The Do’s and Don’ts of Bonus Plans

The subject of bonus plans has bewildered practice owners for quite a long time. The theory—create an incentive for staff to do exemplary work—generally makes sense. The difficulty is in the implementation. When you tread into the realm of bonus plans, you are entering a minefield. If you construct a bonus plan correctly it can be a very useful tool for you, the executive. But when done incorrectly (and for every right way there are countless wrong ways) it will blow up in your face and create a terrible work environment; your staff will be livid. And when the dust settles, you, the besieged practice owner, will be likewise incensed, as you will feel unfairly attacked when all you were trying to do was to find a way to pay your team more.

Why does this all go so wrong?

First, let’s look at this from the staff member’s perspective. No matter how the bonus system is structured, it’s essentially all about money. While the old adage, “Never discuss politics or religion at the dinner table” is sage advice, neither of those subjects provokes as much emotional reaction as when you tamper with someone’s pay.

Consider how salaries and wages are set up. It’s fundamentally based on exchange. A staff member is hired to do a certain job. Money is given in exchange for that work. Anyone who has ever held a job understands that basic concept. He knows that if he were to consistently do poor work, he will be dismissed. Consequently, most personnel strive to do a good job. In return they expect remuneration and they expect it to be consistent. If an owner constantly changes the pay scale, the staff would understandably be upset. In other words, agreements are in place that are a matter of routine: work ‘x’ number of hours and get paid ‘y’ amount. When and how much a person will be paid then becomes predictable and dependable. There is nothing arbitrary or capricious about it.

Predictability is the Key

So, this brings us to one of the basic problems with many bonus systems: bonus plans are neither predictable nor dependable to most staff members. Here’s an example: In many practices, bonuses are doled out on a whim; the owner feels that this month’s production was better than usual, so he wants to share his good fortune with his staff by distributing some of the profits to them. They obviously like this and want to experience such generosity again. The next time monthly production is exceptionally high, there would understandably be an expectation of a similar bonus. And when it doesn’t materialize, resentment ensues.

What has been violated is “predictability.” To earn their basic check, staff members know they need to show up and do good work. This will predictably lead to a paycheck. However, with the bonus, there is no such predictability. The practice had a similarly good month but the staff was not rewarded as before. Now they resent the owner and view him as a cheapskate; the owner, in turn, is left wishing he had never doled out a bonus in the first place. So, what started out as a generous act on the owner’s part has now become the source of dissatisfaction on everyone’s part.

Nevertheless, the owner, who still perceives some benefit to the implementation of a bonus plan, makes adjustments and sets up an actual bonus structure: If the practice does ‘x’ amount of production, the staff will get ‘y’ amount of money in the form of a bonus. So now there is predictability.

But upon closer inspection, we see that predictability still eludes the staff. For if production consistently increases, so will the expenses associated with obtaining it. Consequently, the owner must increase the amount of production required (‘x + 5’, for example) to earn the same ‘y’ bonus. And the unintended result is that the staff loses predictability again. From their point of view, just when they started making consistent bonuses, the owner suddenly changed the rules and moved the goal line further away, making it more unlikely that a bonus will be earned. And their concern is that even if they were to somehow achieve the new production goal, the owner would again change the rules. And he’d be viewed as a cheapskate once more.

Lack of Control = No Bonus

 In addition to the problem of predictability, there is the issue of control. Oftentimes the team can work hard to achieve a production goal, only to see the practice fall short of the named target. In that event, they will become frustrated, as the carrot (incentive) has been dangled in front of them, but they don’t know what they can do to make sure the practice reaches its target. In other words, they don’t know what to control that would help to achieve the stated goal. They work hard, perhaps work through lunch or take less breaks, and pay close attention to their workmanship. Those are all efforts on their part to control something that can be controlled: their time and quality of work. But when that still doesn’t result in the practice reaching the targeted level of production, staff morale will most assuredly plummet. They will feel as though they are just a cog in an enormous machine wherein their individual efforts can’t affect the overall income of the practice. And when they reach that conclusion, they will cease making the extra effort and then for sure the intended goal will never be attained.

