It’s a Fact: You Can’t Modify What You Don’t Measure

Performance metrics are crucial tools for business success.

With the publication of the Bayer Veterinary Care Usage Study in January 2011, veterinarians were once again reminded that performance metrics, or key performance indicators (KPIs), are crucial tools for business success. There is no alternative to timely and accurate tracking of KPIs as a means to uncover detrimental changes—for example, in patient visits, dentals, or profitability—and to react quickly to reverse negative trends.

The Bayer Study provides evidence straight from pet owners that confirms that the decline in number of clinic visits shown in studies conducted over the past 10 years by the American Animal Hospital Association, American Veterinary Medical Association, Well Managed Practice, and the National Commission on Veterinary Economic Issues. Among other things, the Bayer Study also confirms that feline visits in particular have declined significantly, new client numbers have decreased, and cost of care often trumps loyalty.

These negative trends began far before our country was hit with an economic recession, but as an industry we have been slow to pinpoint the causes or take action. But the Bayer Study hit us hard enough to cause an industry wide awakening, which is the first major step toward a collective and solution-oriented reaction. With our awareness of the need to take action, it is time to implement strategies for reversing negative trends and pet owner perceptions. To do so successfully, practices need to:

KPIs serve to reduce the complex nature of practice performance to a small number of key indicators that make it more digestible. We use same approach we use in our daily lives; for example, your physician might measure your blood pressure, cholesterol levels, heart rate, and body mass index as key indicators of your health. These KPIs help determine whether an illness exists, and if so in what areas of the body is it being generated.

Industry-wide KPIs

Industry-wide KPIs use the “apples to apples” approach, which makes it possible for one practice to evaluate its success by comparing it to averages compiled from a large number of practices. These metrics also provide important data for analyzing and recognizing overall positive and negative trends within a practice. Since time is of the essence for recognizing trends, it is a good idea to create separate charts where it is easy to comparatively analyze performance both annually and monthly, with industry data included as an additional set of data points in each chart for a truly complete picture.

Gaining insight by measuring KPIs is only the starting point, though. The most important step is what is actually done with the knowledge gleaned, and this is where practices often fall down. What needs to happen for KPIs to truly provide value to a practice is the creation of a continuous closed-loop process of improvement that includes measurement, analysis, action and re-measurement. It is about recognizing what are most effective, discontinuing things that are contributing to downward trends, and increasing the things that are working and contributing to improved performance.

Keep in mind…while the above KPIs provide important, big-picture data, these measurements focus solely on revenue generation and not true profitability. A practice can perform at the highest end of the spectrum with regard to industrywide KPIs, yet its true performance can only be determined by calculating profitability, which for many is not a simple task.

Although not a topic for this article, profitability is an important concept for practice owners and managers to understand; for more information on the importance of profitability and how to calculate it go here.

Marketing Metrics

Marketing is an area in which veterinarians tend to be guilty of several things, not the least of which is a lack of metrics from which to make effective planning decisions and allocate appropriate budgets. As a result, many “fly blind” and respond too slowly to new marketing opportunities, which contributes to an inability to maintain a steady stream of new clients, as well as retain and increase interaction with current clients.

With regard to new clients, the following two metrics should be added to the industrywide KPI “wish list”:

Unfortunately, the current lack of “apples to apples” information in this regard makes it very difficult to accurately compare a practice’s internal data to industry averages, but that does not diminish the immense value these measurements have for an individual practice. And while both of these KPIs have some value by themselves, the greatest value is in determining the cause and effect relationship between them.

Here’s a simple example: You spend $10,000 to run a coupon for a free exam (regularly priced at $54) for new clients in the local Sunday paper and earn 3 new clients. You spend $2000 to post the same coupon on a local advertising website and earn 6 new clients. You can then calculate the basic cost to the practice for obtaining each new client. New clients from the newspaper cost $3387, while new clients from local advertising site cost $387—quite a difference! While anyone reading this would immediately withdraw from the newspaper campaign, the reality is that simple measurements such as this are often not calculated, or not calculated often enough, thus wasting extremely limited and valuable resources.

Practice-Specific KPIs

In practice, the term key performance indicators is overused and describes any form of measurement data and performance metrics, regardless of whether they has value.  This lack of understanding can lead a business to make 2 big mistakes: measuring the wrong things and measuring too many things. In the first case incorrect and/or irrelevant data can actually head a program or initiative in the wrong direction; in the second case, too much information often leads to excessive confusion, resulting in a lack of action being taken in any direction at all.

In short, what matters most is that metrics are linked to a specific strategic initiative in order to measure those things that matter most. Once a strategy has been agreed upon, defined, and mapped, KPIs should be designed to track progress and gain relevant insights. These insights will then empower both leaders and team members by providing information for improved decision making and performance.

For 3 examples of Metric Charts, click here.

Consider a practice that has unveiled a strategic initiative to increase the number of chemistries performed on pets over the age 7. In preparation, the entire team has been educated on promoting and explaining the importance of annual blood work for senior pets. What are the most important questions to ask—the ones that will provide the most relevant performance assessment indicators?

The first performance metric to track is the number of chemistries performed on senior pets compared to the same time period in previous years. But this information alone is not enough, because it doesn’t answer the important question, “How many senior pets did we see?” If your practice saw 25% more senior pets in June 2011 versus June 2010 but the number of chemistries only increased 8% during the same time period, the program is actually not as successful as it would appear if you were only tracking the sale of blood work.

In the same scenario, consider that there is concern over individual doctor performance and compliance. An important question to ask would be, “How does the number of senior pets seen and the number of chemistries performed break down by provider?”  Creating this KPI as a performance assessment indicator will make it possible to analyze and break down the information in a different context and determine whether there are discrepancies among veterinarians that require further investigation.