Staff Bonus Considerations

We think that a well-thought-out bonus system is a very effective way to change the status quo in an office and also to include staff members in the growth of an office. It can also serve to help focus staff members on the lack of performance of an office.

We think there are four important factors to consider in any bonus system.

First, the bonus should be based on collections, not on production. The overall objective of any bonus system is to improve collections.

Second, the bonus system should be viewed as a “horse race” that everyone in the office gets to watch during the month. Everyone knows how the office is doing every day each month. Just looking at the “finish line” is neither as much fun nor as motivating as watching the whole horse race.

Third, the bonus system should guarantee that the doctor is also rewarded! The objective of the bonus is not to simply give money to the staff. The objective is to make changes, particularly in collections, above the status quo.

Fourth, the bonus system should be easy to administer and easy to understand.

We recommend the attached spreadsheet for calculating the bonus based on collections using a three-month rolling average. This is used in conjunction with morning huddle reports so the staff knows each day how the office is doing.

We also feel that each staff member should share equally in the bonus system. Hygienists are an exception but they should also share in the total office bonus. For non-hygiene staff members, the monthly bonus is prorated by the number of days each staff person works. For example, a person working only three days per week would get 3/5 of the bonus that a person working five days each week would get. (We also have a separate spreadsheet to track this.)

For hygienists, we recommend they each receive one half of the bonus amount that other staff members receive. Again, this is prorated by the number of days each hygienist works each week. In addition, hygienists have a separate bonus based on their daily net production.

The goals set and displayed in the morning huddle reports should be set to correspond as closely as possible to the monthly goals in the bonus spreadsheet. It would be demoralizing for the staff if they achieved each of the daily goals as stated in the morning meeting and then failed to get a monthly bonus. Coordinating the morning huddle goals with the monthly bonus calculations takes a little fine tuning but is important.

As the bonus amounts will tend to “ratchet up” as office collections increase, it should probably be renegotiated and the bonus levels reset 3 to 4 times each year. The staff should be fully informed of this before the new bonus is instituted so there are no unpleasant surprises that need explanations later. Alternatively, the bonus calculations can remain fairly fixed over time with the understanding that the bonus replaces what might normally be either merit or cost-of-living increases in salary. In other words, “If you want a raise, increase collections and the bonus!”

Link to suggested staff bonus spreadsheet

Bonus Update with Open Dental Version 20

Although we believe that the bonus system described above based on collections is preferable, many dentists … and apparently also Open Dental … would prefer a bonus system based upon daily scheduled production.

You can now display the daily production goal in the appointment module. Here is a link to the Open Dental Manual showing the setup for these goals.

There is a report (Reports > Standard > Production and Income (top-left pane) > Monthly Production Goal), which shows the daily production and the goal for each day in the time period selected. One more column showing the above the goal or below the goal amount would have been helpful. However, you can easily export the report to Excel and add the calculated column.

The advantage of this type of goal is that is easy to set up and very visible to the staff – right in the appointment book!

The disadvantage to any production goal, as opposed to a collection goal, is that “production” depends upon additional factors such as how and what types of adjustments and writeoffs you do. “Collections” is a hard number and represents the money you use to pay overhead and (hopefully!) take home. A goal-based upon collections protects the dentist from inflated production not matched by actual collections.