The Business of Healing Pets, Trupanion’s blog series written by Stith Keiser of Blue Heron Consulting, takes a deep dive into the business side of animal medicine. Look for a new installment each month featuring topics such as business best practices, effective leadership, strategic hiring, and more.
In a series on leadership, you may be wondering why we’re talking about our clients, the health of our practice, and the quality of our medicine. That’s a fair question. At a high-level, we’ve reviewed P&L metrics and KPIs because those numbers tell us how we’re leading our hospitals. For some, talking about growing as leaders is enough to want to grow. For others, you need to know why.
Think back to the first assignment in our second post: “Why do you do what you do, and why did you choose practice ownership or management?” Whatever your reasons may be, the numbers we’ve reviewed point to progress. But how?
- Gross revenue, the total revenue of the hospital, is a product of only a handful of high-level factors.
- Practice philosophy—high touch, low volume versus low touch, high volume versus trying to be everything to everybody, for example.
- Volume—just because you’ve identified a desired practice model doesn’t necessarily mean you’ve got the caseload you’d like to have.
- Quality, and consistency, of care—I’ve rarely been in a hospital that doesn’t tout practicing high-quality care, yet standards of care vary widely. This isn’t a judgment on one hospital’s definition of best medicine over another. This is simply a challenge to define your standard and then ensure you have the team, training, and systems to consistently deliver it.
- Compliance—just because you and your team believe in the value of nutrition, for example, doesn’t mean it’s clearly communicated to clients.
- Management—staff training and leverage, scheduling, pricing, etc.
- Cost of Goods Sold (COGS)/Cost of Professional Services (COPS) and payroll are products of our leadership and management. It’s as simple as that. We look at these numbers as a percentage of gross revenue because we’re evaluating our leverage of these assets in providing care and running a sustainable business.
- Net income is the proof in the pudding. Real net income reveals our ability to operate a financially viable business. It represents our ability as entrepreneurs and leaders.
One of the neatest opportunities we have as leaders is the chance to rally our team around goals that align with our why. In our last article, we reviewed specific KPIs and corresponding benchmarks to help us assess the health of our hospitals. However, the metrics I presented are by no means the only ones. Depending on what’s important to you and your hospital, you might also review new client numbers, client retention, specific compliance rates, appointment book fill rate, staff turnover, etc.
Strong leadership leads to strong business.
Regardless of your goal, we know through research that there’s a positive correlation between strong leadership and business performance, staff culture, and even quality of care. For example:
- Leaders that exhibit four of the six key leadership styles consistently lead their divisions to outperformed sales targets by 15% to 20%.1 We’ll get further into those leadership styles later.
- In a study of 50,000 managers, those who scored in the bottom 10% for leadership skills averaged $1.2M in annual losses for their businesses. By contrast, the middle 80% averaged a net of $2.4M, and the top 10% recorded gains of nearly $4.5M. In summary, poor leaders lost money, good leaders made a profit, and extraordinary leaders more than doubled profits.2
- In human medicine, studies have shown that as staff engagement and culture increase, so do patient experience scores.3
- Employees of the most highly effective leaders are four times more engaged than employees of the lowest effective leaders.4
In other words, leadership pays. Not just financially but in the influence we have on all those with whom we interact. Give some thought to the KPIs that reflect what’s important in your practice and create goals that align with those.
Next month: We’ll take a look at different leadership styles and traits of successful leaders.
Stith Keiser is the Chief Executive Officer for Blue Heron Consulting, a group specializing in veterinary practice management coaching. In addition to consulting, Stith is a managing partner at a handful of veterinary practices and collaborates on the advancement of professional development curriculums at several veterinary schools as an adjunct faculty member. In his free time, Stith enjoys spending time with his wife, family, friends, and two dogs, a Red Heeler and black Lab, in the outdoors.
1Leadership That Gets Results. Goleman, Daniel. Harvard Business Review. March-April 2000.
2Great Leaders Can Double Profit, Research Shows. https://www.forbes.com/sites/jackzenger/2015/01/15/great-leaders-can-double-profits-research-shows/#2bac8acd6ca6Forbes. Jan 15, 2015