Bonuses Versus Raises

One of the questions I am most often asked by orthodontists is, “Charlene, would you recommend starting an incentive program for my staff?” There is no easy answer to this question. Each orthodontist needs to evaluate his or her own situation and goals for the practice. Some orthodontists have been successful with their incentive plans for years, and others have reported poor results. In researching this complicated question, I decided to conduct a survey of a group of orthodontists. The participants were from all across the country. The length of time they had been in practice and their amount of production also varied. Their common thread was that they all owned private orthodontic practices with a staff of 20 or fewer. A complete list of the questions I asked and the responses I received are posted at the end of this article.

The Orthodontist’s Point of View

The following is a response that I received when conducting the survey that I believed summarized many orthodontists’ points of view regarding their experience with incentive bonuses:

Charlene N. White

“I didn’t answer all of the questions because I wanted to explain my situation. This is actually a very ‘hot’ topic in my office right now, so I thought I would give you my opinion of the pros/cons. As you know, I started my practice about 4 years ago and periodically tried to offer financial bonuses during those years. I tried different formulas for goal-setting, but as a new practice, I had very little history to refer to. Therefore, I had trouble setting goals for the future because the growth curve during the first 5 years of practice and the second 5 years of practice are quite different. I got frustrated by ‘formula’ systems and started giving random, unannounced bonuses when I observed exceptional work or exceptional results in a month or quarter (and still do that today).

“When I was doing formulated bonuses, I did not see it as a motivator. It quickly became expected by all employees. I had one employee even ask if she could get part of her bonus check early so that she could purchase a home computer. In other words, it was no longer a ‘bonus’ but part of their income that they were counting on and sometimes budgeting for. The other difficulty of the formula was deciding who got what piece of the pie. Though we have a policy that there is no conversation among one another about salaries, I am not naÏve enough to think that it doesn’t get talked about behind closed doors. So maybe I did not present it correctly, or wasn’t smart enough to make the right formula, but that didn’t work for me.

“As of this year (2007), I have chosen to set three main goals for our practice. One involves the reduction of dental/office supplies. One involves a specific increase in collections. And the last involves responses from patient surveys. If all three of these goals are met, then I have committed a time on the schedule to send my staff on an all-expense paid trip to Jamaica. I plan to rent a beachside house for them, and make it a great trip. I have overheard much more conversation and commentary about ‘going to Jamaica.’ I hope this will provide not only a motivation, but a memory for them if they succeed. I’ve never heard anyone tell a story about the big paycheck that they received, but a fun or exciting experience will be discussed over and over again.

“Next year, we will focus on three other areas of our practice and offer another similar ‘nonmonetary’ reward. So we’ll see how that works.”

A lack of appreciation and unhappiness when the goals are not met are the most common complaints that I hear from orthodontists regarding bonus systems. The staff are satisfied when they reach the bonus and unhappy when the goals are not met. We are all creatures of habit. When the staff gets into a pattern of receiving bonuses, they are upset when it does not happen. A sense of entitlement comes into play. The staff is thinking, “We have really worked hard, and we deserve a bonus.” Meanwhile, the orthodontist is thinking, “We have been here working hard each day, but the reality is that production is down. We did not reach the goals. That was the deal. What am I suppose to do, give them a bonus anyway? That only means I take a decrease.”

Busy Does Not Mean Productive

There is a misconception among staff that if they are busy, then they must be getting a bonus. The reality is that you can see 80 to 100 patients per day and have a drop in production that leads to decreased collections. I train staff to understand that if there were no “treatment starts” scheduled for the day, the production on the daysheet says zero. That was not a good day. If you have a bonus system based on increased production and collections, the key production appointments must be filled. Those appointments are exams, records, consultations, recalls, and starts. In a clinically efficient practice, the numbers of patients per day should actually be dropping.

Staff should also understand clearly how the bonus is reached and how the bonus is calculated. In addition, they need to know what can detract from the bonus. For example, if the bonus is based on guaranteeing the staff 20% of collections, the collections must be increasing without an increase in base payroll in order for the staff to receive a bonus. If the staff says, “We need more help. We need to hire another staff member,” they need to inquire as to how this will affect their bonus. One person can add 1% to 2% to the payroll, which might negate the bonus.

If the staff is not calculating how much the practice collects in the current year compared to the previous year, they can also be thrown a curveball. For example, if collections are down in the last quarter of the year and the practice is going to collect $50,000 less than the previous year, it is highly likely that the goals will not be met. That means that the end-of-the-year bonus may be zero and staff members may be very disappointed because they have planned on this money for their Christmas shopping. Staying on top of the numbers is important so that everyone is aware of the potential results.

