As business owners and managers, you are constantly working to get the best performance out of your teams. How can you keep them focused on the most important tasks? How can you impress upon your team the importance of being patient and gracious with patients, even when a patient is being difficult?
Practice owners often feel that financial incentives should be an effective tool for motivating their staffs. After all, owners are keenly aware of the link between their performance and their income. And for most owners, the possibility of earning more money than they would have as employees is a big reason they decided to own their practice. For this reason, many owners assume their staff will respond to financial carrots just as they do.
However, the research on motivation paints a cloudier picture. Daniel Pink’s book, Drive: The Surprising Truth About What Motivates Us, cites research showing that while financial incentives do drive better performance in rote tasks (like making widgets), money can have a negative impact on creative problem solving (like balancing the best lens technology against a patient’s actual budget).
In my experience working with hundreds of practice owners, bonus plan results are all over the map. Some owners see their staff constantly striving for improvement over the bonus. Others feel their staff just don’t care. Many practices excel with no bonuses at all.
Whether you are revisiting your current bonus structure or considering putting a plan in place, here are some key questions to help your decision:
1. What am I trying to improve? In general, the goal is going to be either a key result area or a new habit. A key result area might be revenue growth or better revenue per exam or keeping the schedule full. A new habit would target behaviors like selling second pairs of glasses, asking for an annual supply purchase, or recommending screening photos. Bonuses for new habits ought to be in place for short periods – 90 days or so. You only want it in place long enough for people to form a new habit (of recommending second pairs, for instance). Left in place permanently, these goals can distort your staff’s behavior (in our second-pair example, this might mean underselling the first pair of glasses to get a second pair sale). Key results area goals can be permanent, and often have the advantage that everyone can participate. Be mindful of having bonuses for just one person or department, lest other team members feel left out. I like gross collected revenue growth as a goal because every role in your office affects it.
2. What is the goal? A good goal is one that will force you and your team to change and improve the way you do things. If you always reach the goal, your bonus plan is effectively a raise. If you never reach the goal, you’re probably asking too much. A target your team has a 50/50 chance of reaching will stretch them without discouraging them. In most cases, the minimum improvement should be 6% (especially for revenue). But if you have reason to expect a big improvement, don’t shy away from an aggressive goal. Start-up practices might aim for 40% or 50% revenue growth. And be sure the participants in the plan have some control over the growth area. For instance, I don’t recommend judging the entire office on controlling cost of goods, because usually only one or two people control the purchasing.
3. What is the payout? Be sure to calculate how much you will pay out for expected results and the best-case scenario. Many bonus plans pay out a reasonable amount if individuals or the team just ‘meet’ their goal but end up being overgenerous if the team dramatically exceeds expectations. And be sure that you, the owner, will be earning more net of paying out the bonus. Bonuses can be a great way to let you staff share in your success as your practice grows, but there are cases where the staff earned more, but the owner earned less.
4. Would you get the same results by just setting goals and measuring the results? For many practices, just having goals is enough to tap into the staff’s competitive juices and drive results. As the adage goes, you get more of what you measure. As a practice owner or manager, bonuses are just one tool you have in your tool kit to incentivize change in your employees’ behaviors, reward extraordinary efforts, or let employees share in the practice’s success. If you choose to have a bonus plan, use these rules to be sure it’s a win-win for owners and staff alike.
Nathan Hayes is the Practice Finance Consultant for IDOC. He is a 10-year veteran of the eyecare industry, working at HMI Buying Group and Red Tray, Prima Eye Group from its inception and now IDOC. In his current role, Nathan helps OD practice owners manage their overhead, grow practice revenues and profits, and maximize their personal income, free time, and professional satisfaction. For questions or comments about this article, please contact firstname.lastname@example.org.