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MEMBER, ACADEMY OF DENTAL CPAs

October 4, 2005

Bonus Incentives
As you well know, there are as many bonus plans out there as there are dental consultants. You know the old saying, Everybodys got one! It seems like I go through an unending discussion at least once a year with a dentist on the merits of a particular bonus plan that he or she has recently heard about. My fellow Academy members have the same experience. The majority of us are not crazy about bonus plans. The core feeling is that it does not make sense to pay a bonus for what the employee has been hired to do anyway. However, that is not to say that all bonus plans are a bad idea. Sometimes they can be very effective if the right plan is installed in the right circumstances. Diane Glasscoe wrote a very good article on this subject for the February 2005 issue of Woman Dentist Journal. I would think that PennWell would be happy to send a reprint upon request. The first thing that Ms. Glasscoe expounds upon are four myths about bonuses: 1. Bonuses always motivate . Not true. Bonuses that motivate are achievable. If you set the bar too high, the bonus plan will backfire on you, causing morale to drop and motivation with it. 2. Extra pay for extra work . Most employees have full lives outside of work and resent infringement on their time. They do not feel the same way about the practice as the dentist owner. If you expect them to work into lunch or after normal hours on a consistent basis, you will create resentment. 3. Staff wont expect the bonus because it has to be earned each month . Ha! That is so wrong. Staff expects the bonus to kick in every month. When it does not, the blame game starts. Why did the dentist take a vacation? What is wrong with the scheduling assistant? You see, there is an assumption that this is a team and that the good staffers will force the bad staffers up to par or insist that be discharged. What happens when the dentist disagrees with who is good and who is bad? What happens when the staff decides that it is the dentist who is the bad guy? I had a situation where the staff was going nuts because the dentist was giving substantial discounts to his pet patients. 4. If I have a bonus plan, I wont have to give raises . Potential employees may be turned off by the low pay scale, even though the history of the bonus has been above average. Exceptional employees could be turned off by offers that seem low and unstable, especially when they learn the bonus varies from month to month. Dentists earn a good living and can suffer through down times. Some staff live from paycheck to paycheck and need a guaranteed amount to sustain their lifestyle. Many cannot justify the risk that comes with a bonus plan and low pay.

Bonus disadvantages include: 1. Once Page 2 the plan is set, it needs to be attainable. The plan must be monitored and adjusted. 2. Bonuses do not compensate for poor schedule control. 3. Staff members come to expect the bonuses every time. 4. Bonus incentives should not be a way to prop up weak pay. 5. Some doctors become unhappy when the financial impact of a bonus system becomes a reality (I have seen this happen and heard the howls of outrage when the doctor wanted to adjust to make it less costly to the practice). 6. When production, collections, or both are part of the bonus formula, scheduling coordinators may delay certain procedures or delay posting payments to the next month if the goal has been met. According to Ms. Glasscoe, a properly designed bonus plan should: 1. Eliminate complaining about occasionally working into lunch or after hours. 2. Cause employees to police themselves and work for the common good. Slackers are out! 3. Bring immediate gratification for hard work. 4. Ease difficulty in establishing raises each year (Note that the bonus plan is not a substitute for giving raises)! 5. Keep the schedule full.

Sidney L. Jacobson JULY 2005 compared to JULY 2004 Fees collected Operating expenses Net before owners costs JULY 2005 Net production New patients $48,077 17 Down 11.36% Up 8.77% Yeartodate Up 4.37 % Up 5.56%

Down 40.74%

Up 3.37%

JULY 2004 $56,550 24

Year-to -date 2005 2004 $420,870 154 $402,717 172