How not to cut your associates’ pay
Chris Barrow considers the best way to tell associates that changing market forces will affect their pay
Before commenting on how not to tell an associate dentist you’re cutting their pay (and offering some insights on how to tell them) let’s establish some ground rules. I accept that this article may well be read by owners and associates.
So: I don’t travel around the country automatically recommending that associate pay scales are reduced – so don’t blame me; I’m here to comment on what I’m seeing and hearing every week – so don’t shoot me; what I’m seeing and hearing is that there is downward pressure on associate pay scales – so don’t hide your head in the sand (or stick it anywhere else unusual).
What am I seeing and hearing? Take your pick from:
• the £5.00 UDA
• flat rate salaries of £30-35,000 for those just out of Foundation training
• sliding scales starting at 35% and increasing to 55% based on monthly gross
• existing terms of business re-written to accommodate current trading conditions, typically 50% to 45% or as low as 40% in extreme situations.
The first three represent market forces at work on the recruitment of younger dentists. Market forces are, well, just market forces.
Our ancestors chose capitalism as a replacement for feudalism and over communism so what you see is what you get. Every macro and micro economic gust of wind will affect pay scales (and are so doing, albeit more frequently and violently nowadays).
Add in the good old law of supply and demand that we were taught at secondary school and we have to accept that when umbrella production is over capacity and it stops raining (difficult to imagine, I know) – the price of umbrellas is as collapsible as their covers.
Equally collapsible, it appears, are pay scales for millennial dentists, a phenomenon that is now spreading to their older colleagues.
However, It’s the last of those four examples, the reduction in existing percentages, that prompts me to comment because it causes most of the problems. For those owners who do take an interest in their own financial analysis, they are seeing profit margins decline as operating costs go up. For those owners who don’t take an interest, they feel a creeping sense of financial unease when they check their bank balances on a Friday afternoon, until their accountant points out what is going on.
Alternatively, the owner is on the receiving end of an unusually large and unexpected tax bill and both knees jerk simultaneously in the direction of anything that costs money – lab, materials, staff, operating costs (including coaches) and, ultimately, the associate and hygiene/therapy team. (I’m leaving the hygienist/therapists out of this article because I’m a coward).
So once the owner’s knees have contracted back to somewhere near their original configuration, the decision may well be made to reduce associate pay as part of an overall overhaul of expenses.
If I may be allowed a touch of mathematical reality, given that in most practices material costs can be 4-7% of sales, lab costs 7-14% of sales, staff costs 17-21% of sales and associate costs up to 25% of sales, it’s hardly surprising that an attack (sorry, restoration of differentials) on associate pay is top of the action list.
Which is where the aforementioned problem starts. Not the realisation of the financial shrinkage, or the proposed solution, but the methodology by which the ‘bad’ news is communicated.
Enter witness A – the stressed dental practice owner, fresh from a frustrating meeting with his accountant, now battered, bruised and faced with the job of telling his/her associates that 50% is going to become 45% in the near future.
It goes something like this:
Step 1 – reason
’I’ve brought you all together this evening to explain why we are having to make some changes to your percentages. Over the last few years you are probably aware that it is costing a lot more to run the business. What with increases in lab fees, material costs, staff wages, operational costs and compliance costs, plus the need to reinvest in the business equipment, premises, fixtures and fittings, branding, marketing, advertising and training – we are making less money now than at any time since I opened/bought the practice.
So I’ve taken professional advice from my accountant/bank manager/coach/dental suppliers (note the nifty transfer of blame) and they have made it clear to me that the only way I can continue to operate the business and enjoy a reasonable income for myself, my beloved and the little ones is to reduce your percentages from 50% to 45% next month.
I appreciate that this isn’t the best of news but I’m forced to make this decision due to circumstances beyond my control. Let’s all work together to make the as painless as possible.’
Step 2 – threat
’By the way, my other alternative is to sell the practice to a corporate, take my money now and leave you all to deal with your new bosses whilst I work a three-year earn out by creaming all the best treatment plans off the top. So it’s the devil you know or the one you don’t.’
I’m reminded of a famous Charlie Brown cartoon, in the first panel, Charlie Brown is standing over Snoopy, wagging his finger and shouting words to the effect of, ‘How many times have I told you not to walk into the kitchen with muddy paws? If you do that again I’ll stop your food!’
In the second panel, the scene is repeated but we hear what Snoopy hears, ‘Xxx xxxx xxxxx xxx xxxxxxx xxxx xxxxx xxxxx xx xxx xx xxxx xxxxx xxxx xxxx xxxx food!’
This ‘Snoopy effect’ is exactly what happens when you use steps 1 and 2 to announce the changing goal posts. All the associates hear is ‘pay cut’ – nothing else that you say registers. Trust me – I’ve been there and seen it – more than once.
In fact, I’m tempted to suggest that a better way to announce the news would be a hand-written Post-it note to each associate as follows, ‘PAY CUT COMING – 50% to 45% – any questions? Attend a meeting in one week – have a nice day.’
At least that would give them the time to get over the Snoopy effect and get their own marital drubbing out of the way. However, the Post-it note may not go down too well as an example of effective leadership, so let’s see if we can come up with a viable alternative.
Step 3 – the alternative
‘I’m not going to beat about the bush here, profit margins in the business are down and I intend to do something about it. In simple terms, I’m going to expect a higher level of production from you in order to maintain and grow your current level of earnings. Nobody wants a pay cut, me included, and I therefore appreciate that we are going to have to throw all the resources of the practice at helping you to maintain your income. It will come as no surprise to discover that I propose to alter the associate pay scale to 45% in three months time (giving you and us plenty of time to adapt).
To maintain your current level of income, assuming that lab fees stay roughly the same, you will need to increase your current average daily production by just 12%. Any increase above that will increase your pay.
The question that we all need to address is how we are going to make sure that you hit that 12% increase in productivity from month four and, with that in mind, I’ll be having meetings with all team members over the days ahead to discuss:
• How we can improve our existing marketing systems
• How we can improve our patient experience
• How we can identify production opportunities at our morning huddle
• How we can increase our conversion rate on treatment plan acceptance
• How we can assist you in surgery to ethically sell more dentistry.
I’m going to make sure that everyone who accepts this is fully supported for their continued loyalty.’
Now – before you say it – I’ll say it. The chances are that The Snoopy Effect will still apply. Which, frankly, is a good reason to tell the truth and give your associates notice of the meeting and time to digest the agenda, rather than springing the surprise on them after a full clinic day.
That may take us back to a somewhat more diplomatic version of the Post-It note – but you get my drift. As the late Belfast-born comedian Frank Carson used to say, ‘It’s the way I tell ‘em!’ Recognising that his accent was as amusing to his audience as the content. Please don’t practise your Ulster diphthongs before you arrange this meeting, but do think carefully about the how, what, where and when because it will save you a lot of pain.
My advice to associates reading this? Notwithstanding the rules I established at the start of this piece – wake up!
Chris Barrow has been a consultant, trainer and coach to the UK dental profession for over 20 years. Naturally direct, assertive and determined, he has the ability to reach conclusions quickly, as well as the sharp reflexes and lightness of touch to innovate, change tack and push boundaries. His main professional focus is as Coach Barrow, providing coaching and mentorship to independent dentistry.
EMAIL: [email protected]