25 May Everything Dental Blog – May 2016
“What do you pay your staff to do?” Tim Twigg
This question was posed by Mr. Twigg at the Dental Business Institute. Interestingly, every dentist answered this question differently. Few if any, were seeking an employee who would fill voids, add value or bring a new skill set to their office(s). That was the impetus for this interview.
Below is an exchange between Tim Twigg and The Everything Dental Blog. Our goal was to provide practical advice on common Human Resource matters and to explore some of the exposure issues dentist face in our current business environment. We hope you find this interview interesting, relevant and helpful.
EDB: Many dentists are using a working interview to assess new hires. Please share your views on the topic including any pitfalls or exposure issues that may result from this.
TT: We see the “working interview” as an integral part of the hiring process. Unfortunately, the way it is conducted in most practices does create exposure issues for dentists. First, as the name implies, work is being done. If indeed, the potential employee is doing productive work, for example, a hygienist cleaning a patient’s teeth, then the candidate must be paid for the time. Second, when the candidate is paid for the time, regardless of whether or not s/he has been “officially” hired or not, and regardless of the form of payment (wages or 1099) the government considers this person to be your employee. Thus, issues like unemployment, workers’ compensation and payroll taxes come into play. And third, “volunteering” is not a solution, since volunteering is not permitted in situations like this.
Among our recommendations are:
- Change the name, call it a “Skills Assessment”.
- Limit the time to no more than 2-hours. (If you don’t believe you can adequately assess a candidate’s skills in 2-hours, then you must compensate them for their time as W-2 wages).
- Role play or simulate scenarios, don’t have the candidate perform productive work or be performing functions as a replacement of a regular employee.
- Have signed documentation in place, establishing the parameters.
EDB: Where do you see compensation models going for auxiliaries in the PPO world? Offices with heavy PPO involvement, even those that runs efficiently, will have diminishing returns if they give a dollar an hour raise to everyone – every year. What do you recommend?
TT: No doubt there is continuing pressure that is squeezing margins and profitability. Given that payroll represents the highest chunk of practice overhead, then naturally, this topic creates a lot of questions. First, offices have to look at ways they can run more efficiently (electronic billing, outsourcing, automated contact management, etc.). This can be through implementation and/or better utilization of technology, as well as ensuring training and competency levels of employees. Second, there is the trend of consolidation that is happening, which can create positive economies of scale, which can increase margins. Thirdly, we are big proponents of bonus and incentive plans vs. just the conventional annual raise. If there is a portion of my compensation that comes from the success of the practice, then I will naturally have a greater vested interest in contributing to that success. There are also many non-monetary ways that employers can positively impact employees and performance, like: positive feedback, recognition, and appreciation.
EDB: What are the top three HR exposures issues you see at the traditional, independent dental office and is it different for group practices?
TT: First, many of the issues, which could be prevented, result from the lack of education, understanding and awareness that dentists have about HR and Employment Compliance. This leads to the “it won’t happen to me” syndrome and apathy, which of course creates a risk environment. Because HR involves people (the human resource), that means it involves emotions. With conflict or misunderstandings, emotions come into play. When dentists lack the knowledge or confidence about how to proactively and successfully handle conflict, they ignore the issues or bury their head in the sand. In these situations, the problems rarely resolve themselves. Second is “protected classes” which has turned the “at-will” prerogative on its head. And the third would be lack of good documentation. The statistics are that without good documentation, the dentist will lose a labor-related claim 85% of the time. Independent and group practices all are impacted similarly.
EDB: Corporate America has significantly improved their identification and selection of new hires. This is due to comprehensive hiring practices which includes a battery of tests for the prospective job candidates. What are these companies doing to improve outcomes? Where can a small dental office get access or outsource these activities?
TT: I think many of these companies have begun focusing more on finding the “right person”, not just “any person”. They are paying more attention to attitude and fit, rather than skills and experience, recognizing that you hire for the things you can’t train, i.e. attitude. Their interviews focus more on behavioral-based questions and they employ job-match and selection tools. All of these skills and tools are readily available to the small dental practice.
EDB: Tim, Please make the argument that human capital ROI can be measured in performance, long term employee retention and team harmony.
TT: Certainly for the practice that has had to deal with a labor board complaint or lawsuit, those costs could have been avoided if the practice’s “HR House” was in order. Turnover is another big cost—both from the emotional/stress toll and the financial toll. Studies indicate that turnover costs equal how much you pay for that position for a year. Turnover, twice in one year for positions paying $35,000 year, costs the practice $70,000! We also know that when there is stability and long term retention, practices will increase revenue by 12-14%, simply by avoiding the hiccups that occur from turnover. This all represents a lot of lost money, i.e. income, during a dentist’s career. The human capital ROI is both from saving money and generating money.
EDB: Much has been written about the benefits of team harmony but some feel the office is a working environment and it’s not the employer’s job to make it fun. Can you respond to this?
