BUSINESS MANAGEMENT TOOLS FOR OPTOMETRIC PRACTICES Management & Business Academy Sponsored by Alcon and Essilor RAPID IMPROVEMENT PROJECTS (RIPS) MBA Business Management Tools provide step-by-step guidelines to improve business processes and increase financial performance. Each technique has been proven to be useful in other business settings. TM Background In most optometric practices there are dozens of process improvements that can be made to improve financial performance. ODs who attend MBA seminars are often overwhelmed with the many opportunities the MBA faculty presents to improve operations. As they return home after an MBA seminar, attendees have difficulty deciding what to tackle first and how to get staff to embrace and implement changes needed to improve performance. Busy with the daily grind of patient care, drowning in a sea of opportunity and unsure of how to change staffs’ habitual behavior, many ODs simply postpone action and nothing changes. This MBA Business Management Tool outlines a very basic process for establishing practice improvement priorities and implementing Rapid Improvement Projects (RIPs) to achieve both short‑term and long‑term financial gains. The simple process can be used in most change initiatives involving staff. The RIP process is based on key learning about change initiatives from many businesses: • • • • • Attempts to change many aspects of current operations and achieve many goals simultaneously always fail. It is easier to retain focus and accomplish change over a shorter period than a longer period. Change initiatives are more likely to succeed when goals are expressed quantitatively, and progress is regularly monitored and reported. Frontline staff involved in implementing a new process must also be involved in planning the process change. This assures that all the likely unintended consequences of change are surfaced. And involving staff is more likely to achieve buy-in of changes. Behavior will change only when clear personal accountability for new concrete actions is defined. For further discussion of RIPs see Ownership Thinking by Brad Hams, chapter 5, pages 152-179. RIP Process 1. Select a key performance indicator (KPI) that, if improved, would yield a large revenue gain to the practice. A thorough business review is a useful prelude to selection of a performance indicator to be improved. MBA provides a comprehensive set of key metric benchmarks, or Key Performance Indicators (KPIs), for optometric practices. Comparing practice performance to these benchmarks is useful to isolate weaknesses. Conducting a SWOT analysis can also be helpful to identify KPIs in need of improvement (see MBA Business Management Tool “SWOT” on www.mba-ce.com). As opportunities are identified, a rough calculation of the financial gain from improving performance should be made for each KPI under consideration. A rank-ordering of the potential gains can be the basis for selecting a target KPI. It is unproductive to select RIP improvement goals for which there is no objective, quantitative measurement of current performance available, or which, if achieved, the short-term financial impact is unclear. For example, in the absence of prior patient satisfaction tracking, it is not productive to establish a RIP goal of “improving patient service.” It would also be very difficult to estimate objectively the near term financial impact of service improvement. 2. Compare current KPI performance to industry benchmarks and to historical performance by the practice. In order to bracket an improvement goal, it is useful to compare current KPI performance to industry benchmarks and to historical performance. The MBA Key Metrics: Assessing 2 MBA Business Management Tools, Rapid Improvement Projects (RIPs) Optometric Practice Performance, a comprehensive review of performance benchmarks for independent ODs, shows performance deciles for ODs, enabling practices to grade themselves on a reliable performance scale and bracket realistic quantitative goals. Plotting historical performance of the practice enables more accurate forecasting of KPI performance in the absence of any process change, which can also help bracket a goal and calculate the gain from improvement. 3. Establish a quantitative RIP goal to be achieved within 90 days, and identify the financial impact of achieving the goal. Setting a quantitative goal is critical to provide an objective standard for keeping score and measuring success. It’s more motivating to people to strive for concrete achievements (4‑minute mile, pole vaulting 16 feet, or lifting 350 pounds) than to have vague goals (running faster, vaulting higher, lifting more). Translating the KPI into dollars and cents will make the project seem more important to those who will implement it. Ninety days is a realistic timeframe for many improvement projects of limited scope. The advantage of limiting the time frame is that it’s easier to maintain the focus of a group for a shorter period and an imminent reward will be more motivating. More complex projects may take longer than 90 days, but involve the same steps. It can be helpful to name the RIP in a clever, memorable way to continuously reinforce its importance during daily activities. 4. Agree on the reward for achieving the goal. Offering an incentive to achieve the KPI goal is a way to engage active staff participation and foster teamwork. When individuals see that others in the work group are dependent on their effort to achieve the goal and reward, the group is more likely to police itself. 5. With staff input, identify the variables which impact the KPI, and rank order their importance. Many KPIs are influenced by many factors. It’s important to understand the relative contribution of the factors influencing performance so that those which are addressed in the action plan are those with the greatest impact. At the conclusion of this step, reach consensus on a limited number of variables influencing performance (maximum of five or six) to address in the action plan. 6. With the staff, brainstorm, reach consensus and document the concrete actions required to achieve the KPI goal, and assign responsibility for each action. Staff involvement in the RIP process is critical because staff is usually closer to the action and in a better position to craft a new process that is both practical and nuanced. Staff understands current process flaws and breakdowns and their root causes. Involving staff in projects to improve performance will teach staff how their activities influence financial results, and increase their sense of ownership. Staff involvement increases the likelihood that process changes will become permanent, because staff is able to exert control over their work. MBA Business Management Tools, Rapid Improvement Projects (RIPs) 3 For each variable identified in the previous step, brainstorm the actions that would need to occur to improve performance. As this is being done, identify the people responsible for each action. Reach consensus on the actions most likely to impact the KPI and which appear practical to implement in the short term. Document the action plan and schedule of personal accountabilities. 