The question in today's healthcare market should not be, "Should we offer incentive bonuses?" says Greg Zoch, managing director and partner with Kaye-Bassman. He says while the baby boomer generation generally doesn't count on bonuses as part of their compensation, younger generations expect to be incentivized to perform "above and beyond" their normal duties. "It doesn't really matter whether we like it or we don't like it," he says. "If you want to keep the top performers that you have at your center, you need to give them bonuses. Think of it in terms of motivating the right kinds of behavior and as a retention tool."
So aren't annual raises enough? Mr. Zoch says that while raises reward employees for longevity and doing their daily jobs, bonuses reward employees for performing at extraordinary levels. "If a raise is the mechanism to retain good employees and reward them for good behavior, then a bonus is the way to recognize and reward exceptional behavior," he says. "You don't give somebody a bonus for mediocrity — for simply showing up and doing exactly what they're told to do."
He says building a bonus program comes down to two basic questions: How much do I give, and how do I know when it's been earned? He says the answers will differ based on whether you're looking at bonuses for administrators and clinical directors or surgery center staff, such as RNs, surgical techs and others.
Administrators and clinical directors
1. Divide bonuses into distinct areas that are important to your center's needs. Mr. Zoch says bonuses for administrators and clinical directors could be divided into three parts, with each part worth one-third of the total bonus. This way, the ASC leader can focus his or her energy on meeting the most important goals for the center. If the leader falls short in one area, he or she can still receive a partial bonus for achieving success in the other areas. Mr. Zoch says the goals should be distinctly different; for example, if the bonus is totally dependent on the administrator meeting her budget, problems with reimbursement or the economy could make it impossible to achieve a bonus. That could be frustrating and not fairly reward success in other important areas. He recommends dividing bonus goals into areas such as:
• Completing a major project or initiative. If the surgery center has a major accreditation survey or a renovation project to complete, the board could assign a bonus based upon successful completion of the survey or project. This benefits the surgery center because the project is essential to its success, and it keeps the administrator or clinical director on-task despite the distractions of daily operations.
• Meeting or exceeding budget expectations. Staying within a budget is essential to maintaining surgery center profitability, so budget expectations should always be part of an administrator's annual bonus program, Mr. Zoch says. He says including a budget component in the expectations is important to make sure that you generate profits that allow you to pay the bonus. "If the budget's not met and staffing hours or supply costs are out of control, you may not have the money to pay the bonus," he says.
• Improving a surgery center benchmark unrelated to budget. Mr. Zoch recommends assigning a portion of the bonus to an area of improvement unrelated to finances, to ensure that administrators and clinical directors can be rewarded for significantly improving the center even if the center's financial performance is below budget. For example, he says the board might incent the administrator to improve physician or patient satisfaction scores. "You should incentivize things that you really care about and that are important to you," he says. "If satisfaction scores are low and that's an issue you care about, you can incentivize the administrator to increase them by 5 or 10 percent. If you are unsure of what areas to improve, discuss ideas with the administrator or at a regular board meeting." Mr. Zoch says that benchmarks can be very important "culture-builders" and help you attract and retain the best people.
2. Assign a specific amount of money to each area. Mr. Zoch says administrators and clinical leaders should know the dollar amount of their potential bonus at the beginning of the year. This way, the leaders can work towards a clear goal and be aligned with the priorities and expectations of the board. He says that while some ASCs choose to divide the bonus equally between the three areas, some assign higher values to areas with more difficulty. He says the board can also give the administrator "stretch goals" or "enhancers". With this method, the satisfactory completion of a goal would earn them a pre-determined amount, but "hitting the cover off the ball" could earn them a higher amount. "Maybe you could enhance the bonus by saying, 'If we hit 100 percent of our budget, one-third of your anticipated bonus will be $8,000. But if we hit 120 percent of the budget, you will earn $10,000."
3. Typical bonuses for administrators are 15-25 percent of base salary and 10-15 percent of base salary for clinical directors. Mr. Zoch says there are certainly outliers and other bonus models, including those tied to distributions, but generally bonuses fall between 15 and 25 percent of base salary for administrators and between 10 and 15 percent of base salary for clinical directors. According to VMG Health data, the mean salary for an ASC administrator in 2011 was $109,184. Based on this salary, the average bonus for an ASC administrator should fall somewhere between $16,377 and $27,296.
