By Terri Ross, Terri Ross Consulting
When we work with clients, one of the top three pain points that comes up again and again is compensation. There is a lot of frustration and confusion as to whether or not they are utilizing the most effective compensation strategies in their practices.
That’s why the team at Terri Ross Consulting has developed a simple system and structure to create a win/win for both the practice and the provider. It is included in the comprehensive, brand-new Financial Foundations online course. Click here to learn more here.
This is part one of a series of articles we’ll be sharing regarding compensation strategies for your practice.
Here are a few questions to ask yourself about your current compensation strategy as you read through this information:
- How did you develop your current compensation plan?
- What prompted you to create your pay structure this way?
- Are you losing money, or is the plan pay for performance?
- Does your current pay structure reward behavior? If it does, which behaviors is it designed to reward?
- Does it fit into the goals of your practice, or are you trying to make your financial plan work around your compensation system?
The Five Non-negotiables for Compensation Structure
1. Must be sustainable. It must be sustainable for the practice based on:
- Length of time open. If you are a brand-new practice without a positive cash flow, your bonus system will be different than a practice that has been open for many years.
- Fixed overhead. If you are in New York City or Los Angeles, your overhead is higher than in smaller cities.
- Projected profit. If you are established, it should fit within your financial plan.
- Industry benchmarks.
2. Must be a controllable expense. For a financially healthy practice, you must have a compensation system that allows you to budget and assure future profit.
3. Must be legally compliant. Your compensation plan cannot have a per-patient reward. It can’t be based on value (or dollar amount) or volume (number of patients), as that is not legal. Of course, you should consult an attorney and review the laws in your state, but it is not legal to pay primarily commission in a medical aesthetics practice.
4. Must reward skill and behavior. Your compensation strategy must:
- Align with performance reviews. When you are simply paying a percentage, the only thing that matters to the employee is the service that was rendered. That’s why there should be a compensation system that is also aligned with your performance reviews. You may have an employee who does beautiful work and engenders love from clients, but they might cause problems by being habitually late, costing the practice money, etc. That’s why you want your compensation system to reward good behavior.
- Encourage growth and increase in productivity. For example, increasing revenue per hour by developing treatment plans that combine multiple modalities for better patient outcomes.
- Reward new skills and certifications. This could be taking a sales training course, learning a new technique or procedure, or getting trained on new equipment.
- Reward achievement of goals. When your bonus system is tied to a goal, that’s where the bonus compensation kicks in.
5. Must provide clear guidelines for individual growth.
- Set pay guidelines based on identified criteria.
- Create a career path within the practice. When you bring on a new employee, it is always exciting, but do you have a clear career path written out on paper to show them how they can grow within your practice? Employees want a career and a place they can stay. You want them to be happy with their compensation, so you need to tie your pay structure to the career development path.
- Manage and develop employees. This takes time, but it is critical.
- Communicate regularly with employees on their progress and revenue goals.
- Set clearly defined goals and establish a bonus system.
Stay tuned for part two in the compensation series, which will be about setting compensation goals and structuring your compensation.
Terri Ross brings more than 20 years of sales and management experience to the field, having worked with leading-edge medical device companies such as Zeltiq, Medicis, EMD Serono, Merck Schering Plough and Indigo Medical, a surgical division of Johnson.
Ross’ vast knowledge and experience as a sales director managing upwards of $20M in revenue and successful teams has allowed her to become a renowned plastic surgery management consultant helping aesthetic practices thrive.
To optimize revenues and business performance, Ross’ practice management consulting services help physicians evaluate practice processes including, but not limited to, overall-operating efficiencies, staff skill assessment, customer service and operating efficiency strategies. The goal is to develop a comprehensive plan of action to improve productivity, quality, efficiency and return on investment.