As times change, so do notions of bonuses

Practice Management. By Mike Norbut, amednews staff. Nov. 24, 2003.

PRACTICE MANAGEMENT

A column about keeping your practice in good health

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With the end of the year approaching, your employees might have that certain look of expectation. The holidays traditionally mean bonuses, and physician employers in the habit of handing out extra checks every December probably know the look well.

But as profit margins shrink, bonuses of a size to which workers are normally accustomed might not be in the cards this year or in the future. However, health care consultants have said changing the notion of the bonus, either by not tying it to a specific time of year or by using alternative methods of showing appreciation, can maintain high office morale and encourage employee loyalty.

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"Our feeling is, if bonuses are expected, they're not appreciated," said Mike Fleischman, vice president of Gates, Moore & Co., a consulting firm based in Atlanta. Fleischman told of an Oklahoma practice that used to give employees a $500 bonus every year, but one year physicians could afford to give only $100.

"Now you're a bad guy," Fleischman said. "And the next year, it got really bad. One of the doctors killed one of his cows and handed out beef to the employees."

Often, a physician will have a good idea of the practice's financial performance before the last few months of the year, and consultants said being honest with employees as early as possible helps soften the blow of missing or reduced bonus checks. If that news is coupled with a different, less expensive perk, like a holiday party, and explicit plans for the upcoming year, it can help ease the transition to bonuses that are less time-dependent, said Helen Hadley, president of VantagePoint HealthCare Advisors, a firm based in Hamden, Conn.

"Usually, in the first year of no holiday bonus, there's a bit of grumbling," Hadley said. "I think employees get more upset when there's no communication."

A discussion about reduced profits could also be a good time to set up a performance-based bonus plan with measurable goals for employees. Smaller amounts can be paid out quarterly, giving employees a carrot throughout the year, consultants said.

A bonus program based on goals eliminates surprises, they said. Employees should know, based on performance, what the bonus amount will be. And presumably, if goals are based on efficiency and business standards, the employee who earns a bonus will have generated enough extra revenue for the practice to support that payment, consultants said.

"The good thing about incentives is they have to perform something measurable to get it," said Jimmy Jobe, a partner with Jobe, Hastings & Associates, an accounting and consulting firm in Murfreesboro, Tenn. "With a billing person, for example, you can tie the bonus to the collection of accounts receivables."

While a bonus in any form helps to boost employee loyalty, other discretionary gifts throughout the year can also help morale. Consultants suggest handing out tokens of appreciation for a job well done, such as gas cards or movie passes, on a regular basis.

Scott Morcott, MD, a family physician in Vernon Hills, Ill., said his practice can't afford to pay a "meaningful" bonus to employees, but when the office hits a milestone or reaches a goal as a group, doctors take the employees out for a dinner or a concert.

"Or when we see things are getting intense, and we need a release, we'll take everyone out," Dr. Morcott said.

Doctors who find some profit at the end of the year could also use it to bolster benefits or add new ones, like a retirement or profit-sharing plan, consultants said. Although a bonus, especially one during the holidays, might satisfy an employee's urgent need, it might not have the power to build practice loyalty over time, consultants said.

"There's no greater incentive than a monetary one," said Michael Carroll, managing director of TriBrook Healthcare Consultants in Tampa, Fla. "The danger is, if it's one time, it's there and it's gone. What's the lasting impact that that has?"

Norbut covered practice management issues during 2002-06.