eyecare by the numbers

That Which Gets Measured, Improves

by Al Cleinman

Aclient with several locations contacted us in a panic, seeking assistance with a lease that had been terminated by his landlord. “I take $50,000 out of that business every year and I don't want to lose it,” he said. Looking at the income statement for the location, something didn't look right. Upon analysis, it was clear that the payroll for the location was significantly understated.

Yes, our client took a management fee. But the majority of the location's payroll was being funded by other locations. The bottom line was that our client was subsidizing this location and was actually losing money.

A new client contacted us to help him finalize his succession plan. Two years prior, he had hired an associate to ultimately purchase his practice upon his desired retirement date, three years hence. The associate was producing little revenue; was being paid a handsome salary; and the practice wasn't growing.

When confronted with our concerns, the client responded that he felt it was critical that he have the associate in place so that there was someone to buy his practice upon his retirement. We showed our client that, with his plan, he would end up earning nothing for the practice. The current cost of the associate would eliminate any net pay-off downstream.

Whether the result of sloppy accounting, a lack of understanding, or failure to invest properly, these types of errors cost ECPs hundreds of thousands of dollars, if not more. And in today's lower-margin, vision plan dominant environment, where the average ECP is being forced to do more with less, such waste must be recovered. Now more than ever, an effective performance measurement system is critical to success.

Quick Tips QUESTION LIST?

Once you have established your leadership perspective on information sharing, your performance management system is built upon a foundation of accurate data. Ask yourself:

Is your legacy computer system delivering the data you need?

Can you produce a report showing each individual doctor's and optician's production?

Do you know which products and services are selling?

Do you know your profit margin by product?

Are you disciplined with data entry?

EVALUATION STRATEGIES

Effective performance measurement begins with strategy. As a leader, you must first recognize that, most likely, you are not an expert in this area and performing this function is not a good use of your time. Get out of the bookkeeping business. Retain someone who has both experience and expertise. Performance measurement is far more expansive and useful than simple bookkeeping. Your time is better spent building your practice vs. paying bills or tracking data.

What is it that you're trying to accomplish? A performance measurement system starts with the entire team having access to and understanding the data they need to do their jobs. Withholding information will not deliver performance improvement; teaching financial literacy will.

Imagine football or baseball players not having access to their or their team's stats. What would the result be? Not only must you understand the overall performance of your practice, but members of your team must have information about their specific role, the means by which they can measure their success, and their individual impact on the practice's bottom line.

Practices that implement a financial performance system grow even in a challenging economy. They are more successful overall and their teams are more engaged and satisfied. Leaders with these systems exhibit less stress. While a good performance measurement system requires an investment in leadership effort, time, and money, there are few more powerful tools to move your practice forward. EB

©2012 Cleinman Performance Partners, Inc.