Staff Incentive Compensation Programs

1. Staff Incentive Compensation Programs Bruce Maller President, BSM Consulting

2. Types of Employee Compensation Hourly or Salaried Wage Incentive BonusCompensation Employee Benefitsand Retirement Plan Annual Employment Performance Review and Merit Increase

3. 2014 Database ResultsProvider Compensation Ranges 2014 Job Title Benchmark Range 41 Physician Assistant $52.35 – $90.05 20 $49.65 – $75.60 Nurse Practitioner Cosmetic Provider/RN 91 $27.70 – $50.00 45 169 $21.00 – $35.10 $35.50 – $54.90 Licensed Aesthetician RN Injector The wage rates outlined above are for employed providers and inclusive of bonus, incentive, and/or commission compensation. They do not however, include employer-paid benefits. The benchmark range represents the spread between the 25th and 75th percentile in the database.

4. 2014 Database ResultsStaff Compensation Ranges Job Title 2014 Benchmark Range 28 Marketing Director $21.80 – $31.55 378 $14.70 – $19.65 Medical Assistant Practice Manager 129 $24.15 – $38.60 401 $13.50 – $18.55 Receptionist Also track: Cosmetic Care Coordinator, Billing and Insurance Clerk, RN - Support Capacity, Surgical Counselor The wage rates outlined above are for employed staff and inclusive of bonus, incentive, and/or commission compensation. They do not however, include employer-paid benefits. The benchmark range represents the spread between the 25th and 75th percentile in the database.

5. Incentive Compensation Defined Incentive compensation is compensation above and beyond an employee’s normal wages.

6. Benefits of Incentive Compensation Plans Create enhanced job satisfaction Improve customer service and patient satisfaction levels Foster teamwork Facilitate employee recruitment and retention

7. Before Implementing anIncentive Compensation Plan Measure and benchmark operating results. Identify areas of operational improvement. Provide staff training and support to correct any deficiencies. Forecast the economic impact of operational changes and related goals.

8. Key Components of IncentiveCompensation Plans Goals Guidelines Communication/ Employee Buy-in Plan Assessmentand Refinement Payout Considerations

9. Key Components: Goals Measurable/time-specific Attainable, yet a stretch Linked to practice success An objective which employees feel they can exercise control

10. Measurement Tools Financial Metrics (Revenue Growthand Profitability) Management Objectives Production or Efficiency Measures (Surgical Volume, Conversion Ratios, Improved Operating Expense Ratio) Patient Satisfaction

11. Sample Incentive Compensation Plan Goals All Employees Achieve a 20% growth in breast augmentation surgery during the next fiscal year. Targeted Individual Increase lead conversion from patient seminars by 20% for 2015, as compared to 2014. Specific Department Surgical Counselors: Increase conversion rate from consultation to surgery by 15%, by the end of this fiscal year.

12. Key Components: Guidelines Clear and easily understood Easy to administer Meaningful opportunity for staff

13. Key Components: Communication / Employee Buy-In Kick-off meeting Provide periodic updates Look for opportunities to educate team members

14. Sample Agenda for “Kick-Off” Meeting Review Plan • 1 Link to Practice Vision/Goals • 2 Discuss Payout Mechanism • 3 Set Dates for Periodic Review • 4

15. Key Components:Payout Considerations Determine payout amount Frequency of measurement Timing of payout Eligibility of payout (i.e., full-time vs. part-time employees)

16. Example #1: Fixed Amount GOAL Increase breast augmentation surgery by 20% over last year. PAYOUT $15,000 for goal achievement with adjustment for performance less than target, i.e., 80% of goal equates to payout of $12,000 (80% of $15,000).

17. Example #2: Per Unit Payout $200 set aside for each surgery performed over and above last year’s volume Current Year Volume: 250 Previous Year Volume: 175 Incremental volume of: 75 x $200 = $15,000 payout

18. Example #3: Individual Plan Based on Employee’s Performance Objectives NOTE: Employee is eligible to earn a maximum bonus equal to 25% of his/her base salary. A minimum score of 3.0 is necessary to achieve a bonus. The bonus payout is outlined to the right.

19. Example #3: Individual Plan Based on Employee Performance Objectives NOTE: Employee is eligible to earn a maximum bonus equal to 25% of his/her base salary. A minimum score of 3.0 is necessary to achieve a bonus. The bonus payout is outlined to the right.

20. Example #4: Team-Based Incentive ModelSteps in the Process Complete an historical analysis of revenue, operating expenses, and company profitability. • 1 Determine an appropriate measurement tool, i.e., gross revenue or operating profit. • 2 • 3 Establish a goal for revenue or profitability growth. Determine a percentage of the growth factor that would be set aside in an incentive pool. • 4 • 5 Determine eligibility for participation in the plan. Determine the allocation of the bonus among employee classes, i.e., administrator, managers, and other staff. • 6 • 7 Within each class, determine a method for allocating any bonus earned. • 8 Determine each individual’s share of the incentive pool.

21. Example #4 Team-Based Incentive Model

22. Example #4 Team-Based Incentive Model

23. Key Components: Plan Assessment and Refinement Review of actual results compared to goal. Solicit employee feedback. Modify plan as necessary.

24. Frequently Asked Questions Do I put the plan in writing? • ? Since we have a plan, do we still need to offer employee pay raises? • ? How do I know if the plan is working? • ? How do I manage employee expectations? • ?

25. Thank You!