First, let’s clarify a few things:

When we say performance-based compensation, we’re not referring to an occasional sporadic reward or a holiday bonus—we’re referring to a formal plan in which employees can earn extra pay based on hitting specific metrics or goals.

This is relatively new in home care; aside from marketers, less than 10% of agencies report paying their staff performance-based compensation. However, it’s beginning to take off and more industry leaders are calling for it to become a standard.

Benefits of performance-based compensation

Why should agencies consider performance-based pay?

1. It allows you to pay competitively without committing to pay scales that might be unsustainable if there’s a period where company goals aren’t being reached
2. It helps focus employees on driving results for the most important business outcomes they can impact
3. It helps you attract highly driven employees

One way to think about is by considering the benefits we generally agree exist in paying marketers/sales reps based on performance.

It’s very common to pay marketers commission that accounts for a chunk of their income; agency owners readily see the value in this because it allows driven marketers to raise their earning potential while ensuring that the agency sees a return on its investment.

While other roles may produce results that don’t always map quite as obviously back to revenue, their results do drive business results. If they didn’t, you (hopefully) wouldn’t be paying money for people to do these jobs.

If nothing else, setting performance-based compensation is a good exercise in understanding your expectations for each role.

Guidelines for setting metrics and rolling out a plan

While it’ll take time to understand what levels of performance-based compensation might make sense given your agency’s financial position, the process of implementing these plans are relatively straightforward.

1. Identify the most important 1-3 metrics for each role. These should generally measure the most important quantifiable business outcomes in their primary control.
2. Begin tracking those metrics if you haven’t already, so that you’ll have at least a small amount of historical data with which to set future goals.
3. Decide the right metrics to track based on your business operations but work closely with each team member to set challenging but realistic numbers for their goals. Including them in this process is important so that they feel buy-in. If your plan affects caregiver pay (more on that below), it probably doesn’t make sense to have this conversation with every caregiver but you should seek caregiver feedback as you go about this process.
4. Announce the change as a monthly or quarterly initiative rather than a permanent one; this lets you test and experiment. If the payout from your first experiment is unsustainable long term, this allows you to lower future compensation rewards without people feeling like pay is being taken away from them.
5. Improve based on your experiment and re-implement. Once you’ve found the right mix of metrics, goals, and rewards, you can make it an ongoing part of compensation.

A few other things to keep in mind:

1. The wrong metrics can incentivize poor behaviors or create problems for other team members/departments. Think carefully through the outcomes your metrics incentivize, not just for that department but for other departments.
2. Consider rolling goals (30-60-90-day, etc.) for goals that are important to measure weekly but might fluctuate too much to track on a purely weekly basis
3. As a general rule, if more than one person owns the metric, nobody owns the metric. This doesn’t mean there’s no place for some shared goals like revenue growth, but it does mean that wherever possible each team member should have goals that are primarily within their control and not someone else’s. For example, if possible you should track caregiver satisfaction and shift fulfilment by cohort so that you can measure performance separately for each scheduler.
4. Caregivers can and should be included in performance-based compensation plans; one of the most popular ways to do so is by paying them retroactive raises.
5. Because factors like seasonality can mean that even very capable employees will sometimes struggle to hit their metrics, you should ensure that employees have a comfortable base salary/wage and that performance-based compensation is used primarily as a way to each more competitive, market-exceeding levels.
6. Generally speaking, avoid capping employees’ earning potential if there’s no ceiling for the numbers they’re trying to hit. You might have seen the episode of The Office where the company institutes a sales commission cap, causing the sales team to stop working when they hit their goal; capping rewards is a good way to cap results.
7. Generally, on-target performance compensation should end up as 5-10% of an employee’s total pay.

Potential metrics for each position

The best goals will vary depending on the breakdown of roles and responsibilities in your agency; however, from years of researching these topics these are the metrics that we generally recommend.

Management

• Revenue growth
• Net new billable hours
• YoY or rolling growth in revenue, clients, weekly billable hours
• Net Promoter Score
• Readmission rate

The metrics that make for good management goals are generally also conducive to being shared team goals.

Care coordinators/schedulers

• Client satisfaction
• Caregiver satisfaction
• Shift fulfilment
• Average time to start a new client
• Overtime

Intake

• Inquiry-to-admission ratio and/or inquiry-to-assessment and assessment-to-admission ratio
• Assessments performed
• Accuracy of scheduled assessments

Sales/marketing

• Weekly added billable hours
• Weekly added revenue

Field staff

• Client satisfaction
• Falls
• Readmission rate

HR/Recruitment

• % planned to hired
• Applicant to first billable shift
• 90-day caregiver retention
• Time to first billable shift

Caregivers

• Timeliness/attendance
• Client satisfaction or positive client feedback

Further resources

If you’ve read this far, you’re clearly dedicated to keeping solid operations and continually learning how to run your agency more effective. Here are some additional resources that might be useful to you:

• Listen to our interview about this topic with the Home Care Association of America
• How much should I pay my office staff?
• How much do home care owners earn?
• Where can I get well-written job ad templates to attract applicants for different roles in my agency?