Our hosts, Ryan Leech and Dr. Ivan Zak, discuss types of veterinarian compensation models. What are they? How do they affect the business? How can consolidators use them to implement goals and objectives across the entire framework? And how to create a culture that people want to work in?
Welcome back Consolidate That! Ivan, we have a very special guest today – you.
It’s you, or is that me? It’s one of us. We don’t have a guest. It’s just the two of us, which is always fun. Excited to have a good chat with you today about some stuff. What we’re going to talk about today is building on a blog post, or an article that our, that our team recently wrote called veterinary compensation, demystified, a comprehensive guide for consolidators.
So we’re going to talk about some of the different compensation models that are out there in the industry right now and how that affects the veterinarians through production, how they look at their different, you know, wellbeing, mental health, stability of their job and all of those sorts of things. How does that sound to you?
I love this topic, so let’s, let’s dive in.
Well, why don’t, why don’t you start by giving a little bit of a background about some of the different things that you’ve done. You know, you’ve worked in different veterinary hospitals and on multiple different types of payment structures. What’s been something that’s worked well for you.
And what are the different ones that you’ve seen in the end?
So I think it would be good to start with just list those that we can sort of think about the models and then maybe I’ll push off that and talk about what I’ve experienced. So the first one, I think it’s the most terrible one is a production-based model with a negative accrual.
It’s when you have certain targets and then when you don’t meet those targets, you potentially actually owe money to the practice. So you need to, you know, to meet certain numbers and when you don’t then, you know, then you owe them money. So that’s one…
Anything that has negative in the title for your payment plan is usually a bad, bad start.
Exactly. And then and that reminds me of the flavor of one that we’ve seen recently about the vacation. We were talking with one consolidator and they were talking about how they were helping to build, you know, their compensation strategies. They’ve changed it, thank God. But the idea was that they set the targets.
And then if you, for example, go on vacation, we were working through that scenario. Then you kind of missing your targets by two weeks. If you went on a two-week vacation and then you simply have to catch up within that month and or that quarter. So it really, really demotivates you to take vacations which is a great way to burn out people.
So I thought that was a pretty strange way to do it, but they didn’t, they didn’t go for it. So that’s good. Then there are straight production models. So some people usually new grads are super afraid of this because, and I was in the same boat, so it’s basically when you get a certain percentage and it varies in the industry.
As far as I remember, I haven’t been in practice personally for over five years. I haven’t been paid to be in practice by the practice owner for over five years.
I’m surprised people paid you to begin with, but, you
That is a surprise as well. So, usually new grads afraid of straight production, you always make production it’s you know, it’s a wild west.
There’s, there’s so much money that had coming into the vet practices, especially these days. So you always make it, but when you’re a new grad and you have loans and you’re afraid so straight production doesn’t work that way.
Yeah, that’s what I was on. My first job out of college was selling cars.
And that was straight production. If I didn’t sell anything, I didn’t get anything. But the plus side to that, the way that they treat car salesman, you know, if you don’t sell anything, you don’t have to worry about having a job too long. So if your paycheck is really low, they go ahead and let you find a different job at a different place. So it’s really nice of them.
So vets don’t like that either. And then there’s one that is a base salary with a commission model. So that’s basically when you kind of have a base guaranteed, and then if your revenue exceeds certain expectations or the standards across the practice, then a, then anything on top of it as sort of the gravy, and then you generate commission only on that piece.
And then there’s another one ProSal and I’m always confused between the two and this one, I think it’s a guaranteed monthly, but then if you shoot through to over the revenue well, what is the base then? Everything is sort of commission-based so one or the other, I don’t remember which one works which way.
And then there’s simple salary models and everybody sort of goes away. From those these days, which is a big surprise to me. And this is why I wanted to go over these. So from my personal experience, I worked the first year in practice. I started on salary as any new grad, I was like, look, I have loans and stuff like that. So, so I wanted a guaranteed sort of paycheck, but I worked in emergency and I think that most of my classmates, I think when we graduated was like 60k average pay. I was in my first year in an emergency. I was it’s 90k. I think the first year it was pretty, pretty good. And the way they did it, they said, look, just start on salary, which is totally fine.
And then if, yeah, but we’ll show you. Your sort of production. And then by monitoring that production, you can change any time, which is of course by the third month, you’re like, holy cow, I can just simply take more money who wouldn’t, right? So I started doing that and that’s sort of, you know, it’s ProSal or commission plus base those two models.
