Two years ago, our firm took on an optometrist who practiced in a medium-sized community on the outskirts of a large Midwestern city. When this O.D. first became a client, his practice was open only two-and-a-half days a week and was supported by a staff of two. So, this O.D. had to work for another practice to supplement his incomesomething he was not happy about. His goal was to build his practice so it could be open five days a week and thus, quit his second job. One way we worked with him to grow his practice was educating him about the importance of rewarding those staff members he did have.

The key resource in any successful optometric practice is a motivated and goal-oriented staff. There are three reasons for this. For starters, through my 20 years as a practice-management consultant, I have noticed that staff interaction with a patient during his or her annual eye health examination accounts for roughly 70% of the patients total time in the practice. This means that if your staff isnt happy, your patients will not be happy, and they will seek eye care services elsewhere.

Staff interaction with a patient during his or her annual eye health examination accounts for roughly 70% of the patients total time at the practice. So, it is crucial that your staff be motivated.

Second, the cost of attracting and training new employees far outweighs any cost to you for ongoing training and retainment efforts. Thus, there is an inherent efficiency to retaining a long-term employment base in your practice.  

Finally, the productivity of your staff influences your practices volume. For many years, the benchmark of staff productivity was one full-time equivalent (FTE) per $100,000 of practice volume. (The standard work year in the United States is 2,080 hours, or 52 weeks, at 40 hours a week. After discus-sing this number of hours with several of our clients, their goal of staff productivity was $50 an hour. Thus, if you multiply $50 by 2,000 hours, that equals $100,000 in volume.) However, in todays managed-care environment, I have seen revenues decrease on a unit basis by 20% to 30% for at least 70% of the patient base. So, staff productivity should now approach one FTE per $125,000.

We recommend a distinct, three-part process to motivate your staff. Here, I will discuss these three parts.

Set Financial Goals
Establish specific, measurable and achievable financial goals for your practice for the year. If you do not clearly state the financial objectives of your practice and communicate them frequently, your staff will not be motivated to achieve these objectives.

Therefore, in the fourth quarter of each year, establish specific goals and a cash flow budget for the following fiscal year. Goals should be established in the following areas: attracting new patients and retaining current ones, revenue-per-patient, eyewear sales and cash receipts. Once specific goals in these areas are established, you can come up with a budget and cash-flow projectionsomething that is outside the scope of this article, as doing so is relative to you and your practices financial situation.

Schedule Staff Meetings
Schedule a meeting with your staff prior to the beginning of the fiscal year, and discuss the budget, goals and specific projections. In any organization, people will always support what they help create.

We supply our clients with a month-to-date recap form to enable them to communicate their goals with their staff. This form contains three columns: The goal of the practice, where the practice is currently at in terms of meeting the goal, and what needs to be done the rest of the month to meet the goal.

Schedule a meeting with your staff prior to the beginning of the fiscal year, and discuss the budget, goals and specific projections. In any organization, people will always support what they help create.

To get both the staff and the optometrist to achieve the set goal, we have them focus on the number of days they work during the month. I have found that many practices are open 22 days out of the month, with the optometrist working 17 or 18 days to see patients. Therefore, if the goal of a particular practice is to incur $50,000 for the month, for example, the optometrist would be responsible for incurring $2,777 because 18 divided by $50,000 equals $2,777. His goal: To figure out how many exams must be scheduled per day to incur his portion of the goal.

Using this same logic, his staff would be responsible for $2,272 of the $50,000. Their goal: To uncover how patients use their eyes so they can fulfill these patients visual needs via the practices optical shop. This requires asking questions about a patients lifestyle, such as What are your hobbies?

Schedule weekly staff meetings in which key staff members report on their progress toward reaching the predetermined goals and objectives of the practice. One staff member should be responsible for compiling and distributing weekly sheets that outline the progress being made on the month-to-date recap form.

Staff meetings should be at least 45 minutes long, but no longer than one hour. Why? People begin to lose interest when meetings go longer than an hour, and longer meetings cut into production time.

Many O.D.s have long abandoned routine staff meetings because these O.D.s often feel that there is a lack of interest in or enthusiasm for such a meeting. Also, these meetings often turn into gripe sessions, in which little is accomplished. If, however, you present an agenda to your staff, and structure entire meetings around this agenda, you can accomplish what you seek.

Encourage all staff to attend because the health of the practice affects everyone. The weekly staff meetings should be structured around you and a four-part reporting format that should consist of doctor input, staff input, strategies and a formulated plan of action. Each week the strategies and plan of action will guide the agenda of all staff meetings.

Offer Financial Incentives
Once you have a budget, complete with goals and cash flow projections, and you and your staff are meeting regularly to monitor progress, implement a financial incentive or bonus for your staff. This financial incentive is a key component for staff motivation and means more dollars for your practice.