This dilemma of staff feeling that they aren’t able to effectively contribute and resultantly help to control the income level of the practice is one of the most common problems in virtually every practice I’ve analyzed. In most cases, I traced back the source of this predicament to the owner not knowing how to identify all the parts of a practice that affect income. By the way, did you know that in a solo-doctor practice there can be up to 12 or even 15 such areas? In a multiple-doctor practice there are more than that! Once those areas have been identified, the owner must place a staff member in charge of each area and develop a statistic to monitor it and then teach the staff member how to control the area so as to keep the stat at the appropriate range. The owner who can accomplish that is the owner who can control his or her own economic destiny.

Bonus Plan Inequity

Let’s return to the subject of bonus plans. In addition to the problem of the staff’s inability to effectively control the attainment of targeted income goals, there is also the sense of inequity or unfairness that most bonus systems create. The majority of bonus systems are set up to take a certain amount of money and divide it among the staff, generally in proportion to the number of hours they work. But in most practices, you’ll find a few superstars who do the majority of the extra work required to reach the target. They are the ones who talk to patients about referring friends and family when the other staff members are reticent. And they are the ones who are more productive than their co-workers on an hourly basis. But when those superstars see everyone being rewarded equally, despite the obvious differences in the quality and quantity of the work being done, resentment emerges. Consequently, they stop putting forth the extra effort. After all, why should they work so much more diligently if they will be paid the same bonus as those who don’t make the extra effort? And, of course, the irony is that when the superstars start cutting back on their efforts, the goal won’t be achieved and NO ONE gets a bonus!

Profit-Based Bonus Plans

Poorly crafted bonus plans also create problems, mainly financial, for owners. Bonuses are supposed to be calculated and paid on profit, i.e., the money a practice makes after accounting for all expenses (often referred to as the make-or-break point or overhead). If a bonus system starts to pay out before profits are achieved, then the owner has effectively taken a pay cut.

Based on analysis of many thousands of practices, we can conclude with certainty that most owners don’t know how to correctly figure out their make/break point. One of the reasons for this is that those owners don’t take into account the non-monthly expenses when calculating overhead. Examples of such expenses are repairs to equipment, equipment replacement, money set aside for reserves or for staff training, etc. Since those aren’t bills the owner deals with on a recurring monthly basis, it’s easy for them to be excluded from the make/break point calculation. But they are expenses and will eventually have to be paid. Therefore, in most practices, the make/break point is actually higher than what the owner believes it to be. Consequently, the bonuses levels can be tied to income goals that don’t correctly take into account the actual profit being made.

Summary of the Situation

These are the main reasons bonus systems can fail to function well:

  1. lack of predictability for the staff
  2. the staff’s perceived inability to proactively control the production or income that would achieve the bonus
  3. bonus distribution that is not based on level of contribution
  4. bonus levels set incorrectly.

While other factors might cause bonus programs to be problematic for the practice, those listed above are some of the biggest culprits. And the result of that is the opposite of a win/win scenario. The team is unhappy and perceives the owner to be a cheapskate. On the other hand, the owner is resentful, shocked or even furious that his or her efforts to help the staff make more money are not just unappreciated, they are attacked. What a mess!

Fill out the form to the right to read “Bonus Plans – The Solution” (highly recommended). Scroll to top


Fill out the form to read Bonus Plans – The Solution (highly recommended).

