John Woehrle

	 Should your staff understand your practice’s financials? The short answer is yes. How can your team appreciate the effects of their actions unless they do?

	Good staff members want to make positive contributions to your practice. They also want to be recognized for their contributions. When staff members have a vested interest in your practice, they perform better. A vested interest in your practice, by definition, means that the staff has some knowledge of the practice’s objectives and finances.

	Let’s address the elephant in the room: “If the staff knows the practice’s finances, everyone will know how much I make.” Perhaps, but with the average income of solo practitioners dropping, it is very likely that the staff assumes that you make more than you really do. Even if that is not the case, there is no question that you spent a great deal of time, effort and expense obtaining your education. You provide valuable services that warrant an excellent income. The additional financial investment that you’ve made in your practice, facilities and staff justifies an additional return on your investment.

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	Your staff also needs to understand that there is a difference in the practice’s net profit and your income. For example, profits need to be placed in reserve for acquiring ever-emerging new, and sometimes expensive, technology. If you’re renting, you may be placing funds into reserve for a down payment on your future practice location. And let’s not forget your professional student debt.

	Now that you’ve made the decision to share the financial status of the practice with the office, what do you focus on? Production (both gross and net), collection and expenses are the financial focuses of every practice. Virtually all consultants will look at production per hour and, in some cases, per minute. You need to feel comfortable with each facet of your practice’s finances in order to explain them to your staff.

	In order to look at real number examples, let’s make a few key assumptions:

	Production:                        $750,000

	Practice overhead:            65% (80% fixed; 20% variable)

	Supply cost:                      7%

	Lab fees:                          7%

	Hygiene/hour:                    $125.00

	Dentist/hour:                      $300.00

	How does a change in production affect your net income? A five-percent increase or decrease in production results in a 12-percent change in net income. Remember that 80 percent of your expenses are fixed. They won’t go up with an increase in production. Much of the increase in production will, therefore, be pure profit. Now you have the basis to sit and talk to your scheduler, treatment plan coordinator, hygienist and assistant and explain their part in the plan. 

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	If your practice is producing $750,000, a five-percent increase in production equals a $32,625 increase in net profit. Remember, this increase requires additional work. So, if you have excess capacity, your staff can be directed to focus on increasing production based upon either scheduling more patients or scheduling more procedures per patient. The entire staff can be involved in “selling more dentistry.” The increase in production should be more than adequate to offer your staff incentives for helping you achieve your vision.

	Another way to look at production is production per hour. If your hygienist has three hours open per week, you’ve lost $375 per week in production. Over the course of 48 weeks, that is $12,480 in lost profit. Additionally, if you have three open hours per week, you’ve lost $34,560 in profit. Three open hours for one hygienist and one dentist can result in a combined $47,040 in lost profit. Doesn’t it make sense to be sure that your staff understands these numbers, is empowered to help you achieve them and get rewarded for doing so?

Continue to the next page to see how changing your fees can affect profitability...

	How does changing your fees affect your profitability? Clearly this is a function of the percentage of your practice that is dedicated to PPOs and/or state and federal programs.  Assuming a 100-percent fee for service practice, a five-percent increase in fees will result in a 14-percent increase in net profitability. Since the increase in revenue did not require any additional effort or supplies, an increase in fees will result in a larger increase in profitability than an increase in production.

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	If 50 percent of your practice is not fee for service, then a five-percent increase in fees will result in a seven-percent increase in net profit. For our $750,000 practice, that is $23,520.

	Seeing the dramatic potential effect of increasing fees and increasing production, you’re still wondering, “What about those really big expenses, like our supplies and lab fees?” While these are the first things that everyone thinks about when looking at profitability, focusing on them is, by far, the least effective means of increasing profitability. A five-percent decrease in supply or lab costs will result in a one-percent change in profitability.  In our $750,000 practice, that translates to $2,625.00 in profit.

	There is no doubt that controlling lab fees and expenses is important. However, when you look at the effect of increased production and increased fees versus decreased supply costs and/or lab fees, where is your team’s time best spent?

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	Giving your team insight into your practice’s finances shouldn’t be viewed as a threat. It is one important piece of the management puzzle that helps empower your staff to help you achieve your professional vision and personal dreams.

	Sikka Software has tools to help you track performance and manage your finances. To get started click 

 or download the free app for android and apple devices. 

Articles

Should your staff understand your practice’s financials? The short answer is yes. How can your team appreciate the effects of their actions unless they do?

Should your staff understand your dental practice's financials?

	Almost all of us have spent hours developing plans and programs that we are sure will improve our businesses. We gather our teams together and solicit input. After listening to the team’s comments, we launch the new programs. We assume that everyone agrees completely with the plan, understands their roles, and is as excited as we are. After all, “I’m the boss.” Three months later, we look around and wonder what happened to our great plan.

