Heather Driscoll: Good afternoon, everybody! And, welcome to this week’s session of Spark’s Strategic Thinker. I’m here with my colleague Drew Schaefer, how are you doing today Drew?

Drew Schaefer: Great, Heather! How are you?

Heather Driscoll: I’m good, it’s getting a little bit cooler and the fall weather feels good. And with fall weather, we start talking about all kinds of fun things like planning for the next year. And, usually with planning for the next year, people start asking lots of questions around incentive programs, bonuses and such. So, how do you feel about talking about bonuses today?

Drew Schaefer: I love bonuses. 

Heather Driscoll: (laughs) Yes. Yes you do. Well, let’s go ahead and share a couple of slides here to get us started. I always feel like it’s a good idea for us to just remind ourselves that The Strategic Thinker is just an opportunity for us to talk about kind of normal day-to-day happenings in dental practices, specifically dental enterprises. Because the bigger your dental group gets, the more impact - positive and negative - things like a bonus system can have on your overall value and performance. So, at Spark we tend to focus on 4 specific quadrants. Ultimately, these 4 quadrants help to drive the overall value in dental enterprises. So, today we’re going to talk about the process in which you can use to go about creating a good bonus structure. So Drew, there are some best practices when thinking about either creating a new bonus, restructuring the bonus you have, stopping a bonus, all of those kinds of things. And certainly, while there’s not a “one size fits all”, we’ve definitely come to find that there are some best practices that help keep people out of trouble when it comes to bonuses. Before we dive into those best practices, anything you want to add?

Drew Schaefer: No, I can jump on in and talk about how making sure our bonuses are rewarding the right behaviors and keeping competitive and staying true to our mission and values for our team members. 

Heather Driscoll: Awesome, alright. So, the first one: Win, Win, Win. What does this mean to you, Drew?

Drew Schaefer: This means that a bonus structure should be one that everybody wins or everybody loses. When the practice is successful financially, it’s generally a by-product of good patient care and a lot of people working very hard to make that happen with a good patient experience. And similarly, if there’s less favorable financial results, it can be due to a lack of effort, lack of teamwork, COVID aside of course, when you take out the things that are outside of our control. So, having it structured in a way to where it only benefits the company and shareholders, or only benefits the team, it’s going to lead to more animosity and less sustainable structure ultimately. 

Heather Driscoll: Right. So, anytime someone comes to us with an idea on bonus, we automatically start here: Is it a win for patients? Ultimately, does it end up creating an opportunity for patients to get more consistent, extraordinary care? Ultimately then, is it a win for the practice? And, is it a win for the team? So, if it doesn’t pass any of those 3 checks, we usually recommend people go back to the drawing board, so first and foremost: Win, Win, Win. Alright, you already kind of mentioned it, but bonuses are typically used to influence behavior, so what are some of the behavior-based bonuses you’ve seen over the course of your career in dentistry?

Drew Schaefer: We see, especially with the advent of more data that people have at their hands, you see a lot more behaviors for specifically hygienists and some of their measurable behaviors, whether it’s sealants or perio, trying to move away from some of the top line production or collection numbers. You see different behaviors with in-house dental programs... why am I blanking on the word, Heather, help me out.

Heather Driscoll: Discount plans or wellness plans.

Drew Schaefer: Discount plans, yes thank you, wellness plans. And, basically trying to pick apart some of the individual behaviors that build up to that patient access to care and those top-level financial results, as opposed to just taking that top line result.

Heather Driscoll: Yeah, absolutely. Some other things I’ve seen, bonuses for improved same-day treatment conversions, just getting a little bit better at being effective and efficient with your teamwork and providing a really great patient experience from a convenience standpoint. Certainly some of our favorites... profitability bonuses, right? Those tend to be a good by-product of great patient care and utilization of your team and management of your expenses. Referral of patients, referral of team members, some of those kinds of things. And so, I think you’re exactly right, whether it’s a specific procedure we’re focused on or the coordination of great teamwork, ultimately what we’re looking for is improved consistency of any type of outcome. And so, bonuses are a really great way to get people focused on something they maybe haven’t been doing quite as well, or maybe get focused on continuing to perform in a positive way, or a stretch, to go from good to great. So, behavior-based bonuses, no matter what they are, really good to kind of quantify what you’re looking for as far as benchmarks and outcomes. Alright, so once you’ve figured out that it’s a win for everybody, and you know what you’re focused on improving, probably my next most favorite thing about best practices with bonuses is that it should be easy to calculate, because if it’s confusing it’s very hard to get people to get excited about that. And, on the accounting side of things Drew, I know probably some of my ideas on bonuses have made your life miserable on more than one occasion. So, tell me a little about your thoughts on calculating and transparency.

