Three Steps to an Amazing Dental Team Rewards Program

Sometimes bad experiences around compensation can be traced back to problems of purpose, where a program has been implemented for the wrong reasons. A bonus program should never be part of a basic compensation package, that's what fair market-based salaries are for. It should not be introduced as a way to fix performance issues in the practice. If the dental team is not achieving the basic standards you want to see, offering more money for meeting those standards is not going to work. Just the opposite: it sends the message that the team deserves "extra" rewards for performing at foundational levels. For that matter, I think the term "incentive" sends the wrong message too. You should be offering these bonuses not as a means of motivating performance, but as a way of rewarding growth. There is a big difference.

When a rewards program is implemented in the right way—with a team that is delivering results consistently, and with absolute clarity for expectations and an airtight understanding of the conditions—it can be an immensely powerful tool for guiding focus and reaching new levels in strategically targeted areas while protecting a solid foundation of competency. Done right, it can make a good team into a great team.

So what is "the right way?" There are a number of considerations that go into creating a good rewards program, but in the end it comes down to doing three things well.

1. Establish the Funding

An important starting point in implementing any reward system is determining how much of a reward is in play and when it kicks in. The last thing you want is to discover that the increase in revenue you have seen has been offset by a similar increase in overhead, so the reward payouts actually end up setting you back economically. You can't just pull these figures out of the air; they need to be based on recent results and reasonable expectations. If necessary, you should have your accountant draw up a financial forecast of revenues and overhead projections. You can read more on dental practice success here.

However, if you have a fairly consistent history of practice numbers to work with, there is a simple method of calculation to arrive at these numbers. Start by looking at a recent three-month period that is representative of your current revenue (a period with no vacation time off nor an unusually high concentration of high value cases). Divide your revenue for that period by the number of days to get your average per-day figure. Keep in mind you are looking at total collections, not production figures—you can only spend what you actually collect. 

From here, it is a matter of working out how many days you plan to work in the coming 12 months and figuring out what would be a meaningful and reachable per day increase. For example say your current baseline has you at $3,000 a day. Taking into account a basic increase of up to 10 percent—which you should be able to achieve in any given year without a bonus reward—that brings your new projected baseline to $3,300. Now if you think you and the team can bump that up by $500 a day to $3,800 over the course of 160 days in the next year, you're looking at a real increase above baseline of $80,000 for the year.

Now the question becomes how much of that $80,000 do you want to share with the team? You have a lot of discretion here. It needs to be an amount that is meaningful enough to be genuinely significant when it breaks down to the individual payouts, but it should not exceed your overall staff expense ratio. If that ratio is 25 percent for example, then you can consider up to $20,000 to be available for disbursement. Divide that by the 160 days you intend to work and you now know that for every day you spend in the office, another $125 goes into the reward pot.

Now you have the information you need to go forward each month. If this month you are working 15 days you want to make sure you hit at least your baseline of a $3,300 per day average ($49,500) before any funds become available for payout. And you know that, based on the $125 a day rate, that the maximum payout available for the reward program is $1,875. (Note that these numbers are based on the doctor's hours, so it is your responsibility to put in the days you planned.)

This is an easy system for the team to track, which is what makes it a simple and effective way of guiding behaviors. They know the payout at stake and they can tell at a glance by following revenue numbers day-by-day how close they are to putting that amount into play, which creates a sense of urgency and focus if they see the practice is falling off pace.

2: Select the Next Focus for Growth

The purpose of establishing a bonus program is to encourage and reward growth, but you don't want the team focusing on pursuing growth in one area if it means sacrificing the level of mastery they have already achieved in the fundamentals. So when you have that real increase—to $3,800 a day in our example above—you can feel confident in disbursing one-third of the bonus payout you have set aside because you can be confident that the competency essentials of appointing and collecting are progressing well. Once you know you have protected the foundation of practice success, you can now look ahead to protecting the future and rewarding further growth. Look at the key drivers of growth, select the ones you want to focus on —factors like monthly new patient flow, case acceptance rate, and hygiene retention—and once again review your averages over a representative three months. This will give you a jumping-off point for establishing realistic new levels in these important drivers of success.

3. Set the Target Payouts

Now that you have indentified the growth factors that you want to stress, you need to put numbers to your goals and determine how much of a reward you are willing to share for how much improvement.

In other words, once the practice has met its basic economic improvement goal and achieved one-third of the available bonus, you can make the rest payable on a sliding scale. For example, if a focus this quarter is on new patients, and you have been averaging 17 a month, you could make the other thirds pay out upon reaching 25 new patients accepted. You can set similar benchmarks for goals such as cases over $5,000. These specific goals need to be tracked monthly but they should be established quarterly because that's the ideal term for each item on your growth agenda—any more frequently and it becomes too hard for the team to change gears. So make these growth factors part of the discussion of your quarterly meetings. At your annual meeting, celebrate your successes then revisit your funding guidelines to take into account your improvements and to establish a new baseline. After all, a rewards program is never about maintaining a status quo, it's about growth and challenge, so the goalposts have to keep moving in order for it to have real purpose.

This is where ownership begins ...

There are still many other variables and special considerations that can come into play when devising a rewards system—many more than we can cover here. But if you follow this basic three-point framework you can be well on your way to establishing a program that truly works.

This is a framework that is designed to create an ownership mindset. In fact, you'll know your program is working when the team starts holding you accountable. For many dentists who take this approach, the happiest day is when they realize they are no longer pushing the staff to focus on the right things—instead, the team is pushing the doctor to keep up with that quarter's growth objectives. That's what real team ownership is all about, and that is what a well-crafted rewards program can deliver.

(Click this link for more articles by Imtiaz Manji.)