Alan Twigg discusses key insights on effective bonus systems to enhance your practice. See more of Alan at the Practice Growth Summit 2024 with All-Star Dental Academy®!
Resources:
About Alan Twigg
Alan Twigg is a Co-Owner at Bent Ericksen & Associates. For 10 years, Alan has guided hundreds of clients and consultants through the challenging world of Dental HR and Employment Compliance. He thrives when creating peaceful calm on an emotional topic (HR), through education, compassion, and acceptance.
About Alex Nottingham JD MBA
Alex is the CEO and Founder of All-Star Dental Academy®. He is a former Tony Robbins top coach and consultant, having worked with companies upwards of $100 million. His passion is to help others create personal wealth and make a positive impact on the people around them. Alex received his Juris Doctor (JD) and Master of Business Administration (MBA) from Florida International University.
Episode Transcript
Transcript performed by A.I. Please excuse the typos.
00:00
This is Dental All-Stars, where we bring you the best in dentistry on marketing, management, and training. Here’s your host, Alex Nottingham. Welcome to Dental All-Stars. I’m Alex Nottingham, founder and CEO of All-Star Dental Academy, and with me is Alan Twigg, co-owner of Bent Erickson. This interview is part of a collection of interviews focusing on business and personal growth, and our topic is bonus plans.
00:27
And when it comes to practice growth, we have an entire event dedicated to personal and business growth for you and your team. And that’s the All-Star Practice Growth Summit this upcoming May 17th and 18th in South Florida. And you can learn more about the event at alls Please welcome Alan. Yeah, thank you, Alex. It’s great to be here. Looking forward to chatting and looking forward to the event in May. It’s gonna be wonderful. Wonderful.
00:55
I want to start out before we get into bonus systems. And I know you won’t give it all away because we only have like 20 minutes anyway on it. Cause you have to come to the event to get all the juicy stuff. But we will address some really good nuggets here for the podcast listeners. But before we start on bonus systems, first I always like to ask for this practice growth series. How would you define growth? And before you even say that, let me just give a little bit of background. So you’re the co-owner over at Ben Erickson. This is one of the…
01:24
largest, most well established HR firms in dentistry. So a great history of you and your family, helping to make sure we’re compliant with HR, and that we avoid legal issues with that. So just to give a little little background, how would you define Alan growth? And why is it important?
01:48
Yeah, I think for me and for us, growth is all about being able to achieve the goals that we want to achieve. You know, we have vision and mission and values and purpose with our organization, and we need growth in order to achieve those. I am a firm believer that if you’re not growing, you’re declining because, as we know, inflation and costs and everything are always going up. So if you’re not keeping pace and growing, then you are declining. And, you know.
02:15
I think that sometimes growth and profit and all of that kind of gets this, you know, almost like this bad rap because it’s all about, it seems like it’s all about money and just, you know, somebody wants a new car or a new house or something like that. But really, to me, growth is about everyone achieving more. It’s about the organization meeting its goals.
02:36
And similar to what we’ll talk about today with bonus systems, it’s about everyone in the practice sharing in that growth and that success, which I think is really important that it is truly a team effort in the growth and the development of the office and the goals. It’s interesting hearing multiple speakers that I interviewed that are speaking at the event. And I asked the question about how you define growth and why it is important. And invariably many of them, and I have more to interview,
03:06
say very similar thing, that if you’re not growing, you’re declining. And to me, I like when I see that continuity and consistency. It just means if you hear it from multiple sources, pay attention. And I’m a big fan, because I was taught by Tony Robbins, as you know, I was one of his top coaches for many years, and he would always tell us about model the best in business. And you’re saying what he would say, it’s the same thing. There’s no plateauing, I mean, you’re declining.
03:35
And you got to always be working. And with growth, either change can happen to you, which it will, or you can embrace change and be a change maker and go with it. So it’s something you’re choosing to do versus it being put upon you. And one of the things that, again, kind of laying the framework of bonus systems and why we need them and so on, is I think a big prerequisite, and I’d like you to comment about this, is having a great culture.