TT: I don’t think of it as much about the environment has to be “fun”, and yes, it is a work environment. I think it is more about “engagement”. I want employees who are engaged working for me—I want them to think—I pay them to think. They have a sense that they make a difference for the people they serve, for co-workers and the business. I guess you could call it a sense of “purpose” for the job, rather than it just being a job or a paycheck. If the atmosphere is light-hearted and fun, so be it. If it is more serious and structured, so be it. These are a byproduct of the leader and the practice’s culture, not some “how it is supposed-to-be”. Many studies show the economic benefits of higher engagement and ways to achieve it. And many studies show the negative organizational and financial impact of lack of engagement or disengagement.
EDB: I hear this from my clients all the time – I like my staff and they are pretty good but it’s getting harder to keep them. They are at the top of their Salary range and paying them more would come out of my pocket. What do I do?
TT: Understanding what staff expect and want is an important first step. Interestingly, while certainly pay counts and the generally accepted benefits (vacation, holidays, sick leave, etc.) count, the statistics from employee surveys indicate that many other factors play into staff satisfaction, and in fact, many of them rate higher than pay and basic benefits. Things like: interesting and challenging work; recognition, acknowledgement and appreciation; ability to contribute, make a difference and be included; and a sense of job security.
These don’t really cost anything and are more related to leadership and basic management principles. These studies, coupled with the ever-changing world of business, require employers to re-think how best to manage their employees for performance and retention. What is needed from an employer to retain top-quality talent is much different today than what it was in the past, and with a reasonably good economy, the competition for quality employees is fierce.
Employees tend to view compensation as a right, but take a more emotional position to benefits. To the employee, benefits, and particularly the “intangible benefits,” represent how much an employer cares about his/her employees. Examples of these are: direct deposit of paychecks, implementing wellness-related plans (fitness, smoking cessation, stress reduction, etc.), providing discounts on products or services, providing business cards & job titles, community/voluntary service hours—with recognition by having quality representation within the community for a volunteer event in which the employee is participating, education reimbursement to encourage employees to keep pace with the various changes occurring within their job, and bonuses.
Rather than encouraging complacency, effective leadership and management needs to recognize and reinforce desired performance attributes and accomplishments and help ensure employees will do them more.
EDB: Can you shed light on raises versus bonuses and what you recommend?
TT: As I mentioned earlier, we are big proponents of bonus and incentive plans. When my ability to make more money is predicated on my contributions and the practice’s success, then I start to think like an owner. The traditional annual raise assumes there is money to pay it, and that isn’t always the case. Bonus and incentive plans pay out when goals are being accomplished and there is greater success, creating a win for the employees and a win for the employers. I’d be glad to send a complimentary reprint of a nice bonus plan article to any of your readers.
EDB: Senior dentists are exploring many different exit strategies. Many are finding it difficult to attract suitor’s because their practice, facility or location fails to meet certain criteria. However, the majority of older dentists are selling to younger dentists (traditional transition) but more and more senior dentists are considering selling to groups or a DSO. Based on conversations with hundreds of sellers, brokers and transition professionals, we have determined that the sale to a group or DSO can be more lucrative on the front-end. However, dentists need to be cognizant that they’ll lose the benefits of ownership when they sell (regardless of who they sell to) and will usually make a smaller commission (based on collections) at a DSO or group than they currently do as owners.
TT: Certainly, there are different motivations for a dentist to sell. One, like you mentioned, is the motivation to retire/exit. Another is concluding that the stress, strain, pressure and/or lack of enjoyment of owning is not worth it. A dentist may still enjoy the clinical aspects, just not the ownership/leadership/management aspects. An important question is: do I still want to work, full or part-time? If yes, then one has to accept that there will be a loss of the independence, autonomy and control that is enjoyed by being the owner; regardless of the nature of the sale (group, DSO, individual). And most likely any ongoing compensation (whether salary or commission based) will be less. One just has to weigh the pros and cons—financially and emotionally.
EDB: We know that successful senior dentists (leaders) have the talent and personnel to replicate (open a second office) and develop a much more lucrative exit strategy. Point in fact; A senior dentist who opens a second office in a decent location, ten to twenty minute drive from their current facility, will scale up in 3-5 years versus the 10-20 years it took to develop the original location! This is due largely to their leadership, experience, knowledge, personnel and the tools available to them. Dental Practice Pro (software utility and dashboard) actually uses a Google™ heat map to show you where to open that second location. How do we encourage dentists to take the plunge and in effect, create their own group practice?
TT: I agree on the benefits of mergers and acquisitions. The economics are and can be amazing. And the industry demographics support it also. It is one of the most low-risk, fail-safe ways to grow and expand. A dentist can realize 2-3 times the income over a short period of time versus what s/he would get from simply selling. From an HR perspective you have to be mindful of employee thresholds, ending employment with the previous employer and having clearly defined job descriptions and policies to lay out a solid foundation. All of which is very easy to do, and shouldn’t be a reason to not explore this growth/exit strategy.
EDB: What is your opinion of the future landscape of dentistry? Do you see dentist’s continuing to join groups? Selling to Corporate entities?
