Compensation Best Practices in 2018

It would be so simple if practice owners could open a fortune cookie for each one of their employees and find the method by which to fairly compensate them.  While there are commonly accepted methods of compensation, their implementation in veterinary practices varies because different entrepreneurs have different business goals.  Also, “fairness” is a relative term that introduces variability into an equation that might otherwise be consistent from practice to practice.  This article describes the factors that practice owners should consider when determining compensation for veterinarians and paraprofessional staff.

Benchmarks

Below is a table that provides a snapshot of current key indicators available for small animal companion practices.  It is not meant to be all-inclusive, but rather to provide some guidelines that enable managers to take the practice’s compensation pulse. They can then determine if the practice is on track for the next year or needs to perform some diagnostics to prevent a fiscal derailment.

Name of Key Indicator Key Indicator Comments Where Found
Total revenue per doctor Less than $450K       10.1%

450K-500K               4.5%

500K-550K               10.1%

550K-600K               14.6%

600K-650K               15.8%

650K-700K               9.0%

700K-750K               5.6%

750K-800K               5.6%

800K-850K               10.1%

850K-900K               3.4%

More than 900K       11.2%

Medical hours only The Well-Managed Practice Benchmarks Study (2017)
Percentage of gross income for paraprofessional staff compensation 22.5% (wages only)

0.6% (retirement)

1.4% (payroll taxes)

24.5% (total cost)

 

  The Well-Managed Practice Benchmarks Study (2017)
Percentage of gross income for veterinary compensation 21% (blended rate) Wages The Well-Managed Practice Benchmarks Study (2017)
Name of Key Indicator Key Indicator Comments Where Found
Average starting salary for a veterinary associate $66,800

 

With < 1 year of experience (excludes benefits) The Well-Managed Practice Benchmarks Study (2017)
Average student debt $166,714

 

The average of 2017 veterinary school graduates with loan debt DVM360 – Where DVMs fit in the U.S. Student Debt Crisis
Average amount of employee’s healthcare cost paid by a Well-Managed Practice 67%   The Well-Managed Practice Benchmarks Study (2017)
Associate compensation ranges (%) for private practices

 

Blended rate: 16-22%

Split rate: 22-26% for services, 4-8% for products

  The Well-Managed Practice Benchmarks Study (2017)
Starting compensation ranges for (hourly rate):

Hospital Administrator

 

Practice Manager

 

Receptionist

 

Credentialed Technician

 

Veterinary Assistant

 

Median        75th Percentile

 

$29.65              $35.10

 

$21.65              $22.80

 

$12.00              $13.00

 

$15.00              $16.00

 

$11.50              $12.50

Median and 75th Percentile ranges as benchmark The Well-Managed Practice Benchmarks Study (2017)
On average, full-time support staff to doctor ratio

 

4.2 All staff members The Well-Managed Practice Benchmarks Study (2017)
On average, veterinary technician/assistant to doctor ratio 1.9 Includes credentialed technicians, non-credentialed technicians, and veterinary assistants only The Well-Managed Practice Benchmarks Study (2017)
Name of Key Indicator Key Indicator Comments Where Found
Average profit margin 9.9%   NCVEI Update – New Insights in Practice Growth- Karen Felsted presented at NAVC 2011
Debunking The Myths Of Base Salary And Production Percentages Why pro sal can work for your practice Each of the debunked myths gives practical tips to follow to include the links for dvm360.com (ProSal) and PayScale.com Veterinary Economics March 2010 – Squashing Pro Sal Myths
Percentage of practices using compensation method for associates Fixed Salary – 21.4%

Base + Percent of Production – 56.4%

Percent of Production – 18%

Hourly – 3.8%

  The Well-Managed Practice Benchmarks Study (2017)
Total compensation worksheet   How you calculate your pay ranges affect your bottom line DVM360 Dec. 2011 – ProSal Total Compensation Worksheet
Crediting doctor’s production   What should be credited to the doctor and what should be credited to the practice DVM360 Nov. 2013– Crediting Doctor’s Production Worksheet

DVM360 July 2005 – Giving Away a Fortune

2010 Veterinary Economics State of the Industry Study   Quantifies compensation methods, how satisfied the owners are, how happy the associates are DVM360 August 2010 – Veterinary compensation conundrum

  

Veterinary Compensation

Many periodicals and books discuss the factors one should consider in establishing a compensation policy for veterinarians. Of particular importance is the question of whether compensation should consist of a fixed salary, a percentage of the revenue generated by the veterinarian and collected by the practice (i.e., commission-based), or a combination of the two. If a commission-based component is present, it is also important to consider how the revenue figure will be calculated. Will it be limited to revenues generated from professional services, or will it include revenues generated from items like over-the-counter medications and foods?    Percentages can also vary in relation to the magnitude of the revenue number that is generated.  Implementing compensation systems in practice requires attention to the details of production calculation and timing of payment. The key to remember is there is NO one size fits all when determining the appropriate compensation for veterinary and non-veterinary staff.  There are numerous factors that go into assessing the actual method used for compensation, which often requires the assistance of an advisor.

