By: Dr. Travis Campbell
Do Bonuses Work?
Most high-end offices (1.5M+) work on some sort of bonus or incentive program. Many corporations also run on some form of incentive or bonus program as well. For the sheer amount of usage of bonuses, they must work. So, why do so many dentists report that bonus programs didn't work for them?
It all comes down to making sure the entire program is set up well. It’s not just the bonus that matters, but the reasoning behind it, how you manage it daily, how you use it to motivate, and whether the math was set up correctly at the beginning.
Basically, bonuses work well when they are set up and managed well. They work poorly or fail when they are not set up or managed well. I’ve managed a bonus program for my office for over a decade, and while it has had some challenges and required modification, it overall has been one of many reasons we are doing so well.
Bonuses Become Expected
Yes, they can become expected and lead to a sense of entitlement. This usually happens when the bonus program was either not set up well initially or was not managed well over time. The entire goal of an incentive program is to incentivize people to work a little harder, and to take that one extra step to make the office function just a little bit better.
If you create a financial bonus, but then do not talk about it daily, the program will likely not provide the results you were looking to achieve. Bonuses are meant to be the carrot on the stick, to provide a reason to work harder. This does require a level of daily discussion in some form to make sure the incentive is motivating extra work.
Business Numbers and Bonuses
How much should one provide as a bonus? Think about your overall numbers on your P&L. Payroll should be under 25% for a dental office. Bonuses are meant to help the business improve on a profitability basis. Therefore, the total bonus provided must be under 25% of the growth or improvement (or else the business does not become more profitable).
This is why many bonus programs provide 5-15% of the growth as a bonus/incentive to the team. As you pay out more in bonuses, your total payroll percentage goes down.
The other thing to think about is how dentistry is different from most businesses. Most businesses have low fixed expenses and high variable costs. Dentistry is the opposite; we have very high fixed expenses and very low variable costs.
This means as we do more dentistry in a given time period, our profitability can skyrocket. It also means if we are not producing/collecting enough per month our fixed expenses can be a major reason for stress or failure.
Management
One part of setting up a good program or system of any kind is planning for the maintenance of said system over time.
Bonuses can only be static if most other factors do not change as well. An office that has plateaued may not need to be modified much, while an office in growth mode may need a lot of modifications. If you are going to setup a bonus program, make sure to account for future changes such as new team members and higher collections amounts. As the office grows and expenses change, the bonus system needs to change with it.
Motivation
The main reason behind bonuses is to motivate and reward action from team members. To this point, bonuses need to be both achievable and reliable. Attainable means not setting the goal out of reach, meaning they need to be able to achieve it semi-regularly. If it becomes a rare occurrence, bonuses can turn into demotivation tools.
Reliable means that the team members can see it, see progress, and feel confident that if they reach the goal, it will be paid. The challenge I see often with bonus programs that do not work is they are either overly complex (and the team has no idea whether they are on track), or the owner always seems to find some way to decrease or not pay the bonus (team loses trust).
Tracking
Goals need to be easy to understand and tracked both monthly and daily. If the team cannot easily see where they are on the track towards the goal, the bonus program will not generate the desired progress. This means either talking about it daily (like a morning huddle) or having a daily updated chart displayed somewhere the entire team walks by every day (such as in the break room).
Pathway
If the team can see and understand the goals, they then need to be able to know what THEY can each PERSONALLY do to help reach the goal. Having a goal is no use if the team doesn't know what changes they need to make daily to help reach the goal. Ex: Hygienist might be given the goal of helping increase both perio and fluoride acceptance for their patients. Tracking that acceptance rate can help see whether the changes or efforts they are making are worthwhile or need to be modified.
Types of Bonuses
All of the above are necessary before instituting a bonus program if you want it to be successful. It is not just about the bonus itself, it is about how the program can be used to help educate and motivate the team (and reward their efforts).
There are several basic types of benefits. Here is a snapshot of various options:
Grab Bag - Daily or weekly goals, if met, each team member gets to grab a gift card from a bag. Gift cards would be various amounts, so it becomes a fun game as well.
Production/Collection Based - Set a daily, monthly, weekly, or quarterly goal and then provide a bonus when they reach said goal.
Task Based - If you want specific new tasks completed, setting a goal when they are done can help. Ex: Bonus $X every time you sell an Invisalign case or an implant.
Expense Based - BAM (Bare-Ass Minimum) is the most widely used bonus program of this type. You take the monthly/quarterly expenses you have, and then provide a percentage of anything collected over that amount.
Overall, though, bonuses are far more than just the bonus itself. It is the entire system designed to help educate and motivate the team to be more productive. Bonuses are designed to reward people, so they must be freely and happily offered (and if you set the math up right, the owner benefits greatly when they do give out a bonus).
