|
|
|
|
Weekly Tidbits (continued) The
Recession Is A 100% Guarantee, Now Batten down the hatches.
We have to weather this storm for the sake of our businesses and for the
country. Those who take appropriate
action now will sail through without a single problem, but those who choose to
pursue business as usual will be in for a bumpy, painful ride.
This is not the time to be passive.
As our website motto suggests, “Wise is the person who thinks before
acting, then acts decisively.” The weekend before the attack on NYC and DC
I wrote that we are teetering on the brink of a recession, but at that time I
felt that we might squeak through with just a minor hit of one-half of 1%
negative growth for the last quarter of 2001 and first half or so of 2002.
All bets are off since September 11, 2001, just four days after I wrote
that prediction. I have now
collected two weeks’ production statistics from dental practices throughout
North America, both clients of ours and non-clients, and the decline seems to be
in the 15% to 20% range so far. This
will pose a financial burden of enormous proportions on many practices.
More than a handful will be forced into bankruptcy.
Staff members will be put out of work, and families will face financial
ruin. The good news is that none of
this is necessary. Diligent analysis and appropriate action can forestall damage
and loss of revenue. No one can be certain, but I would suspect
that the decline for several months to come will be in the 20% range. That means simply that for a practice previously producing
$50,000 per month the production for the next few quarters will be only $40,000
per month. Digging deeper into the
details suggests that this will be much worse for the doctor’s personal
income, though. For instance,
suppose this hypothetical practice producing $50,000 per month kept a healthy
overhead of only 60%, $30,000. That
means that the doctor would be earning about $20,000 per month. Reducing production to $40,000 does not reduce very many
costs. The only reduction in cost
would be about 10% for supplies and labs (even less for many specialists).
Now the overhead is only $29,000, but the total income is just $40,000.
This means a monthly reduction of $9,000 in the doctor’s personal
income. Without belaboring the
point, this is going to hurt. And,
the practice noted above is as our clients would operate.
Most practices have overhead closer to 75% than 60%. This means the doctor is earning more like $12,500 per month,
now. Reducing this practice monthly
income to $40,000 will reduce the doctor’s personal income to about $3,500 per
month. First, he/she can juggle,
“rob from Peter to pay Paul”, and let some bills run late, but eventually
that will not work anymore, and this practice is in danger of bankruptcy. My first suggestion is to take an hour or so
to check your situation. Print a
report of total production for the three months prior to September 11, and
calculate the daily average production per day by dividing total production by
days’ worked. Now, do the same
for the last two weeks. Factor out
aberrations like large cases unless these are frequent.
In most cases there will be a decided reduction…in the 15% to 20% range
as I mentioned. Now, look at your
collection percentage for the past year. Reduce
this percentage by about 5% to account for the patients who have already been
affected like airline, hotel and restaurant employees.
If you are in an area where there is a large percentage of patients who
are employed in the leisure business like Florida, Las Vegas, Atlantic City,
etc. reduce collections another 5%. Multiply
this new collection percentage by the new production percentage daily average
since September 11. Multiply by
number of days worked per month. The
result will be your new monthly income reality, if you are passive at this time.
Look hard and soberly at this number because it is not fanciful and
hypothetical. It is the truth based
upon appropriate analysis. Please,
please do not assume that you will be lucky, and all this will simply not matter
in your practice. It is not
necessary to depend upon something as fickle as luck, and you probably will not
be lucky, anyway. What needs to be done?
Frankly, you have to turn your entire operation around from a passive
group waiting for patients to call to an active pursuer of quality appointments.
This means an attitude adjustment to most offices.
You need to contact your patients through newsletters at least once a
month. You need to go through all
inactive patients and actively attempt to get them reactivated. Cancellations and no-shows are going to increase dramatically,
so the confirmation process cannot be so nonchalant. If the patient or guardian is not contacted directly, the
appointment is not confirmed. Period.
All internal procedures must be as efficient as possible because there
will be more work required to maintain production levels.
Ironically, some very well organized practices will continue to grow and
never notice a thing, but most others have become exceedingly lethargic during
this ten year financial boom, and new attitudes, new actions, and new procedures
are absolutely essential. I was asked last week to indicate the critical monitors to watch at this time to survive this crisis. I would list them as follows: 1) average daily production for doctor and hygiene (Look in two week chunks before panicking. Going down? Act decisively.) 2) average daily collections (If this is below 98% of production, it is already a problem in such a healthy economy as we have had. If it goes down further, the collections protocol must be changed or more work must be put in this area.) 3) Overhead percentage (If this is over 60% there is danger already.) 4)Number of new patients per day (Look in two week chunks before panicking. Going down? Act decisively.) I want to apologize for this blatant commercial, but if your practice is getting out of hand already, call us while it is still possible to help. There is not that much I can do with this type of email communication. A thorough diagnosis is probably necessary, and it will cost money to conduct such a diagnosis. However, that cost will be minor compared to the danger ahead. To somewhat bail me out of this commercial I would say that you can call anyone else who you KNOW can help. Check references, but do it soon if things are sliding already. Also, do not feel inadequate that you are calling for help while you are usually so smart that you can solve your own problems. This is an area where pertinent experience and expertise is necessary, and the smartest person on earth does not have all types of experience. Over the past two weeks I have written
hundreds of words about the September 11th events and my feelings.
That is how I vent, and it is just for that purpose that I wrote.
No one has read or will read any of this.
Nothing has really helped me to understand and deal with this, though.
I want to be understanding of the plight and attitude of anyone who would
take such drastic action, but I think that is giving too much credit to the
murderers of almost 7,000. I am like most Americans who are generally
compassionate people, but what level of compassion covers this type of wanton
slaughter. There is no justification for such actions.
None whatsoever. Yes, our actions as a country have not always been
egalitarian, but certainly not much different from any other country. I think it
can be shown time and again that the US has provided humanitarian aid to the
hungry, rebuilding aid to the war-torn, assistance to those whom nature has
overwhelmed, and even aid to our potential enemies.
Guess who sent the most money last year to help feed the poor in
Afghanistan? These terrorist acts
were not justified retaliation, they were the result of envy, greed, and
revenge…and an evil that is palpable. And
please forgive me for saying this, but anyone who tries to justify this action
no matter the supposed provocation is indeed walking on the graves of the 7,000
innocent victims. Except these
victims and their relatives will not get the victims remains for their graves
because more than 6,000 bodies have just dissolved into the rubble never to be
found. Let’s not forget, Hitler
had a list of grievances against the world, and used this as justification for
the extermination of at least 6,000,000 people and the needless deaths of
hundreds and thousands of others from the war he started.
Japan had her grievances, and millions died. Stalin is said to have killed 60,000,000 of his fellow Slavs
because he thought they were plotting “anti-revolutionary” activities.
Idi Amin felt justified in cooking and eating his enemies.
After all they wanted to overthrow his regime.
Castro was justified in executing tens of thousands because they didn’t
agree to his dictates and resisted his rule.
Anyone can justify any action it seems because we have decided that there
are no absolute rights and wrongs. Everything,
they say, is relative. I am here to
state that there is evil, and it exhibited itself vividly in the skies on
September 11th. America
has made mistakes and there will be innocents who will die over the next few
years, but it will not be due to evil but in order to stop even more evil
attacks. There is serious talk of
chemical and biological attacks, and no one seriously thinks these evil doers
would demure due to conscience or come to the conclusion of the civilized world
that these are too evil for this earth. There
are no rules and no limits apparently. There is no mercy for the innocent. No religion requires that
we stand by and refuse to defend innocent victims from evil.
This is not about religion, and no religion would approve such overt
evil. This is about cold-blooded, premeditated murder from the evil minds of
monsters. It covers the entire world, too, just as
they hoped. The world’s economy
will probably go into recession because of US problems.
