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Special Report: Facing the Hard Facts About Staffing

 

 

 

 

FACING THE HARD FACTS ABOUT STAFFING
brought to you by Summit Practice Solutions

 

The situation that we find ourselves in will not resolve itself quickly. The pandemic will not return to normal without a cure (experts say 6-18 months), so the threat will drastically affect our practices and ways of life far into the future. At least in the next 6 months, gone are people gathering in large groups, cinemas will remain closed as will restaurants as we knew them. I see so many things that will have to be altered by technology before they can return to some normalcy.

We are also looking at a financial recession that has been lurking for years and has been triggered by this pandemic. The sheltering at home and social distancing will slow the virus infection curve but will almost certainly mean that the country will experience a second wave or spike of infections in August through September. By October, we will have a new flu season at a time that the pandemic hysteria will still be raging with few permanent answers on the horizon.

All this to say that we need to take a long view of the recovery and assume that the best action would be perfection of the basics of dentistry and business strategies. Moving back to the core of a start-up practice with a culture of “whatever” it takes will win the day. High end dentistry will suffer the longest when the public moves away from “vanity” and towards “sanity”. Our patients’ income as well as our own will affect when and what our patients will spend their money on. When we look at consumer history and how people prioritize their spending, consumers will pay their TV network subscriptions as the number four most important expense and dentistry is number twenty-four. Add in the almost certain PTSD component to recovery where our patients are fearful of putting themselves in harm’s way by going back anytime soon to the dentist, and the road back may be slow and long. In the balance, it may be a while before dental spending will recover to pre-COVID-19 levels.

You need to shift your focus back to perfecting basic dentistry and profitability. Like 2009 when we peaked our heads around three separate recessions, it took years to recover. While that time was horrible, we came out of it stronger for the most part. Fast forward 11 years and look back and it is clear that we failed to learn the lessons that were available at that time. We did what we had to do to recover, but we failed to change the core values and strategies that would have allowed us a little more preparation for the “next time”. As author and speaker John Maxwell has said:

“In life

  1. You will learn lessons.
  2. There are no mistakes, only lessons.
  3. A lesson is repeated until it is learned.
  4. If you don’t learn the easy lessons, they get harder. (Pain is one way the universe gets our attention.)
  5. You’ll know you’ve learned a lesson when your actions change.”

There is a term called “optimized bias” which has two components. First is confirmation bias, for example, our tendency to seek out confirming information while ignoring everything else. (These are the Facebook junkies taking advice from people who have a great self-image for no apparent reason but are killing it on Facebook).

The second is a meta-bias, the belief that everyone else is susceptible to thinking errors, but not you. My objective in writing books or blogs is not to have you think like I do, but to think differently about everything you consider or study. An example might be the case of accepting SBA loans and Federally funded bailouts.

My first concern is that if you take the loans (yes, I know there is a possibility of forgiveness), you may take the easy route and not make the difficult decisions that a leader needs to make in challenges like this. When you take on debt, it could dampen the consequences of your actions or lack of actions prior to this pandemic, but it only delays or softens the consequences today. It does not in any way prevent them or cure the real challenges in your practice. In a dental way, you are only creating debt that will treat the symptoms. There is no disease resolution. The disease is that the practice that most of us own has not followed sound business strategies. You will just come out on the other side of this recession owing more money, while still having a marginal business plan that struggled prior to this, and in all likelihood will find itself tipping towards insolvency and failure.

This is especially true if we come out of this in a few weeks and it resurfaces in August or September of this year. Today is the day to do something different. If you want a different result, working longer or harder is not the answer. It is working differently. At the risk of constantly harping on these two axioms, I will repeat them one more time.

  1. You can’t get better at giving people what they don’t want. (If you were not growing before the pandemic at 15% plus a year, didn’t have an overhead near the 50-60 percent range with long term staff and above average new patient numbers, you were not meeting your patient’s needs.)
  2. Everything you do is precisely designed to give you the results you were getting. If you want more, you have to be more. You have to change and do everything a little differently.

Two pages of reflection only to finally get to the point of this article. If the resolution to the challenge we find is not immediate, each and every one of us face a post pandemic future far different than the level of success we experienced in 2019. When they ring the bell and the powers that be allow us back into our offices, I believe the patients will be slow to return. If this is the case, what are our options with staff in this new dental economy? How can we come back stronger with the right team, and with a better business plan bolstered by a new culture in our team?
When it comes to staffing after the shutdown, we have but a few options and I would like to run those by you.