TT: As mentioned earlier, there is the trend of consolidation, which can create positive economies of scale, which can increase margins. Whether that comes from just being part of a “buying group/club”, acquiring practices or becoming part of the corporate landscape, it is a trend that will continue. While there will still be a niche for the well-branded, non-insurance dependent practice, it represents a smaller share of the market.
EDB: What is the number one lawsuit facing dental offices today in Human Resources, Operationally and Clinically?
TT: Great question. It is important for dentists to understand that today the risk of an HR lawsuit is higher than the risk of a malpractice lawsuit. In fact, the average out-of-court settlement for labor-related lawsuits is $25,000 in dentistry today and premiums for labor law insurance commonly are higher than malpractice premiums. The answer to your question varies by state. In general though, unfair termination claims for discrimination, retaliation and harassment rank highest. In California, overtime claims are also very high since the overtime “trigger” is 8 hours per day.
EDB: Are there different HR challenges for Solo practices versus small group practices (five offices)?
TT: Yes there are. With more employees come more employment requirements due to employee thresholds. More people means more potential for problems and if HR is lacking, then that simply compounds the problems. It is not uncommon for one or more of the practices to be in different states, say NH and MA, and because the rules can vary from state to state, the practice owner is faced with navigating the differences in an attempt to be consistent and fair in personnel management. This can be influenced by the number of legal entities and whether personnel management is centralized or de-centralized.
EDB: Can you share some pearls on the hiring process with our readers? We are interested in helping dentists identify good candidates as well as good questions for the interviewing process. Do you provide these services so a dentist can have a professional HR team of their own?
TT: One of the most common hiring mistakes is focusing too much on skills and experience. As I said earlier, the focus should be on attitude and fit. Additionally, if my process is one of elimination, rather than selection, it is much easier to weed-out those that clearly don’t fit. We see the hiring process as having 7-steps: 1) defining the job, 2) recruitment, 3) screening, 4) interviewing, 5) job-match profiles, 6) skills assessment, and 7) reference/background checking. Beefing up the interviewing process by incorporating behavioral-based questions, rather than yes/no questions or opinion-based questions is tremendously valuable. And yes, through our webinars, training and support we help clients improve their hiring success.
EDB: Over the years we have seen dentists blindsided by law suits and employee issues. Can you explain why an employee handbook is a valuable tool? And what does it cost to have a professional HB prepared exclusively for the office?
TT: Successful “people management” is all about communication—verbal and written—before, during and after employment. A policy manual or employee handbook represents a form of communication, in addition to meeting some compliance requirements. The most wonderful thing about having a comprehensive handbook is that the answer to any HR-related question can be: “Go look in the handbook or manual”. No more guessing. No more wondering or trying to remember what you said last time. No more making something up on-the-fly. Great, effective communication; fewer misunderstandings; everyone on the same page knowing what the expectations and policies are—that all translates into less stress for everyone and peace of mind for the dentist/owner/employer. From a cost standpoint, there is an initial investment to get everything set up, personalized and trained. Then there is an ongoing support and update fee that might average as little as $40-50/month. Compared to the costs of a labor-related lawsuit, that’s quite inexpensive.
EDB: What is the true benefit of working with Bent Ericksen & Associates for the average dentist?
TT: One is that we really know this industry. We’ve been providing HR services and support to dentists for over 30 years. Two, for the thousands of dental practices we work with, we are effectively a partner and become a great resource for protecting the asset value of the practice and minimizing risks—cost effectively saving the practice time and money.
EDB: Three part question – Is there a way for our readers to have an HR audit to determine their exposure or lack of compliance? Can a practice outsource their HR department? Does this initial fee actually yield ROI for the office (pay for itself)?
TT: Yes, we offer a couple of different complimentary audits and assessments that allow practices to determine their liability and exposure. We also provide a policy manual review service, where we extensively review a practice’s current policy manual or employee handbook. Our policy manual reviews: 1) identify any illegal or contradictory policies described in the manual, 2) note missing policies that are recommended or are required by State or Federal law, and/or 3) point out areas of risk or lack of compliance based on the manual’s content. Relative to outsourcing, yes, it is very cost effective today for practices to outsource HR. It is like having an HR professional on staff without having to pay for it. From an ROI standpoint, there are cost savings and time savings, and if having your “HR House” in order leads to less turnover, which in-and-of-itself can mean a $20,000-$30,000 benefit! Additionally, stability with team and staff means smoother sailing, which means greater efficiencies, and that, in a dental office, extrapolates to higher production.
Tim Twigg – President of Bent Ericksen & Associates.
Tim has over thirty years of practice management and business consulting experience in the healthcare field. His expertise extends to leadership and business development, strategic planning, communication and marketing with an emphasis on personnel and employment law compliance. Mr. Twigg is a published author and HR expert for many major healthcare journals and currently co-authors a column in Dental Economics entitled: “Focus on Human Resources”.
For more information contact Bent Ericksen & Associates in writing at: PO Box 10542, Eugene, OR 97440, by phone at: 800-679-2760 or 541-685-9003 or email at: info@bentericksen.com or by visiting their web site: www.bentericksen.com