DR. JACK PERRY, DDS is a case which describes the issue of Dr. Jack Perry that employees in his dental clinic are not enough motivated to grow the business to its deserved potential. He wishes that in his dental school they’d taught him how to manage a business. He concludes that morale among the staff. They didn’t seem to be working hard. Perry was a graduate from Ontario University at top of his class. He is proud of his financial success and is still growing at 15% annually. He pays a good salary to his staff compared to all other dental clinic in that area and the employees even like working near to their home.
In Perry’s clinic the staffs have very flexibility when going for holidays & vacation. Perry takes care of his staff & even pays his staff an annual bonus. The issue he is facing that staff knows how much salary each other staff make and how much Perry is left with, but they are not aware of the cost of the practice, such as lab material, supplies, phone bill, advertising, continuing education & insurance. He is recalling to a dental conference he had attended with some colleagues in Chicago in 2005, he is using those methods which he learnt there to manage his clinic and he did not want to hire the consultant.
BACKGROUND OF THE CASE: The case deals with the concern of low morale of the employees working at PERRY’ office and were not interested neither motivated in the expansion of the business. In Canada becoming a dentist was a rigorous process because it included three years of study at the university graduate level followed by four years at an accredited dental school and at the end of the school they have to pass a board examination before obtaining their doctor of dental surgery degree.
Perry graduated from Ontario university dental school in 2001 and purchased a dwindling practice from a nearly retired dentist in Cromwell. He employed two part-time receptionists, two full time hygienists. One full time assistant and one part time assistant and all were women and each member had unique skills and specific duties in the practice and Perry paid them like other Canadian dentist only. Hygienist were given $31, receptionist were given $18, full time assistant were given $19.
Perry met his staff on an individual basis to discuss about their work and salary and believed that whatever he paid was fair because rural practices tended to pay lower hourly wages than those in cities and also allowed the staff to take unpaid vacation time as long as they can arrange another staff member to cover their shifts Perry compensated employees based on positions for examples 31$ for hygienists, 18$ for receptionist, 19$ for part time employees. Perry meets his staff regularly. Perry was proactive person because he used to keep the resumes from qualified professionals seeking work.
Perry was having no staff turnover. He was also aware that women who works for him enjoys their work because they were living nearby, whereas he knew that other dentist in the town were having staff turnover and not so good reputation. Perry used to have three week holiday in a year and let their staff also take holiday until the work is not hampered. He used to throw a party every Christmas holiday. The staff always looked for this occasion. He also used to pay 400$ as a bonus also. Perry thought what Sandi had commented that he needs to motivate his staff to help and grow.
But on the other hand some of Perry friend told that as the businesses grow the employees will be unhappy because they will fell slave. The total billing was done daily and monthly. The hygienists were aware that their contributions were 40% of total billing. The staffs were not aware of the total cost such as lab material, salary and many more things. Perry recalled a dental conference he had attended in Chicago in 2005, which featured the presentation on staff motivation and profit sharing. Perry had taken the notes from it.
The consultant who was also acting as a salesperson for his service said that 30% of dental practice in United States had a profit sharing programs. Unfortunately he was not having the copy of presentation. In those presentation two popular approaches was used. First approach was to hire the hygienist as separate contractors. This plan would fundamentally change the way in which Perry compensated. Now hygienist would not be paid hourly but they would earn a share of revenue. The commission rate should be 40%. The consultant also maintained that any office maintained this system have 7% increase.
This will also benefit in terms of making hygienist more responsible also. Till now hygienist were paid $2000. While adopting this would encourage the hygienist to take care of lost appointment because their share would be linked with this. Second approach in this everyone should be made equally responsible for the practice. In this scheme the dentist will develop the percentage of total collection accounted for the staff. The dentist has to guarantee the staff should get certain percentage of share. The rewards would be distributed on the basis of seniority, by position or percentage of hours worked by each staff.
The consultant suggested that this approach would increase the productivity by 10% to 15%. Currently the staff salary account 30%of the total revenue and his revenue would be growing at an average of 15%. He also estimated that this will go for five years. Perry was concerned that this will not reward the key performers. Now Perry looked back at his notes. And realized that he had listed only the structures types the consultant had outlined and not their benefits and drawbacks. Perry did not want to hire the consultant because he thinks that the notes he had taken are enough to analyze the situation.
Perry wanted to understand the financial impact on his staff. He want to analyze that how to implement a compensation structure change. He gathers all the information on his desk and wondered which approach would help his staff. MAIN ISSUES: Dr. Jack Perry feels that the morale of his employees is low and he must come up with a plan which would motivate his staff, and help the business grow. The main issues in the case could be summed up in the following points: •The employees knew that the business was growing.
The hygienists were aware that they generated 40% of the practice’s total billings. Perry met with his staff on an annual basis to discuss their work and salary. They were however unaware of the costs of practice such as lab materials, supplies, phone, advertising etc. •The consultant outlined two popular ways to structure profit sharing program. One was that the hygienists be given a percentage of their collections rather than paying them by the hour. Selling this idea to his employees could be a tough task because if the collections don’t increase, they might end up earning less.
•The second structure talks about the productivity of the staff being rewarded. The percentage of collections accounted for by the staff would be distributed among the staff. The reward could be distributed on the basis of seniority, by position or by the percentage of hours worked by each staff member. But the issue with this model is that it fails to reward the efforts put by people who are great performers. •Selecting the wrong structure could lower the staff morale. Assistants for example, help in comforting the patients and make sure they feel at ease.
If they are not happy with the new structure, they might lose interest in doing their job. This significantly affects patient retention and word of mouth referrals. Perry must make sure he selects that structure that keeps his employees motivated and helps his business grow in the long run. SOLUTIONS: •Dr. Perry business is growing at a healthy rate so it is important to continuously monitor pay structure of the firm and revise it from time to time since wage is directly related to the motivation level of the employees •Dr.
Perry must change the pay structure to accommodate for profit sharing with the employees in the form of a bonus which would be a percentage of the total profits of the practice, in the case of increased revenues for that particular year •A change in the pay structure from fixed to completely variable is not recommended because in case of lower collections in any particular year can lead to lower earnings for the employees •This pay structure can be further revised in the future to increase the profit sharing element in the salaries of the employees as the firm grows bigger.
MANAGERIAL LEARNINGS • A good manager should understand the link between the pay structure and the motivation levels of employees. Simply high wage rates may not be sufficient to motivate the employees and they must given a fair share of the profits earned by the firm. •A good manager must make sure that the employees understand not only the revenue aspect of a growing firm but also the increased costs associated with them. •The pay structure of employees must have additional perks which would help in keeping the employees motivated and increase their productivity.
•Manager should be opportunistic in his approach and should be evaluative in his ideas with respect to the situation. •Manager should have the ability of synchronising the ideas before making strategic decisions. •Organizational ethics & values should be strictly adhered to. •There should be a fine balance of professionalism and emotions in the behaviour of a manager. •The pay structures should be monitored and revised along with the growth of the firm. •An efficient manger must have knowledge about the involvement of an individual employee and must frame the pay structure in accordance with the same.