Optimizing staff productivity is a key to sustainability—with or without value-based reimbursement (VBR). One approach to improving productivity is to offer staff incentives, often in the form of performance-based compensation. The question is, what is the best design for variable compensation? And how can management teams implement new compensation models in order to assure their success? Those questions were the focus of The 2019 OPEN MINDS Performance Management Institute session, Optimizing Productivity: A Guide To New Performance-Based Compensation Models, led by OPEN MINDS Advisory Board Member John F. Talbot, Ph.D. and featuring Colleen Muncy, Owner/Managing Director, StarPro, LLC; David E. Young, OPEN MIND Senior Associate; and Edward Farbenblum, Chief Executive Officer, VestraCare.
At the most basic level, there are two types of performance-based compensation base plus incentive, and pure productivity. Base plus incentive is a base salary with baked in incentives that reward employees for reaching certain benchmarks. Pure productivity pays staff on the quantity of the “value units” that have been chosen to reflect performance (for more on those, see Best Practices In Maximizing The Value Of Your Team: How To Measure & Manage Clinical Staff Productivity). But there are issues in both design and implementation that can make these new models successful—or not. Our panel offered five pieces of advice based on their experience.
Balance the cost of implementing and managing a performance-based compensation model with the potential gains—One key question is return-on-investment (ROI). How much a model costs to implement and to manage in the long-term are essential questions. In this way, compensation models are like any other investment. What does it take to adopt one, and then what kind of cost savings can be expected? If the model it too expensive you run the risk of adding costs. Mr. Young noted:
The turnover in our industry is high, with a lack of lack of autonomy, high liability, low paying positions-all of which add to costs. And organizations are paying a lot to find licensed people. Additionally, the more complicated the system is to measure “performance”, your costs go up because you can be spending a lot of time monitoring it.
Incentivize the right thing—The good news for many organizations is that staff will perform when asked to perform. The bad news is, they will also perform exactly the way you incentivize their performance. The key is to make sure the incentives are aligned with what the organizations wants—and that there are measures that can protect against unintended consequences of productivity-enhancing incentives. Or as Mr. Young pointed out:
Perverse incentives create a problem when staff becomes hypersensitive to monitoring just those incentives. The biggest concern to watch for is, are you incentivizing the right thing? There is a danger that you can lose quality, but it gets tricky. You must have very objective measures, and it must be a measure that can’t be argued a whole lot. Get it wrong, and people will still expect to be paid whether the business is in the tank or not.
Understand the “optics” of a goal-directed system—Most productivity-focused variable compensation programs are focused on finances and the bottom line. The risk, particularly for “non-profits” are the optics: looking bad by paying bonuses, having compensation vary from one clinical professional to the next, and focusing on those finances. Executives need to be transparent about these compensation systems and be prepared to discuss them with the board and customers. Mr. Young explained, “Autism Treatment Center had some push-back as a non-profit organization that had incentives and bonuses.”
Align the clinical infrastructure with the financing infrastructure—It is necessary but difficult to align the activities of clinical staff with the requirements of the finance department. But in a value-based market, this is a necessity. Organizations need the ability to capture and integrate data, and implement a performance-focused dashboard that makes that data available to both clinical and administrative teams. Ms. Muncy noted:
Your biggest silos are your clinical team and your financial team. In a value-based environment, performance and quality must be aligned with costs. We needed to create transparency, using one shared set of data in one dashboard in real time. The key is accurate, timely data, presented in a user-friendly manner. By making this a central function, the clinical staff can focus on the consumer.
Focus on staff, not management—There is no denying that the management team is critical to any enterprise-wide initiative. But the heart of any performance-based compensation model are the staff who are the focus of raised expectations. For a positive cultural experience, the new model must be designed and presented in a way that the staff doesn’t misunderstand or resent the motivations and expectations. Mr. Farbenblum noted:
Our management team has always had skin the game. But to extend this to staff, the effort must be made to extend that culture, building a cohesive work environment and encouraging innovation. People do not like to be counted like widgets makers.
As the competition for both clinical professionals and direct support staff intensifies, expect to see more performance-based compensation. For more on those staffing challenges, check out Aligning Clinical Compensation For The New Value Equation, Staff Vacancies Just Got A Little More Important & Complicated, The Staffing Equation For Community-Based Services, and How Do You Engage Employees & Improve Performance?.
And for even more, join Dr. Talbot on August 14 at The 2019 OPEN MINDS Management Best Practices Institute for his session, Best Practices In Workforce Development: Recruiting & Retaining Staff.