staff
REVAMP YOUR Review PROCESS
There's a better system for your employee review program.
JOHN SCIBAL, O.D., Morehead City, N.C. & JOHN McDANIEL, O.D., Waukesha, Wis.

Nothing strikes more fear in the heart of the average O.D. than the words, "It's time for my review!" While annual employee reviews are a normal part of many optometric practices, they are typically conducted in a manner that is not very meaningful to the employee's advancement or the betterment of the office. Too often reviews turn into a "feel-good" session where you tell the employee how much you enjoy working with him or her and complete the meeting with the obligatory raise for another year of service. Sometimes we address areas of weakness, but the follow-up on these issues is typically forgotten. While many of us have used the standardized scoring sheets with such items as initiative, neatness, cooperation with staff, etc. what do those scores really mean? Do they truly assess the job performance of that individual?

A simpler system

I have searched many years for a better means of employee evaluation and compensation; one that accurately and objectively measures and rewards employees based on their job performance, while at the same time controls labor costs. But I also needed the system to be simple enough so as not to be overwhelming. Just when I thought such a system did not exist, along came Dr. John McDaniel of Waugoo Consulting Group, an optometrist with a master's degree in Human Resources! The program we instituted is a "performance-based variable compensation system" and is the standard of most corporations. Here, we'll review how we instituted our program and how you can do the same.

Rising costs

A primary reason in my search for a new staff evaluation program was to stay within a pre-determined budget for labor costs. While our practice's gross income has grown nicely over the years, I found that my staff expenses had increased from 19% to 23% in two years. I attributed this to three reasons:

• Salary creep for long-term employees

• Rising health insurance premiums

• Spiraling bonuses.

I could see this trend would continue unless we made some changes. While I think it is important to reward employee performance, I felt like my employees thought they were entitled to bonuses and benefits.

Our new policy limits pay raises to an annual cost of living increase based on the prior year's consumer price index. We still offer bonuses, but it comes from a fixed pool of money based on a percentage of the prior year's sales, 2% in our case vs. more than 4% the previous year. In another change, rather than pay for employee health insurance, we raised our base salaries and left the decision to purchase insurance up to the individual. The burden of higher health insurance premiums is now placed upon the employee.

Defining staff's purpose

The purpose of the performance evaluation program is to clearly define each employee's role and to measure and reward him or her based on performance in that role. You'll need to create a job description for each position, and assign weights to each component of the job based on its importance to the productivity of the office. After evaluating the employee, you assign a score that represents the percentage of points that employee scored versus the maximum number of points possible for that job. You can then compare employees' scores with each other and determine each individual's share of a fixed pool of money. Higher performing employees receive a proportionally higher bonus.

We've found offering a large one-time bonus each year based on a specified list of outcomes is more meaningful to the employee. And studies show that people remember and appreciate the occasional large monetary reward more than a series of smaller rewards, and that regular monthly bonuses are often viewed as entitlements.

Update job descriptions

The backbone of the entire program is the job description. According to Dr. McDaniel, only about 10% of offices have legitimate job descriptions. Although our practice had them, they were in need of updating. Fortunately, the employee is primarily responsible for this task, since they know their job best. In our case each employee took the existing job description and modified it to reflect exactly what he or she does on a daily basis. Typically, employees will have "general" duties within a job area but in addition will have some specific skills that they provide for the betterment of the office. For example, a front desk receptionist's job includes the general duty of facilitating patient entry, but she might also be responsible for troubleshooting computer problems. Both items should be listed on that individual's job description. You should also include the minimum education and experience requirements for each position.

However, it's important to create job descriptions that are "outcome oriented." Too often employees confuse their job description with a task list. While there are specific tasks that employees perform throughout the day, as the employer, you are only concerned about the ultimate outcome. For example, suppose you have an appointment clerk who is responsible for filling the appoint- ment book. The task list approach might include something like, "Print recall cards, mail cards, call patients to confirm appointments, etc." The outcome oriented job description states, "maintain a full schedule of patients." The exceptional employee can take that and decide that e-mail notifications or automated phone confirmations would better fulfill the goal and require less time. Isn't that better and shouldn't that person be rewarded for their resourcefulness?

