36: More Pay Please

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When I was working as an associate rat at a school, I never imagined I could own these many practices with this amount of support. So thank you.

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to a whole new level. You have this natural talent, this unique ability.

Hello, everyone, and welcome to another episode of DSO Secrets. I'm your fearless host, Emmett Scott, and excited to be with you today as we talk about another question that I got over the last month here that I thought was really interesting. It and the questions kind of centered around the topic of talented staff, employee, clinician that you feel are asking for more and more and more money. They are bringing tons of value to the business, we'll say, because if they're not, that probably makes it easy. But they also tend to have this insatiable appetite for needing to get compensated more and more. And how do you objectively calculate whether it's worth paying them more or not? So, first principle I'd like to talk through is sometimes we have different personalities out there that are more direct, bold, outgoing, extroverted than ours are. And we just have to know ahead of time that, you know, we may be from a personality perspective, a little bit different than them. So it could be that they're not trying to offend us by their consistent and persistent asking for more, whether that's financial or otherwise. And that might be just part of what their personality is. Second, what I've noticed is most of the time when I've had an employee and with other DSO owners that I've talked to who are running into this situation, the ironic part of it is the main reason they love this employee, let's say it's a hygienist or some kind of treatment coordinator or a doctor, associate, et cetera, marketing person. It tends to fall into those categories. The main reason they love them is, is because they're persistent, outgoing, extroverted, and help patients to get treatment done. We just don't love it when they're using that same technique on us. And I don't think it's a technique. I think it's just their personality. They're very much that they believe in certain values and they honestly sell those to patients. And they believe in their own value and they honestly and forcefully sell those to ours, to us. So the question is, what's the best way from a business perspective, and possibly from a leadership perspective, to work with someone who's a high performer? And since there's a lot of scenarios this could work under, let's suppose that it's a hygienist who's doing a lot of treatment acceptance, who's helping the doctor recognize opportunities, who's got a great relationship with the patients and with the other staff. And I am going to kind of carve off. There are individuals that are extremely talented and they're creating havoc for the other staff members. They're kind of rugged individualists. They're not really team players. So I'm going to put them in a separate bucket. We oftentimes call them talented terrorists. They're the ones that I love them and I love the work that they produce. But frankly, they're not scalable in a team environment, and that one's a little bit easier. You do have to give them some coaching and see if you can create if they can move from rugged individualist to really a team leader, at least a team participant. Otherwise, long term, you've got to figure out a transition plan because that's just not going to work for you. But let's suppose that this individual gets along really well with other team members. So we don't have that issue. And they're bringing lots of value. What is one way to kind of calculate, especially since what they'll do is they'll argue that it's not just the work they're performing that's bringing value, but it's all these other components that they're doing that's also bringing value. So many of you remember from math class the concept of a weighted average or weighting something more than the other. So I'm not just taking and adding up, you know, this revenue and this revenue and this revenue and saying they contribute to all of that. But I'm actually going to wait out the different places that they contribute and try to come up with a financial calculation of what's the value they're truly bringing and how much am I paying for that. So again, in this scenario, we're using a dynamic hygienist who has their tactical clinical work that they do each day. That's pretty easy. We say that if they were gone, would we be able to replace someone else doing that work? So let's suppose I'm going to use a lot of round numbers, some of these may be totally unrealistic, but makes my math much easier. So let's say that they're doing $100,000 in production over some period of time, a month, a year, however you want to extrapolate it. But they're doing 100,000 of production, and we're paying them $80,000. That one's tough because that would be 80% of total production. So we'd probably start calculating that, say, huh, that's not worth doing. Okay, so let's do. Let's say that they're doing something closer to 30% of what they were. So let's say they're. They're making 80,000 and they're producing somewhere around 250. So that might be a little bit closer. Or 300,000 is their production. All right, so I'm making this quite confusing, actually. All right, so there are 300,000 in production. They're getting paid $80,000. We feel pretty good about that. They're doing about three times the amount that they're getting paid. But they come and they say, hey, I need another $20,000. And you recognize that they're also contributing to your ortho piece. They're also helping you open a new practice, maybe training the hygienist in that other practice. You also notice that there's some new services that they've introduced. And so you're just trying you to pay them, but you also don't want your company to grow broke. What's a good way to figure out what's the right calculation to be paying them on and how can you get good alignment with that? So mathematically, here's, here's just a good place to start, is if you give them full weight for the direct contribution. They. They're giving that 300,000. And then you look at the ortho and you say, all right, we did a million dollars of ortho this year. I think that if they were gone tomorrow, that that would have dropped by 20%, 30%, 50%. Determine what you think their contribution to that is. Again, we're talking about a talented employee, so we're holding a lot of variables constant here. So let's say that it's 20% that we think that they've helped ortho. So we would say 200,000 or 20% of the 1 million. We would also attribute to their contribution to the team. We also started a new practice, and they've been training those team members once a week. And we think that $200 a day is the right amount that for that management income or that management contribution that they should get paid. So if we start to break these out in these weighted averages, we can look at the total percentage that they're getting paid compared to the contribution that they're making now. We may add this up and say, wow, they're getting paid 40%, 50%. And we say that's more than I pay doctors, so this doesn't really make sense. Or we might look at it and say, you know what, with what they're doing, if I really add everything up, you know, they're closer to 20 or 25% and we say, you know what, I actually could afford to pay them more. So this is just a quick way to start looking at contribution. You could use this with a lot of different employee types. What is the total contribution they're bringing? What is the impact that that has on the company, revenue or cost savings, etc. Give them an allocation of that percentage and start to figure out, is this working? Now we won't go into this a ton in this podcast, but the other part is sitting down and having the right conversation, which is, you know, how do we align as partners? If they're completely unreasonable and say, I don't care what I'm contributing, I just want X amount of dollars, then you might feel that the relationship isn't one that you can salvage. But if it's one where they really do want to keep growing, developing as an individual and they are contributing, well then you might want to get creative and not treat them like a typical fill in the blank, front desk person, treatment coordinator, hygienist. Because they are different and they are contributing differently. So hopefully this helps. I'm sure in all of your employee management there's somewhere you could take this principle and start thinking through it with associates or hygienists or other staff members, team members. If you have further questions, feel free to jump on our DSO Secrets Facebook page. 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