  1. Hire everyone back at pre-COVID-19 levels and hope your practice returns to previous levels before you go belly up. In a few words: The same number of staff, at the same pay, doing the same thing. Let’s consider the ripple affect of this decision.
    • Doing this for many of us would mean keeping some over paid staff
    • Paying over 30% of what hygienist’s collections are is untenable long term.
    • Paying a total compensation percentage for your entire staff that exceeds 25-27% if we include every employee including outsourced work (accounts receivable, collections, insurance, payroll, CPA, attorney, etc.) will destroy your overhead while keeping under-performing team members.
    • Keeping the same number of staff even though the production per employee falls way below $20,000-$25,000 per employee per month, which is the ideal level.
    • Hiring everyone back when the demand and patients may be only 50% of what it was before the COVID-19 pandemic would mean that you doubled your overhead while the staff did half of the work they did before your shutdown.
    • No one knows what this will look like until we get back, but I believe that it might take 6 months or so to return to pre-COVIC-19 levels. Fewer patients coming in and less production on that smaller number of returning patients. Plan for this, and if it is better, everything will be great. Do it the other way, and you might find yourself struggling to stay afloat.
    • Tough decision not made: This strategy could allow mediocre staff to return without addressing their shortfalls at a time where even before the “fall”, they upset you, failed to perform adequately, stirred the pot, failed to follow office systems and protocols while thinking that you can change them.
  2. You could create a hybrid temporary pay and hire all of them back but only pay the same percentage of collections prior to the shutdown but not the same dollar amount. Example: 25%-27% employee cost of collections is ideal for staff overhead, but let’s say you were at 30% prior to the pandemic. Then you would dedicate 30% of the collections to the staff in the same percentage that you paid prior to the fall. If you collect a dollar, 30 cents would go to staff divided at the same percentage that you had before they were furloughed. A hygienist would get a little more, a new hire less, and the rest would be average so that all of the 30 pennies were distributed as pay. This would move the staff to a “Staff Ownership” mentality. They would learn the business of dentistry; feel the phantom pressure to get patients back while working as a team at the top of their game. Both sides now have bacon in the fire. You eat what you kill and clean.
    • This would encourage all staff to have an “all hands on deck” mentality to help ramp back up to previous levels.
    • It still does not take care of your previous compensation dedicated to staff being too high, but at least it gets everyone back to the office.
    • Once the production was back to a sustainable level you go back to paying what you paid before the fall or to a new level that reflects your goals and a sustainable business model.
    • It would be a great time to look at a bonus or profit-sharing strategy that actually worked to control overhead while increasing pay to your staff while decreasing the percentage of collections dedicated to staff salaries.
  3. Hire only the staff that you actually need as you ramp back up to previous or higher levels of productivity and profit.
    • Probably an assistant and/or a front desk for the first few days until the demand warranted more staff. Much like a start-up practice. This allows you not to become over-staffed prior to the demand and finances to support that employee being hired back.
    • The key to having a recovery that actually fixes the challenges you faced in overhead prior to the fall is to only add another staff member for every $20,000 of collections per month until you get back to a collection level that allows hiring more staff back. This will lead to an overhead of 60% or lower.
    • Sadly, hygiene may be the last to be hired back if the pandemic hysteria, along with the public’s fear of airborne aerosol/water spray, somehow lingers. You may only hire your hygienist(s) back as part time until the demand is back to needed levels. That is why you need to be proactive about recall and reactivation now before you get back in the office. Put your fingers on the pulse of the consumer and determine what the return demand might be. This, again, may challenge you on how to pay hygienists. Let me know if you would like to read about how to convert your hygiene pay to a commission or hybrid-based system. This will clean up a lot of challenges when you come back.
  4. You might consider upgrading staff in a target rich environment due to 30%+ unemployment of dental staffs.
    • Create a new culture with better goals, leadership, and the resulting profits that come with this strategy.
    • Redo your policy manual and staff job descriptions to correct those niggling problems that all of us have with staff and team building.
    • Hiring back as you need the staff to cover the demand for services gives you a longer timeline to interview and upgrade your team with new hires if necessary.
  5. Approach this with a Start-up Mentality or, better yet, as if you just bought your first practice from a previous owner. There will be good things and things that need to be changed. What are the upsides and add-ons that could make this practice more valuable? What are the down sides to this practice? Who do I keep and whose future do I free up? Have the mind set as if you just bought this practice and you understand the importance of certain strategies that would ensure that you could grow it, and make it more profitable. This reversal of insight will help you make the difficult decisions that are needed now. What did they do well, what could I add to the mix, who to keep, what needs to be purchased, what needs to be fixed up, remodel (lipstick and makeup), decluttered, modernize the look, raise the perception of sterilization (tours) and cleanliness (posted videos), especially in restroom, post cleanliness stuff, add Purell at every junction (like the hospitals do), etc. You get the idea.
    • Analyze the practice’s track record and self-diagnose where they were before you purchased the practice: 2019 P&L, practice management KPI, policy manual, job descriptions, staff numbers and quality and culture.
    • You must keep the most important staff members:
      • Those that add the most production.
      • Those that have the greatest commitment to the practice.
      • Those who the patients most bond with.
      • Those that live and breathe the ideal culture you need for a come back in your practice. NOTE: Keep in mind that you still need to deal with the pay vs. allocation % of collections for staff salaries.
    • You must eliminate the mediocre staff that appear to be holding the practice back. If you need more staff, make sure you upgrade them, onboard them well, and measure their performance. NOTE: To be clear this could even be your favorite assistant or any employee that does a good job, but creates drama and team dissent by their actions. So, don’t just think of the new hire, poor performance, lazy matrix. Look at the entire picture of assembling a team. Longevity should not be considered. Only look at the individual and corporate conduct of each member and weigh their value for the future.
    • Look at any staffing strategy as a “do-over button” to emerge with a stronger business plan, better systems, and more committed team.
    • Look at overhead that is tied to the cost of employees with the idea that any additional benefits either are part of the problem or are part of a well thought through solution to keeping staff with less stress, few if any staff turnover, and commitment by the team to this new culture: Vacation pay, sick pay, profit sharing (formal 401K, defined benefit plans, etc.), bonuses (team or individual), continuing education costs, and the number of employees actually needed. NOTE: $20,000 collections per employee per month or more is still the plan.
    • Rectify any pay scale that outstrips the norms for that job and replace it with either a commission basis or profit sharing in the form of a bonus system. This is especially important if you have an office manager. Their base should be what a well-paid front desk would make with additional pay based on performance of the office as a whole. If they are managers they should be paid based on that performance, not on a flat salary.
    • Hygiene pay from hourly to commission with 30% being the highest pay percentage. Historically, PPO’s decreased billable hygiene work, so seeing a single patient every hour is no longer feasible at a fixed hourly rate. Few offices actually track if their hygiene departments are doing scaling and root planing at a level of at least 20% of their billable collections, and fewer still partner with their hygienist to help patients want what they need. Current pay is too high and also benefits do not match the collection that they bring. This pay was based on billable production from decades ago and is no longer a viable alternative. Run a production by provider report for all of 2019 and then take the total pay for each of your hygienists and divide each one by that hygienist’s production for 2019 and look at the percentage. If it exceeds 33%, you have a huge problem.