I recall an interview with an emotional CEO in NYC who lost about 700
employees mentioning that there were about 1,500 dependent children who lost
their father or mother. Hundreds of
thousands of people have lost spouses, parents, siblings, children, and other
relatives and friends. And there
are less dramatic, but also painful effects all over this country. I know a great young couple in Minneapolis who had just
bought their first home. They have
a young infant. He worked hard long
hours as a manager of restaurants at the airport, and she worked equally hard
for Northwest Airlines. They were highly successful for their age and, of
course, stretched to the max to realize the American dream. By the end of the first week they were both out of work, and
they are now worried about losing everything.
Minor compared to the deaths in NYC, DC, and PA but tragic in its own
way, too. We will recover as a country. These folks are way out of their league.
They watch too many of our silly movies and TV programs, and believe what
is shown there. Certainly, America
has become somewhat self-absorbed and spoiled, but this sort of thing is a major
miscalculation. It is like the old
Jim Croce lyrics, “You don’t tug on Superman’s cape, you don’t spit into
the wind, and you don’t mess around with Jim.” (or Sam in this case.)
This is not a simple extraction, though.
This is a molar root canal treatment. I only hope America and allies have
the maturity and perseverance. Our
enemies are betting against us. Have a great week, Hurston Anderson 813 963-7228 PS: Please do not let this thing overcome
your practice. It is not necessary,
but it is possible. Dentistry is a
vital service to humanity and can lengthen lives, reduce pain, enhance
self-esteem, and contribute to general well-being.
Besides, hundreds of thousands of American families are supported from
dental income. Working to help our businesses survive is not trivial. It is
important to our way of life. If we
fail in our businesses due to the coming slowdown, it will allow these
terrorists to win. Be vigilant. And
call, if you need help. Our
workbooks may help, too. Call or
email for info. Your
Dental Practice Can Prosper During the Coming “Recession” Here in the US we have had such a good
economy for so long that few can even remember what it was like before. While this boom is the longest on history it is not the
first, nor will it be the last. Beginning
in the second quarter of 1991 it is now ten full years long.
George Bush (41) would have liked it to start just one or two quarters
earlier, and George Bush (43) hopes the probable downturn will only last a
couple of quarters ending before the beginning of 2003.
Bill Clinton (42) rode the economy like the Big Kahuna “hanging ten”
on the Pipeline off Waikiki, and looked great to 60%+ of the American people in
the process. Whether we think
he was responsible or lucky, he was sitting in the chair and never got in the
way. But enough of politics. Actually, I feel strongly that we will have
a very short downturn that will challenge the definition of the word,
“Recession”. My guess is that
we are looking at the first two or three quarters of 2002, and then only
something mild wavering between 0% growth and minus 1/2%.
However, any time there is a weakening in the economy there is always the
danger of overreaction by government, the media, and big businesses.
Alan Greenspan is lowering the discount rate so fast that the Fed may be
paying banks to take loans soon (a joke, of course), and that will help some.
However, so much of the US economy depends on consumer optimism, that we
need politicians and the media to act responsibly avoiding hyperbole, at least
during this tricky last two quarters of 2001.
Maybe we can get ourselves another O.J.-type event to keep the media
busy, but we have elected very few politicians who can avoid the temptation to
draw attention to themselves like “Chicken Little”. Our system for electing politicians has evolved to favor the
media darlings who debate well on TV and have nice hair.
These folks love the limelight. The
Founding Fathers must be spinning in their graves.
Luckily, this was not the case during the first century of this
country’s existence. Politicians
needed to be competent, not just photogenic. George Washington had bad teeth,
John Adams would have scared the dickens out of the voters, Thomas Jefferson was
a bit wordy at times, and Abe Lincoln looked like a gawky geek by today’s
standards. In fact, until the 1860
election there was not a candidate for President who even overtly campaigned for
himself. (not Lincoln, but
Douglas). It was considered in bad
taste for a candidate to be un-statesman-like enough to pursue the job.
Can you imagine? I worry that our politicians seeking attention may scare
consumers, and that the CEO’s of big business with no fortitude may overreact
by downsizing too much. If everyone
would just cool it for a while we could possibly avoid this, but I fear that is
too optimistic. The fact is that unless dentists make a
special effort, there is likely to be a 10% or so reduction in overall dental
production in a few months. Crowns
becoming large fillings, prophys less frequent, cosmetic dentistry delayed a
bit, patients opting for drug store whitening, slight cracks being watched a
little longer, a twelve hundred dollar root canal/buildup/crowns becoming
extractions, patient collections slowing, etc.
You know the routine. Whether
we like it or not a good deal of dentistry is considered simply a consumer
purchase to a large percentage of our patients.
Dentistry is not necessarily immune to recession.
A nervous consumer affects dentistry.
The fact is that the economy’s bases are still strong, but consumers
who hear about layoffs, predictions of doom, etc. become a little more careful
with their spending. A 10% decrease in production can be absorbed
pretty easily by dental offices with overhead under control and
effective/efficient internal procedures. The
problem is for those practices which are already overextended and complacent.
Even a really healthy-looking practice producing $70,000 per month with
collections at 90% and overhead at 75% of collections is vulnerable.
That means the dentist is earning about $190,000 a year before taxes.
A good CPA might keep taxes at about 20%, leaving about $150,000 to live
on. This is not poverty level, of
course, but with a mortgage on a $500,000 house, a Lexus minivan and an F150 at
$1,100 or so a month, a trip or two a year, two or three kids to send to private
school/college, club dues, ballet lessons, etc. there is already very
little being put away for
retirement already. If production
is off by 10%, almost all of that comes from the doctor’s portion because it
is not that easy to reduce expenses quickly.
How do you fire half a person, return part of a new digital x-ray, pay
90% rent, etc. The fact is that the
doctor’s income goes down much more than 10%.
In fact, the $190,000 shrinks by $50,000 to $75,000 per year.
Now, there is a real problem for the doctor.
The family doesn’t want to move to a smaller house, juco is not an
attractive option for the kids, and the cars are not worth what they were at the
dealer’s showroom. So,
he/she begins to borrow and tries to cut back expenses.
The natural reaction is to begin squeezing in the practice starting with
supplies, raises, newsletters, etc. This can cause more serious problems in
morale, turnover, etc. In the worst
of cases, the practice suffers a major blow.
I would apologize for using such a negative example except that it is a
real situation from our files during the last downturn. (To the dozen or so clients that are
presently making large investments for the future, do not be alarmed.
As you remember, we have considered these issues.) Everyone is a management genius during good
times. I remember back in the late
60’s when the Dow was on a steep climb for several years.
A few young businessmen back in Dallas had formed an investment club with
a very simple approach. They would
buy on he first day of the month and sell on the last day of the month.
I’ve forgotten whose theory that was being touted, but they were by
golly, investment geniuses as long as the market was trending upward.
Unfortunately, they didn’t really remember that they were only
benefiting from a rising overall market. When
the market starting down their genius turned to something else. Good times are great, and we should enjoy
them, but they can also mask much inefficiency and waste.
When the conditions get tougher the systems and procedures that worked
great during the boom can cause a bust. Whether
we like to admit it or not, the best way to look dispassionately at the
effectiveness of internal procedures is to judge the financial results.
This can be done by analyzing the numbers.
I strongly suggest that all dentists do a very thorough analysis or their
practices, now. If the downturn
hits harder than predicted, it could save a great deal of anguish.
If it is a non-starter, it will still be a valuable exercise.
As they say (Franklin’s Poor Richard?), “An ounce of prevention is
worth a pound of cure!”. Email if you want some ideas on how to proceed with the
analysis. My guess is that Barry Bonds will reach 75
home runs by season’s end barring injury.