National starting salary information is generally published annually in the Journal of the AVMA. (See: Employment, starting salaries, and educational indebtedness of year-2013 graduates of US veterinary medical colleges, October 1, 2013, Vol. 243, No. 7, Pages 983-987; Employment of male and female graduates of US veterinary medical colleges,  JAVMA October 1, 2011, Vol. 239, No. 7, Pages 953-957.) See also the latest biennial edition of the American Animal Hospital Association’s Compensation and Benefits-An In-Depth Look and the AVMA’s Economic Report on Veterinarians and Veterinary Practices (Wise, J., Center for Information Management, AVMA, Shaumberg, IL (Tel: 847-925-8070). Two periodicals, Veterinary Economics and Veterinary Hospital Management Association Newsletter, also regularly publish helpful articles. In addition, Wutchiett Tumblin and Veterinary Economics published Benchmarks 2013 Well Managed Practices.

Paraprofessional Compensation

 Paraprofessionals are often compensated on an hourly basis and the industry has yet to develop widely adopted performance-based compensation models. Paraprofessionals generally report low job satisfaction and high turnover rates. In the 2016 NAVTA Demographic Survey, 38% of veterinary technicians left the practice due to insufficient pay, 20% due to lack of respect from an employer, 20% from burnout and 14% because of the lack of benefits. Full time technicians reported a salary between $15-20 per hour, while part-time technicians reported $14-16 per hour. After taxes, even the well-paid veterinary technicians are only slightly above what is considered the poverty line for a family of four in the United States ($24,300).

According to the United States Bureau of Labor Statistics, the median pay for veterinary technicians was $16.06 per hour in 2017. By comparison, a JAVMA published study on Jan. 1, 2016 of certified veterinary technician specialists reported that the weighted mean pay rate in 2013 was $23.50 per hour.

In AAHA’s 2016 Compensation & Benefits survey, average veterinary employee turnover was 21%.  In Veterinary Economics 2010 Benchmarks survey of Well Managed Practices, turnover was 26% for receptionists, 21% for assistants, and 44% for ward attendants. To compare with the national workforce, Compdata’s Annual Compensation Survey showed that national average turnover was 18.7% in 2008 and 15.9% in 2010.  The chart above can be helpful to calculate a practice’s turnover expenses. Turnover is a pervasive and expensive problem that can be mitigated by learning how to properly motivate employees.

Third-Party Harassment at Your Practice: How to Respond

Originally published in Today’s Veterinary Business, February 2019

Harassment creates a negative environment in the workplace, lowering morale, reducing productivity, and otherwise upsetting employees. It can take the form of unwanted flirtation, forced touching, or inappropriate jokes about an employee’s religion, race or sex. It could involve an unwillingness of someone to work with, for example, a sight-impaired employee. Harassment can also occur when someone inappropriately contacts an employee outside of work hours. Any behavior that threatens another person, humiliates him or her or otherwise victimizes a person can be considered harassment.

When employee harassment occurs, and all parties involved are working at your practice, the situation can be challenging; but hopefully you can have a process in place to deal with the situation.

What do you do when the person accused of harassing one or more of your employees doesn’t work at your practice? Perhaps the person is the janitor for the building where your practice is housed, a pharmaceutical salesperson or a landscaper. The accused could be an investor, a shareholder or even a client. The harassment could happen in person, in writing or on the phone, by email or even through social media postings.

So, what do you do?

First, it’s important to educate yourself and your managers about the laws surrounding third-party harassment, including case law, so your practice team has a solid foundation on which to form third-party anti-harassment policies and procedures. At the core of relevant case law is Freeman v. Dal-Tile Corp., the case in which the United States 4th Circuit Court of Appeals ruled that, yes, employers can be held liable when a third party engages in acts of workplace harassment.

