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Staff Salaries

How to implement a performance-based compensation policy

REBECCA L. JOHNSON, CPOT, COT, COE

In my consulting work, I often find employers who are challenged by mediocre staff members who feel entitled to a pay raise every year, regardless of performance. In addition, there are excellent, loyal employees whose salaries have crept up through the years to make one more percentage increase difficult.

My advice? Implement performance-based compensation instead of traditional raises based on tenure. Here are five steps to implementing a performance-based compensation policy:

1 Determine your overall practice goal

Set a realistic practice goal for each quarter based on historical numbers and projected growth. For example, if your Q4 2013 production was $300,000, your goal for Q4 2014 could be $315,000, based on a projected 5% increase from 2013.

2 Set individual staff goals

Think about the role of each position in your office, and create four to seven individual goals based on your expectations of each staff member. When creating goals, consider how each position generates revenue for the practice. For example, technicians may be responsible for promoting retinal photography packages or annual contact lens supplies. Clearly articulate your expectations to your staff members, and what they can do to exceed your expectations.

3 Measure and rate employee performance

To measure performance, I recommend a rating scale of 1 to 4:

1 = barely gets by;

2 = meets expectations;

3 = exceeds expectations; and

4 = clearly outstanding.

The majority of employees will average a 2.0 to 3.0 rating. (See “Goal Chart” for examples.)

4 Review employees every quarter

Hold quarterly one-on-one reviews with each employee. These meetings give you a chance to encourage an employee who rates high and coach an employee who has a low rating. During the review, discuss each area of accountability, where the employee is succeeding and areas that need improvement. Determine whether the employee needs additional training or resources to help accomplish his or her goals.

5 Align raises accordingly

This is where entitlement compensation ends. Pay increases and bonuses should be tied directly to the ratings and only given when the overall practice goal is met. By aligning raises and bonuses to individual ratings, employees receive fair compensation based on their participation toward meeting the practice bonus.

Fair compensation

Review-based compensation creates a positive environment to reward success. Employees find higher job satisfaction because they know exactly what is expected and how to make the “win.” OM

MS. JOHNSON IS THE FOUNDER AND PRESIDENT OF EYETRAIN4YOU AND THE EXECUTIVE DIRECTOR OF BUSINESS SERVICES FOR GPN. E-MAIL HER AT REBECCA@EYETRAIN4YOU.COM, OR SEND COMMENTS TO OPTOMETRICMANAGEMENT@GMAIL.COM.