A conversation I have been having more and more often is how best to pay veterinarians. In North America veterinarians are commonly paid on a percentage of their overall production or revenue. Sometimes they are paid a small base salary and then additional production once their overall billings equal what they would have been paid on production alone. In the European Union, most veterinarians are paid by salary.
The reason this comes up so often lately is that practice owners are putting an emphasis on developing a culture of collaboration and teamwork, but when the veterinarians are paid based upon how much they bill, there is a mismatch. The veterinarians are rewarded for their individual production, yet the practice owners want them to sacrifice that for the greater good and get frustrated when their vets aren’t on board.
We had a similar challenge in my practice about eight years ago. Our values and purpose are the foundation of our culture. We wanted to develop a culture focused on our core values that feature teamwork and collaboration. Yet, our vets resisted because they were being paid on production and if they focused on teamwork and collaboration, it meant sacrificing the time they could spend seeing patients and making an income. We also found that our level of medical care was decreasing since our vets were focused on big-ticket items or wanting to work only with those clients that would spend a lot. The way we were compensating our vets was negatively impacting our culture. Not that they were purposely putting a damper on how we worked together, but the way we were paying them incentivized them to focus on themselves. Anyone would do the same thing. Something had to change.
I met with the vets and shared my frustrations. They were all great people who cared about their team and wanted to be able to contribute without sacrificing their income. I proposed that we pay them on salary and that our focus should be on growing the business, and not a particular veterinarian. I felt that their value to the company would be so great that I told them I would pay them what they were paid the previous year, so they didn’t have to worry about making less money. This demonstrated that I trusted to do the right thing. In addition, I proposed a profit-sharing plan where we would allocate a certain percentage of profit to be shared by everyone. This was another way of emphasizing that everyone contributes to the success of the practice.
What was the result? We have grown double digits, on average, since then. All of the vets are productive but now they are willing to help out with things that might not benefit them directly. They will take the time to mentor and share cases with a new vet. They will spend time writing blogs or recording videos to help promote the business. They are less protective of clients or high valued services. In short, they work as a team that knows that together they help drive the success of the practice.
I don’t know why the focus on production came into being. When I talk with practice owners who pay their vets in this manner, they tell me that competition encourages growth or that without it their vets wouldn’t work as hard. I’m not sure if they believe this or are just parroting what they have been told.
I believe and I have seen it in my own business and other practices that I have worked with that if you hire the right people with a good work ethic and are motivated to be a great vet they will work just as hard receiving a salary, as they would if they were paid on production. They become happier and more engaged workers because the pressure to increase their billings goes against what is optimal health care. We should do what is best for the patient, so when you take away that conflict of interest the veterinarians are much happier. Finally, the mood in practices that pays by salary is usually much more relaxed and easier going than when they are paid on production. Other vets are not considered competition and their livelihood are not threatened by doing other things that don’t generate immediate revenue.
How we compensate our veterinarians can have a huge impact on practice culture and morale. So much so that as practice owners and managers we need to consider if how we pay supports the culture we want. If it is every person for themselves keep on paying by production, but if you want a team-first approach and the goal is to build the practice and not individuals then production pay will hold you back from achieving this.