In this landmark case, the plaintiff asked her employer for help when an independent sales representative who came into the company repeatedly subjected her to harassment, both sexual and racial. She did not feel her company protected her and she ultimately resigned. She then filed a complaint with the U.S. Equal Employment Opportunity Commission, stating that the workplace environment was hostile, and the reporting system was not working.

Educating your management team about this case is crucial to set the stage about how seriously these behaviors are now taken in federal courts. Also, be knowledgeable about and share how your state laws read, because specifics do vary by state.

Then, after making sure your managers are clear about these laws, it’s important to discuss what’s needed in your practice to create appropriate policies, procedures and channels of communication so that your employees, unlike the plaintiff in the case described above, can be promptly heard and remedies readily applied.

Include expectations of third-party vendors in your employee handbook, and let employees know how to inform you about any harassment by them. Be crystal clear that you have zero tolerance for this type of harassment, stating that any instances should be immediately reported. Review these guidelines with new employees and regularly revisit them when you review your handbook with all employees annually.

When Choosing Third-Party Vendors

Clearly communicate your expectations to vendors when you select them, letting them know that appropriate behavior in your practice is required. It can help to schedule an orientation-type meeting when you choose a new vendor, whether a salesperson from a drug company, someone who services office equipment or a contractor. Whenever you professionally communicate expectations, it’s more likely that they’ll be met. Although these types of conversations may initially feel awkward, companies with similar philosophies will respect your boundaries. And, if a third-party company is not comfortable with a professional discussion about the prevention of employee harassment, it’s not a company you would want to continue to do business with.

When an Employee Complaint is Made

A prompt response is crucial to maintain a professional workplace where employees are respected. Plus, if the case ultimately goes to court, your speed of response may become an important factor. If you do not act immediately, it could be considered a lack of care and potentially contribute to a decision that your practice is an unsafe work environment.

Your practice should investigate the complaint, just as you would if the accused harasser worked for your practice, although specifics of the investigative process may differ. The investigation should be prompt, unbiased and fair, with no assumptions made ahead of time.

While the investigation is ongoing, you can adjust the affected employee’s (or employees’) duties to protect him/her/them from the accused harasser. Do so in a way that has the least impact on employees’ jobs. This is important because, if any change in duties negatively affects the employee who lodged the complaint, this can be considered unlawful retaliation.

If your investigation indicates that harassment is occurring, have a conversation with the third-party vendor and/or his or her human resources department, as applicable. You may need to break off the relationship with the vendor, or you may be able to continue the relationship with the company with a different representative.

Depending upon specific circumstances, there may be other steps to take, including preventive measures to provide additional protection to employees going forward. This should include, but is not limited to, reviewing your employee handbook to ensure that the procedure to file harassment complaints about third parties is optimal (or if policies and procedures related to this situation need updating). Policies must contain the same zero tolerance language as harassment policies created for intra-practice situations and must provide protections to witnesses to the harassment who come forward with relevant information.

When you do your annual review of your employee handbook, use it as an opportunity to further educate employees on third-party harassment, including how it is defined and how they should respond if they see it happening at your practice. Encourage your employees to speak up and let them know that you will protect them from retaliation.

Whenever this type of situation arises, consider seeking out the advice of experienced attorneys, especially if you haven’t handled something similar before. Better yet, talk to an attorney when creating your policies, which will help to ensure that if third party harassment situations do arise at your practice you have systems in place to swiftly deal with them. This protects your practice, as well as your employees and vendors.

Remember to maintain confidentiality. It’s crucial that your employees feel safe in reporting harassment issues, including with third parties. This will play a significant role in creating an overall safe workplace, and one that is stronger, more productive, and more successful.

Note About Client Harassment

It can be especially challenging if an employee experiences harassment from a client. Because it can affect practice revenue, employees may be especially reluctant to report these situations. For this reason, it’s important that your practice policies explicitly state that harassing behaviors by clients should be reported, and that they will be thoroughly investigated and appropriately handled.

Regardless of the parties involved, the act of harassment in the workplace is a serious matter that should be addressed immediately. Your practice should have a policy in place to deal with it and everyone working at the practice should be educated about it. This will promote a safe working environment where everyone can do their job successfully.

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Managing Social Media Behavior at Your Veterinary Practice

Originally Published by Today’s Veterinary Business, December 2018

Use of the internet, particularly social media, can be a double-edged sword, especially in the workplace. On the plus side, it can be a wonderful vehicle for marketing your practice and otherwise connecting with clients and potential clients. On the darker side, what happens when an employee posts content that can have a negative impact on the practice? Should you respond? If so, how should you respond? If a post is offensive, do you have the option of disciplining, even firing, that employee?

