Thursday, June 11, 2009

Employee Incentive Plans

Creating and implementing an incentive compensation program provides the mechanism your staff needs to focus on specific and targeted product sales or cosmetic services. The result is a positive impact on your practice’s ability to achieve the goal, staff morale, and bottom line performance.

In review, the key elements to an overall staff compensation package is comprised of three key elements: a fair and equitable hourly or salaried wage, the ability to earn merit increases based on yearly performance compared to their job description, and an incentive compensation package. This article discusses the strategy and implementation of the staff incentive plan.

Several key decisions need to be made in preparing and developing the staff incentive compensation plan. These include,

· which staff members are eligible to participate in the program,

· what services or products you want to include as part of the plan and

· setting appropriate and reasonable goal(s).

Staff Member Eligibility

Deciding which staff members can participate does have some real considerations. Are all full-time employees eligible, probably so, but what about part-time? Are part-time employees eligible at all, or, at some reduced amount? How about aestheticians, or, other non-physician providers, such as physician assistants, nurse practitioners, or nurse injectors? These must be answered prior to implementing any incentive compensation plan.

Deciding who participates in the incentive plan is purely subjective. Many consultants have their own opinion and I certainly have mine. I consider an incentive plan as a goal for the practice. To achieve this goal requires everyone in the practice to be engaged and educated about the products or services highlighted in the plan. As such, I believe everyone, including part-time employees and aestheticians, should participate equally in the plan. This sounds odd, but experience demonstrates tremendous buy-in to the plan and success in achieving the goal. Remember the premise for an incentive compensation plan. That is, to motivate your staff to go above and beyond their typical job duties and to engage patients in these products or services, create demand for these products or services and to create value for the practice.

Non-physician providers, PA-Cs and NPCs, may be another story. Since most of these employees are already on some type of production compensation package, you may choose not to include them as part of the staff compensation plan. In the case of these non-physician providers, they generally benefit from the staff incentive plan through increase overall service delivery production.

Services or Products to Include

Selecting which products or services to include in the staff incentive compensation plan is subjective. However, selecting those products or services that return the greatest value to the practice and patient are the most attractive. From a practical matter and from a medical-legal perspective, selecting cash services make the most sense. It is important that you have the ability to track sales of the products or services through your practice management software. This provides the real-time data comparing performance to goal, and the necessary data to assist you in developing a realistic sales goal.

Incentive Compensation Plan

The most effective plans are those that benefit the staff and the physician-owner as well. The successful plan also puts some of the responsibility and accountability back on the practice personnel. I have seen some incentive plans based on overall practice growth. While not a terrible design, this type of plan generally puts most of the responsibility for achieving the goal on the providers. I have seen one example where the surgeon finds himself in surgery late on a Friday afternoon while the staff has already begun enjoying the weekend. After a few sessions like this the surgeon quickly abandoned the incentive compensation plan for the staff.

While there is no question that the provider(s) must do their part, it’s a matter of selecting those products or services that maximize the provider productivity time.

In overview, your plan should be based on historical data and be sensitive to the “seasonality” of those products or services. For example, some cosmetic services have some seasonality. Similarly, most plastic surgeons see a decline in their surgical load just before and just after school begins. As such, your compensation plan needs to be reflective of these seasonal variations.

Understanding prior performance on your targeted products or services is critical. These data elements help us establish the upcoming compensation period goal. The staff incentive compensation plan that seems to work best follows this design:

Establish the sales goal for this period’s targeted products and services, minus, the prior periods products and services sales. The difference represents the growth of the targeted product and service, and establishes the basis for the total incentive compensation plan pool of dollars.

$150,000 – Sales Goal

$100,000 – prior periods sales

$ 50,000- basis for incentive plan pool.

Next, as the business owner you must decide the portion of this basis pool you wish to share with your team. Common percentages range for 10-25%, depending on the current status of the targeted product or service at your practice. Thus,

$ 50,000 -Basis for incentive plan pool

X 10% -Percentage you elect to share with your team

$ 5,000 – Total dollars available to the team, if they hit the sales goal target at 100%

Most offices use a sliding scale to determine actual payout. That is, should the team over-achieve, more money is funded by the basis. If the team under-achieve, there is less money available in the incentive pool. Most practices implement their plan at a minimum of 80% achievement and top out at 120% of achievement. This should be enough of a spread to reward behavior while at the same time protecting the staff and the practice from potential errors in goal development.

Goal Development

This is probably the most difficult element to implementing a fair staff incentive compensation plan at your office. You may be offering selected services, but have seen a decline in overall performance. This is a great scenario to implementing a incentive plan. Historical sales data for your practice is critical in goal development. Also, if you can get national sales growth numbers from your suppliers, that too, is a help. You also need to have a good understanding of your current market and competitive nature of your area.


Implementation of a staff incentive compensation plan is probably the most enjoyable part of the process, aside from handing out money for a job well done. The plan should be presented at a staff meeting where there is ample time for questions. It should be in a written document, complete with examples. Your staff should know what their individual opportunity is and what role they play in achieving it.

Education is key. You must invest in your staff’s education of the products or services you are including in the plan. As the physician-owner it is your responsibility to ensure everyone on your team is knowledgeable about the products and services highlighted. As part of this process, be sure to ask your vendors for assistance. I suspect most of them would be delighted to assist, especially since you have included their product as part of the incentive plan.

Well constructed incentive compensation plans have many positive benefits. It certainly benefits the staff and the practice with increased financial reward. Somewhat secondary, but equally beneficial is the teamwork the plan helps establish. Improving teamwork and improving staff work satisfaction have benefits well beyond the incentive compensation plan. I hope you will give one a try.


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