04:05
a great team because we can throw bonuses at them. And that’s the thing, sometimes we do these tactics, like a bonus system, which you have to know about. But if you put the tactic in and you don’t have a proper culture, a proper team, you’re kind of putting, in dentistry, it’s like you’re putting a veneer over an area that’s infected. You didn’t clean the infection out. So tell me a little bit about that and that importance.
04:31
Yeah, absolutely. Without a doubt, you got to be starting with a solid foundation. You need to have your ducks in a row. You need to have the right people in the right seats on the bus before you even start. And we always say that, you know, building successful HR is like building a house. You need to have a solid foundation first. And that’s things like your policy manual and job descriptions and having somebody that knows what they’re doing. And then you need to, of course, do all of the right recruiting of getting the right people brought in.
05:00
All-Star, of course, has a great hiring program that can help people with that, which is wonderful. But you gotta get those right people in. And then once you have the people in place, then it’s about culture and performance management and properly incentivizing people and giving them a reason to show up and work hard and stick around. And one of my favorite definitions of culture, and there are many definitions of culture, and I think all of them have value, one of the ones I really like is that culture,
05:29
is basically an average of every single interaction that every single person has in your practice over time. So it’s interactions between the doctor and the team, between the team members among each other, between everyone and the patients. It’s almost like if you were to take every single interaction that happens among all of those people, and you almost like assign a five-star review to every single interaction, you average all of that out, that is a way of imagining your culture.
05:59
One of the, there are two things I like about that. One is recognizing that culture in that regard is an ongoing process. It’s not something you set and then you’re just done forever. It’s a perpetual thing every day as you work. And the other thing about it is recognizing that we all have off days. We all have days when stuff’s going on in our personal lives or our business lives. And we’re not always on our perfect A game every single minute of every day. And that’s okay.
06:27
you know, we can have a couple of four star interactions with people and our overall average and our overall culture isn’t going to suffer dramatically. So I think that’s a little bit of a, give a break to the people out there that are kind of like me that are perfectionists that want to do, you know, an A plus hundred percent every single minute of every day. You are, you are. And so there’s an element of like going, okay, well we can give ourselves a little bit of a break here that our culture is an average over time.
06:57
And you kind of have to be with what you do. You can’t make mistakes with HR policy and procedures. One other point to make as we set the stage, in my webinar, Dental Practice Excellence, one of the silent killers I talk about is declining team performance. And that often is when we’re not training, when we’re not hiring properly, that fits our vision of what we want to create. We’re keeping people too long that shouldn’t be there. And we’re not…
07:27
Again, if we’re not given the training and the coaching, what happens is their performance declines, they will leave because they don’t feel appreciated or they don’t feel competent or you will let them go. Something’s gonna happen. And this is line, I always like the site, Uncle Jay, I do it a lot, now I know it. He’s a medical consultant and a lot of dentists are like, why do I wanna train people? And thinking of this, why go to the practice growth summit, bring all these people, even people that I don’t even know that I wanna keep? Why would I make that investment?
07:58
because what if they leave? So it’s like, well, if I, what if I train them and they leave, make the investment? And Uncle Jay will say, well, what if you don’t train them and they stay? Exactly. So the whole thing is while you’re here, you’re gonna be trained. While you’re here, we’re gonna do it the best way. And it’s, I’m quoting, this is not Dr. Cody Calderwood’s quote, but he says in our mastermind group a lot, one of our.
08:26
our wonderful dentist at All-Star, is rising tide lifts all ships. So I’ve been hearing that a lot, that what culture you set, what level you set, all the ships rise. So here’s the point that I wanna get to you. Turnover’s gonna happen. And I’ve been telling a lot of people, the statistic, and you’re gonna support me on this because it comes from you. I say, Ben Erickson says that when there’s a turnover,
08:54
in a practice, it’s gonna be one to three times the cost of the employee to replace them. Not just the hiring service cost, that’s actually the cheap part, we do that. We have a hiring service that hires it. But tell me more, why is it so big? If you lose a hygienist, you’re paying 80 grand or whatever it is, how does that turn out to be an $80,000 loss in the practice? Like, help me understand the cost of turnover. Where’s that coming from?
