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

Drew Schaefer: Great, Heather. How are you?

Heather Driscoll: I’m doing great. Well, you’re just the guy for this week’s conversation topic because it’s kind of been a little bit of a hot subject lately with the labor market going on, but we’re going to talk this week about compensation. I know it’s one of your favorites. I’m going to get our slides up here to guide our discussion. But, for those of you who might be new to joining us, each week we actually come together to talk through hot topics in dentistry, we call it The Strategic Thinker. And, it’s really a concept that helps us support the foundation of what Spark is. Spark is actually a company that focuses on group dental practices and really, even more so, focusing on the Dental Enterprise Value Matrix, and helping people understand what drives value in group dental practices. So, we do that by focusing on specific areas that fall in these 4 quadrants of the Dental Enterprise Value Matrix. So, today we’re actually going to be straddling 2 quadrants I guess, both Process and Financial. And, we’re going to talk a little bit…

Drew Schaefer: And Personnel! (Laughs)

Heather Driscoll: And yeah! And Personnel, and honestly we could probably work a little Culture in there too…

Drew Schaefer: Exactly, yes. 

Heather Driscoll: We’re going with the whole shebang this week. So, we’re going to start by just trying to answer the question that has, again, been coming up pretty regularly lately, just people being really interested in how we handle compensation and pay raises in our dental group and how they might handle compensation in general in their dental group. So, Drew and I are going to spend some time really talking about the benefits of just creating clarity around compensation in general. So Drew, I’m going to let you get us started by talking about the benefits of having really just kind of a strategy and philosophy on compensation in general. 

Drew Schaefer: Yeah, and every organization is different, different by locale, different cultures, different labor markets, so the most important thing is to be proactive and not responsive and truly have a structured philosophy on compensation and be able to communicate that clearly to potential hires and our existing team members. And, as far as what we mean by philosophy, is really the pay modeling that you do to attract talent, whether that’s strictly an hourly rate or a salary rate. Or, if you have bonus structures, what level of compensation you’d like your team members to be able to earn through a bonus structure? And, last but not least, is also what benefits outside of what’s deposited to the bank account they’re receiving, whether it’s dental care, health insurance, or some sort of retirement match. All of these are harder to translate for our team members to an hourly wage, but it’s very important that we do it for potential hires and existing team members, they can really compare apples to apples better with other employers within the market. 

Heather Driscoll: Absolutely. And, you know, I guess both of us get to share the hat of human resources on any given day in our organization. And, from my standpoint being more on the recruiting side of things, I’ve found it interesting the number of people who really are asking more questions about comprehensive benefits and comprehensive compensation, not as fixated just on an hourly wage anymore but really wanting to make sure there’s a benefit structure they can count on long term. And, maybe make more of a career out of their dental home than maybe they had in the past. So, that’s a good thing.

Drew Schaefer: Right.

Heather Driscoll: So, the next thing we’re going to touch on is just the benefits that come from providing consistent feedback and opportunity for growth. So, sometimes we kind of trick ourselves into thinking that everything is about money. And, sometimes what people are looking for as far as overall compensation and benefits is really, truly just the opportunity for growth within the organization. So, maybe that’s the opportunity to advance their skill sets, or go from one position to another, or even beyond that, just having the opportunity to network, or participate in continuing education activities. But, if you can have real clarity up front as to what your company philosophy looks like in all aspects of compensation and benefits, and really prepare your team for how they can expect those conversations to happen, and how they expect those opportunities to take place, we always find it’s better to be on the proactive side of things as opposed to having to react when your team members come and start asking and inquiring about opportunities. 

Drew Schaefer: Yeah, I think one of neat things that we see, particularly at our national Spark meetings, is to your point, opportunity for growth. And, a lot of Spark members bring in younger team members that aren’t in a leadership role but aspire to eventually ascend to that role, and kind of give them exposure from that standpoint as far as what’s available outside of just the practice.

Heather Driscoll: Absolutely. Yeah, it’s a great kind of farm league to expose people to what can be their future. So, it’s a really great tool for that.

Drew Schaefer: Exactly. 

Heather Driscoll: So, another thing that we’ve found to be successful is really just defining skill sets and really creating tiers and pay bands associated with those tiers so that you can, again, proactively prepare team members for what they need to do, honestly, to have the opportunity to earn more. So, where we found this worked really well is primarily on the clinical side of things. So, there’s tiers for dental assistants. And, maybe as an entry-level dental assistant I’m comfortable taking x-rays and assisting the doctor on really simple procedures, but as I work my way up through those tiers, I’m becoming a bit more skilled in making multi-unit temporaries or assisting with more complex procedures like implants or sedation. Maybe I’m a business assistant who takes on different levels of opportunity. But, knowing these things in advance as a new team member, having someone lay out these tiers and these opportunities associated with the tiers is really helpful. And, that way when a team member is hoping to earn more, they can really very easily take the lead on further improving their skill sets knowing what kind of compensation opportunities might be attached with that. So, I can think back over the years when dental assistants have wanted to make more, being just really consistent at steering them back toward those tiers and helping them to know that if they spend just a little bit more time trying to figure out how to master a temporary crown, or whatever it may be, that we’d be happy to consider a change in compensation. But again, having that defined ahead of time makes it so much easier for the leaders of the organization, and honestly makes it a bit more inspiring for the team members as well. Alright Drew, so this is the hard part, when people like me come to you and say, “Hey, I want to give some people pay raises.” What do you think about a budget and how to plan for compensation changes?

