How to implement a performance-based compensation policy
REBECCA L. JOHNSON, CPOT, COT, COE
In my consulting work, I often find employers who are challenged by mediocre staff members who feel entitled to a pay raise every year, regardless of performance. In addition, there are excellent, loyal employees whose salaries have crept up through the years to make one more percentage increase difficult.
My advice? Implement performance-based compensation instead of traditional raises based on tenure. Here are five steps to implementing a performance-based compensation policy:
1 Determine your overall practice goal
Set a realistic practice goal for each quarter based on historical numbers and projected growth. For example, if your Q4 2013 production was $300,000, your goal for Q4 2014 could be $315,000, based on a projected 5% increase from 2013.
2 Set individual staff goals
Think about the role of each position in your office, and create four to seven individual goals based on your expectations of each staff member. When creating goals, consider how each position generates revenue for the practice. For example, technicians may be responsible for promoting retinal photography packages or annual contact lens supplies. Clearly articulate your expectations to your staff members, and what they can do to exceed your expectations.
3 Measure and rate employee performance
To measure performance, I recommend a rating scale of 1 to 4:
1 = barely gets by;
2 = meets expectations;
3 = exceeds expectations; and
4 = clearly outstanding.
The majority of employees will average a 2.0 to 3.0 rating. (See “Goal Chart” for examples.)
4 Review employees every quarter
Hold quarterly one-on-one reviews with each employee. These meetings give you a chance to encourage an employee who rates high and coach an employee who has a low rating. During the review, discuss each area of accountability, where the employee is succeeding and areas that need improvement. Determine whether the employee needs additional training or resources to help accomplish his or her goals.
5 Align raises accordingly
This is where entitlement compensation ends. Pay increases and bonuses should be tied directly to the ratings and only given when the overall practice goal is met. By aligning raises and bonuses to individual ratings, employees receive fair compensation based on their participation toward meeting the practice bonus.
|Goal||Appointment schedule utilization||Clean claims and quick follow up for prompt payment||Increase number of AR add-ons||Promote annual contact lens supplies|
|Measurement||Percentage of appointments utilized||Percentage of insurance claims that are 90+ days old||Increase in AR sales||Increase in contact lens supply sales|
|Rating scale||1 = > 80%
2 = 80%
3 = 85%
4 = 95%
|1 = > 10%
2 = 10%
3 = 5%
4 = 0%
|1 = > 70%
2 = 70%
3 = 75%
4 = 80%
|1 = > 55%
2 = 55%
3 = 65%
4 = 75%
Review-based compensation creates a positive environment to reward success. Employees find higher job satisfaction because they know exactly what is expected and how to make the “win.” OM
MS. JOHNSON IS THE FOUNDER AND PRESIDENT OF EYETRAIN4YOU AND THE EXECUTIVE DIRECTOR OF BUSINESS SERVICES FOR GPN. E-MAIL HER AT REBECCA@EYETRAIN4YOU.COM, OR SEND COMMENTS TO OPTOMETRICMANAGEMENT@GMAIL.COM.