Surgery center staff
1. Consider a profit-sharing program. Mr. Zoch says profit-sharing is a common way of giving bonuses to staff. In this model, ASC leadership sets aside a certain percentage of the center's profits each year creating a bonus pool. At the end of the year, or quarterly, it is divided among the employees. He says the bonus pool is sometimes divided evenly among all employees but sometimes doled out according to longevity or position.
"It could be that everyone gets the same amount, or that all RNs get the same and all techs get the same," he says. "It could also be that you get a bigger share with more longevity. So the person with five years' tenure gets a bit more than the person with two years' tenure." He says profit-sharing can incent staff to work hard throughout the year, because they'll understand that money they can save the facility along the way through efficiency and paying attention to waste will contribute directly to their bonus.
2. Make sure the bonus you're giving to tenured employees is attractive. Mr. Zoch says that unlike administrators and clinical directors, staff members do not necessarily need to know exactly how much they're going to make as a bonus, since their individual contribution is much harder to measure. "And there's something a bit mysterious and exciting about not knowing," he says. He cautions that giving out the same amount every year can send the message that hard work has no real effect on their bonuses.
Instead, he says surgery centers should distribute bonuses based on the surgery center's profitability and each department's success during the year. "I like tying bonuses to profits, but it should be a large enough amount to put a smile on their face. When you hand a tenured OR nurse a bonus of $100, it could be a real disappointment," he says. He recommends making sure the bonus is at least several hundred dollars. A tiny bonus could actually damage employee morale. "Giving a tiny bonus is like giving a waiter a 25-cent tip," he says.
3. Find an alternative to bonuses if your ASC isn't profitable. If you simply can't give your staff bonuses because you don't have enough money, then plan an event to celebrate the team and the culture at your ASC. "Maybe have an annual picnic and include families," he says. "If you provide food and beverages for a picnic, you'll probably spend very little compared to the good-will and camaraderie you'll create." He says these celebrations can feel almost as good as financial rewards when you don't have enough money for a financial 'thank you'. "I know of an ASC that has an 'employee appreciation day' each year and the docs wash all the employee's cars," Mr. Zoch says. You have no idea how big a charge the staff gets from this event and how they look forward to it each year."
"Regardless of what you do for bonuses, do something," says Mr. Zoch. "Healthcare is a team sport and keeping top talent on your team is, in part, a financial consideration. It's human nature to want recognition and appreciation for exceptional performance. And money is a traditional way of showing that recognition and appreciation. If you don't take care of your team financially, someone else just might."
Greg Zoch is a managing director and partner with Kaye-Bassman International, a 31 year old executive search firm. He may be reached at gregz@kbic.com or 972-931-5242.
So aren't annual raises enough? Mr. Zoch says that while raises reward employees for longevity and doing their daily jobs, bonuses reward employees for performing at extraordinary levels. "If a raise is the mechanism to retain good employees and reward them for good behavior, then a bonus is the way to recognize and reward exceptional behavior," he says. "You don't give somebody a bonus for mediocrity — for simply showing up and doing exactly what they're told to do."
He says building a bonus program comes down to two basic questions: How much do I give, and how do I know when it's been earned? He says the answers will differ based on whether you're looking at bonuses for administrators and clinical directors or surgery center staff, such as RNs, surgical techs and others.
Administrators and clinical directors
1. Divide bonuses into distinct areas that are important to your center's needs. Mr. Zoch says bonuses for administrators and clinical directors could be divided into three parts, with each part worth one-third of the total bonus. This way, the ASC leader can focus his or her energy on meeting the most important goals for the center. If the leader falls short in one area, he or she can still receive a partial bonus for achieving success in the other areas. Mr. Zoch says the goals should be distinctly different; for example, if the bonus is totally dependent on the administrator meeting her budget, problems with reimbursement or the economy could make it impossible to achieve a bonus. That could be frustrating and not fairly reward success in other important areas. He recommends dividing bonus goals into areas such as:
• Completing a major project or initiative. If the surgery center has a major accreditation survey or a renovation project to complete, the board could assign a bonus based upon successful completion of the survey or project. This benefits the surgery center because the project is essential to its success, and it keeps the administrator or clinical director on-task despite the distractions of daily operations.
• Meeting or exceeding budget expectations. Staying within a budget is essential to maintaining surgery center profitability, so budget expectations should always be part of an administrator's annual bonus program, Mr. Zoch says. He says including a budget component in the expectations is important to make sure that you generate profits that allow you to pay the bonus. "If the budget's not met and staffing hours or supply costs are out of control, you may not have the money to pay the bonus," he says.