Is he that much better than the Babe, or is it the ball, and the new
parks? No doubt, Bonds, McGwire,
and Sosa are superb athletes. Ruth,
Mantle, and even Maris treated their bodies pretty badly from what we hear.
Maybe, they are that much fitter than the legends.
To me though, I would have expected to see a gradual increase, if it were
really just better conditioning. We’ll
never know, and that makes life just a little grander, I think. Have a great day, Hurston Anderson 813 963.7228 PS: There is a lot going on here at Wisdom Management Group. 1.)We will be shipping our latest addition
to the Protocol Series, Hiring and Maintaining a Top Notch Staff, soon. To
receive a copy fax to 813-963-5974 your cc#, exp date, and address, or call our
office at 813 963-7228 The price is
$179.95 plus shipping and handling of 12.50.
Also, our other Protocol Series workbooks on Finance, Hygiene, and
Scheduling are available at $179.95 each. Marketing
is due in a month or two. 2.)Also, we are now completing the revised
Practice Management Cookbook, the most widely used managed resource in dentistry
used daily on six continents. “Cookbook,
2001” will be available within two weeks.
The price will remain $199.95 plus s/h, but anyone who has purchased
either of the two previous editions will be able to buy it at half price. Same
procedure for purchase as above. 3.) Our website is up in test mode, and we
will send a special email in a few days to announce it’s official opening. 4.) For dentists who want to do a thorough
analysis of their efficiency and effectiveness we are offering a service by our
experts. This is different from the
potential production analysis we perform for free.
It will require a good deal more information from the practice.
Email for details. 5.)On the subject of practice production
potential, we have a form we can send by email that will help us determine this
for you. There is no charge for
this form or analysis. If you are
interested, email me. 6.)Also, our in-office consultants are
excellent at helping raise production and improve staff effectiveness. All clients have increased production by at least $10,000 per
month with the average nearer $15,000 per month. This is a guaranteed recession proofing.
Call, or email for information. Hiring
and Maintaining a Top Notch Dental Team, Part IV It is amazing how much stress is associated with personnel issues in businesses. Large companies will have an entire department just for handling personnel. Today, that is usually the Human Resources Department. I am not sure why Personnel Department has become passé, but it has. To me being termed a human resource does not seem better than personnel, but nobody asked my opinion on that one for some reason. Whatever the name this department is used to relieve managers from the burdens associated with the details of managing their staffs. I have never seen a dental office large enough to afford this specialization, so dentists who own their own practices can expect to wear that hat part-time as well as many others. Possibly, a steel hardhat or helmet would be a good choice while handling personnel issues, though. It can get pretty brutal at times, and you will need all the protection you can get. In order to help a little, and coincident
with the subsequent release of our new Protocol Series workbook on personnel
management, this week’s tidbit is a continuation of my discussion of general
subjects in team hiring and managing. In
previous weeks I have discussed the overall issues involved in personnel
management, specifics on determining if and when to hire a new staff member, and
the hiring process itself. Today,
following my original outline, I want to touch a little on compensation and
training . HOW MUCH SHOULD I/CAN I AFFORD TO PAY? It is essential to be competitive, fair, and reasonable. Too little and too much are both problems. Let’s bear something in mind. A team member’s value as a human being is not the issue in
her compensation nor is her personal financial need. These are very important issues in life, but they have no
bearing whatsoever in compensation administration.
For instance, I have a rather good list of business accomplishments and a
pretty good education. In several
previous positions that has appropriately been of high six-figure value.
However, as a Dental Assistant I would be less valuable than almost
anyone else you might consider. Even
the federally mandated minimum wage would be too much. This does not mean that I
am somehow less valuable as a human being or that I could afford to work at that
income level. Too often, these
extraneous issues are brought into compensation administration discussions. Employees are to be paid for their contribution to the success of the practice. Certainly, we take into account personality traits, experience, education, etc., but these are only to attempt to assess potential contribution based upon past accomplishments. When we hire a new employee we must compete with the market for her services, so that must be considered as well. Also, we must keep the practice solvent, so we need to look at our overhead before and after. Total compensation for all employees should not exceed 20% of gross production (That is about 23% of net production, usually). If it does exceed that percentage, then we are not producing up to our capabilities or we are overstaffed. Typically, the problem is most easily solved by raising production. The cold facts are that you cannot hire a half, third, quarter, or other portion of a person effectively, so whatever we spend on all staff costs we should multiply times five to determine required gross production. HOW CAN I GET HER (probably) PROPERLY TRAINED AND UP TO SPEED QUICKLY? Individualized training and responsibility clarification are essential. One of the biggest causes of moribund
financial results in dental practices is under-trained staff members, or
under-directed staff members. You
cannot operate at 100% when some staff members are capable of only 60%. The entire team must be operating at 100%.
Simply stated, in too many practices too many people don’t know what
they should be doing or they don’t know how to do it most effectively.
Hiring experience is helpful, but no two practices operate exactly alike,
so even the experienced employee must relearn some portions of her job. Effectiveness and productivity are negatively impacted during
times of learning/relearning. It is
essential to minimize the time for training. Circumstances can help.
If the new employee has worked in a similar office, you are ahead of the
game. If there is a member of the
existing staff who can provide effective training, that is a blessing.
If the dentist’s spouse has extensive experience in the practice and is
capable and available to help with training, that can be helpful.
If there is a former employee who can be hired temporarily to provide
effective training, that is another possibility.
If you are a client of ours, we will send in a specialist to train new
employees. Any of these options
combined with well written Job Responsibilities for the employee and thorough,
updated internal procedures and protocols will produce the fastest results. Unfortunately, many new employees will struggle from the very first day to try to figure out how to do their jobs. If she is clever and resilient, she will learn on her own about a third of how things were done before and create another third based upon her own knowledge. This leaves her with a huge gap of knowledge and operating at a very low level of effectiveness. Many practices go from employee to employee with this constant learning, loss of knowledge, and relearning. Because employees are under-trained they are not able to operate at 100% effectiveness. This means that salary overhead is too high, and this takes directly from the doctor’s personal income. If a practice is producing $500,000 per year with salaries at 30% instead of 20%, the doctor is losing $50,000 per year in personal income. The worst part is that there will still be high turnover and low morale, because too many employees are just winging it every day. It becomes a continuous process of hiring, training, and recruiting. Finding someone to train properly, preparing thorough Job Descriptions and internal procedures/protocols, and investing in continuing education for all staff members may seem expensive at the time, but it can save many more times the cost over time. I was in Minnesota for a few days last week
for a wedding. It is a fascinating
place to me as a native of Texas. Sorta
like visiting a foreign country. Everyone
seems to be taller and blonder. There
are more Andersons and Johnsons than anywhere else per capita, but their
ancestors are from Stockholm and Oslo, not Glasgow and Edinburgh like those of
us from the South. “Hot dish”
is not what a waiter in a Mexican restaurant says when he serves your Chalupa
Supreme Meal. It is apparently
something originally cooked in a casserole dish in the oven, but it may be
served cold from the refrigerator. “Pop”
is not another name for your father, but a soft drink of any brand.
We simplify that in the South by calling all soft drinks “Cokes”.
All that aside, I really enjoy the beauty of the upper Midwest and the
great people, “You betcha”. Have a great day,
(813) 963-7228 PS: We
will be shipping our latest addition to the Protocol Series, Hiring and
Maintaining a Top Notch Staff, soon. It
helps managers solve many of the problems described in this Weekly Tidbit.
To receive a copy fax to 813-963-5974 your cc#, exp date, and address, or
call our office at 813 963-7228 The
price is $179.95 plus shipping and handling of 12.50.
Also, we have available in stock our Practice Management Cookbook, the
most widely used managed resource in dentistry used on six continents, at 199.95
plus s/h. Also, our other Protocol
Series workbooks on Finance, Hygiene, and Scheduling are available at $179.95
each. Marketing is due in a month
or two. How can you tell what the potential
production should be from your practice and your team?