There are three main incentive programs widely used by O.D.s:

Determine a goal for growing practice-collected cash receipts. Choose a certain percentage increase over the previous years number. For example, if Practice A set a goal to increase its collected receipts by 10% over the previous fiscal year, each full-time equivalent employee would receive $100 for each month this goal was met or exceeded.

This bonus should be paid quarterly for two reasons: First, paying the bonus quarterly allows for any fluctuations in cash flow to not be as dramatic from one month to the next. Second, staff members tend to become more motivated and excited to receive a larger check quarterly rather than a smaller monthly check.

For this reason, make the incentive threshold at least $100 per full-time employee. If the bonus is less than $100, after taxes, the employee who strived to meet the practice goal will lose her motivation. If Practice A achieved its goals each month, the full-time employee would receive an additional $1,200, or approximately 60 cents per hour, in increased compensation annually.

Determine a goal for growing net income. Again, choose a certain percentage increase over the previous years number. Tying bonuses and incentives to net income motivates your staff to think not only about increasing gross production but about finding ways to increase your profitability.

However, this option is not without its shortcomings and challenges. You must be adept at keeping accurate financial statements, and your accounting must be consistent from one reporting period to the next. An accurate budget, including capital expenditures, debt service, reserve account funding, etc., is necessary for this to work well.

Tie staff incentives and staff compensation to a percent of revenue. In this option, you must first determine what percent of your total revenue comprises staff salaries. Next, you must decide if that percentage is within normal and acceptable limits. I have found that in a solo practice, staff salaries are 15% to 17% of your revenue. In a large partnership practice or one in which there are several practice locations, staff salaries range from 17% to 20%.

Staff compensation should include net payroll, all payroll taxes and any benefits paid on behalf of staff. The total of these dollars makes up the entire staff salary line. If you determine that the percentage is within normal limits for your practice, create a pool available for compensation, including the set salaries, based on that percentage.

For example, if after analyzing complete staff salaries, you determine the percent of revenue comprising staff compensation is 17% of total collected revenues, then the staff receives the greater of their current fixed salaries against 17% of the collected receipts. In this model, staff salaries are held at their current levels, and each employee is eligible for a cost-of-living increase after the staffs annual review. The incentive and motivation is to grow the practice in collected cash receipts each month so that the percentage is greater than the fixed compensation. (See How to Tie Staff Incentives to Revenue.)

How to Tie Staff Incentives to Revenue
2004 2005
Revenue: $600,000 Revenue: $680,000
Total available for staff salaries from 2004: $102,000
Percent of revenue devoted to staff salaries: 17% Total available for staff salaries from 2005: $115,600 (17% of $680,000)
The difference between 2005 staff salaries ($115,600) and 2004 staff salaries ($102,000) is $13,600.
Total dollars available for staff salaries: $102,000 Amount available for 2005 staff bonuses: $13,600

Many practices have based staff incentive programs on gross production. This is a recipe for long-term financial disaster because optometry is fundamentally a dollars in and dollars out specialty. Therefore, all staff incentive programs must be based on collected receipts only.

All staff incentive programs should also be based on overall team performance. In the past, many practices used spiff systems to provide incentives to only certain employees. The spiffs were introduced to help motivate optical staff to offer things, such as add-ons or second pairs. Often, the spiff systems achieved the goal of motivating the optical staff but at the expense of demoralizing the rest of the employees. Therefore, rather than risk pitting one group of employees against another, recognize the overall accomplishments and importance of all staff members.

Deciding which one of the three options to use is a matter of your comfort level and what makes sense for you.

The rising cost of technology, decreased unit revenue because of managed care and some inflationary pressure combine to make running a profitable optometric practice challenging. Fortunately, most optometric practices have good, well-intentioned employees. But, keeping them motivated and enthusiastic about the practice and the patient care being delivered is crucial to a practices long-term success. Set financial goals for your practice, schedule productive staff meetings that outline these goals and, if you havent already, implement an incentive program for your employees.

Our Midwestern client did this. Not only did he reach his goal of turning his practice into a five-day operation, but his practice revenues increased from $356,000 in 2003 to $432,000 in 2004. He is currently on track to earn $490,000 by the end of 2005, and his practice has grown so much, that he is now building a $700,000 building to house it.

Mr. Nolan is vice president and an original partner of the Williams Group, which is a Lincoln, Neb.-based practice-management consulting firm that works exclusively with private-practice optometrists. He has lectured on practice management issues in North America and has visited and consulted with hundreds of practices in North America, Australia and New Zealand.

Vol. No: 142:12Issue: 12/15/2005