Be Informed is William Buck's regular newsletter, filled with up to date news and relevant advice for individuals and businesses.
Identifying measures that matter
Today, accounting systems have allowed improvements in decision-making and performance due to their ability to collect, analyse and report information on a range of deliverables. These are a great source of information for an organisation, however when it comes to measuring actual business performance, the traditional means of solely relying on financial indicators does not offer a holistic view.
Getting the balance right involves analysing a range of functional management and high-level practice information to track trends on every level and to align these with key activities and goals. When the focus is only on financial outcomes, the practice’s strategy and objectives are not clear, which in-turn affects other facets of the organisation- most significantly culture, which drives growth and encourages positive behaviours and overall business performance.
A management system commonly used to gather more accurate views of business performance is the ‘Balanced Scorecard.’ This scorecard is derived from the practice’s strategy, which sets, tracks and achieves key business strategies and objectives. Put simply, it’s a Report on A Page (ROAP).
As these measures are derived from the practice’s strategy, it has evolved from being a performance measurement system to a strategic implementation system. This is for the two reasons. Firstly, the Balanced Scorecard forces practice owners and managers to translate what can be a vaguely expressed as strategy into concrete objectives and measures. Secondly, it is relatively straightforward to cascade the scorecard down throughout the practice and thus create a culture of shared objectives.
A Balanced Scorecard integrates performance measures from four perspectives: financial, customer, internal business processes and learning and growth perspective. It’s important to employ a range of measures in each of these functional areas that identifies business drivers, data and KPIs.
Finance measures include revenue, profitability, cash and budget variances. However, when it comes to KPIs, financial indicators should only make up about 25 per cent and Non-financial 75 per cent of your measurement capabilities. The other 75 percent comes from customer measures that capture the creation of value from the perspective of the customer such as their satisfaction; Internal business processes which include the key processes at which the practice excels in order to add value to customers and, a learning and growth perspective that supports the rest of the scorecard, by focusing on the organisational infrastructure, such as employee skills and information systems.
Some KPIs for a practice may include:
- Percentage of claims denied by Medicare per month
- Average number of consultations per hour by GP
- Percentage of new patient numbers per month
- Percentage of patient cancellations and ‘no-shows’ per month
- Employee satisfaction
- Percentage of patients who book follow up appointments
- Cost to acquire new patient per marketing channel.
- Average visit value (Total revenue / Total Visits)
- Patient waiting minutes
To ensure your KPIs are working the best for you, it’s first key not to fall into two common traps of performance measurement. First, don’t make the mistake of measuring against yourself. Benchmarking your practice against other practices will ensure that you measure performance against an independent, industry standard source. Second, make sure that you don’t just look backward. Although historical performance can be a good gauge, when it comes to identifying future performance, you need to look at big trends and other external and internal forces that may inhibit or grow your performance. Therefore, it should also cover a variety of lead and lag indicators; that is what is about to occur and what has already occurred.
While developing a high-quality set of performance indicators takes considerable effort to develop, the positive outcomes for practices are worth the investment of time and resources; creating synergy throughout and ultimately allowing the business to perform at its best.
The ability to accurately measure and report on the identified measures may be difficult given internal reporting system limitations. A number of key challenges when implementing a Balanced Scorecard can arise such as not having a clear idea of the practice’s strategy and key objectives , having conflict in terms of what measures are deemed as important. Also, if compensation is tied to key targets for the performance indicators, conflicts of interest may arise and cause considerable bias in the process.
It’s important to engage your doctors, support staff and customer’s satisfaction to understand if your measures are working; fine tuning and diligence is required by all parties.
To achieve objectives, once you have identified the KPIs for each key business area, creating a dashboard – or visual display- where metrics and goals come together to provide a complete view of the situation will allow everyone to visualise and monitor the consolidated information at a glance. This is where your ROAP comes into play. Your KPIs are much like instruments that measure temperature and barometric pressure. It might be useful to know whether the temperature has increased or decreased, and even more critical, whether a storm is imminent.
Armed with insights, you can take action to strengthen the leading indicators and drive improved future results.
When it comes to KPIs, consistency is key. They aren’t a set and forget implementation. A healthy process for identifying and implementing key performance indicators involves the practice owners and managers regularly revisiting and revising the measures. Furthermore, a properly developed and implemented KPI program incorporates regular review processes where practice owners and managers and other stakeholders (such as your doctors) assess the meaning of the results.