7. Post results continuously during the 90-day period, and monitor compliance with action plan. Keeping score and making the score readily observable will keep staff focused on the goal and on their contribution to the outcome. 8. Celebrate victory. At the end of the 90-day RIP event, favorable results should be celebrated and rewards delivered. It’s motivating to reiterate the financial impact of achieving the KPI goal and to recognize individual contributions to the outcome. This will improve the odds that process changes made during the 90-day RIP will become permanent 9. Conduct a post-mortem evaluation. In the course of making process changes to achieve the KPI goal, the group may gain new insights into factors that retarded progress or which might be implemented to further improve results. For some KPI these goals should be surfaced in a post-mortem staff meeting. The group may decide to set a new, higher goal for the same KPI for the next 90day period. These should be surfaced in a post-mortem staff meeting. For some KPI goals, at this meeting the group may decide to set a new, higher goal for the same KPI for the next 90-day period. Caveats • • • • 4 Select a KPI for improvement that has a limited number of variables affecting performance. Some global KPIs (such as revenue per exam) are influenced by dozens of activities of the practice. It is more effective to break down such global KPIs into component elements (such as revenue per eyewear Rx, contact lens sales per contact lens exam, average exam fees, etc.) and address each as a separate RIP initiative. Component KPIs have fewer variables influencing performance, reducing the complexity of a change action plan to a manageable scope. In setting 90-day goals, it is better to strive for modest but realistic and meaningful goals than for over-ambitious stretch goals that take no account of the difficulty of changing entrenched habits or of inevitable, unforeseen obstacles to change. When enumerating the variables impacting a KPI, it is important to be thorough and to assess objectively the relative contribution of each variable. If the action plan does not address the most relevant and impactful variables, the likelihood of goal achievement is reduced. Action steps should be specified as concretely as possible. Specific behaviors to be performed by specified individuals in defined situations are more likely to be implemented than vague statements about desired outcomes. MBA Business Management Tools, Rapid Improvement Projects (RIPs) RIP Process Example Steps 1-3 KPI selection, goal setting, financial impact estimation Situation: Practice dispensed 1,500 pairs of eyewear in past year, of which 750 pairs were sold to patients with vision insurance. The average revenue-per-pair from patients with vision insurance patients was $200 (selected KPI), and from patients with no insurance it was $250. The average revenue-per-pair from patients with vision insurance has been stable over the past 12 months. KPI Goal: The goal is to increase average revenue‑per‑eyewear pair sold to patients with insurance to $225 by month three of the project. Financial Impact: If average revenue‑per‑eyewear pair sold to patients with vision insurance were increased to $225, with same number of exams performed, annual eyewear sales revenue from these patients would grow to $168,750 from $150,000—an increase of $18,750. Step 4 Reward for achieving goal A dinner party, including spouses/significant others, will be held at an upscale restaurant during month four. Step 5 Variables impacting KPI • Patient understanding of insurance benefits • Staff habit to assume patients want to limit purchases to what insurance covers • Gross revenue‑per‑eyewear sale (eyewear product mix) ○○ OD lens recommendation and handoff to dispensary ○○ AR lens percent of Rxes ○○ Progressive lens percent of presbyopic Rxes ○○ High index lens percent of Rxes ○○ Prescription sunwear percent of Rxes ○○ Frames merchandising ○○ Average frames sale • Eyewear retail pricing Step 6 Action plan 1. As office visit commences, receptionist will notify patients of current coverage limits and explain that allowances cover basics only and not devices that most patients prefer. 2. Doctor will close each eyeglass patient exam with a concrete recommendation/prescription for a spectacle lens offering best performance and will reiterate recommendation in presence of optician. 3. Anti-reflective treatment will be recommended to every patient purchasing eyewear, by both doctor and optician. MBA Business Management Tools, Rapid Improvement Projects (RIPs) 5 4. Branded designer frames will be displayed in the prime location in the dispensary, and the optician will encourage all patients to examine the display first. Step 7 Performance tracking/monitoring Performance metrics to be tracked: • Revenue‑per‑eyeglass Rx • Percent of eyewear Rxes with AR lenses • Average frames sale Step 8 Celebration Conduct dinner party during month four. At staff gathering, praise individual performance and show financial impact of achieving goal. Step 9 Post-mortem evaluation It was agreed that, as the dispensing process began, the optician would remind patients that their insurance was a valuable discount not meant to cover the entire cost of desirable eyewear. A goal of $300 revenue‑per‑vision‑insurance‑patient was set for the final month of the next quarter. TM About the Management & Business Academy The Management & Business Academy™ (MBA), which is sponsored by Alcon and Essilor, was begun in 2005 as a unique professional education program designed to teach eye care professionals skills and techniques to boost practice performance. The program includes seminars with lectures by leading practice management experts. The curriculum focuses on practical, easy-to-implement ideas to improve office processes and financial results. Topics include financial measurement and goal setting, enhancing the product mix, creating legendary customer service, managing and motivating staff effectively, increasing patient loyalty, and effective case presentation. The sponsoring companies consider the MBA program an important commitment to educating their customers about how dispensing advanced technology products can provide the highest standards of care to the patient and financial success to the practice. 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