Optometric Management Tip # 551   -   Wednesday, September 26, 2012
Getting Rid of Bonus Programs That Don't Work

Tip #549 was about staff bonus programs that don't always achieve the business goals they were designed for. At the end of the article, I wrote that I would make the next tip topic about how to stop a bad bonus program. I forgot about that pledge when I wrote Tip #550, but an alert reader reminded me so I will cover it today. I appreciate the feedback!

Tip #549 presented several reasons why bonus programs may not work as well as we might have hoped. In many cases, there is not much correlation between the work required and the reward. In other cases, the incentive is taken for granted and old behaviors creep back into place. Some bonus programs cause staff to be competitive or to resent the success of others. Whatever the reason, if the practice owner simply takes a bonus away, staff morale will likely suffer.

Don't reduce benefits
The most important thing about ending a bonus program that has been in place for a long time is to give back something of at least similar value. Once employees become accustomed to a benefit, whether it's financial, a preferred schedule or other perceived perks, they do not like to lose it. Fortunately, it is not that difficult or costly to find something you can offer instead.

Several years ago, I wanted to drop all bonuses and incentives and just return to paying good wages for a job well done. Before announcing that we were dropping the bonus program, I calculated the average bonus payment per month received by each employee over the past six months. I converted that dollar amount to a per hour figure for each employee. It was different for each staff member but it amounted to roughly 50 cents per hour. I told the staff that we were dropping the program because I did not believe it was working well, but that each person would receive an hourly wage increase determined by the average amount of their bonus history.

This change was well received and staff morale was fine. It seemed quite fair to my staff; maybe even generous because they would earn the same amount without the risk of not making the bonus. When you think about it, however, the change really did not increase my cost. I still paid on average the same payroll I was already paying.

If you want to change the bonus program, rather than drop it, you can simply try to make the new program have the same potential for rewards as the old one.

Keeping the program fresh
You may want to make your bonus programs have a preset expiration date so it is understood by all. I find quarters of the year to be a good time interval because it evens out random business cycles and it results in a larger check that monthly periods. This approach is actually better because it allows you to promote different metrics, services and products each quarter, which stimulates new behavior and interest.

Update on my spiff program
Many readers emailed me to ask if the $10 spiff program I implemented this quarter for selling a pair of digital progressive lenses is paid to the individual staff members or if it is accumulated and distributed to all. It is individual; those who sell more earn more. I'm trying to see if a high degree of correlation between the work and the reward pays off and in my experience it makes a big difference. We do not have a program going on right now for the front desk staff, although we have had some in the past. It has not caused any hard feelings. Sometimes you just can't tell until you try it.
Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management