Because people in general are so openly sharing thoughts and opinions on social media, it’s not surprising that many experts believe that terminations based on employees posting inappropriate content will continue to increase. Handling this type of issue at your practice can be challenging for your human resource team, given that this is a fairly new type of problem to tackle – but, finding the right approach is crucial, given that just one post has the potential to blow up into a public relations and human resource disaster.

So, how do you respond to, say, a sexist-sounding post on an employee’s page? Although you don’t want to over-react or react emotionally in the moment, and you don’t want to micro-manage your employees, here’s the crux of the situation, distilled into just one sentence. How much potential damage could a particular post have on your practice’s reputation?

What’s important is that you respond fairly, not allowing one person who, say, has a knack of being humorous in his or her posts more leeway for the same type of material that another employee posts in a more serious manner. And, if you choose not to respond, be aware that you’re still really responding – giving the message that you either are fine with the posts or you aren’t concerned with the messaging. And, although a non-response is sometimes the right choice, in today’s business environment, your practice could also be harmed by this more passive approach.

What You Can – and Cannot – Do

At a minimum, you should create a policy about your employees’ use of social media while at work. Be clear about what an employee can and cannot do, and then consistently adhere to that policy. You have the option of banning social media use entirely while on the job. If, of course, someone’s job includes posting for the practice, you’ll have to clearly delineate what is and isn’t permissible during work hours.

However, you cannot ban employees from talking about work-related issues online when they aren’t at work, and they are legally permitted to discuss topics with one another on social media that fall within protected concerted guidelines. Employees can, for example, discuss their dissatisfaction about management style at the practice, how much they’re getting paid and so forth on Facebook or Twitter, as just two examples.

Employees are not protected and can be fired, though, when they discuss these issues online with someone outside of the practice, as this no longer falls into the category of co-worker dialogue about the workplace. They can also be terminated for sharing information that is deemed confidential, including but not limited to trade secrets.

Employees aren’t protected when talking about a workplace topic that isn’t related to employment terms. If someone calls a manager “lazy,” that communication may ultimately be protected. If the employee posts, though, that the manager is “fat,” then that may open the employee up for termination. Or if an employee posts that “my veterinary office is full of ugly people,” this is leaving the realm of employment-related discussions.

It can be difficult to discern when a post crosses the line, so your practice may need help with an attorney experienced in this type of law to determine legalities of particular posts. Note that laws can differ by state so, if your company has practices in more than one of them, you may not be able to make blanket social media policies. Employee protection is especially strong in California, Colorado, Louisiana, New York and North Dakota. Also, be aware that employee protection about social media postings applies to unionized as well as non-unionized employees.

Hate Speech and Protected Classes

You can fire employees who engage in hate speech. Sometimes a post clearly contains hate speech, while at other times, it is borderline. Hate speech is defined as communication that has no purpose or meaning other than expressing a feeling of hatred for a particular group, perhaps focused on race, ethnicity or gender, sexual orientation, national origin, religion and so forth.

When Creating a Social Media Policy for Your Practice

Your policy should contain clear guidelines about what is and isn’t permitted while at work, and also explicitly state that trade secrets and the like must remain confidential. The policy should ask employees to not use social media to post defamatory material that could create a hostile work environment. It is also reasonable to ask them to preface any social media remarks made about the practice online with a disclaimer that you don’t represent your employer’s point of view. It makes good sense to be proactive, too, and run your social media policy past your practice’s attorney.

As a creative solution, some companies are providing social media breaks for their employees throughout the day, perhaps 15 minutes in length, a couple of times per day. This can give everyone a chance to relax and refresh their minds. The goal isn’t to completely restrict your employees from ever using social media (which isn’t do-able, anyhow) but to encourage moderate use in appropriate ways. If you want to use this strategy, outline specifics in your social media policy.

Sharing Your Social Media Policy with Employees

How you share the news about your social media policy can go a long way in determining how well it is received. For example, you could pick a day to get some pizzas for your employees, and use that as an occasion to have a discussion on your social media policy. Explain why having the policy is so important in today’s times, and educate them on the problems that can arise when this form of communication isn’t appropriately used.

As you share the role that social media and its messaging plays in your practice’s culture and values, using a helpful approach is more likely to be successful than leaving the impression that you don’t trust your employees and plan to monitor their every message. And sometimes, by simply educating employees on privacy setting options in social media, you can help to prevent an unpleasant situation.

