Dr. Allen Nazeri explains why measuring Key Performance Indicators matters for clinic performance and valuation. KPIs create accountability, boost morale, and attract investors. He covers why they fail, when small practices should start tracking them, and using Net Promoter Score to measure customer service.
Questions this video answers
April 24, 2021
$600,000
$1,000,000
$150 (new-patient inquiry-to-appointment conversion target per month)
Net Promoter Score (NPS)
Chapters
Value engineering strategies to 10x the value of your clinic and dominate the market. Part 8 Chapter 7 Measure it so you can tweak it if there is one thing that separates professionally managed companies from the rest, it is their ability to measure, monitor and tweak results. After all, the more tweaks we can make, the better results we can expect.
It allows those of us in the leadership positions to communicate and align everyone on our team with our overall business strategy, like if we were going to lose weight. Measuring our calorie intake and adjusting it can help us get the desired results in our practices. Knowing where we are at any given point of time and continuously monitoring and fixing it can help our team achieve their goals. This measurement is known as KPI or Key Performance Indicator, and it can apply to the entire chain process consisting of the input, the process, the output, the outcome and the feedback. It measures the performance that allows us to modify behaviors in our organizations through coaching, training and retraining, enabling us to achieve our targeted results consistently.
Can you imagine making hiring or firing decisions and assigning people to train without knowing the KPI well? Unfortunately, this is how most healthcare practices operate. Wearing blinders when managing their business. They make decisions based on emotions rather than logic. Let's look at why Companies with established KPIs for their employees appraised higher than those with null or limited KPIs. KPIs lead to accountability.
Established baselines and targets allow our employees to evaluate their strengths as well as shortcomings. This self evaluation promotes a healthy culture of responsibility while improving communication between the managers and employees. Investors know companies with established KPI practices outperform their rivals without one and are willing to pay more to acquire companies where employees are held accountable.
KPIs build up employees morale. Employees are the backbone of any company and when they are happy and engaged, they respond better to customers and pay attention to and anticipate their needs. If we are continually asking our employees to perform at their best, we also owe it to them to quantify their actions through established metrics. Employees driven by KPIs are more satisfied than those who merely show up and become more competitive in achieving their targets. All of this behavior results in a group culture that is positive and possesses high level of morale. Investors want to invest in companies where the morale is healthy, a sense of ownership and belonging exists, and everyone is on a mission to make the company better. Every day.
KPIs tell a story. The fastest way for me to learn about a company is through KPIs. When hired, I look at two sets of information. First, what my client is measuring. Second, what action steps they are taking to meet the targeted KPIs. Professional investors reap substantial financial rewards by studying KPI and executing plan to adjust the number of gaps toward the desired KPI. This gap is the difference between the current results and the desired results. When a company has well established KPIs in place, it is valued much higher as investors can easily understand its strengths and and weaknesses. Investors love clarity and transparency and companies with KPIs are a safer investment than businesses with no or limited measurement capacity. Thus they're willing to pay more for them.
KPIs help defend valuation I often use KPIs of my clients to establish value for a buyer. This strategy has helped me negotiate additional tens of millions of dollars in value over the years as I can show how an investor can make financial improvements within a business. Equipped with this knowledge, investors can see where they can stop waste and use their existing resources and economies of scale to drive value for their stakeholders. To professionally manage a business, we must measure, monitor and adjust various metrics in our companies. Busy practice owners often ignore this simple idea. They settle for basic and generic KPIs offered by their software vendors that are not sufficient in transitioning a family based company to a professionally operated business. Implementing key performance indicators in all departments must be one of the first things to do to improve current results and add significant value when ready to exit. Frequently Asked Questions.
We have measured a group's performance through KPI for several years, but we keep missing our targets to the point that managers only try to do them to satisfy our bosses. What do you recommend we do to meet our objectives?
Measuring KPI is like me going on a scale every week to see if I have lost weight, but then don't take any actions to support my targeted weight. So if you measure it for the sake of only pleasing the leadership team, it will never work. So let's examine some potential problems you're describing. First, you need to make sure the targets are not unrealistic. If you have too big of a goal, then employees will never be able to achieve it and it will demoralize them. But also after a while, they will not take it seriously. Secondly, the leadership team must adjust and improve KPIs so the targeted results can be achievable. For example, if the KPI for the number of new patients converted from inquiry to an appointment is $150 in a month, but the actual numbers are far below that target, does the leadership have a specific plan to close the gap. More importantly, is the leadership genuinely committed to investing, reinvesting, or training to achieve desired results? Sometimes they're not.
I have a small suburban dental practice with an average revenue of $600,000. Can I wait to implement KPIs once we have reached $1 million plus in revenue?
This question is common among small practice owners. As owners of a small business, we face many challenges and most of them have a significant impact on our finances. Thus, as a small business, we can become more vulnerable than a larger company who who has much more cash flow and a healthier balance sheet. Owners of small companies are often making poor decisions because of lack of proper information and relying more on emotions than logic. Therefore, I strongly suggest incorporating the KPIs into your practice immediately. Lack of it may have been why you have not grown to a bigger business already.
How can we use KPIs to improve our customer service?
KPIs classify as either quantitative or qualitative. If you can easily measure them by actual number, it will be considered quantitative. But the specific information that we need to gather to improve our business performance is qualitative. For example, suppose you survey your customer's level of satisfaction. In that case, even though it is qualitative, it can easily be translated to a Net Promoter score used for benchmarking against other companies. The higher the nps, the less financial impact on a business as less capital is allocated for marketing activities.
This is the end of Part eight, Chapter seven. Please proceed to Part nine.
