Business , Columns

KPIs leave out the whys

Key performance indicators help monitor the success of your actions, but they don’t explain the reasons for change.

KPIs leave out the whys

Key performance indicators, or KPIs, are individual business metrics that help veterinarians, managers and consultants evaluate the overall health of the practice, as well as the effectiveness of new programs and any progress toward goals.

With the multitude of reports available from practice management information software, plus more that can be customized in hundreds of ways, almost every detail recorded in the software can be served up in a report. The challenge becomes whether you can turn these individual pieces of data into information you can use to manage your practice.

A Measure of Change

KPIs help you evaluate the success of your practice as a whole or of a particular program. A metric compares a measurement to a baseline. For example, a hospital performed 75 dentistries during National Dental Health Month in 2017 compared with 68 in 2016, an increase of 10 percent. The baseline is 68 dentistries and the KPI is +10 percent. It is an objective measurement of the change in the number of dentistries done in the hospital.

A key question to ask before you begin to track KPIs is this: How will you use the information? What do you want as an outcome of tracking a specific figure? You should not measure KPIs because you read about them in a magazine or heard about them at a conference. KPIs should be aligned with your strategic objectives and your hospital’s core values.

KPIs are objective measurements that should be combined with subjective information to give you a comprehensive view of your practice.

Let’s look at a medical example: a physical examination of a cat. What is the goal? A healthy cat! How do we measure that goal? We measure it through both subjective and objective data. The objective data are essentially KPIs. The heart rate, respiratory rate, temperature, body weight, blood pressure and blood chemistries are all KPIs designed to tell us how healthy the cat really is.

How do we assess those KPIs? We measure them against national averages — normal ranges — and we measure them internally over time. You want to do the same thing with business KPIs. Identify the factors that influence your goals, and select objective metrics as your KPIs.

Which Metrics to Use

Common KPIs are financial and productivity measures, including growth in total fees, average transaction charge and staff salaries as a percent of gross fees. But your practice’s success depends on much more than financial metrics. Its success is also a function of the doctors and staff members on client satisfaction, patient outcomes and your position in the community. For a global view of your hospital, track a mix of financial, productivity, client satisfaction and employee engagement figures.

With the release of the AAHA/VMG Chart of Accounts for companion animal practices, there is now a widely accepted, standardized method for recording financial information. With this comes an abundance of new figures you can choose to track and manage. Before this new chart of accounts, many practices used a catchall account called Drugs and Supplies. Now, by breaking out categories of expenses that, ideally, match the way your income is allocated in your PIMS, it is possible to review income from injectables, for example, and compare that to the cost of injectables. Even better, the American Animal Hospital Association can begin to report ratios of income to expense and provide a comparison for practices across the country.

While comparing your hospital with national industry benchmarks is interesting, there is great value to comparing your hospital to its historical figures. No other veterinary practice is exactly like yours, practicing in the same environment with the same experiences and values. Comparing current figures to how your practice has performed in the past is an excellent way to evaluate whether you are moving in the right direction.

It is important to understand what each KPI measures and whether the national benchmarks are useful or are simply descriptive statistics. For example, is a cat weight of 10.4 pounds a normal weight? If a publication indicated that the national average weight for a cat was 10 pounds, would that mean this cat was overweight? The answer would depend on the cat’s breed and size, wouldn’t it? And wouldn’t the more meaningful KPI for this kitty be how her weight was trending over time? Would it really be a reasonable goal to get every cat to be 10 pounds simply because that was the national benchmark?

Think of this example when you consider which KPIs to use for your practice. What specific goals are you trying to attain? What KPIs are reasonable measures of your success in attaining those goals? What benchmarks should you use? National averages? Internal trends over time?  Both?

Review Regularly

KPIs help you monitor the success of your actions, but they don’t tell you why something changed, only that it did or didn’t change. Take the time to study and interpret the numbers. What forces were at work that had an impact on your KPI? Regular review allows you to monitor changes and apply quick course corrections, if necessary.

Discuss goals and the progress toward them at staff meetings, and clearly show the value created for the hospital as well as for the pets in your care. A stated goal of doing more geriatric cat dentistry does not automatically translate as “we want to see more older kitties and ensure their mouths are healthy and that they can eat comfortably.” In the absence of an explanation, some employees may construe this as, “We need to make more money on cats and dentistries are a way to do that.” If you don’t state the intention, your staff may interpret your goals much differently than you intended.

Some KPIs should be analyzed weekly or monthly, based on their relationship to your goals. Those may include changes in total fees, numbers of dentistry appointments or client satisfaction survey results. Others, like revenue per square foot, may be metrics you review only once or twice a year, if at all. Profitability, a critical KPI for most practices, fluctuates throughout the year due to the seasonality of most veterinary practice. Reviewing profitability more than once a year, and acting on those results, could lead to incorrect strategic assumptions.

While you may track some KPIs over the course of many years, others should change as your goals and focus change. If you reached your goal of seeing more geriatric cats, you may decide to switch your focus to a different subset of your patients. Continue to monitor geriatric cat appointments quarterly or semiannually to ensure that compliance remains high, but you won’t need to evaluate those numbers weekly or monthly.

Too Much Information

You may have heard the saying “What gets measured gets done.” This doesn’t mean that the more you measure the better you will manage. In fact, the more you measure, the greater the risk of drowning in TMI. Tracking and managing too many KPIs at once lead to confusion and the dilution of efforts.

Instead, focus on key areas of your practice and track only the information that is important to you right now. Select and monitor 15 to 20 KPIs regularly and develop a clear understanding of what they measure and how to manage those numbers effectively. Tune out the noise and focus on factors that will make a real difference for your practice. Move beyond TMI and use KPIs to effectively manage your practice and achieve your goals.

Money Matters columnist Leslie A. Mamalis is the owner and senior consultant at Summit Veterinary Advisors. Learn more at