Attracting and Retaining Key Talent to Grow Your Practice
Operating a growing group practice is difficult work, and success or failure often hinges on the consistent revenue produced by the group's best providers. In fact, retaining key employees is a primary challenge of just about any founder-owner of a group dental practice.
Leaders of group practices may often wonder how to maintain the offices they have while continuing to grow the business through new startup locations and/or acquisitions. Attempting to expand the business' footprint is futile if the existing practices are declining. Poor revenue borne out of the turnover of key providers can bring a budding group to its knees. Stopping associate turnover is a key to the success of a group practice.
Trust Your Team
Many founders have challenges transitioning from holding 100% control of their business to having to listen to the input of others. Even more challenging is the emotional aspect of surrendering complete control of a business they have built. However, if you've hired the right team members, then you should want and value their input.
Whether a top dentist leaves his or her associateship at a small private practice or a large dental service organization (DSO), the issues are usually fairly similar. Though some dentists working for a private practice may have concerns with patient flow, many leave their associateship for a better future opportunity, andthis is not always purely related to compensation. A 2015 study by the Gallup organization showed that more than 50% of people left their job because of their manager. Similar studies often show that lack of communication and empowerment leads to good people looking for better opportunities.
Increase Associate Engagement
Associate engagement is vital to the life of the business. First, the founder-owner should communicate often with key employees both in group settings and one on one. Monthly meetings should be held with key associates, during which the direction of the business and the associates' role in it are discussed. The owner should want the key associates to care about the business and not just their personal incomes.
Second, these associates should be empowered to impact the business. Good people want to be heard by their team leaders and be part of decision-making. The owner may need to be involved early in the process to coach them to success.
Third, key associates should be afforded unlimited financial opportunity and the ability to generate life-changing wealth by earning ownership in the business. The key word here is "earning," not "giving." This opportunity is not necessarily offered to everyone alike. There will always be attrition of employees just like in any other business. However, offering the key associates-those providers who are the most beloved by both staff and patients-the chance to earn equity may motivate them to want to remain with the company and fully commit to its success.
The Ownership Mindset
Many students choose dentistry over medicine for the simple reason that they would rather own their own business instead of becoming an employee of a hospital network or healthcare conglomerate. Dentistry is often considered a better career path to ownership. As these students transition into dental school, typically a plethora of third parties, such as bankers, attorneys, financial advisors, supply companies, and brokers, are eager to avail themselves to present the benefits of private practice ownership. This predominant message of ownership continues into residency programs or associateships.
By the time a young dentist is ready to enter practice, he or she likely has heard the same message about private practice ownership for more than 6 years. An established dental practice founder-owner, therefore, has a difficult task in advocating that the young dentist come aboard and become a career employee. It's a tough sell. Thus, the chance to earn equity may be appealing to the fledgling practitioner.
A Bigger Pie
Traditionally, the concept of "ownership" has been viewed as a "zero sum" game, that is, it's all or nothing. If dentist A owns 100% of the "pie" and dentist B wants 50% of it, dentist A might agree to sell dentist B half of the business for a certain sum of money. However, as the founder-owner of the business, perhaps dentist A should adjust his or her thinking and consider the value of his or her piece of the pie instead of the percentage ownership of it. Put another way: would you rather own 75% of a business valued at $10 million or 100% of a business valued at $3 million? If you find yourself in the first camp, then the question becomes, "how can I best ensure growth from $3 million to $10 million?"
The answer is threefold: (1) attract and retain the best possible talent; (2) help these associates become committed for the long haul by letting them earn a stake in the future they're helping to create; (3) incentivise them to produce above-average results, which often is best achieved by allowing them to earn equity only when they generate or collect more than the average provider. Accomplishing these three things will enable the business to grow its top line at a faster rate than industry averages while expanding the bottom line (EBITDA %) incrementally and experiencing lower turnover rates of key providers than other groups in the practice's market.
Paths to Ownership
If this describes the type of business you, as a founder-owner, are trying to build, there are several paths to associate ownership:
• associate writes a check from personal funds for the portion available to buy-in
• associate takes out a bank loan to buy into the partnership (not recommended, as the bank will collateralize your practice)
• "earned equity" compensation models, such as restricted stock units (often used in corporate America)
• "profits interest" units (used to protect the basis of the initial value creation of the founder)
Any of these options may be offered at the PC (professional corporation) or DSO (corporate) level. Additionally, "earned equity" models are not "share and share alike"; they are more of a "reward and retain" concept for those who drive the business to greater outcomes.
The key to success in offering ownership to associates is providing them the opportunity to outperform the option of private practice ownership. For most top-performing associates, the outcome will be a practice worth close to $1 million in roughly 10 years (based on either purchasing a practice that generates below-average revenue and improving it or purchasing a practice valued at around $1 million, maintaining it, and paying off the loan over a 10-year term). This is the target founder-owners should aim for when determining how to value an earned equity model outcome to retain their best associates.
About the Author
Partner and Cofounder, TUSK Partners, Charlotte, North Carolina. TUSK (tusk-partners.com) provides resources for group dental practices and DSOs, helping clients start, grow, and sell their business.