Screening Applicants

The Group Interview
Finding a new employee is a very time consuming process. To consolidate efforts and streamline the initial stage of the interview and selection process, have all of the applicants who meet the basic criteria come into the office for a group interview session. The purpose for this is that it consolidates the office manager’s efforts, giving you an opportunity to get a look at the applicants and screen out those whom you do not care to invest any more time in. The finalists from this segment will then be invited back for an in-depth individual interview.
Once you have collected all of the resumes from your advertising, go through them and screen out those that do not have the qualifications you are looking for. Take into consideration whether or not the applicant included a cover letter and whether that letter really communicates something about the applicant. Look at the experience, background and talents being conveyed in the resume and letter.
The First Interview
Phone those applicants that appear to be the very best and schedule them to come into your office to fill out an application. During this phone call you can rate their phone voice and composure and get a bit of a feel for their willingness. Make notations on the resume. Schedule all of the applicants for the same time, e.g., an evening after work or on a Saturday morning.
Make preparations ahead of time. Have packets of paperwork ready for each of your applicants. Their packets will contain an application, a questionnaire, a sheet that they will fill in with their employment goals and what their understanding of a practice is. They will also be asked to write a brief collections letter and sign an Authorization for Release of Information form.
When the applicants arrive, welcome them and deliver a brief statement (10 minutes or less) about the practice, its purpose/mission and the position. Then, direct them to the pre-printed packets handed out. Have them:
  1. Fill out their Job Application Essays.
  2. Fill out their Hiring Questionnaire. Asking them what your practice is about, its purpose, the position that they are applying for and a few negative and positive things about the position or practice.
  3. Write a brief letter to a client who has an overdue account (which gives you a good indication of how the person deals with others on sensitive matters).
  4. Sign and date the Authorization for Release of Information form.

As the applicants complete their forms, rate them on their appearance (1-5) and take them individually into a private office to conduct a brief interview (about 5 minutes for this first interview). This will give you a feel for the person.

Before your applicants leave, give them each a card for a complimentary exam at your office. (This is optional, but could garner a new patient even if not hired). Thank them all for coming in and let them know that they will be hearing from you within the next couple of days.

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Fill out the form to continue reading this article Screening Applicants – Part II (highly recommended).

Vital Steps for Collecting Money Over the Phone

In any practice, Accounts Receivable exist. Whoever collects money in your organization needs to know that this particular job has a two-fold purpose:

  1. To bring the patient/client’s account current
  2. To maintain sufficient goodwill with the patient/client to ensure his continued patronage and support.

The statistics that can be used to measure how effectively the job is being done are:

  1. Money collected (Amount)
  2. Number of accounts brought current


Your telephonic communication skills are very important. Following are some guidelines and proven techniques that will assist you in being most effective in collecting outstanding payments from your patients/clients over the telephone. 


  1. Study the patient/client’s account record, and all related documentation to ensure you have ALL the information necessary to make an effective and accurate collection call. Spotting a past due amount on your aging report and then picking up the phone to call the patient/client, without pre-planning, is not a very good idea, as there may be vital information of which you’re not aware. Placing the call without doing your “homework” could result not only in NOT getting paid, but in creating an upset with the client/patient or poor PR for the practice. So, study the file prior to making the call.
  2. Know the correct name of the person with whom you are planning to talk. Make sure that you have his/her complete name, spelled correctly. It is vital to speak with the person responsible for the account, so ensure that you have that data.
  3. Be in the right frame of mind when you place the call. Think positively. Believe that you are going to resolve the account. Do not call in anger, frustration or anxiety. You will get nowhere with your patient/client if you do so. Be both cheerful and professional.