We have a form we can send by email that will help us determine this for
you. There is no charge for this
form or analysis. If you are
interested, email me. Also, our
in-office consultants are excellent at helping raise production and improve
staff effectiveness. All clients
have increased production by at least $10,000 per month with the average nearer
$15,000 per month. Call for
information. Hiring and Maintaining a Top Notch Dental Team – Part III Recruiting, Interviewing,
and Hiring Employees Several weeks ago I started discussing in
some detail one of the most difficult challenges that faces all dentists and/or
dental office managers. As I
mentioned, there are several elements to the overall issue, as addressed in our
latest Protocol Series workbook on team building. In general terms, they are
assessing the need for an employee, recruiting and hiring, salary
administration, training, assessing, motivating, and terminating (if necessary).
This week I want to address recruiting and hiring issues. Anyone who has heard me speak on team
building knows that I eventually discuss constructing teams like building fences
of rock or brick. Larger companies
and a majority of dental practices build their teams as a bricklayer would build
a fence. Brick Fence Analogy. A brick fence requires that all building material be exactly to a prescribed specification. The mason builds the fence by selecting any brick (individual) and adding the mortar (management). All bricks must be exactly as required for the fence. For this approach to work the greatest (almost impossible in people management) task is to find or mold the bricks. Inappropriately sized or shaped material must be either discarded or cut down to a particular size by trimming edges and reshaping, but much or most of the original strength is lost in order to become a particular size and shape. This can be
time‑consuming and expensive. However,
this is the most common approach used for team building in dentistry because it
is the easiest. Unfortunately, it discourages initiative, creates turnover, and
almost never works over the long‑term. A staff of automatons who do their
jobs by rote will become the only possible result of this approach. In a
practice where there is great dissension and stress this may look like an
attractive alternative to the chaos. And, in any practice this may seem more
comfortable for the manager/doctor because he/she feels more in control. There
is a better way. Rock Fence Analogy. A rock fence accepts the fact that not all material is alike, as is particularly the case with human beings. The mason constructs the fence by first becoming acquainted with each available piece of material. He/she never loses the vision of the fence's overall required architecture, but he/she creates the fence utilizing the uniqueness of each to add to its aesthetics and strength. In management this means that personalities, talents, and expertise must not be identical, but they must be complementary. Since we are using all of the building material, there is little wasted. Creativity and individuality are encouraged so long as they fit within the overall architecture. Without a doubt the job of the mason is much tougher, but the result is, in the long run, more pleasing and stronger. Still, the mortar is added to hold the fence together, and sometimes there is a spot that cannot be filled by any of the available material requiring the mason to go in search of a particular, unique item. When this occurs we must begin in earnest to recruit just the right person. WHAT SHOULD I DO TO RECRUIT QUALIFIED CANDIDATES FOR THE POSITION? First, know
exactly the skills and personality you are trying to find.
Of course, you may have to compromise eventually, but at least “Aim for
the stars. Even if you miss, you’ll wind up pretty high.”
There are inexpensive recruiting methods, and there are expensive
recruiting methods. I suggest you
try the inexpensive methods first. For
starters, spread the word through the staff.
This is not possible, if the move must remain confidential, but your
staff is a great source where possible. Call
all your friends in the area and find out if they have been receiving
resumes/applications they can share. Call
the schools where specialized training is offered.
And, advertise in the local newspaper.
Bear in mind, though, that newspaper ads are not the most efficient
method of finding prospective employees. If
you have no other choice, make sure you maximize this medium. Many newspaper
ads are practically worthless for attracting the best candidates because they
lack proper focus. In a tight job
market, who is likely to be available? There
are those entering the industry for the first time, there are those who are
moving from another area, and there are those who are employed but still
looking, for whatever reason. Forget
about trying to attract with money. You
don’t really want that type of employee, and it doesn’t work. For men who are writing employment ads primarily oriented
toward women it is important to realize that men and women have different
motivations. Women are more
inclined to react positively to ads which discuss relationships and work
environment issues. Most who are
looking for a job are not feeling comfort, security, or stability at this time. Suggest these things in your ads. Things like “join our team”, “warm, caring
environment”, “competitive compensation package”, etc. are good for
appealing to those who are looking for a career not just a paycheck. In a tight job
market, it is sometimes necessary to pay recruiting fees, and these can be
rather high at times. However, it
is not as expensive as lost productivity or the internal turmoil that can result
from missteps in the recruiting and hiring process.
Remember too, the personnel agencies are to be used only for providing
prospects to you. Do your own
interviewing and hiring. WHICH CANDIDATE SHOULD I HIRE? Each job in
dentistry requires a different type of personality, so it is imperative to hire
with that in mind. The interviewing process is a time to get to know the
candidate and for the candidate to get to know you and your team.
Do not cut it needless short, or you are depending upon luck rather than
intelligence to build the team that represents you and your practice to the
community and, in particular, to your patients. I am convinced
that determining the personality of the candidate with the assistance of a
personality profile analysis is important.
Many are available. We use
the DISC by People Smart for our own hiring and for our clients.
In fact, every manager
should have each of his/her employees analyzed, as well as himself/herself.
To return to my “rock fence analogy”, finding the perfect last piece
for the “rock fence” includes complementary personalities.
And, it is not just for the benefit of your practice.
It is also important for the candidate to work in a place where he/she
can be happy and successful. If we
hire poorly or lazily, we are not properly dealing with people are at a
particularly vulnerable time in their lives.
Most problems with employees can be prevented through effective
recruiting and hiring. The proper
questions and approaches for hiring are not easily dealt with in a paragraph or
two. Get a good resource on the
subject from wherever you choose. (Certainly,
I feel there is a void in this area specialized to dentistry, and that is why we
are finishing our workbook about 10% of which is on this subject.
See my post script.) Never
forget that you are selling the candidate on accepting the position from the
first contact. Consequently,
pre-interview, interview, post-interview, team interview, working interview, and
the actual meeting for making the offer are all sales contacts.
They are also times for being sold and impressed, but to get the best
employee it is important to want them, and they should always know this.
Don’t forget, you have the final decision about hiring.
Just courting a prospective employee aggressively does not mean you are
duty bound to hire them, but it does make a difference to the candidate. I will continue
for the next few weeks to discuss employment agreements, job descriptions,
policy and procedure manuals, training, motivating, etc. Although you
can’t really feel autumn approaching here in southwest Florida, it is not far
away. The time of school supplies,
high school sports, professional and college football season openers, the crop
harvests, all the holidays on the horizon, the end of the high humidity and
heat, the World Series, the Indy 500, the PGA, and the final surge toward yearly
business goals is fantastic. It is
great to be alive in August of 2001! Never
in the history of the world has mankind been as healthy, wealthy, or free.
Yet, it also seems that people are less contented than in the past.
We are a puzzling species, indeed. Have a great week. I will. Hurston Anderson (813) 963-7228 PS: We
will be shipping our latest addition to the Protocol Series, Hiring and
Maintaining a Top Notch Staff, in a few days.
It helps managers solve many of the problems described in this Weekly
Tidbit. To receive a copy fax to
813-963-5974 your cc#, exp date, and address, or call our office at 813 963-7228
The price is $179.95 plus shipping and handling of 12.50.
Also, we have available in stock our Practice Management Cookbook, the
most widely used managed resource in dentistry used on six continents, at 199.95
plus s/h. Also, our other Protocol
Series workbooks on Finance, Hygiene, and Scheduling are available at $179.95
each. Marketing is due in a month
or two. How can you tell what the potential
production should be from your practice and your team?