	Similarly, we’ve all hired incredibly experienced, competent people. Because of their experience, we assume that we think the same and share similar goals and work habits. Everyone goes into the fresh relationship with great enthusiasm. Sometimes, a few months later, we have to wonder why that person isn’t performing to our expectations.

	So the question becomes, “How do you maintain a positive, enthusiastic work environment and get the results that you know your team is capable of producing?”

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	A good employee wants to be part of a larger group and have a role within that group. In a work environment, it is the employers who define that role and help the employee excel within it. If a role is well-delineated, the goals are clear and reasonable, and the strategies are in place, a good employee recognizes that they are set up to succeed.

	The first step to providing successful performance feedback is creating well-defined, achievable goals. Make sure your goals align with your short term plans as well as with the organization’s overall goals.

	Equally important, you will need to create appropriate strategies. Strategies are the activities that the staff needs to perform in order to be successful. The activities should yield measurable results. You will need to define a timeline to implement your strategies.  It may take some time to ramp up in order to fully implement all of the activities necessary for success. 

	Finally, you will need to measure your team’s activity and their incremental results toward achieving their goals. There should be predetermined incentives for achieving and consequences for failing to reach those goals. One note of caution, do not incentivize or penalize staff for results over which they have little or no control.

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Continue to page two to see what you need to do next.

	So, the plan is created, accompanying strategies are established, and you are prepared to measure activity and results. Now you need to have your regularly scheduled meetings with your individual team members to assess performance. While annual performance reviews continue to be the norm, more frequent reviews create a positive environment for immediate feedback and appropriate course adjustments.

	Quarterly reviews are very practical so that you and your staff continue to align in daily workflow. Please note that, with your busy schedule, it is easy to overlook meeting with top-performing team members. Why waste the time giving feedback? Simply stated, top-performing team members want to be evaluated. A casual “you’re the best” does not fulfill the team member’s need for recognition or feedback. The top performer requires as detailed a review as a struggling team member.

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	Many of your reviews will involve team members who are trying but not quite hitting the mark. 

	An effective review should be as factually based as possible. “I feel that…”, “I’m disappointed in you” or “Why can’t you be as good as your co-worker?” are not phrases that should be used.

	A direct approach is always the easiest. “Your goal was X. You achieved Y. We need to discuss why there was a shortfall and how are we going to correct it.” Your team member shouldn’t be insulted and you don’t need to feel uncomfortable. One of your employee’s first explanations for not reaching a goal might be that they did not have the proper tools or training. Ask yourself if you provided the necessary strategy and tools for the team member to succeed. If not, make the appropriate correction, but don’t take the full responsibility. Why didn’t the employee bring up these issues earlier? Make sure that the team member understands that he or she is responsible for the results. 

	You don’t expect perfection from your employees. Don’t expect it from yourself. You are new to goal setting and performance reviews. Don’t worry, you’ll get better at it. 

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	If you know you have provided all the tools, strategies and training that was necessary for your employee to meet their goal, you have a different issue. Reaffirm that the employee was clear about the goal, how to use the tools provided, and the time frame that he or she had to complete the task. Assuming that the employee clearly understood what was expected, your next step is to determine the corrective actions, document them, and have the team member sign off on them. Corrective actions should be similar to your initial strategy in that there are clearly defined actions with measurable outcomes over a specific period of time.

Continue to page three to learn what you should do if your team member fails to achieve their goals.

	When team members fail to achieve their goals, always look for some positive feedback. “While you didn’t hit your target for the number of bleachings, there was definitely some improvement. I listened to what you were saying. We just need to make some small adjustments and you should be where you need to be.” 

	It’s worth taking a moment to discuss appropriate goals. Remember that Rome wasn’t built in a day, and neither is a highly successful practice. Start slowly. Ask each team member what areas of their personal performance and practice they see as possible targets. For the first time around, the goal is less important than establishing a culture geared toward achieving goals. 

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	The business of being a solo practitioner or a dentist in a small group practice is getting increasingly complex. Goal setting and performance review is a key component of any business.  If done properly, it can be highly motivating and rewarding. If done improperly, it can have the opposite effect. Even when done properly, you may find that you have team members that don’t fit in with the new culture. That doesn’t make them bad people, but it may mean that their best career path is with a different organization.

	You probably consider patient care to be your primary consideration. Your staff is a key component to delivering that care. Now, more than ever, care must be delivered in an efficient manner. Setting appropriate goals and monitoring staff performance will help allow you to offer the type of care that you would like to provide while providing the income that you and your team has earned.

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	Sikka Software has tools to help you and your team track performance and success. To get started click 

 or download the free app for Android and Apple devices. 

Good performance feedback can lead to a better, more efficient practice.