  1. Introduce yourself and state the purpose of your call.
    Example: “Hello, Mr. Smith? This is Mary Jones from Dr. Nelson’s office. How are you this evening?  I’m calling you about your account. Do you have a few minutes to talk with me about this?”
  2. Be very deliberate in your statement about the account. Do not rush through this or be difficult to understand:“Our records indicate that you have an outstanding balance of $350, and I am inquiring as to when we might expect that payment.”Now give him an opportunity to respond.
  3. Do not make him feel embarrassed or as though he has done something wrong. Do not verbally attack him. Notice that in the above example it states, “Our records indicate…” Avoid statements such as: “I’m calling about the $350 that you haven’t paid us for four months!” This would definitely get you off on the wrong foot with him, and it would be quite difficult to resolve the ensuing conflict.
  4. The tone of your voice is very important. Do not be hostile or angry. Do not think of the client/patient as a “deadbeat” or a big problem. Think of yourself as a problem solver and come across that way. He will see that you are trying to help and will be more willing to help in return.
  5. After you have identified yourself and stated the purpose of your call, STOP!! Don’t say anything more at that point. It may seem like forever, but if you wait for the person to say something, it will go much more smoothly, as he is now having to originate a response to you regarding your inquiry.
  6. Listen to what he has to say. Don’t just hear it, but really listen and understand. It could be that he has already mailed the check, or maybe he was planning to mail it that day. If you come on with a harsh demand for payment, you could stop an already intended payment. So, give him a chance to talk.
  7. If he resists, registers an objection or is just generally uncooperative, let him say everything he has to say. Let him know that you understand, and then handle the objection, confusion or whatever it is by giving him an honest and realistic answer. If you do that, you will get a full picture of what his objections are, and you will have left him with little or no argument to fall back on once you have handled the objections he put forth.
  8. Don’t be brash or punitive. Understand that this is a tough position for him to be in. Don’t harass or attack him. Don’t make a threat (such as a lawsuit), except as a last resort and ONLY if you fully intend to carry it out.
  9. Go over with him the fact that it is to his advantage and benefit to make payment. Let him know that the advantages include: not getting turned over to a collection agency, feeling better because an agreement has been worked out, no harm being done to his credit rating, etc.
  10. Bear in mind that everything he has to say might sound very reasonable. But also remember that those “reasonable” explanations are the very “reasons” why he’s in a bind in the first place. The explanations won’t handle anything.

Fill out the form to learn the remaining 5 indispensable collection call techniques AND to find out the 5 vital steps to take AFTER the call (highly recommended). Scroll to top


learn the remaining 5 indispensable collection call techniques AND to find out the 5 vital steps to take AFTER the call (highly recommended).

Getting Clients and Patients to Be Accountable for Cancellations

You need to put a system and policy in place to discourage your clients or patients from unnecessarily canceling appointments. First, you should have a company policy that is given to your clients/patients as part of their “Welcome to the Practice” handout, letting them know what is considered a no-show—usually less than 24 hours’ notice—and what happens when a no-show occurs. It is important to make sure that your clients/patients are aware of this policy before enforcing it, or you might create an upset.

Clients or patients who wish to cancel an appointment on short notice or who fail to come to a confirmed appointment need to be gently challenged on missing that appointment. An attempt should be made to get them to keep the appointment if at all possible, and if that doesn’t work, they should be notified of the $25.00 fee to be collected at or prior to the next visit. If the client or patient still wishes to cancel, he or she is to be rescheduled. The fee should only apply if the client/patient has already been given his/her “first-offense warning.” The idea behind the fee is NOT to anger the person or make the person wrong but to inform him or her that you are serious about the importance of appointments being kept and completing a course of treatment on time.

The script would be something like this: “You can’t keep your appointment? Oh dear! The doctor has this time set aside especially for you. Is there anything you can do to make it?” If that doesn’t work, move into the missed-appointment-fee handling.

  1. For the first offense, the office policy is to waive the fee. The client/patient should be notified of this, and it must be documented in the chart by the receptionist. The ideal way to approach the individual is by saying, “Mr. Jones, it is our office policy to charge $25.00 for late cancellations or missed appointments; but since this is your first offense, we will waive the fee. Now, let’s get you rescheduled. . . .” This message should be practiced so as to be said all at once and in one breath. The entire message should be delivered before the person can interrupt. This part is very important. You should have the client/patient chart in front of you so that you can be accurate in telling the person of his first offense and the waiving of the fee. If you do not have the client/patient chart in front of you, treat the person as if this were the first offense and note it in the chart.
  2. For the second offense, a client or patient will be called by the OM because a second failure may mean that the person is upset or unclear about something in the treatment. Please give the chart to the OM so the client/patient can be called that day. This must be documented in the chart.
  3. For the third offense, the client/patient will be sent a letter that will require a $25.00 payment for missing the appointment, plus a $25.00 payment to be held as credit for the next appointment, for a total of $50.00. This must be documented in the chart.

If you have any questions regarding this procedure or its implementation, fill out the form to schedule a free call and we would be happy to assist you.


If you have any questions regarding this procedure or its implementation, fill out the form to schedule a free call and we would be happy to assist you. (highly recommended).