What do you say when your employees demand raises? How do you appease a team who believe they are undercompensated? Compensation decisions are often made through guilt and pressure rather than through an objective, logical process. I’m working with two teams where the compensation issue is taking central stage and has caused ill-feelings, low morale and miscommunication. Let’s look at why this happens and how to address it.
Case Study #1: Undervalued and undercompensated
“Why should I try so hard when my peers at other practices make more money than I do?”
This was the question expressed by a staff member I interviewed as part of my diagnostic on the practice. It’s a plaintive and profound question that gets to the heart of the issue about compensation.
Compensation is about money; but it’s not ONLY about a paycheck. It’s about all the ways employees feel recognized and valued.
Money is linked with employee’s sense of worth and value. When employees don’t feel sufficiently valued and appreciated emotionally, they always demand more money. In fact, the greater the team’s “pisstivity” the more money they want.
So tip #1, in addition to providing a competitive paycheck, invest in your team’s emotional well-being. This is crucial in building a team of motivated, long-term employees.
Tip#2 is to ensure that your employees are not underpaid as compared to their local peers. Personal acknowledgement will help but it will not be enough if your employees perceive they could make more money in a similar practice, doing the same work. Make sure that not only is their hourly salary competitive, but that employees also see the monetary value of any benefits you provide.
Case Study #2: You owe me a bonus
The dentist informed the team that since no one had received a bonus in the last few years, she was eliminating the bonus plan. Chaos broke out. The team insisted that she was taking money from them, money that they merited and needed.
Was this the case? No- but the employees were reacting emotionally instead of logically. And the more the dentist described her logic, the more upset they became.
As I have noted before, money is a physical and symbolic representation of how one is valued. The team believed that a bonus plan provides a direct reward and acknowledgement of their efforts. They were reacting to the loss of this acknowledgement.
Interestingly, the dentist reminded the team that they had all received a $500 Christmas “gift” from her which none of them had even acknowledged. This reveals another truth. Typically, dental employees view bonuses and holiday gifts as entitlements they deserve simply for being employed another year. Employees quickly develop an if/then mindset about this extra money: If I do “y”, then I deserve “x.” And sadly, some employees will argue that even if they didn’t achieve “y”, they still deserve “x.” Bonuses and holiday gifts typically do not increase motivation, improve morale or lead to better performance for the long-term. They are like chocolates, desirable but ultimately not nutritious or filling.
How can you create a better compensation system? Here are my recommendations:
- Be generous with appreciating and acknowledging employees in the manner and language that each employee will value. This won’t prevent folks from asking for salary increases, but it will generate a better practice culture, increase an employee’s loyalty to you and reduce the tension around compensation.
- Research local salaries and ensure that your salaries are commensurate with the quality of employees you want to employ. You can’t really justify paying average or below average salaries if your fee range is in the 80th or 90th percentile. To learn the rates in your community, ask fellow dentists, your CPA or check out salary ranges in local job listings.
- I’ve written before about why bonus plans tied to production goals backfire. The quick take-away is that bonus plans tend to work only for a short period of time and the behaviors they encourage may actually be more destructive than helpful. But giving employees surprise gifts to acknowledge an achievement, does equate to higher motivation and improved performance. Check out two articles I published in Dental Economics about this topic. https://weisspractice.com/what-should-you-pay-your-team-to-feel-motivated-march-2022/ and https://weisspractice.com/why-you-should-ditch-your-bonus-plan-nov-2021.
- Compensation should be viewed as another system in the practice and therefore it needs to be transparent, equitable and predictable. Raises should be considered at the same time of year for everyone (not at an employee’s anniversary hiring date) and should be based on the practice’s profitability and the employee’s personal performance.
- Employee “reviews” should involve the employee in evaluating their own performance and creating their new performance goals. It needs to be a collaboration and a conversation, not a report card.
I’ve literally written a book on compensation and I’ve taught hundreds of dentists about how to implement a better plan. If you have any questions about your employee compensation model, contact me.