09:19
Yeah, there’s direct costs and indirect costs. So direct costs are, yeah, the recruiting time, the cost of advertising, and then there’s certainly the cost of everyone’s time, reviewing resumes and phone screening and interviews and the time that people are spending. And that one, I think, is something that is somewhat easy to quantify if you’ve got a doctor and what their typical hourly production can be, if they’re…
09:48
properly scheduled and doing everything that they should be doing. So you can assign a dollar value in that regard. And if you’re spending eight hours doing interviews, then it’s that times eight. And then beyond that, of course, when somebody is being onboarded, ideally, of course, there is an actual onboarding program where they’re being trained with another team member who is actually bringing them into the fold and not this thing that.
10:14
I’m sure Larry Guzzardo always talks about and Eric about, just put him in the chair and give him 10 seconds of training and say, good luck. That leads to, of course, all sorts of other costs down the road, but if we’re doing proper onboarding and proper job shadowing and so on, then there’s that other employee’s time doing that. You’re paying, of course, both of those people for that. And then there’s also this factor of…
10:40
there is sometimes a gap between when somebody leaves and when we hire the next person. And during that gap, we’re short staffed. The rest of the team is running at potentially over 100% effort. And it means that people are not able to produce and achieve what they could, because they’re just not at the top of their game and they’re potentially at risk of burnout. So you add all of that up, plus the fact that a new person coming in,
11:09
even if they have experience, and they’re pretty good and pretty sharp, it’ll take them at least a few months to get fully up to speed and fully productive. And during that time, you’re losing production. And so that’s a rough number of, you know, that positions annual salary, and sometimes it’s less, sometimes it’s more, it depends on the experience and the onboarding process and all of that. But the point is just that it is way more than just your direct costs
11:40
the ad and a little bit of people’s time. It is quite a bit. So it’s something to be taken seriously for sure. Yeah, and I appreciate that. I wanted to confirm, because that’s what I was saying the reasoning is, is you’re right, it’s not just the direct costs that you can quantify directly. It’s all the other costs that, it’s these silent killers that I haven’t talked about that you’re not seeing that’s happening. And that’s assuming you do it right, you’re actually onboarding. If you’re not, or you’re inefficient with it, they’re making mistakes.
12:08
the new employee until they figure it out. It could take a long time or you’re continuing the search or you’re turning over again. And I think that sometimes we underestimate the lower level position. So a hygienist is a producer. So those you can, okay, yes, they’re making us money. Well, what about a front office person? What about an assistant and their relationship with the, with the team, with the patients and that’s being broken. It’s going to take time. You lose an associate doctor or a principal doctor or partner.
12:37
Those relationships are really hard to build. I think we can say, oh, yeah, if I lost a principal partner or even the main doctor, what do I do? If they can’t work or whatever, that’s huge production losses. And certainly we can see multitudes of their salary will destroy the practice. But that’s an extreme example. You back it down a bit, that reasoning would apply to every other position. We just don’t think about that, but they do have an impact.
13:07
A great cosmetic dentist that was on Extreme Makeover, I was speaking to him a few years ago, and he told me that we were doing a project together, and he was saying to me that his front office is often the most underpaid, but they make him the most amount of money. Because without them answering the phone, without them having the rapport with the patient, case acceptance would never happen. You can’t do these fun procedures. It’s not you build it, it will come. You have to go with that.
13:35
So thank you for clarifying that. You’re the source. I cited you. I did a good job. You will be very proud. Thank you, Alan. Okay, let’s get to bonus systems. We’re all excited. We see that obviously we have to have a good culture. That’s a prerequisite. We got to have the right team going on. And now bonus systems. Why, tell me about bonus systems. Why do we have it? You mentioned something about bonus regret. I want to hear about that. What are some…
14:03
people doing it right, wrong. Tell me about bonus systems. Yeah, so I’m really excited to talk about this because I think in HR sometimes we get lost in topics that are all about rules and laws and liability and that’s all important. But to me, bonus systems are in that category of something that’s really fun and can really, when properly set up, really make a huge difference in the practice and a big difference in the culture. So I’m really excited to talk about it. Yeah.