Share examples of appropriate/acceptable posts and ones that cross the line, and be open to questions, concerns and employee feedback. Getting employees to buy into your policy is a big step forward.

Monitoring Social Media

In general, avoid monitoring a specific employee’s social media accounts to watch for inappropriate comments. If you’re aware of a controversial comment, let that employee know how you plan to investigate and then review the situation with him or her. Then do exactly that.

When you follow up with the employee, get his or her side of the story. In some cases, the comment is so inflammatory that termination may be the only response. Other times, what the employee has to say may provide context that allows for lesser forms of discipline. Remember to be consistent and to follow up appropriately with everyone involved at the practice. As needed, update your social media policy and share it with all of your employees.

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Optimizing Millennial Success

Millennials are on track to be the most educated group of people entering the workforce in history. They have been defined as “ambitious high-achievers” and, as such, it was speculated that employers would appreciate these hard workers entering the workforce. However, the Millennials’ transition into the workforce has not been as smooth as it was predicted, and misunderstandings between groups from different generations have allowed for the untapped potential from Millennials to be wasted. There are various characteristics of Millennials that when understood and properly managed by employers, can create a happy working environment for all generations.

Millennials are commonly defined as people born between 1981 and 2000, although no absolute chronological endpoint has been established for this generation. Currently, they are young adults, falling between the ages of 17-37. They will soon become the largest living generation in America with nearly 75 million constituents.

The Millennial generation has been described as confident, ambitious, independent, innovative, optimistic, adaptable and technologically advanced. Those are potentially positive traits for an employee. However, as it happens with every generation, there has been some friction as the Millennials have entered the workforce. Criticisms are arising, perhaps to the largest inter-generational degree to date, as new perspectives clash with old ones. This is happening, in large part, because Millennial perspectives on information, job security, and leadership tend to be diametrically opposed to those of older, existing workers.

As Baby Boomers and Generation Xers are retiring, Millennials have been entering the workforce at increasing rates, with Millennials recently surpassing Generation Xers and Baby Boomers to become the largest component of the U.S. labor force, comprising 34.6% in 2015. By 2020, they are projected to comprise 46% of the labor force. Competitive employers will therefore be trying to attract and retain Millennial workers to create an edge for their business to succeed, and the best way to attract any demographic group is to understand what they want and then provide it. To understand Millennial motivation, one must look to the big influences on their generation to see what has shaped and helped to define them.  

Millennial Influences

Millennials, just like with preceding generations, have been shaped by the events of the world as they grew up. Events that occur during formative years tend to have a significant impact on people as they mature, with some sociologists saying that people are disproportionately influenced by events that occur between their late teens and mid-twenties. Others believe that the range of influencing years is broader. Most agree that by their late twenties and early thirties, people become more set in their beliefs. By this definition, the big influencers for the Millennial generation would include helicopter parents, digital media, terrorist attacks, and economic recessions, including the burst of the dot-com bubble and the subprime mortgage crisis.

Helicopter Parents

Millennials were often raised by parents who scheduled everything for them. Their schedules outside of school were frequently packed with everything from sports practice to music lessons. Many parents of Millennials had no trouble petitioning a coach for more playing time or a teacher for a better grade for their child, making Millennials a more micromanaged generation. Notably, this packed schedule often involved group activities, frequently making Millennials great team players. Plus, Millennials are often very close with their parents and rely upon them as a source of advice and wisdom.

On top of their highly involved parents praising them, Millennials often received trophies for participation in their activities. This has fostered expectations that they deserve an award simply for showing up. On the plus side, Millennials want to continue receiving these awards, which can help them to focus on developing the talents and skills that will help them win coveted awards. This means they are often setting new challenges for themselves, which could be very useful in the workplace if properly harnessed. However, this has also led many Millennials to believe they are unduly special; 54% of them believe the workplace should adapt to them and it is therefore unnecessary for them to conform to company culture.

In summary, the helicopter parent influence on Millennials shaped them to be team oriented, externally motivated and confident, and has also led many of them to believe they are “special.”

Digital Media

Millennials were the first generation to grow up surrounded by the instant gratification technology of digital media. Because technology was integrated into so many aspects of their lives, from cell phones to IMs to personal computers, they are technologically savvy. They are therefore also experts at multitasking and have become accustomed to getting what they want, such as answers to questions, when they want it. Millennials also witnessed the birth of social media, which has allowed the world to shrink exponentially; through improved access, Millennials are exposed to more ideas, cultures and opinions. This has made them more open-minded and more networked than past generations. Having access to many opinions with the click of a button has also helped to shape this generation into a collaborative group.