• Improving a surgery center benchmark unrelated to budget. Mr. Zoch recommends assigning a portion of the bonus to an area of improvement unrelated to finances, to ensure that administrators and clinical directors can be rewarded for significantly improving the center even if the center's financial performance is below budget. For example, he says the board might incent the administrator to improve physician or patient satisfaction scores. "You should incentivize things that you really care about and that are important to you," he says. "If satisfaction scores are low and that's an issue you care about, you can incentivize the administrator to increase them by 5 or 10 percent. If you are unsure of what areas to improve, discuss ideas with the administrator or at a regular board meeting." Mr. Zoch says that benchmarks can be very important "culture-builders" and help you attract and retain the best people.
2. Assign a specific amount of money to each area. Mr. Zoch says administrators and clinical leaders should know the dollar amount of their potential bonus at the beginning of the year. This way, the leaders can work towards a clear goal and be aligned with the priorities and expectations of the board. He says that while some ASCs choose to divide the bonus equally between the three areas, some assign higher values to areas with more difficulty. He says the board can also give the administrator "stretch goals" or "enhancers". With this method, the satisfactory completion of a goal would earn them a pre-determined amount, but "hitting the cover off the ball" could earn them a higher amount. "Maybe you could enhance the bonus by saying, 'If we hit 100 percent of our budget, one-third of your anticipated bonus will be $8,000. But if we hit 120 percent of the budget, you will earn $10,000."
3. Typical bonuses for administrators are 15-25 percent of base salary and 10-15 percent of base salary for clinical directors. Mr. Zoch says there are certainly outliers and other bonus models, including those tied to distributions, but generally bonuses fall between 15 and 25 percent of base salary for administrators and between 10 and 15 percent of base salary for clinical directors. According to VMG Health data, the mean salary for an ASC administrator in 2011 was $109,184. Based on this salary, the average bonus for an ASC administrator should fall somewhere between $16,377 and $27,296.
Surgery center staff
1. Consider a profit-sharing program. Mr. Zoch says profit-sharing is a common way of giving bonuses to staff. In this model, ASC leadership sets aside a certain percentage of the center's profits each year creating a bonus pool. At the end of the year, or quarterly, it is divided among the employees. He says the bonus pool is sometimes divided evenly among all employees but sometimes doled out according to longevity or position.
"It could be that everyone gets the same amount, or that all RNs get the same and all techs get the same," he says. "It could also be that you get a bigger share with more longevity. So the person with five years' tenure gets a bit more than the person with two years' tenure." He says profit-sharing can incent staff to work hard throughout the year, because they'll understand that money they can save the facility along the way through efficiency and paying attention to waste will contribute directly to their bonus.
2. Make sure the bonus you're giving to tenured employees is attractive. Mr. Zoch says that unlike administrators and clinical directors, staff members do not necessarily need to know exactly how much they're going to make as a bonus, since their individual contribution is much harder to measure. "And there's something a bit mysterious and exciting about not knowing," he says. He cautions that giving out the same amount every year can send the message that hard work has no real effect on their bonuses.
Instead, he says surgery centers should distribute bonuses based on the surgery center's profitability and each department's success during the year. "I like tying bonuses to profits, but it should be a large enough amount to put a smile on their face. When you hand a tenured OR nurse a bonus of $100, it could be a real disappointment," he says. He recommends making sure the bonus is at least several hundred dollars. A tiny bonus could actually damage employee morale. "Giving a tiny bonus is like giving a waiter a 25-cent tip," he says.
3. Find an alternative to bonuses if your ASC isn't profitable. If you simply can't give your staff bonuses because you don't have enough money, then plan an event to celebrate the team and the culture at your ASC. "Maybe have an annual picnic and include families," he says. "If you provide food and beverages for a picnic, you'll probably spend very little compared to the good-will and camaraderie you'll create." He says these celebrations can feel almost as good as financial rewards when you don't have enough money for a financial 'thank you'. "I know of an ASC that has an 'employee appreciation day' each year and the docs wash all the employee's cars," Mr. Zoch says. You have no idea how big a charge the staff gets from this event and how they look forward to it each year."
"Regardless of what you do for bonuses, do something," says Mr. Zoch. "Healthcare is a team sport and keeping top talent on your team is, in part, a financial consideration. It's human nature to want recognition and appreciation for exceptional performance. And money is a traditional way of showing that recognition and appreciation. If you don't take care of your team financially, someone else just might."
Greg Zoch is a managing director and partner with Kaye-Bassman International, a 31 year old executive search firm. He may be reached at gregz@kbic.com or 972-931-5242.