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.

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.

To view article on Today’s Veterinary Business, click here.

 

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

Performance Management A Program, Not Just A Form

The overall objective of any Performance Management Program (“PMP”) is to ensure a Practice and all of its subsystems (processes, departments, teams, employees, etc.) are working together in an optimum fashion to support achievement of the overall strategic and operating performance goals. In simpler terms, a Performance Management Program strives to ensure the right people with the right competencies are in the right jobs at the right time. An effective PMP will also look to achieve the following objectives:

  • Shape the culture and reinforce the core values of the Practice
  • Facilitate communications between supervisors and subordinates
  • Motivate and reward superior performance
  • Effectively manage unsatisfactory performance
  • Identify opportunities for personal growth and development
  • Link pay to performance
  • Stimulate individual and collective productivity

Why PMP’s Fail
While Performance Management Programs have been utilized for many years, they are not universally considered an effective management tool. In some cases, performance management is more about checking a box than about aligning employee performance and development. Instead of viewing the performance review as a valuable communication and recognition tool, many Practices think of it as a necessary evil; a paperwork exercise that managers love to hate. Exacerbating this feeling of disdain is the fact that supervisors often spend a majority of their time focusing on the small minority of employees that do not meet expectations and not enough time giving appropriate praise, recognition and appreciation for those who do. Even your best workers can be better, but if you don’t give them the guidance they deserve, then they will never reach their full potential. Some of the more common shortcomings of a PMP include:

  • Individual goals are not tied to the strategic direction of the Practice
  • Senior management is not fully committed or invested in the process.
  • Performance objectives are only looked at every six or 12 months and not on a continuing basis.
  • Performance appraisals are not included as part of a larger employee development initiative.
  • Little or nothing is done with the actual appraisal results.
  • Management fails to develop and administer a coaching and improvement plan for any employee who is not meeting expectations.
  • There is a lack of clarity in the link between pay and performance.

Developing a Performance Management Program
When creating, institutionalizing and communicating a PMP effectively, it is a valuable resource for a supervisor to help employees identify and develop needed skills, knowledge and abilities. However, if used inappropriately, a PMP can demoralize employees, frustrate managers and expose a Practice to potential legal risks. Therefore, several questions must be addressed when developing a PMP. Who will be involved in the performance review process – will the review be horizontal, vertical or a 360°? How much time can each contributing party commit to the PMP? Will the review focus on objective results and/or subjective perceptions? How often should the reviews be performed? Who will oversee the PMP to ensure it is being used properly? Who will provide training to the reviewers? What will be done with the results of the reviews? And, most importantly, how will the success of the PMP be measured?

Conducting the Performance Evaluation Review
Prior to meeting with an employee to conduct the performance evaluation review, it is advisable to have the employee complete a self-evaluation form. Give the employee approximately 1 week to complete the performance evaluation form and return it to his/her supervisor 1 week in advance of the performance evaluation review date. Only after the supervisor has completed the performance evaluation form for the employee, should the supervisor review the employee’s self-evaluation form and rating. Following this process will help ensure the supervisor performs an independent performance evaluation that is not biased by the employee’s perceptions of how he/she performed. Other important points to consider when preparing for and conducting a performance evaluation review include:

  • Be sure to deliver the performance evaluation review at the designated time-giving the review after the date can leave an employee feeling slighted, anxious and devalued. It also sends the unintended message that the performance evaluation review cannot be that important to you or the Practice.
  • Be mindful of overrating an employee- rating an employee higher than is warranted may be an easier message to deliver, but it can create other problems. For one thing, it may give failing employees a false sense of security and make it difficult to administer needed discipline.
  • When discussing a performance issue with an employee, be sure your verbal and written comments support your rating and always use specific examples that clearly demonstrate the level of performance.
  • Be sure you are rating the entire performance evaluation review period – supervisors often fall into the trap of rating only the most recent activities and actions. If an employee is being evaluated annually, the performance evaluation review should consider everything, good or bad, that has occurred during the past twelve months vis-à-vis the employee’s performance.
  • Ask for feedback-there may be mitigating factors and circumstances that affected the employee’s performance during the review period. It is critically important to provide an employee the opportunity to discuss and present an explanation of any factors and influences that may have contributed to his/her performance. Encouraging this two-way dialogue ensures “everything” is considered when developing the performance rating.

Developing Performance Goals
Another key piece of a PMP involves developing performance goals and expectations. Goals are written statements that clearly describe certain actions or tasks with a measurable end result. Goals should be well-defined, detailed declarations of specific actions to be taken during the upcoming review period for which measurable outcomes are expected. Each goal should be specific enough to let the employee know what is expected to be accomplished, why it is to be done, and the target date for accomplishing it. The following acronym is often used to assist supervisors in developing goals for their employees:

S Specific-answers what, why and when actions or activities should be accomplished.
M Measurable–clarifies how to determine if the goal has been achieved.
A Agreed Upon- both the employee/supervisor should agree on what is expected to successfully complete the goal.
A Aligned-supports the Practice’s mission and overall objectives.
R Realistic-ensures goals are doable but with a stretch challenge.
T Time Specific-establishes deadline for completion.

To Sum It All Up
In order to determine the effectiveness of a Performance Management Program, it must first and foremost support achievement of the Practice’s mission and goals. It should help employees understand what is expected of them and against what measurement criteria their performance will be assessed. If the program is utilized properly, a welcomed byproduct of the PMP is improved communications between supervisors and subordinates. As the PMP evolves, a Practice should begin to notice a stronger link between pay and performance. Rather than giving arbitrary increases to all employees, the PMP will provide justification for differences in salary increases and rewards. Finally, documented differences in performance should help identify employees able to assume additional responsibilities as well as those individuals requiring additional development and/or discipline.