The digital media influence has shaped Millennials to be team oriented as well as technologically savvy, open-minded, globally conscious, multitaskers and networked.

Terrorist Attacks

A bulk of this generation was still in school at the time of the 9/11 attacks, and they experienced an increase in helicopter parenting following this event. This fostered the generations’ dependence on technology, with personal cell phones being given to children so parents could contact them at any time.  Due to close ties with their parents, Millennials also experienced a reinforcement in the value of a sense of community.

During this character-forming time in the Millennials’ youth, they witnessed a senseless act of violence that demonstrated the fragility of human life. Thus, a sense of urgency seems to permeate this generation. They live their lives with borderline-delusional courage, unconventional work ethics and a ferocious need to customize their futures because they watched as other futures were cut short. They are therefore driven by their passions more than past generations and live more in the moment because of these events. This influence also helped to mold Millennials to be family oriented and passionate about making a difference.

Recessions

The 1990s were a time of steady economic growth and expansion; the mid-to-late 1990s saw optimistic entrepreneurs pursing new internet ventures, influenced by successes such as eBay and Amazon. Many internet companies called “dot-coms” were launched, and investors financed these start-ups. However, these ventures were not as profitable as originally assumed and many of the companies crashed, leading to a stock market crash. During the final decades of the 20th century, 30 million U.S. workers were laid off. For the Millennials, this meant seeing their parents lose their jobs. They were imprinted as children by a period of diminished job security and weakening ties between the employer and the employee. Company loyalty did not mean as much as it once had.

After seeing their parents bear the brunt of the dot-coms, Millennials experienced a recession themselves just as they were entering the workforce. This “Great Recession” lasted from 2007 to 2010, in large part because of mortgage credit being offered to subprime borrowers. When these borrowers defaulted on their loans, the housing market crashed, which affected the overall economy. It decreased wealth and consumer spending, lowered construction, limited the ability of firms to lend money, and limited the funds firms could raise.

The group of people who were affected most by this crisis were the Millennials who were just entering the workforce, particularly the graduating class of 2008. They had trouble finding jobs, much less jobs with high enough wages to offset their massive student debt. This caused many young adults to postpone major adult milestones such as marriage, or the purchase of their own car or home.

Even several years after the recession, Millennials are still having some difficulty finding jobs. Statistics from Pew Research indicate that 25-34-year-olds made up 48% of the unemployed population in 2015. Additionally, it has been harder for Millennials to access credit, which has caused some of them to settle for jobs they don’t want, with people from this generation frequently looking for new potential employment opportunities. They have seen layoffs or been in a position where they themselves could not find a job. Thus, many have responded with the mindset that they will not let the same things happen to them or are determined not to have them happen again; they are therefore constantly looking ahead.

These economic recessions made Millennials ambitious and stressed, and they have contributed to this generation’s external motivation.

Tips for Optimizing Success Based on Millennial Traits

Based on the major influences of the times, certain traits within Millennials arose that shape their motivation. These traits give insight as to what is important to Millennials, and thus, how they can be managed and fostered in the workplace to optimize success. Millennials are team oriented, family oriented, externally motivated, “special,” confident, ambitious, technologically savvy, open-minded, globally conscious, networked, multitaskers, passionate about making a difference, and stressed. Here are a few ways you can harness these traits to optimize workplace success.

Millennials are all about work and life. Nearly six in 10 (57%) of them say work-life balance and personal well-being in a job are “very important” to them.  Not surprisingly, then, lack of flexibility was cited among the top reasons Millennials quit jobs. And nearly 40 percent of young workers, male or female, in the United States are so unhappy with the lack of paid parental-leave policies that they say they would be willing to move to another country.

So, what options can you offer Millennials? Can you offer flexible scheduling, including but not limited to telecommuting elements? What is your parental leave policy? Should you take a second look at what you offer? When you talk to the Millennials at your practice, what options do they say are important to them?

Millennials prefer to work in teams, in part because they perceive group-based work to be more fun, but also because they like to avoid risk. Millennials also report that working and interacting with other members of a team makes work more pleasurable. Millennial workers like to be actively involved and fully committed to whatever projects they take on, and they contribute their best efforts to the organization when their work is performed in a collaborative workgroup or team.

