A more balanced view – the role of the KPI

Ideas, insight and inspiration

Instead of counting anything and everything, strive to get a better, focused perspective of the measures that drive the performance of your business

 

According to Forbes magazine the phrase “If you can measure it, you can manage it” originated in the 15th century.
The late Peter Drucker, probably the greatest thinker and writer on management and business, took the phrase and modified it to “What gets measured gets improved”.

It is difficult to dispute Drucker’s wisdom; if you want to lose weight you need to know from where you are starting and what the scales show you. If cycling or running is your thing, then you will almost certainly want to know how far you travelled and how long it has taken.

However, some seem to presume that just knowing these figures will be an incentive to improve them – sadly that does not always follow. For change to happen there has to be a good reason and motivation.

  1. Edwards Deming, the man responsible for Japan’s post-war success, argued: “Just because you can measure everything doesn’t mean that you should”. Certainly I have visited some dental businesses where the counting of anything and everything has become such a laborious ritual that there is no time or energy for any sensible analysis or interpretation of results.

The acronym KPI, short for key performance indicator, is regularly used, often without thought for its true definition: “A KPI is a quantifiable measure a company uses to determine how well it meets the set operational and strategic goals”.

Unfortunately many dental businesses have little more in the way of set goals beyond “survive until the end of the month”. This results in them floating with the tide, at the whim of the changeable business weather and unsure of their direction.

Often when KPIs are measured they are limited to the financial metrics. As important
as these are, they tend to overemphasise the short term. To be a winner in the long term, a more balanced view is needed. Kaplan & Norton writing in the Harvard Business Review in 2005, described four perspectives of the measures that drive performance in what they called “The Balanced Scorecard”:

 

Financial Perspective

How efficient are the practice operations? 

 

Customer Perspective

How do our patients see us?

 

Internal Business Perspective

What do we need to excel at?

 

Innovation and Learning Perspective

How can we continue to improve and create value?

 

Financial Perspective

Let’s start with the financial KPIs. These need to be measured daily, weekly monthly, quarterly and annually. They include:

  • production – individual and the practice as a whole
  • average daily productivity of all fee earners via daybook
  • total practice expenses
  • expenses broken down by categories
  • net profit
  • cash flow, highs, lows and all points in between
  • percentage net profit of practice every month as a graph
  • bank accounts with the worst and best figures as graphs
  • analysis of and changes in operating expenses
  • average production per patient
  • profit per practitioner
  • comparison of expenses with budgets
  • debtors

 

Customer Perspective

Our patients tend to value things in terms of time, quality, performance and service and, of course, price. So we should record:

  • number and (accurate) source of new patients
  • number of enquiries vs. number of new patient appointments booked
  • number of patients not returning to the practice either for treatment or recall.
  • number of complaints.
  • recalls – expected vs. attendance
  • average appointment time and waiting time (punctuality)
  • emergency and post-treatment visits
  • results of post-treatment questionnaires.

 

Internal Business Perspective

Here we examine where we need to excel:

  • percentage of cancellations/rescheduling
  • range of treatments offered
  • uptake of treatments
  • external and internal marketing initiatives and systems
  • team – amount of “pain”, including unplanned days off, lateness and sickness (using the Bradford Factor Calculator to measure)
  • staff turnover, and the results of exit interviews
  • understanding that the practice brand is based on consistency with the same excellent experience for everybody
  • our patient journey is documented and reviewed regularly at team meetings.

 

Innovation and Learning Perspective

Can we continue to improve and create value?

What skills need to be learned to expand the treatments offered?

All team members have personal development plans (PDPs), which are reviewed at six-monthly appraisals.

 

Benchmarking

Is defined as evaluating something by comparison with a standard, ideally best practice. In principle, this sounds good. However, in many cases it is difficult to know if the “industry standard” is completely relevant to your business. It may be purely of interest. Instead I will usually compare practices with their own history, monthly, quarterly and yearly and the goals they have set for themselves to attain.

The use of KPIs should not be restricted to practice owners and managers. They should be shared across the board with all team members who should understand their use and importance.

Often I find practices restrict their measurements to purely the financials and thus have taken the short-term view. For a bigger picture of the general health of your practice, you need to measure much more than money.


Alun K Rees BDS is The Dental Business Coach. An experienced dental practice owner who changed career he now works as a coach, consultant, trouble-shooter, analyst, speaker, writer & broadcaster. He brings the wisdom gained from his and others’ successes to help his clients achieve the rewards their work and dedication deserve.

www.thedentalbusinesscoach.com

 

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Published: 4 May, 2018 at 11:23