Game Changers - Compensation

We've discussed certain Game Changers that are testing the economic foundations of traditional health services practice models. Change begets change. With change comes uncertainty and risk - but its where the reward is. Change is required of those who are committed to stay in the game and remain competitive.


Here's what I'm telling the leading practices that I'm working with...


The first responsibility of a leader is to define reality.

Our emerging practice realities are economically driven... cost per unit of service needs to be improved, revenue sources need to expand and diversify, and risk needs to be shared. These are the same realities that have faced the automotive industry in recent years - enough said. Interestingly, a related reality is that most health services owners/managers come into the game with little economic training or passion.

In matters of economics it's aways a good discipline to begin with the big rocks. In the health services sector there is no bigger rock than compensation. Consider these realities...

1. Few practices establish adequately informed or disciplined compensation practices

2. Persistent labor shortages drive compensation packages steadily upward

3. Compensation progression is commonly tenure based rather than contribution driven

4. Staff have been conditioned to expect annual compensation adjustments - only upward

5. The value of escalating labor benefit expense goes under appreciated

6. A culture of "entitlement"has taken deep root in the industry

7. Salaried compensation models establish fixed rather than variable expense limiting management options

8. PT productivity is one of the lowest in the health services industry

9. Accountability for financial contribution and return on investment is weak

10. Practices are held hostage by fears of resignation and staff turnover

11. Financial compensation is framed by matters of experience and self-defined quality rather than financial contribution

12. Excessive labor costs threaten job security and even survival of many practices

The time for a well considered and systematic migration to variable compensation has arrived. Such a migration will produce winners and losers - both categories will be self defined. Are there risks in doing so? Certainly, but the status quo has its own risks. Is it easy to do so? No, but neither is keeping existing compensation models working!

Practices who successfully establish a sustainable variable compensation model with benchmarked performance will enjoy a decisive competitive advantage in the market as measured by clinical, operational and financial outcomes.

Professionals who step up and graduate to variable compensation will also improve their personal competitive advantage while enhancing earning capacity and earning job security. Variable compensation is all about accountability and risk sharing - its the future. Its a big rock that's worth moving.

Variable compensation based on financial contribution can be a huge Game Changer. Is everyone in that game? No, only the leaders...

The next Game Changers post will consider Start-ups, Start-overs, Turn-arounds, and Right Sizing.

All The Best!

Bob

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Performance Builders