What team structures do you have in place at your practice? Have you sat down with your employees to find out ways in which they would like more teamwork to exist? What changes can you make now? In the future?

Because they fear risk, knowing that health insurance is available and affordable is important to this generation. What are you able to provide them? Are there voluntary benefits you can offer them? Because this is a generation with significant student debt, increasing numbers of companies are offering loan repayment assistance. Have you investigated that option?

Millennials appreciate the opportunity to learn and grow. Have you sat down with them to talk about promotion possibilities and the best way to get the education and training needed for a desired promotion?

These are just some of the ways in which you can optimize Millennial performance at work and retain your best employees. It’s important, too, to avoid pigeon-holing any employee, assuming you know what someone wants because of the year of his or her birth. For employees of any age or generation, the way you can learn the most about their desires, fears, needs and wants is open and honest communication. Set aside time to learn more about your employees as individuals and help them with their unique career paths – and you will all benefit.

Key Factors to Consider in Appraisals and Assessing Practice Value

Written By:David McCormick, MS  Simmons Mid-Atlantic & Great Lakes
Stephanie McGinness, DVM Candidate, 2012

What are the key factors you should consider when assessing practice value?  Profitability and appraisals are both important parts of the process and the following is a list of guidelines and topics to help guide your future research.

 

Practice Value:

  • Profits drive the value of a practice. They are the return on owning the practice and it is the return that is being purchased.  The greater the return, the greater the value. Practices have appraised for anywhere from 110% to 15% of gross revenue.
  • “Profits” are what you would get if you owned the practice only – meaning you don’t work there and you don’t own the real estate (i.e., fair market compensation for your veterinary work, fair market rent and clean financials).
  • If a practice is financially healthy, it will have profitability in the range of 14-18% of revenues.
  • If a practice is financially healthy (14-18% profitability) then it will probably have a value that will end up being between 55% to 80% of revenue.
  • Asking what a practice will go for is like asking what the cost of surgery is; it is such a broad range that it’s tough to be accurate. The recent average of a practice sold by Simmons has a value of roughly 72%, however, they’ve been sold in a range from 30% to 95% and there’s even one on the market now at 110% that will close this month (June 2011).
  • The average practice these days has a profitability in the 8-11% range and thus is likely has a value that will end up being between 30% and 50% of gross revenues (if that).
  • Practice values in general have been decreasing. There’s greater pressure on profitability: increased support staff costs, increasing benefit costs, higher-end pharmaceuticals that can’t be marked up as much, etc.
  • The economy has also impacted values. If the practice was managing for revenues instead of profitability then typically the revenues *and* the profitability took a hit. Profits go down – so does the practice value.

Assessing Profitability & Practice Appraisals

  • It is best to have your practice appraised every 3-5 years for management and planning purposes. If the value is low, the profits were low.  If the profits are low it has to be a revenue and/or expense issue and we can help identify the problem(s).  Fixing the profitability improves the practice’s cash flow, increases the practice profitability and its financial health, and increases the overall practice value.
  • An appraisal is an opinion of value – and anyone can give you “an opinion”. These are big decisions.  If you want a good opinion you need to know where it’s coming from and select a qualified veterinary appraiser.
  • To assess a potential appraiser, request veterinary references and inquire about their experience level (particularly in the veterinary industry), accreditation and credentials (i.e. ASA, CBA, CVA, AVA, AIBA) with the understanding that they don’t guarantee competency, and compare their report to those prepared for you by previous appraisers to assess their report writing competence.
  • Any decision on value should be defendable and is based on the appraiser’s judgment, the financial analysis, and the conditions in the market for that area (assuming here that the goal is fair market value).
  • Free resources for estimating your practice profitability are available on the NCVEI.org website. Find the Profitability Estimator under the Benchmarking tools.  It was developed by the Veterinary Valuation Resource Council (VVRC) and is free.  It helps you go from the practice tax return to an estimate of your true practice profitability.  This is a similar practice to what we do in the No Lo Workshops hosted by VVRC at the major conferences.
  • If you’d like more in depth information, please visit the VetPartners website at www.avpmca.org

14 Issues Your Veterinary Practice Partnership Documents Should (Have) Address(ed)

What happens when you die? Will your heirs receive a fair price, or any price for your investment in the practice? Will they remain locked into that investment forever? Will your heirs collect profits from the practice? What if the other partner (who is getting paid under his practice employment contract) has voting control and decides not to distribute profits?