 

Whether it’s an assistant, front desk, hygienist, or any other position in the office, there will come a time when you must make the difficult decisions on hiring and firing. With that goes the business decision of what to pay and how to set up the employee/owner relationship. Let’s talk philosophically about where you should start, and how we could avoid repeating the past and perpetuating a poor long-term business plan for staffing. Keep in mind as you read these bullet points that “what you allow, you encourage”. It is time to take back your practice with the right strategies and a determination to do it now. The time is perfect to reset the areas of your practice that have held you back. Consider that you will never have a better time or, for that matter, an easier time to correct a career of faulty staff assumptions in your practice.

Are there times when a current staff person is unsalvageable? YES
There are only two types of staff. The first is good staff needing some more training. The second type of staff is those that need to have their future freed up. In my office, staff averaged over 14 years of employment during my decades of practice. I am a huge fan of hiring the right people the first time, and for the right position. We spend the time to train them well, measure their results, and create consequences when they fail to perform. This is the definition of great onboarding of your employees. With this said the time line for this would be a matter of a few weeks, not months. As most of you know, in our offices we have always stressed a “Purpose Driven, Doctor Led, Staff Owned” model. This ownership mentality for my staff includes having them involved and even having the final say on new staff and doctor hiring. Hire slowly, and fire quickly. Make the right decisions the first time and minimize correcting those hiring mistakes. This is a huge part of great leadership. In today’s economy, you can ill afford marginal staff. As I told the doctor over the phone: I would never keep an employee and continue to pay them to make my life miserable. Regardless of how difficult it is making the decision to terminate someone; you will never regret doing it. You will only regret taking so long to have done it.

How much should I spend on compensation for staff?
We find that an overall expense of about 25% of your total collections should be spent towards staff compensation. This would include associates, as well as all other staff including any benefits, taxes, continuing education, staff meals, presents, etc. Anything other than what the owner doctor makes. I would even include the cost for coaching or a consultant. They are kind of a part time employee that should yield extra production and profit. The first place to look is your P&L and add up what your average monthly expenditures are for staff compensation. This is the area that I find in most offices is holding back profitability. We will encourage our clients to push the area of production, staffing, and overhead to a point of a 50-60% overhead average. We expect a well-run general dental practice to produce about $20,000-$25,000 of production per month per employee. That would mean that if you had 5 employees plus the owner doctor you would be producing about $100K-$125K per month. The average office will do only about $12,000 per employee. If your current percentage for staff is in excess of 25%, you would need to work at utilizing your office and staff to bring this into line. Profit is everything: Only net counts. It doesn’t matter what you produce, it is all about what you take home. NOTE: I include my CPA and Attorney costs under compensation also. If you do this, then add another 2-3% to the total bringing the target to 27%-28% for staff compensation.