And I think that in reality, it’s, I don’t think it’s motivating the right reasons. And every time you were in an exam room, you know when you’re especially in an emergency when someone is dying and you need to do a splenectomy and transfusion and stay overnight and three days in the hospital, and it’s a hemangiosarcoma that they will die from in four months anyway. Your total comes up to $4,000 and you were thinking, what is it? 21% of $4,000 instead of how do I treat this pet to live through this? And should I do it at all? Because this is in four months, it’s a four-month rental really for your dog. And it’s like, do you wanna rent your dog for another four months for a thousand dollars a month.
I mean, it’s brutal to say in that way but it’s the reality. So I hated it. I hated the commission after a year. I just, I just thought I lost my sort of, you know, empathy. I lost I think that integrity basically as a veterinarian and the goal of what I’m doing. So, so that was the only year I worked on commission.
So out of 12 years of practice, I, next year I refused and I said, I’ll never work on commission again. And that just allowed me, you know, one of the things that I didn’t like about veterinary medicine is that you know, when you were an emergency vet, nobody likes you. I mean, nobody wants to see you. Nobody wants to go to the vet at 11 o’clock and pay, you know, thousands of dollars on the spot, which you didn’t expect. You’re like, oh, he’s vomiting. And then at the end of the day, almost every single person either looks at you or says it out loud and says, you’re doing this for money.
So when you’re not on commission, I could easily say, look, I’m here paid by the hour. And if you leave, I’ll be paid, the same amount of money if you stay. And that allowed me to feel comfortable about the direction of my medicine and what I do. Maybe I made a couple of bucks less, but I felt like my integrity was intact.
That’s. I mean, that’s a major point. There’s, you know, I’ve been in sales for my whole career and a friend of mine who worked for IBM for a while and worked for different startups as well.
He, you know, salesmen to the core, he said I’m coin-operated. Put money in you get something out and that works for a salesperson and that works for a sales job, but it doesn’t build a culture of, you know, join and loyalty. You don’t feel like you’re doing something purely in the best interest of the client.
You don’t feel like you’re really working for the goals of the business that way. You’re looking at yourself almost as a wheel or a cog in the machine that can just say, Hey, plug me in anywhere at any business if you put the right amount of money in the, in the back, you’ll be able to get me to do what you need.
So it’s one of those things that, that I think is interesting. I’ve built a lot of different payment structures for myself and for teams that are always commission-based. And one of the ones that, that was really unique was when I was at a brand new startup in the gas delivery space. So there was not a business plan or a business model of knowing exactly what the revenues were going to look like.
And I was building out the sales team and my founder and I, we sat down and he said, well, I want you to be on commission. And I said, okay, we can do that. That’s no problem. And he said, build out a payment plan. So I built out a payment plan based on the goals. And then I told him, I said he tweaked it.
And I said, okay, well, here’s, what’s going to happen if we tweak this to just drive me on a number of new customers, but not revenue. My goal is going to be just to get customers. Then, if we tweak it on revenue, my goal is not to get new customers. It’s going to be to get every penny out of the existing customers.
We have. If we do it off, a number of businesses, we sign up. I’m just going to be looking at that. So having a really dedicated payment structure or one that’s narrow and focus does change a lot of the performances and we ended up after six months and 10 payment plans that we went through. I ended up saying, let’s do a salary because I want the company to succeed.
That’s my goal is for us to grow the business and grow it in the main way that keeps me in a job with you guys. Grows the business, grows the business model and the plan, and we moved to a salary and I think that was a smart move that really aligned both of our goals. And when you’re dealing with veterinary medicine, I think that’s a key thing too.
Totally agree and, you know, the more we talk to consolidators, and then the more we talk about the salary structure and bonus improvements and things like that, I really think we’re not motivating the right behavior. And from two perspectives, one from veterinarian wishing the good outcome for the health. They cover it up with, you know, oh, it’s good for the health to do the extra blood work on this and then I’ll do extra blood work if I think it’s necessary. But it just creates that, you know, negative connotation to our profession. The second side of it is that we’re driving the wrong behavior on people that are in the burnout crisis. And that’s what we’ve been talking about. And then that’s exactly what happened to me because I realized holy cow, I can make that much money in an emergency.
And then another six days also drive, you know, the relief work. And then, so I was very coin-operated and, you know, even though you said, no, sales roll it’s okay. Veterinarians are salespeople as much as they hated it. We sell services. We sell our skills that we acquire. We sell products, we’re salespeople. So that is correct.
But I think that that structure is dangerous in some professions. And veterinary medicine is one of them. So the more we talking to consolidators, the more I’m thinking that at adapting, something like we did in VIS and you know, that we were using this sort of model after we all read a Rules of No Rules.
