When there's no money for raises

December 2, 2005

Employees might be willing to stay on if you reward their efforts in other meaningful ways.

"Flexibility, creativity, and appreciation go a long way when money is tight," says Judy Capko, a consultant in Thousand Oaks, CA, and author of Secrets of the Best Run Practices (Greenbranch Publishing, 2005). Among the possibilities, according to Capko: paying partial tuition or buying books for part-time students, shaving a half-hour off everyone's workday, or offering flexible hours or staggered shifts.

Still, many "nonmonetary" rewards will cost you something, like the $25-$35 gift cards to restaurants and retail stores that FP Heather Williamson of Bridgeton, MO, gives staffers. And other rewards, like additional time off, have indirect costs. But some imaginative solutions to the "I can't afford raises" problem cost you nothing, and might even benefit your practice. For example, FP Sarah Towne of Vallejo, CA, offered employees the opportunity to structure office systems, such as billing and scheduling, as they saw fit-as long as all tasks were completed on time. "They responded very well to the autonomy; one of them even turned down a much better offer to stay with me," Towne says.

Be up front about practice economics

It's not that you're scrimping on raises; it's how you're scrimping on raises that counts. "A 'substitute' raise shouldn't come as a surprise," says Kenneth T. Hertz, a member of the MGMA Health Care Consulting Group in Alexandria, LA. Communication is the key. While Hertz doesn't think you need to share every detail about practice finances with the staff, the more open you are about decreased reimbursements, increased regulations, and rising costs, the more acceptance you'll get when you tell employees that their take-home pay will remain stagnant.

That's the route Livingston, NJ, pediatrician Richard Lander took in 2002 and 2003. "One of the big third-party payers had cut our reimbursement by 40 percent, which was a huge blow to us," he says. "I was quite frank with our staff. There were no Christmas bonuses those years, nonclinical employees were given only 1 to 1½ percent pay hikes, and, as the owner of the business, I took a 30 percent pay cut."

FP Randall L. Oliver of Evansville, IN, agrees that being forthright with employees goes a long way toward maintaining staff loyalty. He and his employees discuss finances at monthly office meetings. "During one difficult year I gave everyone a raise of 25 cents an hour. This amounted to $500 per person for the year. Even though very small, they were getting something. In another year, I simply outlined the financial picture and said I couldn't give a raise. My staff was very understanding and everyone stood by me. The next year, after things had improved, I gave a generous raise." No matter what, Oliver continues, staff is entitled to a small raise, a bonus, or an explanation.

If you're skimping on raises, don't reward yourself lavishly, and do put a lid on seemingly unnecessary expenses. These might include purchasing new office furniture when the existing furniture is still serviceable, Hertz notes, or taking your family on a three-week CME skiing trip.