Staff Management

Salary Negotiations: Make it Mutually Benefical for Owner and Associate

By Eric M. White, OD,and Matthew Geller, OD

SYNOPSIS

Salary negotiations between a new associate and a practice owner have to produce a result that benefits both parties.

ACTION POINTS

START PAYINGASSOCIATE PER DIEM. Then transition to pay based on percentage OD contributes to practice gross income.

KEEP ASSOCIATE BUSY. Don’t let an associate wait around for overflow patients.

HELP ASSOCIATE GROW WITH PRACTICE. Compensation should match growing role in the practice.

In photo, left to right: Eric M. White, OD, and associate Matthew Geller, OD

A new associate-ship is a great opportunity for both practice owner and new associate. It’s a chance to improve the practice’s services to patients with new niches and increased doctor availability, and it’s a chance for the associate to begin his or her career and gain a valuable mentor. But before this beneficial relationship can begin, the thorny issue of salary needs to be dealt with. Here is how we handled it, from both of our perspectives.

Eric M. White, OD: Practice owner, joined the practice in 1985, which he later purchased.

MatthewGeller, OD: Associate in practice, joined practice in 2013.

START ASSOCIATEPER DIEM

Where Do Salary Negotiations Begin?

Dr. White: Before Dr. Geller came into the practice, I contacted several of my friends with larger practices both in San Diego and across the country to see what the going rate for a per diem charge is for an associate doctor. I decided to go on the high side, mostly to show Dr. Geller I was serious about him coming in, and that I wanted this to be a long-term relationship. I remembered my own experience as an associate, and Idid not want to nickel and dime him. I also did not want to start him on a percentage-based salary until he was more established in the practice. I presented him with a high per diem for San Diego. We decided to wait five to six months before starting to negotiate a contact. Right now we are on a handshake contract. After three months, it is going better then I thought, and I am very comfortable about knowing he will be here for a long time. We are still trying to get him busier, so right now he is now making me money and breaking even, but what he is doing for the practice in other things, such as improving our operational efficiencies, more then makes up for it.

Dr. Geller: I am confident with what I am worth, but at the same time I am willing to accept a lower salary. I can accept lower because I know that, in due time, I will prove myself as someone who can make a practice profitable, and for that reason, my future salary will reflect that. The big thing is this: I judged Dr. White’s personality from my first conversation with him, and I knew beyond a shadow of a doubt he was very flexible with salary. He is very reasonable and would pay me what I am worth. For that reason, I never had to, and will never, have to worry. For all the new grads, my advice is to be critical of your employer’s overall personality and not necessarily the immediate numbers you get.

KEEP ASSOCIATE BUSY

How Do Know If Salary Is Fair?

Dr. White: I wanted to make sure my schedule is solid because at this time I still out-produce Dr. Geller, so keeping my side full will be able to cover both our salaries. I need to make more than I pay him and the new staff we hired to cover him. I project it will take him four to six months before he is able to produce more than his salary. We have discussed moving to a percentage of money collected at the six-month timeline. This way he will be able to make more money than the per diem, and I will not have to cover his salary.

Dr. Geller: A mathematical formula for salary is difficult to come by, but one should look at a basic formula: Income – Expenses = Money in the bank. I used an Excel spreadsheet to predict possible scenarios for myself. I changed income and expenses to assume various scenarios. For example, I calculated my “money in the bank” under a per diem salary, and then under a percentage-based salary. This gave me a nice projection of the future. Do a simple Google search for “income projection spreadsheet template” and modify any one that you see. A similar template will beavailable onNewGradOptometry.com, now under construction.

Where Can You Compromise on Salary?

Dr. White: In the beginning with a new associate, it is important for the associate to stay busy doing things, rather than just standing around waiting for overflow from the practice owner. Dr. Geller has done a ton of things to make the office more efficient and set in motion many things with social marketing and medical procedures. The biggest thing for a senior doctor to ask himself: Am I loosing money or is he productive in other ways than just seeing patients?I have had other associates who literally just stood around reading magazines or playing on the internet. Dr. Geller always thinks of things to do and has set into motion plans to build referrals to our practice.

Dr. Geller: The biggest thing for me is a future promise for growth with the practice. If I know that I can grow, make more money and have more fun, then I am satisfied. With this promise I know that it is up to me to make this happen, it won’t magically just occur. So I basically take a step back, see what the practice needs, make a list, and start going down this one-by-one. There are perks to being an associate like getting frames and lenses for extremely discounted costs, and dinners with Dr White are always a nice addition. At the end of the day, it comes down to your paycheck and future hope of a bigger paycheck. Yet it is up to the associate only to make sure he or she is worthy of that bigger paycheck.

HELP ASSOCIATE GROW WITH PRACTICE

Probationary Period Necessary?

Dr. White: We started immediately after Matt started talking about contracts and I felt uncomfortable. I needed to make sure our personalities were a good fit first. We had to both decide if this is what we wanted. We decided on four to six months as a trial period. We are almost three months into it and I am very comfortable with Dr. Geller being with the office. I do want to wait till he is a little more busy before starting a contract stipulating a percentage salary. What I have found is most offices either do percentage or per diem. The associates I had in the past were always given a per diem salary and I always felt they did not have the incentive to work. On the other hand, I have talked to several doctors who said when you start associates on percentage-based salaries they don’t make enough to live off of, and end up quickly leaving the practice. That is why I have chosen to pay Dr. Geller on a per diem basis until he can afford to be paid on a percentage basis.

