True or false? Take this compensation quiz

1. To maintain staff morale, make salary increases across the board.

FALSE. One common misuse of compensation is known as the peanut butter approach—spreading increases evenly among employees rather than differentiating among and rewarding top performers. High-performing employees feel slighted while others receive an unintended message that salary is dependent on merely showing up. A better approach: Provide an incentive based on differentiated performance, not politics, self-promotion, or perceived across-the-board fairness.

2. You should combine salary and performance reviews.

FALSE. Combining salary reviews and performance reviews compels an owner or manager to justify a salary increase—or lack there of—in terms of the performance evaluation, which can be difficult when other factors enter the decision-making process. To prevent this problem, conduct the reviews independently. The advantage: During the performance review, you'll discuss performance only. When you conduct the salary review, you can more openly discuss other factors—skills, scope of responsibility, overall evaluation of the employee, and profitability of the practice—that determine increases.

3. There's a limit to what a top-performing employee at your practice can and should be paid.

FALSE. "Many doctors are overly concerned that one or more of their top employees has reached or surpassed some arbitrary ceiling for their position," says Dr. Charles Blair, DDS, a management consultant based in Charlotte, N.C. "We're more concerned with the effectiveness of individual employees in helping the practice grow profitably, so we focus on the ratio of staff payroll costs to practice gross income. As a result, we often find that paying top dollar for truly stellar employees can result in a more profitable practice."

Veterinary Economics Editorial Advisory Board member Bob Levoy is a seminar speaker based in Roslyn, N.Y., who focuses on profitability and practice growth. His newest book is 222 Secrets of Hiring, Managing and Retaining Great Employees in Healthcare Practice (Jones and Bart Publishers, 2006).

Bob Levoy