criteria over which the team members have some control.
- Involve all team members in the incentive program.
- Communicate the evaluation criteria to everyone.
- Evaluate all team members for their participation in the program.
- Regularly inform team members of the practice’s success in achieving financial goals.
- Base rewards on the achievement of the goal and each individual’s contribution to it.
This is a tall order, but such an incentive program has been successfully incorporated in many practices. Let’s take a look at it—first the financial side, then the performance side.
Determining the incentive
First, you must establish exactly what team members will receive as their bonus. I like to use a percentage of the increase in gross revenue: If the practice sees financial gain, so do team members. Normally this percentage is 10 percent of the increase in gross from one quarter compared with the same quarter of the previous year. In a mature practice, 10 percent of the increase is very fair. If a practice is growing, if a new associate is hired, or if a new building is constructed, the percentage might be reduced. Remember, this is 10 percent of the increase in gross, not the gross itself.
Why gross? Because you have to base the program on what employees can influence. They can affect gross revenue, but they can’t control net. If you buy a new piece of equipment or hire a new doctor, it may decrease the net even though your team members have been working hard to offer services and provide excellent client care. So, stick with gross, and you’ll see employees shine.
Measuring employee contributions
On the performance side, each team member must know what he or she needs to do to improve the practice’s gross revenue.
- Receptionists must know that it’s critical to convert phone shoppers to clients, remind clients to bring in stool samples, and review the medical record so they can ask clients about purchasing food or other items they normally buy from the practice.
- Technicians must know that it’s critical to offer a full-service approach. If a client comes in for a wellness visit, the technician needs to review the lifetime-of-wellness checklist with him or her to make sure your team is offering optimum healthcare. Surgical technicians must record all of the services you have performed in the computer record, timeline of surgery and anesthesia, make medical recalls, and complete discharge order forms.
- Veterinary assistants need to discharge patients promptly and assist clients to the car.
Once the team knows exactly what you expect of them, those criteria become part of the evaluation process. Here’s how it works: Each employee is evaluated each quarter—receptionists, technicians, veterinary assistants, and even practice managers. You’ll need separate evaluation forms for each position and you’ll include individual goals as well as position expectations. You’ll give team members the evaluation forms at the beginning of the quarter, so they know exactly how they’ll be assessed.
At the end of the quarter, each employee evaluates himself or herself. The practice manager completes the same form after obtaining input from the practice owners and associate veterinarians. The team member and practice manager then sit down to discuss the evaluation, addressing any differences and determining the team member’s future goals.
This conversation is very important. Employees want to know how well they’re doing and what they can do to improve—and they also sense it if they’re being rubber-stamped. At the end of the evaluation process, the employee receives a score between 0 and 100. I suggest you set no more than 20 criteria, worth five points each.
Now for the tricky part. Once you score the evaluations, you need to adjust the score based on the number of hours the employee worked to make the incentive fair. For example, if an employee receives an 80 on her evaluation but worked an average of 20 hours a week during the evaluation period, the score would be adjusted to 40 (half of a full-time employee’s hours).
Total the adjusted score and divide each score by the total to calculate the percentage of the fund the employee receives. The entire fund is divided according to employees’ evaluation scores and hours worked (see “Using an Employee Incentive Program”).
The beauty of this program is that there is no discrimination. The veterinary assistant can receive as much as the office manager or technician—it all depends on whether she did her job and helped the practice excel.
Tips for making it work
Many practices require employees to achieve a minimum pre-adjusted score—a 60 or 70, for example—on their evaluation form to receive anything from the incentive fund. This rewards your top employees and makes more money available to those who are truly making the practice more successful. It also sends a strong message to those who are not.
Another note: A team member must be employed during the entire incentive period; if she comes in during the quarter or leaves before the end of it, she won’t receive anything from the incentive fund.
You’ll also need to revise the evaluations periodically. If an employee receives a score of 90 or 100, raise the bar. Take some criteria out of the evaluation and insert new objectives to enhance the employee’s performance. You don’t want your team members feeling they’re in dead-end jobs; show them there are new challenges ahead.
If there’s no increase of gross, you still need to evaluate your employees. In fact, I think team members will be even more interested in learning what they can do to help the practice during the next quarter to receive their bonus.
Now a warning: You cannot cut corners with this program. If you’re not willing or able to incorporate it entirely, don’t do it at all. If you don’t do the evaluations or don’t do them effectively, the program won’t work. You can’t do the evaluations every six months or every four months—I’ve tried, and the momentum doesn’t build enough. You must do them quarterly. The criteria used in the evaluation must be objective, not subjective, and the evaluation process must be fair.
In addition, your team needs to know the “score.” Create and post a chart that lets employees know the practice income last February compared with this February. Income should be posted daily or weekly and benchmarked to the same period of the previous year. Employees shouldn’t be surprised at the end of the quarter to learn there was—or wasn’t—an increase and therefore a bonus.
Your employees are an asset; they’re on your side; they want to help you offer the best possible care and service to your clients and patients. They also want to help you be more financially successful. Provide the tools and incentives that will help them do that. Remember, TEAM means Together Everyone Accomplishes More!
Our VMC Comprehensive Management Resource Library has an entire section dedicated to implementing an Employee Incentive Program. It includes an Excel workbook for calculating the incentive fund, converting the grading scale, calculating individual bonuses based upon evaluation scores, and a team scoreboard worksheet to keep your team apprised of their progress. There are also detailed instructions, examples of completed forms, a team memo template and incentive evaluation templates.