Dr. Geller: If you think about it as naturally and organically as possible, it makes the most sense to match salary to performance. That is the way a well-picked employee will progress 99 percent of the time, from low performance to high performance. I wouldn’t call it a probationary period, I would just call it “testing the waters” to see where the chips fall. Starting low and going high is a natural progression. I think if you are going above and beyond during your “testing the water period” and you have a reasonable employer, they will be very willing to throw in incentives and perks for your performance. Paying for licensing fees, continuing education, health insurance premiums, dinners, or even giving gift cards to the employee’s favorite store, are some things an employer can do to reward an employee during both the “testing the waters” period and even later down the line when things are more established. Incentives are so powerful!

Should Salary Be Written Into Employment Contract?

Dr. White: On a per diem this is important. On a percentage it does not matter because the harder the associate works the more he makes. As an owner of the practice this is how I get paid. If I do not work I do not get paid. There were many times early on where I did not get paid because cash flow was not there. If Dr. Geller wants to eventually be a partner he needs to know how the office works and I feel the percentage formula is the best for that. There can be perks but they come out of the salary package. Every office I have talked to that had an associate who eventually became a partner did it this way.

Dr. Geller: The one thing to watch out for is saturation. Say, for example, the employee is working the maximum agreeable days per week and has a full schedule on all the days. On top of that, they are doing well, making second-pair sales, billing medical insurance correctly and making money for the practice.Technically, at this point, they are saturated and the only thing to do is to increase the percentage that the employee earns, or begin to think about earning equity into the practice. Practice equity is a larger, more robust conversation to have, but I think it would follow similar guidelines and it would be based on performance.

Should Associates Receive Bonuses?`

Dr. White: Again, I feel the percentage of the money collected is a better bonus than a straight bonus. The office’s staff members get bonuses when the office does well, but they are on salary or hourly, not a percentage. This is why the percentage is such a win-win way to build up Matt’s side of the business. The more he works the more he makes.

Dr. Geller: Percentage is the way to go, there really is no better way to be consistent. Running OptometryStudents.com for four years, I saw the power of little bonuses and perks;it brings teams together and makes things exciting. It doesn’t necessarily need to be a paycheck, it could be something so simple. Really this is to show the power of relationships and friendships. The reinforcement builds positivity. Also, the employee should offer bonuses in the forms of helping out. For example, coming into the office to help clean, moving things into storage and being around to handle anything the practice needs is a nice “bonus” to the employer.

Should Salary Protections Should Be Written Into the Contract?

Dr. White: I have not thought of this, but Dr. Geller is getting paid every two weeks, so if something happens to me, it should not matter since he gets paid every two weeks.

Dr. Geller: Getting paid bi-monthly solves things for the short term and goodwill also solves things for the short term. The question is, what happens in a long-term situation? At first, it is hard for an employer to decide if they want the employee to be a beneficiary of the practice, but perhaps after a year of working, this is something the employer can consider putting into the contract. More important is the decision of “how should things run” if something were to happen to the employer? There is no “training” for this but what is important is for the employee to be well versed in the day-to-day office functions, so that he or she can pick it up in a time of need. This is priceless.

How Do You Avoid Salary Creep and the Associate Outgrowing the Practice?

Dr. White: Communication is crucial with a timeline of when to become a partner, not just an associate. Dr. Geller andI have a five-year target to consider this. The owner needs not string the associate along about buying in and the associate does not want to string the owner along about wanting to buy in. I feel after five years both parties will feel comfortable about going to the next step or even talking about delaying it–again communication is everything.

Dr. Geller: I agree with Dr. White 100 percent on this. It’s all about communication and being honest. Dr. White and I plan to have quarterly meetings when the office is closed. We plan to do breakfast, go back to the office and outline new goals and then end with lunch. During this time we will discuss this type of stuff. If the employee feels they aren’t making enough money, they can discuss it at this point. If the employer agrees, then the problem is solved, if the employer doesn’t agree, then a compromise needs to be made. If one cannot be achieved, then chances are it’s better off. Keep in mind, this same thing goes if the employer feels the employee is not working up to standards.

Practice Owner-Associate Salary Negotiation: Best Practices

Determine a good starting point with salaryand when the salary and contract needto be re-examined. For the first few years, this needs to be discussed every six months, max.

Determine a salary that is comfortable for both parties but also can be handled by the practice. After all, it won’t do anyone any good if the practice goes under or both doctors end up getting underpaid.

When looking into the contact, examine the total package. Time off, vacation and medical benefits need to be discussed. This is hard sometimes for the associate to think about, but it has to be looked at as part of the salary. This is why the bottom line is to get the associate busy so they can make enough to cover all these benefits instead of the practice paying for it.

Related ROB Articles

Adding an Associate: Compare Doctor & Associate Expectations

Associate Acumen: Prepare Well When Adding a Doctor

Become Practice CEO: Create an Office that Runs Without You

Eric M. White, OD, is the owner of Complete Family Vision Care in San Diego, Calif. To contact him: Emwhiteod@aol.com. Matthew Geller, OD, is the practice’s associate doctor. To contact him: Mattgellerod@gmail.com.

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