fix this practice
Eliminating Yearly Staff Reviews
Yearly reviews breed expectations. Try this way of evaluating performance.
Richard S. Kattouf, O.D.

Q Every year I schedule staff performance reviews. Does the staff merit a raise with a good review?

Dr. E. L. Briggs

A: The answer to this question is financial. As with any other business or profession, we must monitor the percent of income we pay to our employees. The national average of percent of salaries to gross for the independent optometrist is 18%. The average in some states on both coasts is 21%. As business owners, we want to keep our employees for many years. If you give increases to each employee annually because of a positive review, then the ratio will increase and your net will decrease.

Learning from others' mistakes

All of my clients who perform staff reviews report that every employee expects a raise if the comments on their review are above average. If you fall or have fallen into this trap, you'll loose control of your office finances.

Look at the history of the manufacturing sector of our country. As unions became prevalent, companies gave employees annual raises simply because they had stayed another year. The raise had nothing to do with the employee's efficiency, productivity or profitability. The result is that the USA now manufactures less products than other countries because the unions priced themselves out of the market. The jobs have been lost to non-union states or foreign countries.

We must be sensitive to the fact that cost of living does increase. In our profession, we can't automatically give cost of living allowances. The following steps will help you keep your percent of salaries to gross in proper ratio and inform employees of their performance.

• Base all raises on merit. Employees must earn salary increases by enhanced performance.
• Create alternative methods for raises based on commissions. Don't base all salary increases on the fixed asset side of the equation.
• Get rid of annual one-on-one reviews. Substitute them with daily organizational sessions where you can critique group performance.

Doing away with annual reviews

Dr. Longacre called my company reporting an increased cost of operations and lower net income. His percent of salaries to gross was 24.6% in a state where it should have been 18%.

Dr. Longacre had a policy of annual reviews, which almost always led to raises. The employees expected the increases and demanded the reviews. In 2 years, we decreased his percent of salaries to gross to 18% by using the aforementioned steps. This also created an increase in Dr. Longacre's personal net of 6.6%.

Take control

As a consultant I find that many of you are unaware of any percentages or financial data from your practices. You must study your profit and loss statements and control your staff. If not, practicing won't be enjoyable and your practice will control you.

Accountants aren't knowledgeable about optometric financial norms, so don't think that they can serve as optometric business or financial advisors. In most cases, the doctor is the C.F.O. of the practice. Unfortunately, too many practitioners ignore the practice's finances. Make sure you don't.

DR. KATTOUF IS PRESIDENT AND FOUNDER OF TWO MANAGEMENT AND CONSULTING COMPANIES. FOR INFORMATION, CALL (800) 745-EYES OR E-MAIL HIM AT ADVANCEDEYECARE@HOTMAIL.COM.  THE INFORMATION IN THIS COLUMN IS BASED ON ACTUAL CONSULTING FILES.