Orthotown December 2014 - (Page 28)

ﬁnance // feature by Justin Harding Our clients frequently ask us with the highest of hopes to design incentive plans for their practices. They expect that these plans will encourage good work habits among their staff and motivate employees to work toward the practice's larger goals. Offering incentives to inspire employees may seem like a good idea on the surface, but all incentive plans carry a very high risk of failure. They can lead to entitlement, apathy and even resentment. Given the very nature of incentive plans that seems odd, doesn't it? It's a simple concept meant to generate positive motivation through recognition and reward. Incentive plans are always introduced with good intention. So why are they at such a high risk of failure? It's because even the simplest of plans require many considerations that are often overlooked during their creation, and even the most detailed programs can ﬂop as a result of poor execution. What are you trying to achieve? To build an effective incentive plan you need to formulate an overall goal. Are you trying to increase revenue or income? Do you want a better ofﬁce culture? You must deﬁne the goal before you deﬁne the method for reaching it. Once you know what it is you want to achieve, you can then approach the speciﬁcs. Sometimes when clients ask us to design an incentive program, they aren't aware that their employees' salaries are already higher than they should be. If a practice starts offering incentives when its staff is already overpaid based on production numbers, the practice may soon ﬁnd itself in a precarious ﬁnancial situation. Here is a quick way to determine a pool of dollars available (or not) for an incentive plan. Set a benchmark for staff salaries as a percentage of your net collections, say 24 percent. Don't cheat. All taxes and fringe beneﬁts need to be included in the metric. If you're not there yet, then you're 28 DECEMBER 2014 // orthotown.com not a candidate for an incentive plan. If you're already there, congratulations! Now, at whatever interval you intend to use to calculate your bonus pool, multiply your collections by your benchmark, subtract your already contributed payroll and the resulting amount is your available bonus pool. Here's an example: (24% in this scenario) $100,000 $24,000 $22,000 MONTHLY CASH COLLECTIONS BUDGETED ALLOWANCE FOR STAFF COSTS ACTUAL STAFF COSTS FOR THE MONTH $24,000 BUDGETED ALLOWANCE FOR STAFF COSTS - $22,000 ACTUAL STAFF COSTS FOR THE MONTH = $2,000 FOR BONUS DISTRIBUTION Is it realistic? As you are deﬁning the method for reaching your goal, you need to determine if it's actually realistic for you. Let's assume you want to increase revenue by $10,000 a month by collecting more money. However, let's assume your practice is collecting at 96 percent, on a monthly A/R of $100,000. In this example, you would be asking your team to collect an additional $6,000 that may not exist. Once the team ﬁgured out the goal was unreachable, they would approach the plan with apathy at best. Now that you have a clear and realistic goal for your team, you must assess whether or not the means to motivate them exists. The point behind an incentive plan is to create a win-win scenario for all the players. That is to say, you and your team should beneﬁt mutually in the attainment of a goal. To reach that scenario, http://www.orthotown.com

Table of Contents for the Digital Edition of Orthotown December 2014

Orthotown.com Highlights
Wired for Success: Orthodontics for Adults
The Future of Our Profession, a Resident’s View
Intraoral Scanners
Corporate Profile: Burleson Seminars: Cultivating Success with Proven Strategy
Creating the Win-win Incentive Plan
Case Presentation: Interesting Cases with Teeth in the Wrong Places
Does Your Message Resonate with Adult Patients?
New Products
An Arkansas Office Blast from the Past
Ad Index

Orthotown December 2014