Drew Schaefer: Yeah I think, to your earlier point, it’s a lot easier if you’re providing consistent feedback and setting expectations rather than just a one-day-a-year type budget process, but regardless I see in a lot of companies that are new to budgeting, they’ll say, “Well, we’re going to give everybody a 3% raise this year.” And then, we put that into the budget and they’re like, “Oh! Well, that’s a lot more than we thought it was going to be.” And so, just modeling how that looks as the skill sets ascend, we should be more productive, and so with more production and collections, if there’s that correlation that our payroll costs really should stay in line as a percentage of income. But, if those aren’t aligned, then ultimately that eats out of profitability. And, there are times where the market demands that, and in tight labor markets it’s going to be very natural, so you can’t just strictly say we’re going to only spend 50% of collections on payroll because you might not have the people to generate that revenue. So, from a strict salary-hourly-bonus structure, it’s important to budget that. But also as you evolve your benefits, health insurance goes up 7-8% every year, so is the organization going to increase their contribution, or is that all going to be passed along the employees? And so, there’s all these elements that kind of, once again, go into that total package and so it’s good to set expectations as payroll ascends as far as what you expect production to ascend or otherwise profitability really to decrease and have all stakeholders aware of the pull and tug of that. 

Heather Driscoll: Absolutely. And, I think you hit on a couple of key points there, and that really is that it’s okay to make decisions, whether that be to increase hourly rates, or increase the contribution the company makes to health insurance premiums, whatever that might be, as long as you’re intentional about it, and to your point, all the stakeholders understand what that impact may look like. And, then I think beyond that, and I think one of the things we could all get a little bit better at, is then communicating those decisions to our teams. So, when a company does decide to do a match of retirement or increase the contribution to health insurance premiums, sometimes these things happen and there’s not a lot of discussion. And, from a team member standpoint, you know that they’re benefits but you really can’t quantify what that looks like. And so, I think as leaders of an organization, it’s okay to really broadcast these things and to help communicate the true bottom-line benefits as the individual team member perceives them. Because, otherwise I think they just…. It’s like these good deeds are done, but there’s not really any upside for it.

Drew Schaefer: Yeah, and it’s a pretty easy calculation as well. I mean, if you’re contributing $300 a month toward health insurance and the employee works 150 hours a month, that’s an extra $2 an hour right there. If you add in a 3% 401K match, add another 3% to their overall income and there you have it. And, that way if they’re looking at a competitor down the road that doesn’t offer any benefits, they can see that per-hour benefit a lot easier. 

Heather Driscoll: Yep, absolutely. So, usually we recommend once a year if there’s some way to kind of all-in show people what they actually made, because I think specifically in dentistry, we’re not as consistent at giving annual increases. And, that’s really because we have a lot of generosity through other bonus systems and programs that are a little bit non-traditional in nature. And, sometimes if a team member isn’t used to that, it just can feel like maybe I’m not getting the same kind of benefit that I would somewhere else, when in all actuality, usually it’s much greater, but they’re just not comparing apples to apples. So, we always say, “Have a plan, but allow for some flexibility in that plan.” So, certainly right now we’re seeing a pretty good amount of strain on some key positions in the dental practices. So Drew, share with me some of your thoughts on what flexibility has looked like with some of our consulting clients.

Drew Schaefer: Yeah, I mean, like what I was referring to in the budget, you can have a budget and that’s great, that’s really your business plan and your measurement toward your business plan, but at the end of the day, if you try to stick too strictly to it to account for things that are really out of your control, then it’s going to blow everything up. So, my point earlier on having the people to generate the income, we’ve had some clients that have a dental assistant coming up and saying, “Well, I need another dollar an hour, so-and-so down the street is paying more than you are.” Once again, it might not even be apples-to-apples, and they’re having a hard time recruiting dental assistants anyway just with the tight labor market. Well, for an extra dollar an hour, it makes sense to go ahead and pay that as opposed to being short a dental assistant. And, if you’re measuring your provider’s production per dental assistant, that’s a pretty good indicator of how much you’re giving up just to save a dollar an hour, and once again, they work 150 hours a month, we’re talking about 150 bucks for a month. It’s just not going to make sense. So, to your point, budget and plan, but don’t let that drive some common sense decisions at the end of the day. 

Heather Driscoll: Yep, absolutely. And, I also think it’s okay for people to ask, right? It’s always okay for people to ask. And, depending on our decision, I think just helping the team member understand how we go about making decisions. So, using your example, if I am going to give a dollar an hour increase, I think it’s also okay to then say, “Hey Sally, I’m happy to do that, and one of the things that would be really great for you to help with is just being more open-minded and flexible with same-day care.” Or, whatever it might be, right? It’s okay to put in place some outcomes that you’d like to see that team member help accomplish and contribute to as well. I think that sometimes we get a little skittish around compensation conversations, and I think if we follow some of these tips and really have a philosophy and a strategy and a plan, those times when there does need to be a bit more flexibility are a little bit less scary for sure. 

Drew Schaefer: Exactly.

Heather Driscoll: Alright, so those are our quick thoughts on compensation, and again thanks everybody for joining us for this week’s session of The Strategic Thinker. Thanks, Drew, for your insight and wisdom as always.

Drew Schaefer: Thank you.

Heather Driscoll: And, if anyone is interested in learning more about Spark or finding some resources that we use regularly, you can go to our website at SparkDentalNetwork.com and we hope to see you all somewhere with us soon. Thanks, everybody!

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