Are You Considering Bringing on an Associate Doctor?

December 17, 2018

By Dr. Paul J. Pavlik, Vice President, Dental Practice Management Consulting at Dentist.Business

“A fulfilling job experience is a major part of (an associate’s) motivation.” – Shep Hyken

How do you know if you need an associate?

There are several reasons for including an associate in your practice:

  1. Most importantly, if you are considering the addition of an associate, you MUST have the patient flow to support the associate. Until you have more patients than you can handle, or if the associate can bring a treatment option that is in great demand by your patients but that you do not provide, don’t consider an associate.
  2. If your practice is experiencing rapid growth, there will come a time when you have to decide how the growth will be managed. A decision to “freeze” accepting new patients can make it difficult to restart new patient flow when it might later become convenient or necessary. Considering adding an associate can, on the other hand, absorb this growth and enhance the practice considerably.
  3. If you want to reduce your time in the practice, an associate can aid in this process. For example, if you would like to reduce your involvement by a day or more, an associate can take your place during these time periods in order to maintain production. In addition, if you want to maximize the treatment time available since you are paying for an office space 24/7, you can add treatment time without adding time to your own schedule.
  4. You may also want to limit the scope of the services you provide. For example, you may want to limit your exposure to removable prosthetics and endodontics, but your practice has a large number of patients who need these services. A qualified associate can continue to provide these services without the loss of revenue that would occur if you limited the services by yourself. In addition, the associate may be qualified in patient-requested procedures that you do not provide, so adding these services can further enhance production and revenue.
  5. You may be at the point in your career when you want to start preparing for a transition, i.e., a future sale of the practice. One way to do this is to bring on an associate with a buy-in possibility.

If properly planned, adding an associate who is capable can move your practice to the next level.

Consider the problems that can ruin an associate relationship

  1. Personality: There can be personality conflicts that can cause the relationship to fail. A good way to evaluate an associate is to first invite the candidate and, the candidate’s spouse if applicable, to dinner. Remember that you are going to be associating with not only the doctor but also one who is probably the associate’s closest advisor. Be certain you are comfortable with both. Another way to determine personality traits is to invite the candidate to an outing like golf, for example. If you notice that the potential associate “cheats a little” while playing, chances are this trait may carry through to the way the doctor will practice.
  2. Unexpected Events: Having an excellent transition plan in effect for you and the associate can provide the assurance that an eventual retirement will not be postponed. For example, maintaining the associate’s reasons for staying in your practice should be a primary concern. You don’t want the associate to be constantly considering that “the grass is greener on the other side of the fence.” If that happens, you will eventually lose the associate to something more lucrative; your time and efforts will have been wasted. The average rate of associate turnover is about 18 months which can cause the practice lo lose momentum.[1][1] Frank, Brady, DDS, “The DDSO: Dentist-Owned Private Group Models,” Dental Economics, October 2017
  3. Planning Failure: The most common reason for failure is unfulfilled expectations. Comprehensive transition planning should define expectations in three areas:
    1. Expected economic outcomes
    2. Legal rights and obligations
    3. Sequencing of proper steps

Determining Compensation

The compensation package needs to be fair and reasonable to both the associate and the practice.

Compensation needs to both provide for the basic financial security and needs of the associate, but it should also leave room to allow for incentives for the associate if the associate produces beyond what is considered as the minimum performance required. Therefore, there are three fundamental facets to associate compensation that should be addressed:

  1. The basic financial needs, not wants, of the associate should be addressed. This allows the associate to provide adequately for the family without constantly being on the defensive.
  2. To stimulate energy and motivation, the compensation structure should put no limit on the amount of income that can be earned.
  3. If the associateship is designed to be part of a larger plan including future ownership, it is imperative that you do not mislead the associate about your intentions or do not clearly define and honor commitments.

If the compensation package includes an incentive commission after reaching certain production or revenue goals, remember that as the baseline commission rate increases, the incentive to become an owner decreases. While it is commendable to be as generous as possible, the commission structure must be balanced such that it does not jeopardize the associate’s motivation to follow through with the intended future sale of the practice. As always, proper planning, especially cash flow projections, setting goals, monitoring and measuring progress, etc. can identify this potential error and set the commission structure in a manner that is both rewarding but still inclusive of an incentive to become an owner.[2]

Win-Win-Win …

These recommendations might give you a way of discussing your goals with the associate; the targets and results should be reviewed monthly. If an associate is not given a set of goals (bulls-eye to hit on a target), he is shooting at the target with his eyes closed every month. If he is not shown the results of his efforts, he will not know if he has aimed at his goals correctly. What’s worse, he will not recognize his value in the practice. In addition, if he is producing significantly more than the goals, this gives you the framework on which to base a raise, a bonus, and/or most importantly, praise. This way, everyone is happy. Strive to develop a WIN-WIN-WIN philosophy in your practice — patients win, you win, and the associate wins. A requisite must be to monitor the associate’s progress including all phases of production. This should be done no less than on a monthly basis, and the associate should be met with monthly to discuss progress and goals. Remember the saying, “What gets measured gets done & gets done right!” 

[2] Hill, Roger K., Transitions, American Dental Association, 2006

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.

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