We have a form we can send by email that will help us determine this for
you. There is no charge for this
form or analysis. If you are
interested, email me. Also, our
in-office consultants are excellent at helping raise production and improve
staff effectiveness. All clients
have increased production by at least $10,000 per month with the average nearer
$15,000 per month. Call for
information. Hiring
and Maintaining a Top Notch Dental Team, part II DO I REALLY NEED TO HIRE NOW? The reality is that most staffs feel there is a need for a new
employee no matter the situation. You
must decide if the addition is really necessary. CAN I AFFORD TO HIRE ANOTHER PERSON? It is important to know if the expenses can reasonably bear
additional expenditure for staff. These two questions are inextricably
connected. In fact, answering one
positively always answers the other positively. That is, if you can afford another employee while still
maintaining reasonable overhead percentages and with all employees properly
compensated, you almost certainly need to consider hiring another employee.
Staff compensation is NOT a place to save money.
Paying less than 20% of gross production (see below for explanation) in
total staff compensation is a guarantee of future problems.
It is not good long-term policy to overwork and underpay employees, even
if it is possible. In addition, it
is dishonest. Theoretically, it is
possible if there are employees who are willing to work for less than their
value in the market. However, that
is a slippery slope that always leads to disaster.
They will get fed up and they will either leave or demand fair
compensation, and that money saved will be lost many times over.
Actually, this is such a rare problem that it hardly bears discussion. Leaving Never-Never Land for the real world,
we all know that the more common problem is in the reverse. That is,
you cannot afford to hire another person while maintaining reasonable
overhead percentages, but you seem to need to hire anyway.
Let me clarify. There is no
question that staff overhead should not exceed 20% of gross production in North
America. We have collected and
analyzed data from thousands of dental practices, and this is correct. If a practice is already paying 20% or more of gross
production and additional staff appears necessary, there is a problem in other
areas. The existing staff is not as
productive as possible either due to unclear responsibilities, incomplete
training, lack of team cohesiveness, inappropriate interference, distractions,
lack of proper motivation, or incompetence.
Certainly, the dentist/owner wants to assume incompetence in most cases,
but that is not usually the problem. It
is often not that there is too much being spent for staff compensation, but that
the production capability from that team is not being realized.
The compensation should not be lower. Production should be higher.
Just like any other statistic, though, this
can be misunderstood if we do not define the terms. “Gross production” is defined as all dentistry produced
at the regular fee schedule. The
ultimate decision on discounting is not made by staff but by the practice owner.
Employee discounts, professional
courtesy discounts, insurance discounts, etc. are to be subtracted at their true
cost to the practice from “gross production” to produce “net
production”. Also, “staff
compensation” should include all members of the team except doctors and all
costs associated with their employment including vacation, taxes, insurance,
uniforms, etc. As an example, if
the average “gross production” is $50,000 per month but “net production”
is only $45,000 per month due to insurance company write-downs, free dentistry
to families, etc. the staff compensation should be $10,000 per month, not $9,000
per month. As gross production increases the amount for staff compensation also
increases. Exceptions to this rule must be considered in
several situations. Money paid to
friends, family, etc. which is not really compensation for work in the practice,
but for other things should not be counted toward the 20%.
And, if it is due to some personal involvement between dentist and staff
member the potential for disaster here is much greater than exceeding acceptable
overhead percentages. Another
problem sometimes arises due to the difficulty of the personality of the doctor
or doctors. There are dentists who
make the work environment so stressful that their only way of keeping a staff is
to overpay. The longer this
persists the higher the premium required because of the reputation in the area.
Especially, in this economy no one wants to, or has to, work in a
negative environment. My suggestion
to those dentists who struggle with this is to find some way to lighten up and
be a little happier. Listen to
positive tapes, read inspiration literature, and see a professional, if
necessary. It can save you
thousands of dollars a month in salaries, not to mention the personal emotional
benefits. Oh yeah, having grown up
in the Dallas area I can remember that there were a few dentists who employed
Dallas Cowboy Cheerleaders who were not necessarily the most effective at their
jobs. This is not actually a salary
expense except for the actual work done. It
is either practice promotion or doctor’s personal compensation.
To more serious issues, how do you handle the
situation where staff compensation is too high, yet it is essential to replace
an employee, or add one? You hire
them to solve the immediate problem, but you do not quit there.
Certainly, there is no good purpose served in forcing the practice into
crisis. However, it is essential
for the health of the practice to get the appropriate solution to the lack of
appropriate effectiveness in the team. Do
not forget, overstaffing inevitably leads to inefficiencies.
It is just like the old story of lawyers.
The theory goes that no town can have just one lawyer, because there
would be no one to defend against law suits.
Likewise, it is impossible to have one idle staff member.
She must have someone with whom to talk. Probably, salary compensation above the 20% of
gross production points in two directions.
First, it is necessary to have a good Policy and Procedure Manual,
thorough and up-to-date individual Job Descriptions which eliminate overlaps and
omissions, and effective communication to make the team as efficient as
possible. Also, there needs to be
appropriate knowledge of how to raise the production to the appropriate level to
produce acceptable overhead percentages. Relieve
the pain caused from the symptoms of staff ineffectiveness.
Then, heal the disease caused by the inefficiencies which lead to lower
than optimum production levels for this team. This is a very important issue.
A practice producing $500,000 per year but paying 30% instead of 20% in
staff compensation costs the dentist $50,000 in personal income each year.
In addition, highly productive teams have much higher morale.
Addressing the issue of under-producing teams should be a very high
priority for all dentists. By not simply treating the symptoms but getting to
the actual disease, dentists can reduce stress and raise income.
It is well worth seeking outside assistance, if necessary. In Florida a young UF freshman football player
collapsed and died of heat exhaustion a few weeks back, and this past few days a
27-year-old Minnesota Viking died also from heat exhaustion due to practice.
Actually, access to information is greater today than ever before in our
history, and these types of tragedies are not new.
They are just better reported than ever before, but it does make me
wonder if the lack of control we see in everyday diets and exercise routines
doesn’t somehow contribute when athletes and everyday individuals then put
themselves in highly physically stressful situations.
How important is it really in today’s type of professional football
with such a heavy emphasis on passing for a 350 pound lineman to run wind
sprints? Isn’t his job mainly
just to be big and strong and impossible to move?
Certainly, millions of athletes and pseudo-athletes live longer healthier
lives as a result of rigorous physical exercise.
And, there is Lance Armstrong who just three-peated in the Tour de
France. He believes that his
intense training regime has helped him beat cancer.
It is better to exercise than not. Just
use common sense, I think. Have a great weekend, Hurston Anderson 813 963-7228. PS:
We will be shipping our latest addition to the Protocol Series, Hiring
and Maintaining a Top Notch Staff, in a few day.
It helps managers solve many of the problems described in this Weekly
Tidbit. To receive a copy fax to
813-963-5974 your cc#, exp date, and address, or call our office at 813 963-7228
The price is $179.95 plus shipping and handling of 12.50. Also, we have available in stock our Practice Management
Cookbook, the most widely used managed resource in dentistry used on six
continents, at 199.95 plus s/h. Also,
our other Protocol Series workbooks on Finance, Hygiene, and Scheduling are
available at $179.95 each. Marketing
is due in a month or two. How
can you tell what the potential production should be from your practice and your
team? We have a form we can send by
email that will help us determine this for you. There is no charge for this form or analysis.
If you are interested, email me. Also,
our in-office consultants are excellent at helping raise production and improve
staff effectiveness. All clients
have increased production by at least $10,000 per month with the average nearer
$15,000 per month. Call for
information. Hiring
and Maintaining a Top Notch Dental Team There are some great individual sports, and
I really enjoy following the stars and players of golf, tennis, bicycling,
bowling, billiards, etc. For some
reason though, I tend to be a bit more drawn to team sports.