Drew Schaefer: Yeah, like you mentioned, the simpler it is for them to understand, the more effective it’s going to be. Most people that work in a dental office aren’t accountants, so making it over-complicated is harder for them to translate their daily actions and decisions into that eventual result. So, in addition to being easy to calculate and understand, I think using very specific metrics, first and foremost, detailing how you came to those, and then really measuring them on a regular period. If it’s a monthly bonus, reporting progress at least weekly so they know how they’re progressing against that, and celebrating that, and helping measure what gap they need to fill before the end of that period to really reach the bonus. And so, it’s a lot easier on procedures, or top line production, collections, those behaviors. It’s often more difficult if you’re looking at profitability-based bonuses, just depending on how willing the owners, shareholders, leadership are in sharing profitability in those, but the less you share, the less effective those bonuses will be.

Heather Driscoll: Yeah, great point. What I’ve found is that if the team’s confused as to how to earn the bonus, really not very motivating. And then beyond that, if they don’t have access to the data that shows them how they’re performing, also a bit of a miss. So, the easier it is to calculate and the more transparent you can be with the data they need to figure out how close they are to achieving it, certainly all the better. Okay, so let’s talk a little bit about short term vs. long term bonuses and what we’ve seen as far as effectiveness based off of the role people play in the organization.

Drew Schaefer: Yeah, I think every role in a dental office is a lot different and the income expectations are different as well, so a daily bonus might mean more to a dental assistant or a hygienist than to a doctor just due to pure cash flow differences. And so, short term incentives are not as productive or worthwhile for higher earners, and really you want to focus on more long term sustained performance in that regard. But back to the short term, when you’re getting to the roles that have specific tasks and processes that really lead to that production for the doctors, them doing that consistently and repeatedly and measuring that in short-term bursts can be very effective to creating habits.

Heather Driscoll: Right. So, if we’re thinking about a quarterly bonus, or even something like an annual bonus, really not quite as exciting for a business assistant or a dental assistant, a little bit harder to get traction. And again, from a calculating standpoint, if you’re having to wait until the close of a quarter or the end of a year, again maybe not quite as motivating. But, for some of those more strategic roles in an organization, doctors, operations leaders, shareholders in general, just really balancing out the short term for the people who have more control over day-to-day outcomes and long term for those who are setting the vision and the strategy. Both good bonus structures, just making really sure that our audience is appropriate for the type of bonus you’re looking into. 

Drew Schaefer: Right. 

Heather Driscoll: Alright, probably the most important one, and maybe your favorite Drew, because I don’t know how many times we’ve had people come to us after they’ve rolled out a bonus only to have not done the math. So, tell us a little bit about your thoughts on kind of doing a pro forma on what a bonus might look like.

Drew Schaefer: Yeah, I think there’s 2 main elements to talk about there as far as the math. Anytime you set a target, knowing where you are at currently is most important. Are you setting a target to where you’ve already been performing? Are you setting a target less than where you’ve been performing? Where are you currently? I think a lot of people can say, “Well, we average $200,000 a month in collections so that’ll be a target.” And, they’ll target that same $200,000 whether they’re open 15 days or whether they’re open 20 days. So, the first is really think about the math when you’re setting your targets and what’s really motivating or progress that should be incentivized. And then to your point on pro formas, what’s the benefit when you pay that out? And, assuming there’s an increase in performance, is that increase in performance more than what you’re paying out in the bonus? If you’re only increasing your profitability $3000, but you’re paying out $5000 in bonuses, if there’s better access to care and you want to consider it charity, that’s one way to approach it, but it’s probably not the best structured plan, going back to the Win, Win, Win Model, if more is going out the door than is coming in through the structure of the bonus. 

Heather Driscoll: Absolutely. And sometimes, again back to the short term vs. long term, sometimes it’s okay to give a quick shot in the arm for something that... you know, if you’ve just had a continuing education opportunity and you really want people to hit the ground running, sometimes you’re okay with saying, “Okay, I’m going to give maybe a little bit more for a short period of time.” But really making sure you know the economics of the bonus, really important ahead of time before getting too excited and sharing it with your team. So, on that note, another sticking point, the fact that it’s okay to reward your team, it’s okay to pay if they fall short of a bonus, but consider whether or not that means you should change the bonus. So, tell us about your thoughts around people who just like to be generous, and what that looks like within the confines of a bonus structure. 