Bonus Formulas

When orthodontists are interested in setting up a bonus formula, I advise them to tie it into what goals they would like to achieve, whether it is increased productivity or reduced overhead. I also recommend setting an ending point for the plan. A simple, 1-year bonus plan that I have recommended for years is based on a 10% increase in exams, starts, and collections. It is easy to calculate and track. Have someone in the office compute how many new patients and starts were done and how much was collected for each of the past 12 months. Add 10% to each figure. For example: If you saw 60 new patients in January, the goal for next year would be 66. Consider a bonus of $50 per goal reached per employee per month for full-time staff members, for a maximum bonus of $150 per employee per month. Part-time employees would receive a prorated bonus per goal reached per month. No bonus should be paid to an employee who is away on leave. If the leave encompasses part of the month, a prorated bonus should be given.

Another advantage of this formula is that the practice normally reaches at least one of the three goals, so it doesn’t feel like a total loss. Some orthodontists also tie the bonus into being on time for work and having perfect attendance. At the end of the year, you can set new goals or you can end the plan. You can design it based on what you feel is achievable. If you set goals too high and they are not reached, it deflates morale.

Why Staff Members Want Raises

I have personally interviewed more than 8,000 orthodontic staff members in my career as a consultant. The vast majority would like to have an increase in their hourly rate each year and a good benefit package. They like the concept of an incentive plan, but they feel like they cannot rely on it as income. People who choose to work on an orthodontic team do not have the same hot buttons as those who choose commissioned sales jobs. They like routine and security.

As you noticed in the surveys, the challenge comes in figuring out where a staff member’s salary caps out. This is not a favorite subject of employees; however, it is reality in any job. In many industries, salaries have actually decreased over the last several years. It is human nature to desire an automatic increase each year, but unless you own you own business, there is a ceiling to your salary. In my product, “Step by Step,” I created salary ranges, formulas for raises, and evaluation sheets for every position.

When you hire a new staff member, you should give that person a salary range for that position. If you research salary Web sites on the Internet you will find median salary ranges for hundreds of jobs. For example, the Web site I researched in February of 2007 stated that the median salary for dental assistants in Virginia Beach, Va, was currently $30,481, with 50% making between $27,327 and $33,506 per year. When you are reading salary statistics, remember that they are based on 40-hour weeks. If you work only 32 to 36 hours per week, you need to adjust the salary accordingly.

I have conducted a salary and benefit survey of 79 orthodontic practices, the results of which you can see by going to my Web site, CharleneWhite.com, and clicking on “surveys.” It is broken down by position, experience, and state. The Dental Assisting National Board also has a salary survey by state on its Web site. The JCO also does a survey each year. There are many bases for comparison.

If you want to attract and keep the best staff on your team, you must offer a competitive package for your area. If you do not offer a good package, staff will quit and go to another office. If a long-term staff member is upset that she has maxed out her hourly rate, it is important to have a discussion with the employee. Oftentimes, orthodontists are uncomfortable having the discussion, so they avoid the communication. It is best to talk about it and be honest about the future. I encourage you to tell your staff member, “Go out on some interviews. If you get an offer in writing that is better than what we are offering, we will talk about it.” If the package you offer is competitive, 100% of the time, long-term employees will not be able to get another offer that comes close to their current package.

Advice for Staff

My best advice for staff members who like receiving incentives, bonuses, and perks:

1. Always thank your orthodontist verbally and in writing.
2. Ask the question, “What can I do personally to help reach the bonus?”
3. When the goal is not reached, maintain a positive and proactive attitude. Ask if there is anything we can do to get back on track.
4. Do not fall into the trap of entitlement.
5. Never ask for your bonus early.

Advice for Orthodontists

1. Think the plan through before presenting it to your team. It is hard to stop an incentive plan without consequences.
2. Set realistic goals that can be met.
3. Match the incentive to your specific goals.
4. When in doubt, stick to salary increases.
5. Conduct salary reviews each year. Do not stop talking when it gets uncomfortable.
6. Make sure your package is competitive for your area.
7. Do not start a bonus plan unless you can hand the bonuses out with enthusiasm. There is nothing worse than receiving a bonus from an unhappy orthodontist.
8. Make sure the staff understands the formula and what drives the plan.

My goal is for the orthodontist and staff to feel good at the end of the day. If the staff continues to get cost-of-living raises and the practice is flat or declining, the orthodontist is the only person who takes a decrease in salary. This creates a burned-out orthodontist. If the orthodontist underpays the staff and does not reward them fairly, it creates poor morale and increases turnover. The goal is to create a win/win where everyone will reap the rewards of a well-run practice.

In addition to managing a full schedule of speaking engagements in the United States, Canada, and abroad, Charlene N. White has authored 18 training products, a quarterly newsletter, and numerous articles published in dental journals. She has been a dedicated supporter of the AAO, serving as a Lay Director on the AAO Foundation Board. She can be reached at