There is something particularly appealing about accomplishing for the
common good, sharing the exhilaration of success with teammates (thrill of
victory), getting to know and appreciate the contribution of the other players,
and not being alone when all the efforts do not bring the victory (agony of
defeat). I fully recognize that
there is no sport that does not in some way require the efforts of more than
just one person, but I still prefer the sports where several are on the field
together doing separate but essential tasks all designed to bring victory not
for an individual, but for the group. Dentistry is a team “sport”. While there are a few individuals who seem to think that it
is only the dentist who counts, most of us have long realized nobody, no matter
how capable, can practice dentistry successfully without a great staff.
It is enough to be a great team captain, we do not have to be the entire
team. From locations in five US
cities we provide management consulting in many, many dental offices.
By far, the most common difficulties involve issues related to finding,
hiring, keeping, training, rewarding, evaluating, inspiring, reprimanding, and
even terminating staff. These are
easily the areas which cause the highest stress for the dentist/owner, too.
Just when things seem to be settling down someone’s husband gets
transferred, or someone gets pregnant, or some other team deflating thing
happens. Whoosh! Back we go.
Because dentistry is a team “sport”, one of the most important of the
dentist’s jobs is personnel management. While
a good team can synergistically succeed beyond expectations, a team in disarray
can struggle and cause major stress and financial damage for the dentist. Having dealt over and over again with these
issues with clients we have identified several specific areas in the process of
hiring and managing essential to develop the type of team which can enjoy
success for all. The questions
below are typical of all who manage. DO I REALLY NEED TO HIRE NOW? The reality is that most staffs feel there is a need for a new employee no matter the situation. You must decide if the addition is really necessary. CAN I AFFORD TO HIRE ANOTHER PERSON? It is important to know if the expenses can reasonably bear additional expenditure for staff. WHAT SHOULD I DO TO RECRUIT QUALIFIED CANDIDATES FOR THE POSITION? You can’t build a great team unless you can find prospective employees who can play the key roles. WHICH ONE SHOULD I HIRE? In dentistry not all personalities are well suited for all positions. The interviewing process is to select the right person. HOW MUCH SHOULD I/CAN I AFFORD TO PAY? It is essential to be
competitive, fair, and reasonable. Too
little and too much are both problems. HOW CAN I GET HER (probably) PROPERLY TRAINED AND UP TO SPEED QUICKLY? Individualized training and responsibility clarification are essential. HOW DO I KEEP THIS TEAM MOTIVATED AND POSITIVE? The first step is getting the right people. Next, they must be managed professionally. HOW DO I ASSESS THE EFFECTIVENESS AND EFFICIENCY OF MY TEAM? Oops! Something doesn’t feel right. Is it me or someone else? WHAT IS THE BEST WAY TO WORK WITH AN EMPLOYEE WHO IS NOT AT HER/HIS BEST? Definitely, the team is underachieving. It is up to me to do something to correct the situation. WHAT IS AN EFFECTIVE, YET HUMANE WAY TO TERMINATE AN EMPLOYEE? King Henry II is purported
to have said, “ Have I not about me one man of enough spirit to rid me of a
single insolent prelate?” This question solved his personnel problem with
Thomas Becket. You must find a more
appropriate way to handle yours. Along the way there will be other personnel
issues, but most will fall into these broad categories.
Over the next few weeks I am going to take these broad categories and
offer my humble suggestions. This
area has been heightened in my awareness because we have finally begun the
process of finishing our fourth installment in the Protocol Series.
That is personnel management in a dental office. The fact is that I have
had a rough draft manuscript for almost two years, but it never seemed right.
Consulting with other members of our team here, I finally feel we have
the right approach. It is based,
pretty much, on answering in detail the questions posed above.
If you are interested, read my post script below. My Scottish ancestry leads me to cheer for
Colin Montgomerie in golf’s British Open, but my American heritage conflicts.
The weather is going to be a bit dicey over the next few days, and the
Tiger is lurking just behind. This
may be historic. Oh by the way,
Lance Armstrong is back in the Tour de France, and he will be the father of twin
daughters soon. Life is good. Have a great day, Hurston Anderson 813 963-7228 PS: We
do not know how many of our Personnel Management Protocol books to print.
We will be shipping in about 15 days, so the decision must be made pretty
soon. If you are interested, I am
going to offer a 10% discount for the next 10 days.
That means the price will not be $179.95 but $161.95 before August 1,
2001. We must still cover our
shipping costs of 12.50. Please fax
to 813-963-5974 with cc#, exp date, and address, or call our office at 813
963-7228 to take advantage of this discount.
Also, we have available in stock our Practice Management Cookbook, the
most widely used managed resource in dentistry used on six continents, at 199.95
plus s/h. Also, our other Protocol
Series workbooks on Finance, Hygiene, and Scheduling are available at $179.95
each. Marketing is due in a month
or two. Email if you would like a free analysis of
the effectiveness of your practice. It
is a simple form to return to us, and the process takes only a few days….now
that I have some additional help, at least. I had some really interesting comments from
my column last week about evaluating dental practices.
I am going to carefully edit (for confidentially reasons) a couple and
share them this week. COMMENT #1 – A DENTIST IN THE MID-ATLANTIC AREA
“My questions are regarding the practice
appraisal. I am in touch with several practice management consultants I
have known and worked with over the years, and am learning some interesting
facts about such appraisals done in anticipation of buy-ins. One
close friend, an oral surgeon, shared with me how a "hot-shot"
appraiser charged the senior partner $5000 to do the appraisal, which came to Next there were some private particulars
shared. Then, the following: “From what I am reading from your article,
is that no matter what I pay for the appraisal ( I am presently being quoted
$3000 for this service) it is still going to come in at about 50 to 60% of the
annual collections” …………. “How about the accounts
receivable.? I guess one of my real questions is why do senior dentists
pay out thousands for these appraisals, if they tend to come in at about a
comparable number, that must be open to negotiation anyway.
Could you give me some feedback on this?? And perhaps a ball park
at what you think should be a round number that I might expect to start the
negotiations from? Just how much information do you really need?
Any input would be sincerely appreciated.” My answer, less personal particulars. “The appraisers get the fee because
someone will pay it, and they do add a touch of authenticity to the price, of
course. Your practice is probably worth about $500,000 for the
goodwill. A valid appraisal of your equipment, supplies, furniture, etc.
by someone like Patterson, would probably render their value a bit higher than
you think. I suspect $60,000 to $70,000 depending on how many rooms, how
many new, etc. In addition, the A/R
would be yours. At your production level, collectable A/R is probably
$50,000 to $75,000. Oral surgeons and several other specialists
are at a bit of a disadvantage sometimes, because referrals are so
critical. They cannot guarantee that the referrals will continue. In
those cases, I am likely to suggest their keeping some sort of minority
involvement rather than walking away, if that is possible.” COMMENT #2 – A DENTIST IN THE MIDWEST
“I appreciate your info. However, in Ohio
and a number of contiguous states the initial value of a practice is to add the
previous 3 yrs divide by 3 and that’s the starting point. In 25 yrs
I’ve never read or been told by any financial source 50% of revenue.” My response was as follows: “Thanks for the information. We do
have a good deal of experience in that area including an office in Ohio.
Frankly, almost all the evaluations I have seen still fall within the criteria I
mentioned, but the additional information you have shared is quite helpful, and
we will be sure to consider that in the future. I do wonder if these are
practices with high collectable A/R and good value in equipment,
furniture, etc. For instance, if a practice were producing/collecting
$300,000 with $40,000 worth of equipment, etc and $75,000 in A/R,
the value with my formula would be about 90%. Again, thanks for
the input. It really does help me to be as accurate as possible.” One thing is certain.