And that’s it about Netflix? Sort of not HR, I wouldn’t say it’s just the entire culture. One of the things that they do, they just pay top of the market. Nobody’s celebrating the fact that we hired some specialists cheaper than we would, you know, because he didn’t know because it’s a new grad and they don’t know how much they should be paid.
And then let’s celebrate that we’re paying them 10K less than otherwise hired another person. If that’s the only way you retain that person, then that person will find that next pay next year and leave. Like, this is not a reason to celebrate, but attracting talent because of the culture setting goals that are not monetary. This is what’s more important and in Netflix, they actually encourage employees to talk to recruiters because what happens a lot, they’re being recruited by Google, by Facebook. And when a recruiter calls to someone at Netflix, their management encourages them and say, take the coal, find out how much they would pay you, how much they offer and we’ll match that.
And they just never have people leave because at least for the, you know, for financial reasons, but Netflix is the second company in the world with the culture that people want to work for. So, and that’s exactly the same thing that we did at VIS. And, you know, I liked the Maslow’s hierarchy you in those sort of controversial thing and never been proven scientifically.
But the way I look at this is that money is only to cover those two first layers of hierarchy, basic needs: safety, food, shelter, all of those things. That’s what money for this is an of course. In the employee-employer relationship, money is the of course, I am qualified for this payment adequately. And I think this is non-negotiable, just need to do that.
But setting goals and motivating people to sell more of something that is potentially unnecessary is not motivating the right behaviors. So what we do. We set goals based on other things and KPIs, and they don’t have to be monetary, but your compensation is not dependent on it. Your continuous employment with us is contingent on hitting those targets and continuous development, continuous improvement.
And when you’re hitting those targets, your triggering way more important motivational things like self-esteem. Then what’s triggered by money and especially because over 75 k in North America, that’s enough for, you know, just to sustain your normal, living, everything above that is just your kind of upgrade level by level, better car or house, but it doesn’t really motivate you for more than two months when you up to your salary.
So, so I think it’s very important for our veterinary medicine to look at this and say, should we just standardize and say, look, you know, GP, you should be paid 1.50. I don’t know what they get right out of school. That’s what we write in that article. Maybe it’s 200. I don’t know. And, and the other thing that we just discussed because everybody’s managing labor costs, right.
That’s sort of, that’s the three things that consolidators measured. They manage inventory cogs, they manage labor costs, and they, you know, they improve marketing or they say the improve marketing, which is not really necessary.
That’s what a commission plan does is it basically says, and that was always, my thing was being on commission.
The company should always be okay with you selling as much as possible or doing an additional deal or anything, or treating other patients because you’re just getting a slice of that pie. So it just helps them grow. So managing those labor costs is probably where those maybe a lower base salary with the commission model or the ProSal comes into play for a lot of people.
It’s a very easy fix to do that.
I think that if you standardize the pay, you will really drive, I think it proper behavior, but then everybody says that you know, labor should be docs and the staff should be what 40% I think is sort of industry standards that people are striving towards.
Well, what if you were, what if your revenue is incredible? Why does it have to be full? Who decided that this has to be 40%? And then our industry right now, the pay is going through the roof. There are too many clients out there. Well, what if we’ll have happier vets that have a higher capacity that brings more revenue than the labor percentage?
Maybe you don’t want it that high, or maybe you want it higher because your revenue is so big. You don’t care. Really that it’s, you know, 45 or whatever it is. So I think that we really need to think about maintaining a happy workforce, but not manage that percentage. And of course, you have to manage your P&L, but I think that there’s more to look at it, and especially with a situation where 45% of clinics, you’re looking for 1.8 vets right now, and it’s half a million dollars loss. If you lose a veterinarian, then celebrated that you found someone 10K cheaper, and then lose that person and lose half a million dollars. And is it a worthy celebration? I don’t think so.
So to be the devil’s advocate. So there’s probably a lot of people that are listening that do have their teams and their companies set up on the ProSal model is, is the most most popular or one of the most popular is out there. You’re going to pay, you know, in, in the structure that you’re discussing you pay top of the industry salary, give people a really good way to earn a living and then a highly motivating internal structure within the business.
A culture that changes to the people is focused on it. What’s to keep the carrot dangling or what’s to get the people that are money motivated to stay at that company as well. If someone says, Hey, there’s always, you know, there’s always the people that can look at commission and say, but I can earn unlimited money or I can go somewhere and earn, you know, every single penny under the sun, what’s the way that you think beyond just money that you can keep those people happy and stay within the company.
