ComMission structures
As a mentor client of Dentistry Support® you get. access to helpful information like the answer to, "How do I actually calculate commissions for my Treatment Coordinator or Office Manager?"
I beleive any comission structure needs to be well thought out and meeting multiple benchmarks. I do not want a simplistic hourly wage team member in your practice. I would instead rather create in that same hourly team member a entrepreneur mindset asset.
Implementing effective commission structures can transform the mindset of your team, fostering a culture of accountability and entrepreneurial spirit. At Dentistry Support®, we have successfully integrated at different times one of the following three commission structures in the dental offices we mentor, enabling hourly employees to think and act like entrepreneurs. By tying compensation to performance metrics such as collection rates, revenue growth, and production increases, and same store sales we motivate our team members to achieve exceptional results. This KPI structured approach not only boosts productivity but also aligns the team’s goals with the overall success of the practice, ensuring that everyone is invested in delivering outstanding patient care and maximizing the office's financial performance.
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Commission structures
Monthly Goal Calculation
To set monthly goals based on the previous year’s performance, calculate the average of the monthly production and collection. For example, if the office collected $1,200,000 last year, the average monthly production and collection goal would be:
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Total Collections Last Year: $1,200,000
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Average Monthly Collections: $1,200,000 / 12 = $100,000
For highly growing practices, it is essential to capture growth accurately, especially with sudden influxes such as added providers. To ensure goals are precise, calculate the average of the last 12 months. For instance, if significant growth was observed:
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Total Collections Last 12 Months: $1,500,000
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Average Monthly Collections: $1,500,000 / 12 = $125,000
Monthly Goal Calculation Based on Previous Year’s Performance
To set monthly goals based on the previous year’s performance, use the same month’s sales from last year. This method, known as "same store sales," helps anticipate the current month’s targets based on historical data, ensuring a realistic and achievable goal setting.
For example, if the office collected $100,000 in May last year, the goal for this May would be $100,000, reflecting the same store sales metric. This approach provides a baseline expectation and helps track performance growth year over year.
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Total Collections Last Year for May: $100,000
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Goal for This May: $100,000
For practices experiencing significant growth, such as adding new providers, it's crucial to capture this growth accurately. To ensure goals are precise and account for sudden influxes, calculate the average of the last 12 months. For instance, if significant growth was observed:
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Total Collections Last 12 Months: $1,500,000
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Average Monthly Collections: $1,500,000 / 12 = $125,000
This approach ensures that monthly goals are realistic, reflecting both past performance and current growth trends.
Additional Option
To further tailor the commission structure to your practice’s specific needs, consider incorporating Key Performance Indicators (KPIs) such as case acceptance rates and patient show rates. By including these KPIs, you can ensure that the compensation structure rewards not only financial performance but also the quality of patient interactions and overall practice efficiency. This holistic approach encourages a comprehensive commitment to excellence, driving both patient satisfaction and financial success.
Summary
These commission structures are designed to incentivize the Treatment Coordinator/Office Manager to focus on increasing the office's productivity and efficiency, with clear and achievable benchmarks tied to the office's financial performance. Employees must meet specific collection rate thresholds and additional metrics related to patient management, revenue growth, and production efficiency. By doing so, we ensure that the incentives align with the overall business objectives, motivating the team to achieve outstanding results and contributing to the practice's long-term success. The commission payment is directly tied to the percentage of collections meeting production targets, ensuring that high performance is rewarded accordingly. Calculating monthly goals based on same store sales and averaging the last 12 months for growing practices ensures accuracy and accommodates sudden growth, maintaining realistic and challenging targets.
Option 1
Commission Structure 1: Percentage of Collections Based on Collection Rate
Commission Tiers:
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99% Collections Rate: Employees receive 1.5% of total collections for the month.
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97% Collections Rate: Employees receive 0.75% of total collections for the month.
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95% Collections Rate: Employees receive 0.5% of total collections for the month.
Additional Metrics:
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Achieving these rates requires efficient patient billing processes, prompt follow-ups on outstanding payments, and maintaining a high level of patient satisfaction to reduce cancellations and missed appointments.
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Commission Payment: Employees will receive their commission based on the percentage of collections meeting the production targets. If the collection percentage is 99% or higher, they get the full commission. If it is between 97-99%, they get 75% of the full commission. A minimum of 95% must be met, which earns them 50% of the full commission.
Option 2
Commission Structure 2: Percentage of Collections Based on Monthly Revenue Growth
Commission Tiers:
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15% Revenue Increase: Employees receive 1.5% of total collections for the month.
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10% Revenue Increase: Employees receive 1% of total collections for the month.
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5% Revenue Increase: Employees receive 0.5% of total collections for the month.
Additional Metrics:
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To reach these benchmarks, employees must focus on upselling additional services, increasing patient retention, and implementing effective marketing strategies to attract new patients.
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Commission Payment: Employees will receive their commission based on the percentage of collections meeting the production targets. If the collection percentage is 99% or higher, they get the full commission. If it is between 97-99%, they get 75% of the full commission. A minimum of 95% must be met, which earns them 50% of the full commission.
Option 3
Commission Structure 3: Percentage of Collections Based on Monthly Production Increase
Commission Tiers:
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10% Production Increase: Employees receive 1.5% of total collections for the month.
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7% Production Increase: Employees receive 1% of total collections for the month.
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5% Production Increase: Employees receive 0.5% of total collections for the month.
Additional Metrics:
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This structure requires employees to enhance operational efficiency, streamline appointment scheduling, and ensure that each patient visit maximizes the use of available resources and services.
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Commission Payment: Employees will receive their commission based on the percentage of collections meeting the production targets. If the collection percentage is 99% or higher, they get the full commission. If it is between 97-99%, they get 75% of the full commission. A minimum of 95% must be met, which earns them 50% of the full commission.