To Bonus or Not to Bonus

There are myriad strategies for incentivizing staff, but selection should be primarily based on what you have more of: time or money.

By Crystal M. Brimer, OD, FAAO

Wouldn’t it be great if your staff showed up each day to work, cheerfully and wholeheartedly, as if they were grateful to have a job? It has been an age-old dilemma as to whether to provide bonuses to employees as incentive to do their jobs. Oh no, you say, we only bonus them to deliver above and beyond the duties of the job. But too often, staff and management opinions do not correspond as to where that line of mediocrity lies. And once the line is crossed, some argue that entitlement sets in and bitterness ensues regarding the future attainability of the goal and, thereby, its payout.

Ready to finally implement something myself, I asked multiple successful optometrists throughout the nation about their bonus plans. Many negate the value and abstain completely, attesting that it will backfire in the long run. Some discount the value but continue to engage, as if they have no choice and are forced on by momentum, which perhaps adds credibility to the ideology of the first group. One group I spoke with contributes $100,000 each year to the bonus pool but said, “Perhaps in the end we would get more bang for our buck just giving each staff member a $100 bill at the holiday party.” And some believe it is the only thing that truly engages the staff. One thing is certain: however you get there, one engaged staff member can create hundreds of engaged customers.

Another key question is timing. Even if you believe in the value of bonuses, it is tempting to wait for implementation until you have a “worthy” team in place. But what if it’s the bonus that creates the loyalty and drive that makes the team commendable? It creates yet another conundrum surrounding the question. However, what other options are there to engage staff members? You can hire only part-time employees or only from a specific age group. In addition, you can create a culture that motivates; however, some will argue this is only done by providing incentives, and we return full circle.

Perhaps, there is no right or wrong way to structure a bonus system. But be careful to plan several steps ahead, ensuring that employees are only rewarded when the practice has sustainable growth. Be sure to balance the pay out so that their bonuses do not significantly offset the newly realized revenue. It is also important to balance the attainability of the goal. If it’s too hard, they disregard it and become resentful; if it’s too easy, it won’t truly drive an increase in performance. One last thing to consider is how much time the task of execution adds to you or your manager. The measures being tracked need to be easily obtainable via electronic medical record reports or staff members themselves. It is critical for the staff to see their progress toward the goal in as close to real time as possible. After all, once the deadline comes and they find out if they have won or lost, it is too late to do anything about it!

POPULAR STRATEGIES

Although there is no perfect set up, here are a few different structures our colleagues have implemented that are worth considering:

Fixed Pay Out, Variable Ration

A predetermined pool of cash is set aside in the budget annually and paid out quarterly when the net receipts surpass the goal. The employee’s payout level is determined according to a formula that considers their cross-training, community work, reviews, and attendance.

Everything in Moderation: Fixed Pay Out, Fixed Ration

A small bonus triggered by a growth goal (a percentage gain over the previous year’s monthly receipts). For example, if our production this April is 7% greater last April, then $50, $75, or $100 is paid to each staff member, dependent on the number of hours he or she worked that month.

Variable Pay Out, Tiered Distribution

After deciding on a fixed and reasonable amount of profit that is needed annually for the corporation (to retire its debt), 30% of any additional profit is divided among the employees according to their roles (e.g., $1,000/staff, $1,500/manager, and $2,000/doctor). In several of the plans, including this one, opticians within the company were not included in the company bonus because they have their own system based on capture rate and second-pair sales (in this case they share in a percentage of the lab rebate at the end of the year).

Success Sharing: Multifaceted Aggregate Pay Out, Fixed Ration

A couple very large, multipractitioner offices shared their bonus plan, assuring that it was much simpler than it looked. The two with the most complex plan also seemed to be the biggest believers in the actual value the bonus brings to company growth. Although it’s hard to say which comes first: the belief in the potential or the intricate planning.

The aggregate pay out for the first practice is based on five key benchmarks: total collected revenue (TCR) per exam, TCR per doctor hour, TCR per staff hour, professional fees per doctor hour, and material fees per exam. For every 5% increase in any category, $1,000 is deposited into the bonus pool. In order to derive an hourly multiplier, the aggregate bonus is divided by the total number of staff hours worked by all staff members during the entire year. That amount is then multiplied by the annual sum of hours worked by each staff member to determine his or her individual distribution. The beauty of this plan, and any plan that pays annually, is that it may deter staff members from quitting hastily, as they have to be “present to win.” This practice uses optical lab points as bonus rewards instead of cash, and staff members use them online to pick out merchandise.

The second practice has six critical monthly measures that contribute to the aggregate pay out: gross revenue, total patients, new patients, reduction in accounts receivable, reduction in statements sent, and the percentage of schedule filled. The first three measures are compared to the highest historical month (in 23 years) for each category. Once the gross revenue goal is met, $5 is contributed per additional $100 collected. However, the $5 is increased to $10 if the goal is surpassed by 10%, or $15 if it is exceeded by more than 20%. For total patients seen and total new patients, $10 is paid in for every patient over the historical high for the month, $15 each if the goal is surpassed by 10%, and $20 if surpassed by 20%. Reductions in accounts receivable and statements sent are both compared to the same month in the previous year, and the contribution scale is the same as that for gross revenue ($5, $10, or $15 per $100 recovered or statement not sent). Finally, the last bonus is paid according to a logarithm for the percentage of schedule filled (they have to show up): $100 for 92% filled and up to $1,500 for 100% filled. The aggregate bonus pool is paid annually, divided equally among all existing employees, full or part time.

Lag and Lead Measures: Individual and Group Goals

The last suggestion is more of a management style than a specific bonus plan, or at minimum, they are intertwined as one. It comes from the book The 4 Disciplines of Execution: Achieving Your Wildly Important Goals.1 The basic premise is that by the time you know if you have met the main goal, it’s too late to move it (this is a lag measure). Start by foregoing the list of goals that get lost in the chaos of the day, and choose one or two “wildly important goals” (WIGs). Then choose a few lead measures that will move the WIG. Create accountability by meeting with staff weekly and allowing them to make their own commitments as to how they will move their lead measures this week. And finally, have staff create a scoreboard that shows, with a glance, if they are winning or losing. For example, if the WIG is to grow 10% this Q1 over last year, this can be moved by improving customer service and efficiency (the lead measures), which can be measured via patient surveys, the number of minutes a patient spends waiting, and the number of overtime hours worked. This can be further divided into individual commitments and measures, such as prepping charts the night before, sending thank you cards, and online newsletters. Small individual incentives are tied to the individual goals, and then group bonuses are achieved and divided equally, once the WIG is accomplished.

CONCLUSION

Engaging staff members will always be difficult. It will always require a significant investment, whether it’s by way of financial contribution or by the effort to create and maintain a more rewarding culture. The last model requires an investment of time and energy more than money, and it has proven to be successful in major Fortune 500 companies around the world. Perhaps the first step in devising a plan is to determine what resources you have to invest: time or money. If you’re lucky you have both, or can enlist your office manager to devote the time and energy needed to successfully change behavior. This won’t be a substitute for your involvement, but it can be a key factor for effective plan implementation and longevity.

1. McChesney C, Covey S, Huling J. The 4 Disciplines of Execution: Achieving Your Wildly Important Goals. New York, NY: Free Press; 2012.

Crystal M. Brimer, OD, FAAO
• Owner of a private practice in Wilmington, North Carolina, with special interests in contact lenses and dry eye management
drbrimer@eyecarewithfocus.com