If your heirs are to be bought out, who sets the purchase price? How and by whom is it paid? If part of the purchase price is paid with a promissory note, is same secured? How? What if the practice is not profitable enough to pay the note?

What happens when your partner dies? Your deceased partner’s heirs are now your new partners.

Barring a fluke, your new partners will not be veterinarians. Does your State permit non-veterinarian practice owners?  Will they want to be bought out or stay and collect profits from the practice?  (Without contributing to profit generation of course.)  If the deceased partner was a large shareholder, or the majority interest holder, the heirs will also inherit your deceased partner’s voting rights.  Do you want to share practice management with, or be managed by, such persons?  What if the heirs squabble among themselves, leading to management paralysis and/or litigation? Do you fancy having the practice run by a court-appointed receiver?

If the heirs are to be bought out, who determines the purchase price? How and by whom is it paid? If there’s a note, is it secured? How?

What if you are permanently disabled? Will you receive a fair price, or any price for your investment in the practice? Will you remain locked into your investment forever? Will you collect profits from the practice? What if the remaining partner decides not to distribute profits?

If you are to be bought out, who sets the purchase price? By whom and how is it paid? If there’s a note, is it secured? How?

What if your partner is permanently disabled? Will your disabled partner want to be bought out or stay and collect practice profits (without generating any of same)? A disabled partner’s interests will be different then yours, so if he was the managing and/or majority partner, how will he run the practice? Will he be able to run the practice? What if the disabled partner is mentally disabled?

If your disabled partner is to be bought out, who determines the purchase price? How and by whom is it paid? If there’s a note, is it secured? How?

What if your partner goes nuts? You don’t want a mentally unstable person practicing veterinary medicine. But if such partner is the majority partner you can’t fire him, because he, not you, controls the practice entity. The same problem arises for equal partners. Sure your mentally disabled partner could voluntarily remove himself, but can you rely on that? What if the majority partner has a guardian? How will the guardian run the practice? What if the majority partner or guardian fires you?

What if your partner should be fired as veterinarian-employee? Suppose your partner becomes lazy or his child becomes ill and decides to work significantly less hours or stop working altogether. Suppose your partner becomes a substance abuser and consequently unfit to practice veterinary medicine. Or he steals from the practice. Or he harasses employees and/or abuses clients and/or patients.  The foregoing would be grounds for terminating a veterinarian employee.  But if your partner is the majority or an equal partner you can’t fire him (as explained in the preceding paragraph).

What if you no longer get along? Should the practice be dissolved? If not, who should leave? At what price should the departing partner be bought out? How and by whom is it paid? If there’s a note, is it secured? How?

In a 50/50 practice how are disagreements handled? What happens when each party has equal voting/management rights and a serious disagreement arises? How will the resulting deadlock be resolved?

What if your partner wants to drop out, buy a boat and sail around the world? Should your partner be permitted to withdraw? If not, how do you keep your partner from just resigning as an employee (in light of the constitutional prohibition of involuntary servitude)?

What if your ex-partner discovers he’s chronically sea-sick and comes back to set up a veterinary practice next store (using the client list he kept when he left)?

If a partner is permitted to withdraw, who determines the purchase price? By whom and how is it paid? If there’s a note, is it secured?  How?

What if your partner divorces? If the divorced spouse has, or is awarded, a portion of your partner’s practice equity interest, the divorced spouse becomes a partner. Ménages à trois make great literature and film themes but ALWAYS end badly.

What if your partner goes bankrupt? Do you fancy your partner’s creditor as your new partner? It won’t be fun to have a bank running, or having a say in running, the practice. Worse, the bank likely will want to sell your partner’s share to a competitor. 

Who’s got the land? The small animal practice’s most valuable asset is its location, because most clients won’t travel far for pet treatment. As zoning restrictions get ever tighter, good practice locations become ever rarer (and more expensive). If, as is frequently the case, one partner owns the practice premises, what happens when he dies, is disabled, withdraws, resigns, divorces and/or goes bankrupt?

What if another veterinarian wants to buy your partner’s interest in the practice? Should your partner be allowed to sell without your approval?  Should you have a right of first offer?  A right of first refusal?

IF YOUR PARTNER IS NOT YOUR RETIREMENT PLAN, THEN WHO IS? If you don’t have a firm  agreement with your partner to sell your practice interest to him (or someone else) upon your retirement, then how are you going to retire using your investment in the practice as your nest egg?  What if both partners want to retire at the same time?