9 hard-learned lessons about employee compensation in the dental practice

Do you struggle with making payroll decisions? Here is some practical advice.

In the course of my travels, I’ve asked countless practitioners what insights, hard-learned lessons, and regrets they’ve had about building a successful dental practice. This acquired wisdom has been about every aspect of practice management, including employee compensation.

The following are nine of those hard-learned lessons.

More than anything in your practice, your investment in support staff is likely to pay the highest dividend. Dentists need to think of it as just that an investment, rather than an expense. Consider the job of receptionist. Dentists who are focused on keeping a lid on expenses might view this position as an entry-level job and hire someone with minimum qualifications at the least possible salary and benefits. Dentists with an investment viewpoint would look instead for a highly qualified, top-notch receptionist and be happy to pay a higher-than-average salary along with generous benefits. The return on investment, in this case, would be a smooth, stress-free front desk operation with high levels of patient satisfaction. It’s a difference that makes a difference.

If you want to retain exceptional employees, expect to pay a bit more. The difference between “average” and “above average” is incredibly small compared to the value such star performers bring to your practice. Steve Jobs described the difference between an average programmer and a great programmer as being at least 25 to 1. Given such odds, paying 30 percent more for talent seems like a bargain.

If you underpay your staff, you will attract either less competent people whom you probably will let go or those who are just starting out, who will learn all they can from you and then move on to better-paying jobs. Either way, your salary policy will generate more staff turnover than loyalty.

“Don’t give raises to marginal employees,” says Jeffrey J. Denning, whose firm, Practice Performance Group, is located in La Jolla, Calif. “Raises never motivate workers to improve. To the contrary, a raise in pay signals the employer’s satisfaction with the status quo. Further, if the employee is terminated and sues, she has simply to point to the history of pay raises to show she was doing a good job. Judgment for the plaintiff.”

“There is no such thing as entitlement pay, only merit pay,” says Amy Morgan, dental consultant and CEO of the Pride Institute. “All aspects of compensation must be an acknowledgment of an employee’s enhanced performance. Team members retain their jobs and raise their compensation when they meet or exceed the dentist’s expectations, which produces the higher profits that make increases affordable.”

Aside from cost-of-living salary increases, base raises on merit to reward those who do above-average work, such as a business assistant who keeps accounts receivable within an acceptable range or a receptionist with amazing communication skills who can multitask, remember patients’ names, and handle problems with finesse. Merit-based raises in these cases, not only encourages others to excel in their jobs, but also demonstrates what they’re missing by not performing well. For example, if the average pay increase is 3 percent, the above-average employee will merit a pay raise greater than 3 percent (perhaps significantly greater), an “average” employee will receive 3 percent, and the below-average employee will receive less than a 3 percent (and perhaps no) increase.

“Many dentists are overly concerned that one or more of their top employees has reached or surpassed some arbitrary ceiling for their position,” says management consultant Dr. Charles Blair of Belmont, N.C. “We’re more concerned with the effectiveness of individual employees in helping the practice grow profitably and thus focus on the ratio of staff payroll costs to practice gross income. As a result, we often find that paying top dollar for truly stellar employees can result in a more profitable practice.”

If your practice relies solely on a compensation and benefits package to attract and retain loyal employees, over time there’s a good chance that you’ll be caught in a bidding war for the talent you want. Don’t overlook the importance of intangible rewards such as recognition and appreciation for good work, more autonomy and/or authority, a voice in decisions that affect their work, a pleasant workplace where camaraderie and good cheer abound, and, most important, a positive work environment where staff feel valued and respected. Such “psychological paychecks” have an intrinsic value that hard currency can never touch.

Money motivates but only up to a point. If you gave every employee a $1,000 raise starting tomorrow, how much harder would they work and for how long?