Did you hear about Wells Fargo? For years, the company served as a role model in the banking world for exemplary customer service. Wells Fargo set a goal, or key performance indicator (KPI), to sell eight products to every customer. To accomplish this, they created the “Eight is great” motto, which incentivized employees to cross-sell more products. Did the campaign lead to greater customer satisfaction? Hardly. Instead, Wells Fargo employees created 2 million fake accounts, which led to fraud allegations, $185 million in fines, lost customers and tremendous damage to the brand. Oops!
Was the KPI designed to meet consumer needs? Did it drive the right employee behaviors? Did it serve the bank’s needs? The consequence was not what was intended.
How about another unintended consequence? Sugar cane beetles caused tremendous damage to cane fields in Queensland, Australia. To combat the beetles, the government introduced cane toads from Hawaii in the 1930s. Problem solved? Nope. The poisonous toads thrived in the wild, had little effect on the beetles and caused tremendous ecological damage. Not good.
Here’s one more. Have you tried to solve an issue through a call center representative? Did you feel rushed to conclude your call and hang up? That’s because call centers track a KPI known as AHT, or average handling time. Workers are incentivized to shorten calls. The KPI is not concerned with resolving the issue or satisfying the customer. Perhaps it is the intended consequence.
KPIs Help You Keep Score
Don’t get me wrong, key performance indicators are critical to the success of your veterinary practice. In the same way diagnostic values can assist in determining the status of your patients, KPIs can indicate the health status of your practice. So, let’s back up for a second. What the heck is a key performance indicator and why should you care?
For many of us, KPIs are measures of things like average client charge or the number of pets seen per day. KPIs are meant to monitor goals, reach targets and “keep score” on the things that matter. After all, if you don’t know the score, how do you know if your team or practice is winning? As the old business saying goes, what you measure is what you get.
Intellectually, KPIs are not good or bad. When the right performance is tracked, and that measure results in improved performance, it’s a wonderful thing. But when the wrong KPIs are tracked, or the wrong behaviors are incentivized, you may see unintended outcomes.
Well-meaning KPIs are set with the intention to motivate behaviors that result in successful outcomes. While this is a great idea that often works, getting lost in the weeds is easy.
With that in mind, here are a few tips for developing effective and meaningful KPIs:
- Keep them simple. Focus on the critical few, not the trivial many.
- Ask yourself and the team, “What are measures of importance?” The measures must drive the most important factors in achieving success.
- Make KPIs relatable on all levels of your team. Financial metrics are often not meaningful to your team.
- Ensure that the team buys into the value of your KPIs. Are you and your team after the right outcome?
In the veterinary world, I would consider these KPIs, all of which are good measures that can result in desired outcomes.
- Average patient charge. Or average transaction charge, which is a similar measure.
- Number of pets seen per day.
- Revenue each doctor produces per day.
- Monthly profitability (profit and loss).
Blank sheet, clean slate, fresh start. Pick your metaphor. We’d start with the desired outcomes and work backward, or “Begin with the end in mind,” as my hero, Steven Covey, says. What are the desired outcomes? What is it we really want from a successful practice? I’ve thought long and hard and come up with four things. You might come up with others.
1. Live Long and Prosper Index
How about a KPI that measures the lifespan of the pets in our care? It would correlate directly to regular visits throughout the pet’s life. Patients would receive great lifetime preventive care, including nutritional and behavior counseling, parasite control, immunizations, complete dental care, and needed reactive care.
Consider the lifetime pet spend that results. The American Animal Hospital Association estimates that if pets receive all the care they need, the lifetime spend would be over $17,700. That compares to about $3,600 in good AAHA practices today. That’s a 5x difference! Pets receiving all the recommended care are living well into their teen years. While I love puppies and kittens, more geriatric care would be wonderful for all concerned — happy, healthy pets and families living longer together. It’s a KPI I’d like to focus on.
If we tracked pet lifespans, an admittedly difficult measure, what behaviors might be incentivized? How about forward-booking, subscription preventive-care plans and no perceived penalties for low-dollar follow-up appointments. All these would drive longer pet lifespans and lifetime spends. Would your team get excited if every new-patient exam started with an agreement with the owner to work together to have the pet live up to 20 happy years?
A surrogate KPI for pet lifespan might be the number of visits per year. So, how about this completely unscientific, rife with speculation, back-of-the-envelope thought: For every two visits per year over the pet’s life, we add two months to the lifespan and far more to the quality of life for the pet and family. Fuzzy math would show that a 12-year-old pet, having seen your team at least twice a year over 12 years, can expect to live an additional two years. Pets previously living to 12 would now live to 14. Who wouldn’t sign up for that?
2. Happy Team Index
How about a KPI for doctor and team retention? Retention is easy to track and is arguably a good surrogate for team happiness. Having doctors and teams that are long tenured should indicate a good workplace, a healthy culture and a happy team. It also translates to lower rates of burnout, compassion fatigue, depression and, god forbid, suicide. A KPI as simple as retention could go a long way toward driving wellness in our profession. What is good doctor retention? Ninety percent annually? Ninety-five percent?
What if the No. 1 metric tracked was retention (as it is at the WellHaven Pet Health family of practices)? How might your team’s workday, week, year or career look? Four-day work weeks, additional vacation, more flexible schedules, happier teams, fewer hiring-and-firing headaches? That sounds good to me.
3. Happy Client Index
How about a client satisfaction and enthusiasm KPI? Happy clients could be measured by survey, Yelp, Google, net promoter score. Pick your measure. Happy clients could indicate a happy team, strong culture and good care.
What if client enthusiasm was tracked? When clients are friends and fans whose pets you see multiple times a year, and both sides are committed to providing the pet with its best and longest possible life, only good things result.
What’s your client satisfaction score? How many referrals are you getting? How does your client retention look? Are clients telling their friends and neighbors how good your practice is? Arguably, if you had one KPI to track, the happy client metric might be the one to follow.
4. Freedom Index
Like it or not — and I like it — profitability is a key measure of the success of a practice. If pets in your care are living longer, if your teams are long tenured and if your clients are happy, then profitability should be the natural result. Good business and good medicine go hand in hand. Profits result in the freedom to add team members, employee benefits and equipment, help more pets, introduce new services, take time off and maybe allow you to retire.
We got into this profession to make a difference, but as it turns out, to make a difference you need to make a dollar. Even nonprofits have to make a dollar.
The current KPIs I see most often are not bad, but they might not be driving the preferred behaviors and outcomes as outlined above. Measures like transactions, production goals and monthly profit and loss have their place, but all focus on the short term and aren’t especially useful ways to motivate teams. What if our focus shifted slightly to longer term and more inspiring KPIs?
A Desire to Give Back
The law of unintended consequences is that actions of people have unanticipated effects. Adam Smith, the father of economics, talked about the “invisible hand” as an example of a positive unintended consequence. He believed that we all seek only our own gain (our individual interests) but that in the end we promote the public interest.
“It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner,” he wrote, “but from their regard to their own interest.”
We are each led by an invisible hand to promote an end that was not intended.
In the case of veterinary medicine, we are called to this profession to better the lives of pets and families, and to better the lives of those with whom we work. In so doing, we will inevitably deliver improved emotional, physical and financial well-being for all.
I like to think our profession is, by nature, motivated not entirely by self-interest but more from a desire to give back. The result: a thriving profession, high favorability ratings and pets living longer, happier lives.
If we rethink our veterinary KPIs to track give-back measures like pet life spans, team retention and customer enthusiasm, we’re then producing happy pets, happy teams and happy customers. Under these conditions, profitability is sure to follow.