The more efficient and effective the practice the better the
production/collections and the greater the value. Time and effort spent improving internal systems, procedures,
and protocols will not only benefit the practice during its operation but also
its value to a potential buyer. We are blessed in the US in so many ways,
but there are several international sports at which we are definitely not quite
competitive. One that comes to mind
at this time is Bicycle racing on the road.
I don’t even know the official name, but I mean such as the Tour de
France. That is one reason that
Lance Armstrong always seems so inspiring to me.
Today, he is 7th I think, but I guess (hope) he will move up
closer to competing for the lead in the next few days.
This sport in the US is rather lonely and under appreciated, and he has
suffered testicular cancer which was thought to be fatal.
His dedication and perseverance are an inspiration…the stuff of
legends. In Italy, Spain, France, etc. he would be a national hero
with his record, but back at home in Austin, TX he is almost transparent.
Sorry about this obvious “homer” rooting Europe, but “Go,
Lance!!”. Have a great week, Hurston Anderson 813 963-7228 PS: We
are going through a massive technical effort to move many things to a new
Website. It may take a few more
weeks, but we will have a tremendous amount of free management information
available. Also, I have hired
someone to handle the D2D project of helping dentists buy and sell used stuff
from each other. It got out of hand
for my previous resources. That
will return in a few weeks. Our
Cookbook is still the most widely used daily operational workbook in dental
offices on six continents. It is
available for 199.95 plus shipping and handling.
The Protocol Series of workbooks to organize specific areas of a dental
practice are each available at 179.95 plus s/h.
The five areas are Scheduling, Hygiene, Finance, Personnel, and
Marketing. We have a few slots for new consulting
clients available. To order books,
simply fax to 813-963-5974 with cc#, exp date, address.
For info on consulting or other questions either fax, call, or email. What
is a Dental Practice Worth? Our company has a 1994 Mazda Navajo that we
got as barter from a client back in 1996. I
drive it a lot because I can carry packages, etc. in the back. It has 140,000 miles on it and kbb.com says it is worth about
$4,800. That is not true.
We need to carry packages, supplies, etc. from time to time, and we
don’t have any other vehicle to use without renting one.
A new comparable vehicle would be close to $28,000.
There is nothing wrong with the Navajo.
It runs great. The fact is
that the Navajo is worth $28,000 to
me, but only $4,800 to the general market.
No matter how much I like those Navigators and Escalades (even more than
$28,000), they are not worth their market value to me because they would only
replace what I already have. A dental practice has a market value that is
rather easy to calculate. No matter
how much you pay an appraiser, they will end up at about half of average
collections/production for three years plus the market value of the equipment.
That is, 50% of yearly production (assume collections in line) plus
whatever the used equipment in the office would bring on the used equipment
market. That means, that if a
dental practice has been collecting $600,000 per year the goodwill value is
about $300,000. Add to that the
equity in the building (if any) and the value of the equipment (say, $50,000),
and you have the value of that practice to the general dental community.
In our example that would be about $350,000. But, that is not necessarily the value to
the dentist who is the owner. If
this dentist were in line with our recommendations, he/she would be earning
about $240,000 per year from the practice.
That is only 40%, and many earn 50%, or more.
An excellent annual investment return on the $350,000 would be $42,000
per year, or 12%. Hopefully, the
retiring dentist has additional income sources from previous investments,
savings, etc. to raise that to a
large enough number for comfortable retirement, and there are always reverse
mortgages and other devices, of course, but that is cutting it pretty thin. Every dentists financial situation is
different, but there might be compelling reasons to keep practicing a few more
years, even if it means taking in an associate and cutting back to one or two
days a week. It can be very
sobering to discover that a lifetime’s work is so easily discounted.
For those who really love dentistry total retirement from patient care
may not be the best plan. Of
course, many are just counting the days until they can quit, and that is another
situation. We have in our Financial
Management Workbook in the Protocol Series a planning form for calculating
retirement possibilities including practice value. It is a good idea no matter what age to begin thinking about
such matters. My father was a teacher, coach, and
small-scale builder, and he kept active to some degree until my mom passed away
some five years before his own death a couple of years ago.
He was never the same after her death, and he never worked again after
her death. I wish I had been more
attuned to encouraging him back into his shop.
It is not easy to get up and prepare for that day’s work for 40, 50, or
even 50 years, then, to stop abruptly. Personally,
I plan to stay busy for as many days as my Maker allows me in this world.
I have book to write, companies to found, people to help, and things to
experience. I have more than is
possible left to do, and I will never get it all done.
That does not mean that I will HAVE to work, but that I will be able to
do what I love. Those who have done
this have lived longer, healthier, happier lives. The US celebrated its 225th
birthday last Wednesday, and I thoroughly enjoyed my 4th with family
and friends. One of the most
intriguing oddities about the 4th of July is in reference to our 2nd
and 3rd Presidents. They
did not like each other through most of their lives. They were a Bostonian and a Virginian who fit their molds
perfectly. The tightly wound,
driven city dweller and the laid-back plantation owner. Later in their lives after the political battles settled a
bit they both retired to their homes and actually began a lively exchange of
letters for many years until their deaths.
I suggest that anyone who believes that retired and retiring individuals
become moribund should read a collection of these letters.
What insight, what emotion, and what optimism they displayed.
My guess is that both would agree that they actually became friends
through this lively exchange. I do
not remember if they ever met personally again, but the letters survive, and
they are terrific. In one of
history’s greatest ironies, John Adams and Thomas Jefferson both died within
hours of each other exactly 50 years after July 4, 1776.
If that doesn’t give you chills, you have become way too jaded, I
think. Have a great week, Hurston Anderson 813 963-7228 PS: We
are going through a massive technical effort to move many things to a new
Website. It may take a few more
weeks, but we will have a tremendous amount of free management information
available. Also, I have hired
someone to handle the D2D project of helping dentists buy and sell used stuff
from each other. It got out of hand
for my previous resources. That
will return in a few weeks. Our
Cookbook is still the most widely used daily operational workbook in dental
offices on six continents. It is
available for 199.95 plus shipping and handling.
The Protocol Series of workbooks to organize specific areas of a dental
practice are each available at 179.95 plus s/h.
The five areas are Scheduling, Hygiene, Finance, Personnel, and
Marketing. We have a few slots for new consulting
clients available. To order books,
simply fax to 813-963-5974 with cc#, exp date, address.
