[MASTERY] Pay for Performance

PAY FOR PERFORMANCE

Our recent series of e-newsletters has presented the first four elements of our breakthrough practice management technology Valuocity(C). 1) Move to the Core, 2) More with Less, 3) Manage by the Margin, and 4) Management by Accountability. All past newsletters containing the Valuocity(C) material and methods are located at our website (MasteryCompany.com) in the Library.

This newsletter will focus on the next element, Pay for Performance. And like all previous eNewsletters, this will be a basic overview, sufficient enough for the reader to get the essential tenants.

In most industries, employees receive increases in compensation based on performance; performance of the company, performance of their team and performance of the individual. Not so in dentistry. Raises are primarily based on title, tenure and how much can be extracted from the dentist when he or she is the most vulnerable.

When I worked in the corporate sector with Intel, Boeing, GE Capital and a number of hospitals and hospital systems, as a new employee was interviewed by HR for a job, it was explained how their beginning compensation was determined, how an employee warrants a raise, and how a raise was calculated. No mystery. No hiding out. No blackmail. No intrigue. They accepted the job on those terms or they didn't.

Given today's economy, given how the economic conditions look to be unfolding in the future, and given the level of performance required from staff now, we are working with our clients to install Pay for Performance structures in their practices.

There are two things to expect as you move from your current compensation model based on "what the market will bear" to Pay for Performance. One is some serious push-back. Staff has never had their compensation increases based on practice performance, team performance or individual performance. They won't like it. Second, it forces you to do what you should do as an owner and manager; be straight with your staff, make strong requests, and set clear goals for each staff member.

We suggest that our clients be open and clear with their staff in setting up this Pay for Performance structure and that this structure be applicable across the board. This will eliminate those dreaded conversations that occur annually with each and every staff person, leaving the dentist to make individual decisions based on unsubstantiated assumptions such as the current status of the employee market, rumors about how much this position is being paid in the community, along with feelings, emotions, and fears.

Here are the are basic tenants of our Pay for Performance Compensation Model:

The maximum raise any employee can earn for the year is 5%*. This does not include bonuses when financial targets are exceeded and budget targets are met.
The amount of the raise will be determined by three factors.
- The amount of money available in the practice for staff raises as determined by the margin**.
- The staff member's performance and fulfillment of her or his Accountabilities.
- The staff member's alignment and behavior in accord with the Core Values of the Practice - Core Value Behaviors.
Both Accountabilities and Core Value Behaviors will be scored during two reviews; a Performance Review, followed six months later by a Salary Review. The Performance Review occurs on the anniversary date of hire.
Accountability and Core Behavior goals will be set at the Performance Review and their achievement examined and once again scored at the Salary Review.

Now, one size does not fit all. The Pay for Performance model presented here is open to individual practice modification. This eNewsletter does not consider cost of living increases or what portion the scores (Accountability and Core Value Behaviors) in the Salary Review play in determining the raise available. Much of this model is individually constructed on a practice by practice basis, but the basic tenants are presented here.

Our next eNewsletter will complete this series on our Valuocity(C) technology. The topic will be on marketing, Market Health not Beauty.

Dr. Marc Cooper
The Mastery Company
MasteryCompany.com

* The 5% raise ceiling may vary from practice to practice but this is generally the amount found that works with many of our clients.

** The margin is the measure of practice performance. The amount of money within the margin allocated for raises is determined by the dentist- owner. Some money from the margin goes to capitalization, some for ROI to ownership, the remainder goes to staff raises. The percent of the margin allocated to capitalization, ownership ROI and staff compensation is practice specific and can even vary from year to year.

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Dr. Marc B. Cooper
President and CEO
The Mastery Company

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President
Sahalie Press