A rational approach to practice staff bonuses

ByJohn B. Pinto

As I've written and lectured for more than 3 decades, the basis for making a management decision — after ethics and legality are cleared — is this simple discrimination: "Is it more profitable to take 'Action A' or 'Action B?'" Let's see how this applies to staff bonuses.

Clearly, the reason we bonus staff is to elicit the desired performance: harder work, greater attention to detail — an alignment with the owner's interests. Many practices skip right over this core motivation and provide bonuses where they are unlikely to have the desired impact. Here are a series of observations, recommendations and pearls on the role bonuses should play in your overall compensation methodology.

Any "standing" bonus (for example, $50 per cataract surgery pooled and split up between staff, month after month, forever) very quickly becomes an entitlement and no longer evokes performance improvements. Such programs, if present in your practice, should probably be phased out and replaced by a more dynamic approach.

Bonus programs should be revamped at least quarterly (monthly is better in most settings) to keep things fresh and to manage expectations. Example: Announce in June, "We will put $10 in the pot for every patient visit in November 2009 in excess of our 2008 baseline, and divide this equally among all staff who work the entire period; half-time staff get a half share."

Bonus programs don't necessarily have to be indexed. Another approach I've found highly effective is a discretionary bonus program. Under this system, you would provide each department manager in your practice with a bonus pool sufficient to pay up to about $100 per average staff member per month, with super-performers getting more, underachievers less. This is budgeted in advance and distributed monthly at the discretion of each manager with the administrator's oversight.

Managers such as optical department heads or ASC nurse-directors are (or should be) "profit managers." This is distinct from people such as your practice's tech manager or marketing director — these workers are "cost center managers" or "process managers." Profit managers should receive a bonus indexed to profit from their discrete operating unit and have something in the range of 20% of their total wages coming from this source. An example might be that each quarter your ASC director would receive 10% of the profits in excess of the previous year's baseline. An extra $40,000 in quarterly profits would yield a $4,000 bonus award.

Cost center managers such as reception/patient accounts and technical department heads can receive their own discretionary bonus from the administrator (from an annual budgeted bonus pool under his or her control) for performance, subject to managing partner's reasonable oversight.

Experience shows that the best administrators are those who are motivated by their personal bottom lines as much as by the practice's rosy financials. It's useful to align the interests of your executive director, administrator or office manager with the interests of the doctors. That needn't just be a profit index. For example, if the practice is seeking in the next year to add new technology, bring a new satellite on line and recruit a new partner-track surgeon, chances are that profits will actually falter, perhaps sharply. In such cases, I would index to the achievement of measurable operational and perhaps revenue goals, and not resort to profitability indexing until the development work is done and the metric of success reverts back to raw profit.

It's likely that your practice's payroll costs as a percentage of revenue will rise inexorably in the years ahead. Bonus systems, used intelligently, can keep baseline payroll costs as low as possible. By shifting relatively more staff compensation to a bonus for performance — both theirs and the organization's — you can at least mildly buffer the highs and lows of the practice. A well-crafted bonus program allows you to rationalize payroll costs down seasonally and motivate your most critical core staff.

One final point: Bonus programs should not be a substitute for verbal praise from managers and providers to staff. Indeed, the most valuable and motivating reward for most of your workers is simply a few moments of your time each day citing their most obvious accomplishments.