Drew Schaefer: Yeah, I think that’s very common in dentistry, it’s probably one of the single most relationship-based industries I’ve ever worked in. And so, it’s not uncommon for a group to set a target, set a bonus, and they fall short. And, depending on how far a stretch it was, or whatever the reason may be, that management decided that everybody worked hard, we’re going to pay it regardless. If that’s what you want to reward your team members with, there’s nothing wrong with that, and it probably goes to create a pretty solid culture, but it’s also important to make sure they understand that they didn’t reach the bonus and it’s really out of generosity. And, then it goes into... well what failed in that structure to where everybody worked really hard but they didn’t ultimately achieve the bonus at the end of the day? And, being open to seeing how best to tweak that to where it’s more of a Win, Win, Win in the future. 

Heather Driscoll: Right. No, that’s a great point. And, I think you have to be careful to find the balance there, because I’ve been known to be fairly generous over the course of my career, but I also think that if you’re always giving consideration to the team and falling short of performance then it becomes expected and bonuses just don’t have quite the same kind of impact. So, it’s certainly a fine balance, and one that isn’t overcome-able, but I think you just have to have clarity, to your point. Alright, so bonuses should evolve as the practice evolves. So, what we find sometimes is that the shareholders or owners tend to start making investments in growth and capacity and things like that, and don’t really take into consideration how that impacts the overall financial success of the practice, specifically around bonuses. So, would you talk a little bit Drew about some of the things people should consider as they’re growing and really looking to their bonus system to support growth?

Drew Schaefer: Yeah, and I think - back to your original opening - the budget season is the best time to be, when you’re looking at your strategic planning for the next year, is the best time to be re-evaluating your bonuses. Because, there are some that can be relevant in some regard into perpetuity, but more or less, most bonus programs need to be tweaked regularly as the practice grows and evolves. If you have just a top line target bonus, and you’ve always used - back to my example - $200,000 per month as your target, and then let’s say you have a couple more ops that weren’t built previously that you finished out, and you add a second doctor and more capacity, well then you really should hit that target every time. And, just by having that $200,000 target still out there for your bonus, it’s really setting the expectation pretty low on the team as far as what they think is success at that point. And, same thing with profitability is really profitability should ensue as your capacity increases as well. So, I think the overall structure of bonuses can persist, but the measurements of successes should always be amended as the capacity and structure of the organization and the individual practices change. 

Heather Driscoll: Yep, absolutely, one that is easily overlooked, right?. When we make it easier for the teams to be successful and easier to take care of more patients, well certainly the bonus thresholds should change to support that investment as well. And then the last thing, I think one that it’s important to be reminded of is that appreciation doesn’t always have to be about money. And so, back to our discussion around working really hard and maybe not ending up with the results that you want... Or really, truly some practices, whether they’re de novo practices so profitability really isn’t there yet, or if there’s been significant change or growth in the organization and profitability is a little bit more inconsistent, sometimes I think we want to continue to reward our teams, which is really important, finding ways to do that, but appreciation comes in lots of shapes and sizes. Anything that you’ve seen, Drew, that dental teams have done to certainly still let teams know that they appreciate their hard work, but maybe not in the form of dollars?

Drew Schaefer: Food seems to be pretty effective, at least for me (laughs). So, I think that’s a pretty common one, whether it’s bringing in donuts at breakfast or pizza for lunch, and having something different, that always wins me over personally.

Heather Driscoll: It’s so funny because I don't know if it’s just a dental thing because I’ve spent so much of my life in dentistry, but...

Drew Schaefer: It’s not (laughs), I think it’s an American thing.

Heather Driscoll: I agree, I think the universal language of love and appreciation is food, for some reason, and it works on me too. So, I think that’s good. But yeah, to your point, whether it’s maybe a little bit more motivation in the morning huddle, or food, or maybe not completely without money, but setting aside $100 to go bowling, or whatever it might be. People doing pot lucks, whatever that might look like, I think there’s lot of different ways to show gratitude and appreciation without it always having to come back to some kind of bonus structure. But, with that being said, I’m always realistic in the fact that people like a little bit of a bump in their paycheck as well, so we want to be mindful of that. 

Drew Schaefer: I’ve never had anyone turn a bonus down.

Heather Driscoll: (laughs) Nope, it’s never happened for me either. Well awesome, thanks Drew for your time today. And, I think it’s timely as always as people are planning for the new year and figuring out ways to continue to incentivize and motivate their teams. It’s what we do at Spark, help group dental practices really think big picture about everything from bonus structures to ongoing profitability and performance, so I appreciate you being with me today Drew and I look forward to the next session of The Strategic Thinker! Bye!

Drew Schaefer: Alright, thanks Heather! Bye.

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