For info on consulting or other questions either fax, call, or email. A few weeks ago I received the following
email regarding bonuses. I think my
response to this dentist would be interesting to many others. "To: Wisdom@tampabay.rr.com Sent: Friday, June 01, 2001 8:25 PM Subject: Need help with a bonus system. Hurston, Thanks for your continuing help in practice management via the Internet and your Protocol Series. They are great! I really need a simple but fair bonus system to reward my employees for extra effort. I currently have 2 front desk , 2 assistants, and 3 hygienists (one full-time (4 day/week), one (3 day/week) and one (1 day/week).The full time hygienist in on commission and the others are on salary. My total payroll not including matching social security and med. is about 25%. (Last year I paid 67,000 for payroll on total gross collections of 277,000. I have tried several different bonus systems but they are either unfair to my employees or to me. Any help would be greatly appreciated. THANKS, again !!!! Keep the words of Wisdom coming. Dr. P" Hi Dr. P, I looked at your data, and I feel when you say last year you really mean either five months of last year or the first five months of this year. It would seem unlikely that you would be able to keep a staff of six (effectively) busy producing/collecting only $23,000 per month. More than likely we are actually looking at more nearly $55,400 per month with salaries of $13,400 plus ss and med. Lets just say that is really about $14,100 per month because those expenses should be included along with all personnel related expenses, even free or discounted dentistry you may provide. This raises your salary percentage to at least 25.5% of collections. Frankly, if collections are 98% of production this is too high for bonuses already, but there is a way to make this work. The fact is that your existing salary expense should be able to produce about $70,500 per month without any staff additions. We know from extensive research and direct experience that salaries can be kept at 20% of gross production. Gross production is all production before taking write offs for insurance, bartered dentistry, family discounts, etc. That is, the production at your regular fee schedule for all dentistry. The concern is always not to pay until production is actually collected. In fact, collections are important and an indicator of how your overall staff is working together. When the systems and protocols are in place properly collections should be 98% of net production. Net production being the actual billed amount of your production, less discounts, insurance write offs, etc. In the offices where we assist we put in place the protocols and train the staff to ascertain that this 98% is actually attained. However, the industry average for collections is much, much worse. Because of this situation our typical bonus system cannot be used unless the average collections are at or better than 98%. Otherwise, the practice may be paying bonuses while suffering a cash shortfall because bonuses are based upon production rather than collections. Below is effective method we sometimes use when collections are being brought in line. Let's make some assumptions in your case. Let's say while you collected $55,400 per month, that represented 85% of gross production. While I hope I am low, that would not be far from the national average. This means your gross production would be $65,176 per month. Your salary expense against gross production would then be 21.3%. Production is not high enough still to pay bonuses, but we are getting closer. First, let's look at the purpose of bonuses. Bonuses are not part of the salary. Salaries should be paid fairly and adequately without consideration of the bonuses involved. Salaries are earned for doing one's job adequately enough to be retained in the job. Bonuses are rewards for extraordinary effort, and we define that as producing more than five times the total salary expense. Paying bonuses for less than extraordinary effort is not a good idea because it institutionalizes, and even encourages, mediocrity. Rewarding average effort is not a good idea, but it is not as easy as that I realize. When we begin working with a practice we often find that bonuses have already been paid for mediocre effort. This is why bonuses can become negative rather than positive. Once they are introduced they cannot be removed without major morale issues. Yet, the doctor eventually resents paying bonuses from his/her personal income which is effectively what is happening in that situation. Most bonus plans are either too easy to attain, or they are so complicated that they do not work as intended. Too easy, and it just becomes another type of salary increase which is expected and completely loses its appeal as a reward for exceptional effort. Too complicated and distrust for the dentist by the staff is the result. Bonus systems should be so simple to understand that every single employee can quickly look at the month-to-date production totals and collection totals and see how that will affect her own bonus, if things stay the same. Mysterious and complicated plans are almost always meant to cheat the employees in their minds, and they are worse than no plan at all. Sometimes, the staff is right. Sometimes, the doctor is putting an unreachable "carrot on a stick" and calling it a bonus system. Combine this with very complicated conditions and you understand why bonuses are considered negative motivators in most cases. Back to the case at hand. If the $14,100 actual salaries are correctly calculated, they also include all bonuses previously paid. If not, that must be added, of course. First, simply convert all those bonuses previously paid into salary increases. Look at how much each has been receiving in bonuses, and simply increase her salary by that amount. This will be done when the new bonus plan is announced. It should effectively neutralize the potential negative impact of a plan that was too easy to attain. In this case the new plan should be as follows: The new monthly target for gross production must be $70,500. Remember, collections in this scenario would be 85% of that, or $59,925. Establish a total bonus pool for the entire office based upon exceeding the $70,500. Allocate that based upon the number of actual hours worked during that bonus period. Include actual vacation days, if earned according to established employee protocols. Suppose gross production were to equal $75,000 for the month. That would represent $4,500 production from extraordinary effort. 20% ($900) of that belongs to the staff. Six full-time employees all working equal hours would then receive $150 each for that month's extraordinary effort. This would be paid, however, only if the collections were 85% (A different amount would be used based upon your actual situation, if different.), or $63,750. Assuming 16 days per month this means that the daily goal for bonuses is $4,406.25 and for collections is $3,745.31. Each employee can do the simple arithmetic to multiply this by the number of days worked so far in the month to see where the practice stands. I have no objection to this being posted in the employee lounge area even. It should not be a secret, or it will not work as an incentive to encourage effort. Once the initial analysis is done to establish the target gross production and collections, this is not difficult to administer. Also, look each quarter at overall salary expenses and modify the targets accordingly based upon 20% of gross production. It would be a good idea to pay the first month on faith, if the production takes a dramatic increase and collections are trailing behind. Increasing production will always cause collections to trail by at least a month, and you are trying to reward for effort not punish for circumstances not in the control of the team. This plan would be used to encourage overall practice production, and it should include each and every member of the staff. Other incentives can be used to increase collection percentages toward 98% and to increase hygiene production toward $1,250 per day. In many practices we find that they are quite useful, but that depends upon the particular situation. Never resent the bonuses paid, if this type of system is instituted. Consider only 80% of the income against gross production to be yours to pay other expenses and your own compensation. The rest is not yours anyway. It is theirs, so pay happily and immediately at the end of the month with a separate check. Never pay bonuses with the same check, because it then gets lost in the salary. Bonus is extra, not part of salary. Also, your personal attitude when paying these bonuses can either reinforce the positive effect or completely destroy the purpose. No matter you personal cash flow situation, pay bonuses joyfully and encouragingly. Never show even the slightest resentment, or forget the whole thing. One other explanation may be helpful. Gross production is used because that is the actual effort that is expended by the team. Insurance write-offs, discounting, etc. are expenses to the practice. These losses do not reduce the effort required to actually produce the dentistry. The practice owner is the only one who can determine if these types of losses to production are justifiable, and he/she must bear the expense...not the staff. I do have to caution, though, that many factors in the practice should be considered before saying that this will absolutely work for your practice. I can say unequivocally that this will work quite effectively, if all other factors are appropriate. It will encourage additional effort and it will reward the team as a whole for this. This rewarding of the team is to encourage team effort and reduce divisiveness. An unproductive member of the team will pull the entire team down, and a certain amount of internal discipline will be encourage. If a particular staff member is consistently excelling beyond her salary, increase her salary to properly compensate her even if it is not the regular interval you have established to review salaries. I'm not too fond of regular salary review anyway, but that is another subject altogether. I hope this is of some value
to you. Let me know how it works
out. Hurston" The outcome for the NHL was probably
predictable. The Avalanche had been
dominant all year, but New Jersey almost pulled it out.
A shame either team had to lose. Great
hockey. Now, this NBA thing.
Having watched primarily the west this year, I just assumed that LA would
sweep Philly. Then, Iverson rose to
unbelievable status in my opinion. Admittedly,
I knew mainly about his tattoos and apparent attitude prior to that game.
WOW! The Lakers seemed to
have raised their game a little since then, but if Iverson can just get a little
more help, who knows? Have a great week, Hurston Anderson 813 963-7228 PS: Getting
the internal procedures in order can be a do-it-yourself project in some cases.
We offer our Practice Management Cookbook with job descriptions, and
solutions to all day-to-day operational questions.
In addition, we have created the Protocol Series for organizing key
internal operations. Those now
available are on hygiene, scheduling, and finance.
An electronic version of our Policy and Procedure Manual (in the
Cookbook) is also available. To
order any, call or fax 813-963-5974. Cookbook
is 199.95 plus shipping/handling of 12.50, each Protocol Series title is 179.95
plus s/h, and the electronic Policy & Procedure Manual is 79.95 plus s/h.
Fax with CC#, exp. date, and address. 
Here in the US we will be celebrating Memorial Day on Monday. I think it was originally on May 30 in the northern states and June 3 in the southern states, but now we just grab a nearby Monday and open the pool for the summer, cook out, watch sports, and forget about work. When I think about all those who made the ultimate sacrifice for this country whom we honor on Memorial Day I begin to feel a bit guilty. Starting with the tens of thousands who died from 1776 to 1783 during the American Revolution through the casualties during Desert Storm, Americans have voluntarily taken up arms to defend the principles on which this nation was formed and lost their lives in the process. While these principles of democracy and f |