Yeah. Well, I think that some consolidators are starting to do this. It providing sort of some extra pay to associates that they’re acquiring hospitals from while they’re acquiring from the owner, but there are associates that were promised something and then providing them with compensation.
I don’t think that anybody is doing equity, well, some doing to associates, maybe, but not even further than that. But you know, if you think about all the associates about the ER docs, which are the hardest to find these days, we think about technicians there’s a scarcity of those these days. And they don’t want to work longer than 35 years old because you can’t sustain a family on, you know, 30-35k a year. So I think that there’s a place for an organization to erupt with a sort of shareholder and you know, there’s, WestJet in Canada. Every employee is a shareholder. You know, you get hired and you get some sort of options. So you actually earn more. But back to your question, you know, what, if people are a little bit more, coin-operated as you call it, I think that we’re a pretty well-selected group of people through 16 years of education and the goals that we set out to become a veterinarian to actually not have those goals.
Well, I think that most veterinarians have the goal of treating patients. If someone wants to become more entrepreneurial – buy a practice. Buy practice, build a practice, you know, it’s an entrepreneurial path. You can’t really if you’re that entrepreneurial then you, you can’t work for someone, you should probably like me.
I did not want to work for someone after 10 years in the field. I was like, look, I just want to start building things myself. I want to be innovative and that’s probably your path. So it might be not within the organization where you get a salary. But I just think that motivating people with the commission in medicine is just wrong.
I think that’s a great point in, in a really. Defendable or defense… I don’t think that’s a word. I don’t know what the right word is, but yeah, I think that’s a place where it’s very easy to be able to stand your ground because that does make sense. No one, no one wants to be, you know, when you go to the veterinarian or when you go to your, you know, human health doctor, when you go to somewhere where you’re visiting a specialist and you’re in their field heck even if it’s going, the plumber shows up to your house, you don’t want to feel like you’re trapped. And that that person is holding all the cards and can say, yep, fluffy needs another, you know, $6,000 worth of tests done and things like that. You want that person to be doing. What makes the most sense and knowing that the salary model and their compensation model align with taking care of the patient the best is, is a really nice way to do that.
I have an idea. Yeah, I think that’s, that’s very helpful. I think there’s a lot of other great points that we definitely hit on in our blog post, which people should definitely look at. Debbie Hill helped us write that blog posts that are, that our team put together so many thanks to her as well for getting, some great insights into the veterinary field.
What else should we be looking at? What other things did we talk about? The Netflix culture book Rules of No Rules. What else should people look at when they’re trying, to dive deeper into it?
I just want to bring back this whole Maslow’s I kind of started talking about what I want to build it in your sort of in your, in your head, the whole pyramid, right?
The first one is shelter and safety and basic needs. So those are the first two steps. I think that’s motivated by not motivated. By money. And if you’re not comfortable how you’re covered, if you can’t afford certain insurance, certain cars, certain house, that means that you as an individual needs to progress within your career path, education skill set to grow a little further.
So that’s sort of the basic stuff. Then the next layer in Maslow’s hierarchy is a sense of belonging and love. And people get that usually from family, from friends, from their close circle, but you can create that at work and you can create the sense of belonging at work. And that’s exactly what culture does. Culture and purpose.
And if the organization doesn’t have that, it doesn’t matter how much money you throw at them. They’re not going to have a sense of belonging to the organization that they work for. And then the next level is esteem. And that is what is achieved by hitting certain goals, that don’t have to be connected with money.
If my shelter, my safety, and other things that I established myself as a standard belong or are attainable through the goals that are set in the organization, that’s driven by fear, not motivation. So if I decouple those, and if I have the goal set out to just drive the esteem and the dopamine, when I achieved the goal and I’m celebrating with the manager or with the team that we had certain targets, not necessarily because we’re getting a bonus.
Yes. He can create a little competition among the vets and the organization, if you’re a consolidator and buy them a vacation or something like that. But don’t connect the goals with the money. And then only when you go through those three steps, money enough, then the tribe or the sense of belonging, and then the goals, then people will be at the top of their self-actualization, which is at the top of the pyramid.
So I just wanted to kind of claim that. I truly believe in that. So we manage VIS.
That’s great. Another great book that. It falls in line with that is Predictably Irrational by Dan Ariely, which actually hits on that same thing by putting a dollar sign in front of those motivating factors, having a compensation attached to it.
It actually shows a level of deep motivation for people at that level. They say, well, just give me the dollars for it, but creating something around cultures is definitely a key thing. So Ivan as always thank you so much. Next week we’ve got a guest coming back and joining us. So that’ll be another fun one but look forward to chatting with you again soon.
Likewise, thanks, Ryan.