Management Strategies in Uncertain Times

goebel-richard2.jpgDick Goebel, DVM
Simmons Great Lakes
Southeast Veterinary Conference (speaking notes)

On September 11, 2001 our view of the future took a dramatic detour. The subsequent malaise in our economy and the massive correction of the overpriced stock market also took its toll on our perspective. We now view our practice service and financial operations with less certainty and greater concern. Even the "experts discuss uncertainty with regard to our economy and the trickle down effect that has on each of our practices. How can we not share this uncertainty and the concern that comes with it?

If you have never accomplished strategic planning for your practice, there is no better time to make planning a priority than right now. It has been said (appropriately) that if you do not know where you are going, any road will take you there. Said another way, "Failing to plan is like planning to fail.

Planning should encompass several perspectives. The place to start is with environmental scanning. "Environmental scanning is defined by Logan Jordan 1 as looking beyond your practice to influences in the environment that may affect your practice such as the local, state and national economy, regulatory issues that impact your practice, FDA decisions regarding over the counter sale of veterinary drugs that are currently "by prescription only, the issue of pet owners as "guardians and the implications this might have on liability insurance, and many other factors. What can you do within your practice to protect any or all of these potential threats to your future practice success?

Another perspective is that of introspection. What are you doing well in your practice and what do you need to improve? Are you efficiently utilizing your resources and are they the right resources? Are you wasteful? Do resources need to be re-allocated? Is staff effectively scheduled? Is the inventory efficiently managed? Are you being effective as well as efficient? Management guru Peter Drucker has defined efficiency as doing things right and effectiveness as doing right things. Are you being efficient at doing the wrong things? An intensive exercise in looking internally at your practice can be instructive.

Client service and client compliance can be keys to long-term practice success. Successful practice owners and managers are saying "Many practices offer good medicine and surgery. To differentiate ourselves, we must offer excellent client service. and "We close for three hours every Wednesday for staff training. Practice owners and managers determine the topic, seek the best resources, and then deliver the education. Our staff is key to optimal client service. These owners/managers are enjoying greater success than many of their peers.

The American Animal Hospital Association (AAHA) 2 has recently completed a compliance survey among pet owners. It is both dismaying and encouraging that, on average, only 40% of practice recommendations are actually implemented by owners. They found that, while clients ultimately make the spending decision, the failure to comply is due to inadequate staff education and training as well as inadequate goal setting and measurement by the practice. The dismay has to do with how poorly we have performed in properly educating our clients and asking them to do the right thing for theirpet companions. The encouraging message is that our opportunity for greater service to our existing clients is enormous.

Some of the challenges of client service and client compliance can be met by effective leadership (your role) and by staff selection and training. Staff selection should be weighted more to hiring the right attitude (and motivation) rather than the right skill set. Attitude (and motivation) is nearly impossible to change but employees with the right attitude can be trained to do almost anything. Select for an attitude of service! Then invest in appropriate training. Set goals; measure and reward success.

Get to know your clients. Conduct surveys, focus groups and one-on-one conversations to determine what clients value. Then give them what they value. If you know what clients value most, you can determine what new products and services to offer and which to discontinue! (If you discontinue one service, you may be able to add a new service without taking on increased cost. Look for ways to use this tool of reallocation of resources.) You will also know your clients preference for hours of service as well as the service mix. In the process you will also learn what products/services are price sensitive and which are valuable at (nearly) any price. Carry as a part of your inventory the products that match your recommendations to clients (the appropriate pet carrier, Gentle Leader, Kong toys, appropriate shampoos, nutritional supplements, etc.). Many clients appreciate the convenience of one-stop shopping and saving trips around town in order to comply with your recommendations.

When making health recommendations to your client, in pricing your services and in making an estimate, do you worry more about the client‘s wallet than you do your patient? Which is your patient? The pet or the wallet? Your training and the oath you swore suggests that your role should be as an advocate for the animal and not for the owner‘s wallet. Recommend wellness procedures, diagnostics and treatments that are most appropriate for the patient‘s age, stage and condition. Then let the owner decide what the can or will afford. Unless you fully inform them of the benefits and risks as well as price, they cannot make an informed decision. Your role is to be an advocate and to educate. Remember, in the absence of an understanding of benefits and value, the client‘s only criterion is price.

During your process of introspection, you may want to do an exercise called process mapping. As you may surmise, this is an exercise by which you analyze process and procedures used in your practice. For example, what are the steps a client must go through to make an appointment, to drive to your facility, to find parking, to open your doors with a pet, two children and a purse in hand? Then, how convenient is it to check in, to complete a new client info form, to wait in the reception area and then wait in the exam room……and she hasn‘t even seen the doctor yet? Then, is the exam room experience efficient or hampered with interruptions? What steps follow as the client is ushered to (or wanders toward) the checkout desk? What about the additional package of prescribed drugs or case of prescription diet? Is the process facilitated by your practice in such away that it is pleasant for the client or is it a frightful experience to be avoided? An honest attempt at studying the client visit from the client‘s perspective can be revealing and instructive. Grow your practice by improving your processes.

Further analysis should probe for an unhealthy reliance on revenue streams that are vulnerable. Boarding and grooming as well as retail sales can be offered by nonveterinarians very effectively. Therefore, if your bottom line depends upon ancillary services, you may be more vulnerable than if you plan profit into medical, surgical and diagnostic services. With on-line access to veterinary prescription drugs and the anticipation that heartworm and flea products could go over-the-counter at any time, profitability should be built on revenue streams that do not share this vulnerability. Study your pricing model and make revisions that address these vulnerability issues.

If your drug and supply expense is greater than 25% or your staff costs greater than 22% of your revenue stream, your fees may be too low. Consider participating in the NCVEI model 3 or the 3rd Edition of the AAHA Veterinary Fee Reference 2 to see how your practice fees compare to others in your region.

With low interest rates and a slow economy, facility expansion or relocation may be timely. Maintaining a strong balance sheet regardless of the external economic climate serves the wise owner/manager very well. Favorable rates are obtained by those with a strong financial foundation and who are poised to take advantage of opportunities linked to a recessionary environment. In some communities, contractors and builders are hungry and quite competitive. Linking favorable interest rates and terms with competitive bidders contributes to excellent expansion or relocation opportunities.

Grow your practice through the merger and acquisition (M&A) route. Many solo practices are hard to sell. Key reasons include limited cash flow and lifestyle standards held by many buyers. To merge with or to be acquired by a neighboring practice can be an excellent strategy to a) make your practice more valuable and attractive in the marketplace or to b) serve as an immediate exit strategy (as an alternative to an outright sale). 3rd party lenders are eager to provide financing assistance to facilitate M&A strategies.

In summary, plan, strategize, analyze processes, reallocate where possible, stop doing the ineffective things, ask clients what‘s valuable to them and respond accordingly. Educate your clients by first educating your staff. Achieve greater client compliance. Set goals; measure and reward your team‘s success.

1). Logan Jordan, Associate Dean, Administration, Krannert School of Management, Purdue University and faculty leader for the Strategic Planning Module of the AAHA‘s Veterinary Management Institute

2). www.aahanet.org

3). www.ncvei.org

For a PDF of this article, click here: Management Strageties in Uncertain Times – D. Goebel, DVM, Simmons Great Lakes

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