14:32
Everyone I have ever talked to has bonus regret, bonus pain. They feel like they’ve been burned in the past by a bonus system that didn’t work. And we will definitely talk at the meeting a lot about why bonus systems fail. I’ll just say right now that in general, it’s usually because they’re either too simple or they’re too complicated. And a bonus system that would be too simple would be something like a random Christmas bonus, where
15:01
It’s not guaranteed, there’s no predictability, the team has no idea if it’s going to happen, how much it’s going to be, and there’s nothing they can do that will influence whether that number is bigger or smaller. Or they don’t have a guarantee that, okay, if I really bust my button, we get production and collections up, am I going to see a bigger bonus? There’s no guarantee with that. So that would be an example of something that’s a little bit too simple.
15:27
On the other extreme would be something that’s super complicated, that takes into account every single line item in the P&L, every single variable, and all these things that the employees have absolutely no control over, or the doctor doesn’t want them to have an influence on those things, and that also then makes it so complicated, or if it’s just this massively complicated mathematical formula with 20 different percentages and if this and that and all these things,
15:56
and it’s almost like this black box that nobody is able to understand but the doctor. Again, that’s going to be so complicated that it’s not going to be motivating to people because ultimately what we want, the real purpose of having a well created and well crafted bonus system is we want to create what we call psychic ownership. Psychic ownership is that mindset where people are not just clocking in for a job.
16:25
but they’re kind of thinking, okay, if we can get our numbers up, then I benefit, we all benefit, or if we can get something established, something positive, something, you know, if we can keep our costs down while growing, then we will achieve more. That’s the mindset that an owner has, constantly looking at revenue and expenses and how do we maximize this and stay efficient
16:55
When do we need to hire another person? And can we work a little harder? All of those things our owners are thinking about. And what we wanna do is get a little bit of that going with our team as well. So again, it’s not just a job, it’s not just I’m showing up and collecting a paycheck and doing the bare minimum so I don’t get fired. This is about really having clear goals, clear milestones.
17:19
so that everyone on the team is pulling in the same direction for the same goal and everyone is sharing in that success. So that’s ultimately what we want with a good bonus system. I like that. I like that looking at your team as stakeholders, not shareholders, but stakeholders. And I have the same philosophy with All-Star in this practice growth summit, that it’s not about me, it’s not about you.
17:46
It’s an entire collective of, we’re all stakeholders, that we all wanna grow and be better, and kumbaya, let’s all do it. Let’s have people that want to learn and contribute and want to teach and learn and mastermind all together to do that. And we look at it, if I shift the burden to not just, oh, it’s me, it’s you, it’s everybody is what makes us successful. Then you have a movement.
18:13
And that’s also a model that when I was interviewing Robin Reese, our director of the hiring service and one of your top consultants over there at Ben Erickson, we were talking about recruitment versus hiring. And when I looked up the word recruitment, it means to bring somebody to your cause. Hiring is a tactic. But I think more importantly, we want to recruit people to our cause. Everything we do, we’re recruiting our team to our cause, our patients to our cause. So I like this idea that you are
18:43
you are encouraging the team to have mini ownership mentality, something that they have self-determination. It’s something that they can work towards. They feel excited about as a practice does better. They get, they do better. So this, here’s the thing that immediately jumps in my mind that I’m concerned about. And this goes to the bonus regret. I like that theory in that model. I know at the event you’ll go into much more detail and we can ask questions, but my biggest thing is what if we get it wrong?
19:12
the bonus plan or it’s not working well or the numbers go down and it just doesn’t work. I mean, I assume we should say to the team that it can change. How do you set it up where it can be flexible enough that it can be modified so that everybody benefits? Tell me a little bit about that. Yeah. So first of all, a good bonus system.