So, while the staff is preparing job descriptions, you'll do the same for each job position and then meet with the employee to finalize the job description. This includes adding responsibilities that the employee has assumed, removing obsolete items or re-prioritizing. One of the most valuable aspects of this exercise is to compare your employees job descriptions with your own. It can be surprising and enlightening to see how the descriptions differ. For some it may be the first time the employee truly understands what the doctor expects.

Once you and the employee approve the job description, it should be plotted on a spreadsheet. Adding a scoring column to each line item of the job description transforms it into the performance appraisal form that you will use to conduct the annual review. While each job has many outcomes, some are more important than others and should be "weighted" as such. Assigning different point values to each job component shows the employee which ones you deem most important. The employees quickly learns that high scores in the most heavily weighted items give them the largest bonus, and of course that is exactly what you want.

The actual numbers used to score outcomes are not important. Some prefer to make each job description add up to 100 points, but I found it easier and just as effective to assign "weights" from one to 30 and not concern myself with the final total. The total number of points scored is irrelevant; the only thing that matters is the percentage of points scored versus maximum points available for each job description.

Scoring your staff

Calculating scores involves a two-stage evaluation of each employee. The first score is relative to their accomplishments of the individual outcomes that make up the job description. For each outcome, assign a score between one and seven, with four being average, one significantly below average and seven significantly above average. Multiply this score and the weighted value of each outcome to get the total number of points. Then, compare that with the maximum number of points available to arrive at a percentage.

This scoring system is probably different than what you may have used in the past. You must be totally honest in your scoring. Giving a six or seven to every employee for every task may seem like a nice thing to do, but it defeats the purpose. The program only works if you assign a range of scores both above and below the average. An average score in this case is not a bad thing and represents your middle employee. Half of your employees will fall below this score and half above. It can be helpful to do a trial run with a few employees that you intuitively feel represent your highest and lowest performers to verify that your scoring system is on the right track.

Once you are satisfied with the assigned scores, you may score the rest of your employees and derive a range of percentages. You then compare these percentages to determine each individual's share of the bonus pool. Plotting all of your employees' scores on a spreadsheet shows how each score compares with the average. I prefer to share results with employees individually, comparing their score to the average. Another option is to allow each staff member to see their score in relation to those of other employees, without disclosing anyone's identity.

Use standard deviations to determine the "spread" between the highest and lowest bonus amounts. Depending on your philosophy, you may cluster everyone's bonus very close to an average value, or you may have a wide difference between your highest and lowest performers. I favor the latter approach. In my opinion if everyone makes almost the same bonus it defeats the purpose of the program.

The chart on page 82 shows scored performance appraisals for four employees. Although the job descriptions are greatly simplified, it demonstrates some important points. Total point values assigned range from 75 to 125, but the only thing that really matters is the percentage of the total possible score. You will note that the insurance clerk receives the highest bonus due to the weighted criteria. The low scores she received in attendance and maintaining office supplies were more than offset by the seven she received for lowering accounts receivable. She was rewarded for excelling in the area I decided was most important. The bonus pool in this example is $1,000. As you can tell from the summary sheet, this can be divided up however you'd like.

Anxiety-free reviews

The performance appraisal system has removed the mystery and anxiety of the annual review meeting. Logistically, I set aside one afternoon each quarter for this purpose and I assign someone else in the office to arrange for another employee to fill-in while one is in review. The meetings are scheduled for twenty to thirty minutes each. The employee and I simply review the results of the performance evaluation form together. The employee comes to the meeting with his or her own self-scored form, and we compare the two sheets. Discrepancies need to be discussed, but in most cases both parties are surprisingly similar in their scoring. There is no awkward discussion of a salary increase. The only "raise" is a cost of living increase based on the consumer price index of the prior year. The monetary reward at the review depends solely on how well employees perform the requirements of the job that they themselves have defined.

A work in progress

This is a relatively new program for us, but already my staff and I both agree that it is a much more meaningful method of performance evaluation than we have had in the past. To ensure continued success and value, it's critical to keep job descriptions current and as specific as possible. There is no such thing as 100% objectivity, but as your program evolves, your goal is to make your scoring as objective as possible. This program is not a replacement for the coaching and encouragement that you should provide your staff members on a daily basis. Combined with sound management techniques, this performance evaluation program can help you maintain a workforce that is motivated and goal-driven.

Dr. McDaniel is founder and president of Waugoo Consulting. Send e-mail to JMcDaniel@WaugooConsulting.com.