Pulling the Plug on Bonuses

Boy, when you talk to dentists, you hear amazing things! Take the bonus programs that dentists inflict on themselves. One dentist gives his hygienist 50 percent of the fee for every adult prophy she does (laudable, if you have zero overhead). Another gives $10 for every full-mouth x-ray series (so what is the employee's regular salary for?). A third annually pays her staff a hefty holiday bonus—even in 2004, when her production dropped significantly and she had past-due bills. This is why we hear the question:

How can I pull the plug on bonuses that no longer fit the practice strategy or motivate my employees, but that they've come to expect as part of their compensation?

Although a short-term bonus can be an excellent staff reward for implementing new skills or objectives, adding fun, excitement, and challenge to the job, we don't support long-term incentives, especially for simply doing one's job. As the novelty wears off, bonuses tend to lose their initial appeal as gifts, and the staff begin to use them, like salary, for paying bills. This makes you feel like Scrooge for pulling the plug, should you need to. We also see drawbacks in bonuses that focus exclusively on production increases because there are many more factors that motivate employees. Excellent leaders have staff that would go to the barricades for them because these leaders provide an enjoyable, organized, low-stress work environment where employees feel valued, appreciated, acknowledged, and secure.

Compare this approach to dangling a carrot in front of a donkey. Ask yourself: What if the donkey doesn't like carrots? What if you're asking the donkey to carry a two-ton load up a 20-mile hill? And what if your employees do not want to be treated like donkeys, but prefer to be viewed as professionals performing tasks, such as taking x-rays, because they're the right things to do and not because they want $10 extra?

If you pay an unhappy employee $10 extra to do a task, you end up with a richer unhappy employee. How can the $10 resolve the underlying problems causing the unhappiness? Is the $10 really what the staff want, or is there something else—a chance to grow in the job, air difficulties and resolve conflicts so there's no tension among the players, have efficient systems to do a good job, be proud of the care they give, feel their work has value, etc.? And if you ask the impossible of your staff, will your bonus become meaningless? For example, if you normally produce $50,000 per month, and you offer a bonus to reach $75,000, it will be unattainable without systems in place—staffing, financial arrangements, treatment presentation, etc.—to facilitate the higher production.

If you want to pull the plug on a bonus program without getting washed down the drain, here's how:

•  Level with your staff on why you need to terminate the bonus. Fully explain the reasons so that your behavior is understandable and based on facts rather than on arbitrary, subjective judgment.

•  Fess up. As a leader, take responsibility for the expectations you created. Give the staff what it has come to expect by incorporating the bonus into the employees' salary going forward. In this way you alter the system without punishing the staff for your change of heart. Your employees, who are doing nothing wrong, should not suffer a loss.

•  In the future, develop a fair, affordable compensation protocol that allows your staff to earn salary increases as individuals for performance that improves the viability of the practice.

Although there are only three essential steps to terminating the bonus, success lies in how you execute each step and communicate with the team. We should never be afraid to improve programs, follow our vision, and take responsibility for our actions. When we act in the manner of effective leaders, we can make smooth transitions in the practice and build trusting relationships with the staff.

Amy Morgan is CEO of Pride Institute

Originally published in Dental Economics, April 2005