What’s Your Incentive to Change Your Compensation Plan?

March 18, 2013

Just because something is difficult to measure or evaluate doesn’t mean that it shouldn’t be taken into consideration in connection with your group’s compensation plan.

Most medical group compensation plans take productivity, and only productivity, into account.

I’m a believer in paying for productivity, both because it creates a proper incentive to generate income for the group and because my experience with groups that have paid on a fixed share basis (for example, three partners each receive one third of the distributable cash) is that it ends up creating a perverse incentive not to work, at least for morally-challenged group members.

However, paying only for productivity measured in time devoted or units generated or even some other variant, alone, wastes the opportunity to drive behavior by incentivizing it with pay.

I was recently reading about the current financial woes of the J.C. Penney chain. Although apparently having been mismanaged for years, the chain originally grew to national prominence in the early decades of the 20th Century through a system in which store managers received a one third share of their store’s profits. They were directly, and tremendously, incentivized to follow Penney’s marketing plan based in large part around how customers were treated.

Tailoring your compensation plan to achieve similar results is one of the keys to your group’s long-term success and, perhaps, even its survival.

Let’s talk.

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