19:37
is not about paying people for just doing their job. It’s not about saying, okay, we’re already producing this amount per month. We’re just gonna start paying a bonus on what we’re already producing. The goal of this is growth. And so it’s about saying, this is our baseline and we’re going to grow above that and everyone will share in that growth above what our target is.
20:02
Now, your point is a really good one, and that is by far the crux of setting up a proper bonus system is what is your target? And there’s a whole bunch of numbers that go into that. We’ll talk about some of the specifics around, it depends on the number of days of hygiene, it depends on how much your practice is growing, it depends on how much you want to factor in things like major marketing campaigns that you have coming up or other costs. It also depends on
20:29
things like are you a startup practice and you’re still really riding this wave of ups and downs in your production. If you’re in a mode like that, we probably wouldn’t recommend doing a bonus system because with those ups and downs, there may be too many times or too many months where the team is not receiving a bonus. That builds resentment and resentment is the absolute killer of a bonus system. So there is definitely a right and a wrong time to implement a bonus system.
20:58
And then it is absolutely about picking that goal. And one of the nice things about the system that we’ll recommend at the meeting is it’s real easy to put something like it kind of in place, do all these calculations of, okay, what if we had this, what if we had that? And then as the owner, you can actually run it for say two or three or four months behind the scenes where you don’t tell the team that it’s running and it’s a way of testing.
21:26
your percentages and your goals that you picked. Brilliant. So you can run it that way. You can even do a thing where normally when we set something like this up, we recommend starting with six months of historical data. You could potentially start with a year’s worth of historical data. And you can see where the bonus system would have been if you had chosen this target versus that target. And not only what the bonus would have been, but what each bonus would have been.
21:54
person would have achieved based on all the parameters of who gets how much and all of that. Because if we implement a bonus system and we achieve a bonus, but everyone only gets $20 a month in their paycheck extra, well, that’s not going to make much of a difference in terms of incentive. So we need to factor those kinds of things in as well. I really love how methodical you are in that. Just so thoughtful. I’m like, this feels good.
22:24
We have a rule at All Star for me is I have idea an idea and then Robin she had this new concept It’s called popcorn from the visionary. So I have an idea let the popcorn settle give it a few days before we ever change anything So it’s an idea give it a few days Then we go run You can eat somebody who does the due diligence for you to make sure hey that could work and then go But I think that’s a very important and this is a major decision and it could be a great thing for the culture It could be a huge culture drain or bonus
22:54
and resentment from the team if not set up properly. So that’s why, man, I remember Brian Tracy, who I had the great pleasure of writing a book with, he would always say, every hour you spend planning, you save four hours in execution. In this situation, you’re gonna save a lot of pain when you do it right and you set that up. So I really appreciate it, Alan. Alan, tell me a little bit, so you gave me a great big picture of it and a great.
23:23
I think it’s really important the high level strategic of the bonus system of the prerequisites to a bonus system. I like what I heard as well that we have to see what stage in a business you are to do that. If you’re very up and down, that’s going to be difficult to maintain. So you have to really think that through. You may not be a good candidate right now for that in your growth stage or your process. And that has to be something that you have to take into consideration, the right team and so on.
23:50
So walk me through what will listeners learn. They’re coming to the sunny South Florida, they’re gonna listen to a co-owner of Ben Erickson right there talking about bonus systems. What am I gonna walk away with? How am I gonna grow from this presentation? Give me some bullet points and some ideas or key objectives that I’ll learn. Yeah, so we’ll talk a lot about what makes a good bonus system, what makes a bad bonus system. We’ll talk about.
24:18
this idea of our recommended formula, for lack of a better term, in terms of how you run a successful bonus plan. And there are three key variables that it will be based on. It’s production, collections, and payroll. That’s it. We’re not looking at marketing costs. We’re not looking at taxes and insurance. We’re not looking at a whole bunch of complicated stuff. It’s just net production, net collections, and payroll.
