Dr. Jack Perry, Dds Case Solution
In an office meeting with the receptionist, Dr. Jack Perry, who runs a sole proprietary dentist clinic in Cromwell, Ontario, was informed about the problems taking place in the office, including:lower employees’ morale and motivation levels, cancellation fillings, collections’ follow-ups and cross-selling to the existing customers (John S. Haywood-Farmer, 2007). Dr. Perry was already aware about the problems, but he was not sure if he could handle the human management problems. In his stance, adjustment in the employees’ compensation levels would resolve both the issues, i.e. low morale and less motivation among the employees. Luckily, he identified two approaches of profit sharing by a consultant in a recent conference, in order to increase the staff’s motivation level. He also wanted to identify the best approach to resolve the employee and productivity issues. According to case analysis, plan A is best in meeting both the needs of the employees as well as the employers.
The employees at Dr. Perry’s office were not motivated for their jobs and their morale seemed to be low as they were not putting much efforts in increasing the billings or generating sales for the organization. The employees were not interested in taking follow-ups from the clients regarding collections or appointment cancellations, and they didn’t use any cross-selling techniques in order to retain the existing customers. The low morale and motivation among the employees were leading towards lower productivity levels, which became a high concern for Dr. Perry, as he was not proficient enough to resolve the human management issues.
In Canadian health care services sector; there were around 17500 dentists, and becoming dentist in Canada is considered to be a very tough process, for which an individual has to go for 3 years of under graduation, 4 years at an accredited dental school, passing the board examination before getting the degree and finally 2 years of specialization. Most of the dentists used to run a sole proprietorship business, only 3 percent were working in hospital, public clinic and research centers. To run their clinic, the dentists had to hire receptionists, assistants and hygienists. The customers(above 12) in Canadian health services industry, used to visit the dentist once a years, who were divided into categories of insured medical services v/s non-insured. The dentists didn’t not much control over the service fee, as the governing body RCDSO annually issued an annual fee schedule to be charged from the customers, with deviation up to 20% by the dentists.
Current Compensation Plan
Perry’s clinic involved 2 hygienists, 2 receptionists, 1 full time and 1 part time worker. The total salary and wages expense of the clinic amounted to $299,700 in 2005, i.e. 30% of sales (See Appendix 1). The wages for each category included $31 per hour for hygienists, $18 per hour for receptionist, $19 for a full-time assistant and $11 for a part-time assistant. The compensation plan was based on the position of the employees. Perry believed that the salary was fair and competitive, because it was greater than other competitors in the market and there was no employee turnover and supply of labor issues for the company. In addition to compensation plans, Perry used to give 3 weeks holiday per year and flexibility in managing shifts by adjusting another employee for personal shift. Other benefits included cash bonus and office parties by the owner, on an annual basis.
Compensation Plan A
The first approach of profit sharing with the employees involved the hiring of hygienists as separate contractors. The compensation of the hygienists would be based on the commission rate similar to market, which is currently offering commission of 40%. Appendix 2 shows the approximate designed plan for profit sharing by hiring hygienists as separate contractors for their clinic’s services generate billings. According to the consultant, this approach would increase the billings of the hygienists by 7-13% in first year of implementation.Currently, the hygienists are getting $52000 per person, on an annual basis and just to make a rough sketch of costs, the salary of hygienists is kept at 35% commission rate, which has resulted in an annual package of $53183 per person. The salaries of other employees are kept at lower wage rate plus commission based as shown in the figure, which resulted an overall salaries and wages expense of $232,877, i.e. 31% of the sales amount……………….
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