How do I know what a fair income package is for any staff position in my office?
Go to www.indeed.com or www.dentalworkers.com . These are great places to look at salaries anywhere in the U.S. Open the site and click on salaries at the top left of the landing page. Type in the position and the zip code for your office. It will give you the average salary along with a range in your area. This gives you a starting place. Consider that the dollar amount shown includes the total pay package of taxes, pay, and benefits, not just what they take home in their checks. Next, call a temp service and find out what it costs on a daily basis to hire someone for a particular position. This will be about 25% higher than a permanent employee for that position due to the fees turned over to the agency. The worst place to get information is from another dentist who is overpaying their staff with poor results and a marginal practice. NOTE: Both sites charge a fee for further inquiries into salaries and postings.

I always want to pay my staff more than they could make any at any other office in town.
Human resource experts will tell you that the money that is paid for staff is the last thing that is important to them. Not in my offices. Money is always important. Remember that “Staff Owned” mentality that we try to instill in our team? My staff is given a competitive salary, trained in the business of dentistry, and rewarded with a bonus that makes the total compensation well above any other profession they could work in. Our bonus is the core to incentivizing your staff. We have the perfect profit sharing plan that has worked well for over three decades without alteration. You will notice that I said profit sharing. The name “bonus system” should be changed to profit sharing system. If the office makes more and controls its overhead, the staff should share in the increase. It is like we are on a lake with each of us having a boat. Our boat is larger than the rest of the staff but when the water level rises (profit), all the boats rise. When done right, this lowers the percentage spent on staff while actually paying them more. Giving staff a way to influence and ultimately control what they take home makes everything work. The staff will force unproductive, marginal staff out. They won’t allow that type of employee to jeopardize their earning capacity. They treat the patient great no matter how the patient acts or what day they come in. They understand the subtle nuances of a “consumer driven business”. They know that nothing happens till the patient says yes, and in our practices, they say yes 90% of the time.

What type of pay package should I strive for?
I like to call the perfect pay package being in the “pay zone”. This is the perfect balance of security for the staff member: Good salary and unlimited potential thru profit sharing: A bonus, along with an ideal overall overhead of 50-60%: Good financial positioning. You are in the zone for profitability, overhead, and management control. This is a win/win for staff, doctor, and patients. Enjoy the security of a great financial future, along with a decrease in stress while positioning your team and office for unlimited growth. If you have a “bonus system already”, I would put it on hold until your practice stabilizes for about 6 months or so. In the same way, I would postpone starting a profit sharing strategy until everything stabilizes.

How should you conduct an employee termination meeting?
Though extremely stressful, this type of meeting is best conducted in a concise and straightforward fashion focusing on three goals:

  • Presenting documented evidence that warrants employee termination. This requires an up to date HR file on each employee along with any infractions and history of poor performance.
  • Minimizing the likelihood of a wrong termination claim.
  • Showing appropriate respect to the employee during this difficult event.

The following sequence outlines the basic process to help ensure a successful employee termination meeting.

  • Meeting preparation. Never conduct a termination alone. Always have a witness in the room with you at all times. Have all administrative forms and documentation at the meeting. Do not lie to the employee or stretch the truth. Always show the employee respect. The meeting should not exceed 20 minutes.
  • The decision. Remain calm and confident and maintain appropriate eye contact with the employee. The less said, the better the result will be. Once the employee arrives, explain the purpose of the meeting. Following are two examples of statements you can use.
  • Statement 1 (for a chronic performance problem). “As you know, you and I have had several meetings over the past several weeks/months to discuss your performance-related issues (e.g., interpersonal skills, accuracy of work). Despite that coaching, your performance has not improved to the required level of your position. As a result, today will be your last day of employment with this office.”
  • Statement 2 (for a major policy violation). “An investigation has provided us with evidence that you violated company policy (e.g., sexual harassment, alcohol use, timecard fraud) on (specify date). As stated in the employee handbook that you signed on (specify date), that policy violation has the consequence of employee termination. As a result, today will be your last day of employment with this office.”
  • Finally, my recommendation would be to do it as soon during the day as you decide to free up their future. There is nothing to be gained by waiting till the end of the day. You will be under stress and in a bad mood until you pull the trigger. Decide, prepare, and do it. Don’t wait.

NOTE: I am not an attorney and by writing these suggestions, am not giving you HR advice. As with any legal consideration in taking actions in your office, check with your attorney first and follow their instructions and directions to the letter.

Making the difficult decisions are part of owning a business. As with anything I write, feel free to give me a call. I realize that one size fits all is impossible. I can help you customize you staffing needs and situation to fit these difficult times and your specific practice.

Michael Abernathy, DDS
972.523.4660 cell
abernathy2004@yahoo.com

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