24:46
And based on just those three numbers, we can establish, in a sense, a pie. And that pie represents our business in different categories of profit, employee expenses, and then everything else. And the goal is to grow a bigger pie. And when we grow a bigger pie, a portion of that growth goes to the team. A portion of it grows and becomes extra profit. And the rest of it becomes added.
25:14
added revenue that feeds our increased expenses, because of course, as we grow, our expenses grow as well. And so the goal of this is to not say that all of the expanded growth goes to the team or all of the profit goes to the doc. It’s about sharing in a portion of that. So there will be some, a little bit of math, but it will be, I promise, basic math and easy to understand math. So that part will be fun.
25:44
And I think folks will really walk away with something that will feel approachable and really doable, something that kind of goes, okay, yeah, I get that and I can pull that off and that seems achievable. And that’s really our goal is for this to be something that people get it, they see the value in it, and it’s approachable and achievable. That’s amazing. And of course, you’ll make sure that.
26:12
You’re there for any legal questions that you keep us protected under the HR umbrella. You’ve been to multiple practice growth summits with us and we come to your great event that you hold for HR and growth. Why both, not just, so we talk about your lecture, but you again, you’ve been to our program as an attendee, as a sponsor, as a speaker, why should dentists?
26:39
and their team members come to practice gross summit because of course you’ve been participating in many, many events and you’re coming back. So I guess you like it. So why should they come team and dentists to this event? I would say two reasons, maybe three reasons. One reason is the size. I really like the size that you guys have hit on as far as how many attendees are there.
27:05
It’s big enough that it’s not just three people in the room. It’s big enough that we can share ideas and everyone can kind of help each other out, share their success stories and their horror stories a bit. And so I think the size is really key. When you go to some of these big gigantic meetings, you’re just lost in a crowd of people. You can’t ask questions. You can’t feel like your particular needs are being addressed. And that’s something that I really like and I see it. Your event is just the intimacy.
27:34
of really people helping people is what I would say. Second reason would just be the content. I mean, a lot of big meetings are all about clinical skills and margins and implants and that stuff is important, but as we know, the business side of the practice is so critical and a lot of what you guys cover with Larry and Eric and Robin and others.
28:01
So much of it is really about growing the business side and the operation side. And I just love the way you guys do that. It’s so, it’s so, I don’t know what the right, it’s just so approachable. It’s so, it’s distilled down, it’s real, it’s not big lofty high-minded bullet point, talking point kind of stuff. It’s real nuts and bolts for the people that are actually in the trenches day in and day out doing this work.
28:31
and it’s very practical. And so I just think a lot of people come away with really good step-by-step stuff that’s like, this is going to help me starting on Monday in my practice, moving the needle, and having the team there I think is great because they get practice, they get hands-on, they get to share stories with other offices that are there and it’s just good. It’s a good overall format. Well, thank you, Alan. I appreciate the.
28:59
the plug and I appreciate you being on the program. Always great to have you. And a few links for those that are listening or watching on YouTube. One is benerickson.com. You can learn about the great HR service that you provide to keep you compliant, manuals, consulting, some great stuff there. Wonderful product, we highly recommend that you learn about it. You need to have a manual, you need to be talking about HR. It’s gotta be customized to.
29:29
your your state can’t do something you pull off for the internet, get that support because the average cost of doing it wrong is $25,000 a hit. My father had a problem years ago. He didn’t have those systems set up and it was $25,000 and attorney’s fees. So make sure you you take care of it. Nothing terrible just you you you miss some you missed a line and you know, people will take advantage. So make sure you protect yourself. And they have a great
29:57
program they do every year as well. That’s very, we make sure we come to that very well attended. Also allstardentalevents.com or you can go to All Star Dental Academy and then click on events and you can learn about the program, sign up, get the early bird depending on when you’re listening to this and come join us at the event. So again, Alan, thank you so much and we look forward to having you again. And until next time everybody, go out there and be.
30:26
and All-Star.
