By: Howard Farran, DDS, MBA, MAGD
Publisher, Dentaltown Magazine

Howard Farran, DDS,
MBA, MAGD
Publisher,
Dentaltown Magazine

Christmas bonuses are very ineffective.

Don’t look so shocked. Sure they might briefly make your staff happier and motivate them just a little bit more for maybe a few weeks but what about the summer months, or even the autumn months? What’s motivating your staff then? If motivating your staff is your primary reason for handing out bonuses, why not do it monthly? After all, you and your staff pay bills monthly, not annually, so perhaps offering monthly bonuses are far more motivating to get people to work a little harder and smarter to hit your office goal each month, rather than wait until the end of the year.

Before making monthly bonuses available, your staff needs to know what goals need to be reached. Make reaching the monthly goal a team effort. The staff should all be working together to meet the office goal anyway, so why not make it a blatant and cohesive task. This being said, I do not recommend having a separate bonus for production and one for collection. This will only separate your staff into two factions – “front and back” – the front being those who are responsible for collections and the back being those who handle production. If you keep your team focused on the practice’s monthly goal, not only will they achieve it, but they will become stronger team players in the process. Bring your daily and weekly production status to the morning huddle. Talk about where you are at and where you need to be in terms of meeting your goals. Try to put the goal into realistic terms: Six more crowns, 10 more FMXs, four more wisdom teeth extractions! Don’t wait until the end of the month to start looking for the necessary treatment in your existing patients’ treatment plans… keep your staff aware and motivated from the first day of each month. For example, you can make sure that any staff member is able to print the production from your practice management system at any time so they can see the updated numbers for each month.

Encourage your staff to utilize the tools you already own, such as the intra-oral camera. Take a new photo of that crown that has been in the treatment plan since last year and review your charts the day before to know which patients have existing unscheduled treatment. You should also know the day before which patients need to schedule their recall appointments and who is due for X-rays. Your goals can very well be met and exceeded from your existing patient base if everyone diligently works together, educating the patients and filling the schedule.

Once the goals are attained, then it’s time to dole out the well-earned bonuses. Here is how the bonus system works at Today’s Dental:

The bonus dollars are allocated to patient services (front-office staff), treatment assistants, hygienists and dentists. Only full-time staff members who have passed their probationary period are eligible. The bonus monies are issued on the 10th of each month, based on the previous month’s adjusted production. Adjusted production is your net production calculated by your gross production minus all adjustments. Some examples of production adjustments are insurance write-offs and with-holds, courtesy and professional adjustments, senior citizen and payment-in-full discounts, employee discounts and any coupons you are currently honoring. The management team sets the goals each year based on the previous years’ production/collection numbers along with the monthly production/collection and net income goals, keeping in mind your breakeven number. You always want to make sure the lowest goal amount is higher than your breakeven number. The bonus system is based on three goal levels that increase in $5,000 increments. The bonus distributions we use for each goal level are:

    First Goal = $100 to each staff member
    Second Goal = $200 to each staff member
    Third Goal = $300 to each staff member

Typically when I talk about the bonus plan, dentists come back with questions on how to calculate the breakeven number or how to establish the goal amounts for their practice. Below is an example of the Excel document we use to calculate the breakeven number as well as set the yearly goals.

Step 1 (Monthly Average from P&L Statements): Fill in your monthly average numbers for collections, total wages, lab fees, sundries, and all other overhead expenses (lines 1, 2, 3, 4 and 6). The values for total variable expenses (line 5), total fixed expenses (line 7) and net income (line 8) will automatically calculate the totals for you. The values for lines 5, 7 and 8 are set up with a formula in an Excel document, which you can download from the link below.

Step 2 (Breakeven Calculation): Copy the same numbers from Step 1 into lines 1, 2, 3, 4 and 6 to figure out your breakeven calculation. Adjust the collection number in Line 1 until your net income number in Line 8 is at zero. This shows you what your breakeven number is, based on your overhead, each month.

Next using the information you entered into the spreadsheet, you can now decide what your three production goals for the year should be. Remember to keep them realistic, but be sure to increase them on an annual basis to ensure practice growth. Keep in mind unattainable goals are demoralizing to the staff, defeating the purpose of implementing a bonus system.

Here is a link to the goal calculation spreadsheet that can be downloaded to your computer from www.dentaltown.com. You will need Excel on your computer in order to open and use the document after you have downloaded it:
http://www.dentaltown.com/Downloads/GoalCalculationTemplate.xls

Taking the time to set goals each year will not only motivate your staff, but it will empower them to “know the score.” They will feel more like a partner than an employee, and the rewards will be two-fold, benefiting the practice as well as the entire staff. Having everyone on the same page by knowing what you are producing each day of every month is a winning equation for a successful practice.

Step 1: Monthly Avg from P&L Statements
1. Collections:
2. Total Wages
   (this includes all Staff & Doctors + all Benefits)
3. Lab Fees
4. Sundries
5. Total Variable Expenses
6. All Other Overhead Expenses
   (Rent, facilities costs, marketing, and misc.)
7. Total Fixed Expenses
8. Net Income

 
$100,000
$50,000
  
$8,000
$7,000
$15,000
$10,000
  
$10,000
$25,000

 
%
50%
  
8%
7%
15%
10%
  
10%
25%

 
$75,000
$50,000
  
$8,000
$7,000
$15,000
$10,000
  
$10,000
$0

 
%
67%
  
11%
9%
20%
13%
  
13%
0%