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Hi and welcome to Be the Flagship with our podcast host Jeff Parsons. This is

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where we tackle the day-to-day talent management challenges you face,

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particularly in hospice and small health care organizations. And now over to our

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host. Take it away Jeff. Hello and thank you. I'm Jeff Parsons, host of Be the

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Flagship where our focus is on talent in the hospice and small health care space.

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Today our topic is financial metrics and the importance of having the right

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metrics for your small health care business. And joining us today we have

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Jeff Smith, an expert in the subject. Jeff has joined us in a previous episode

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along with his dear wife. The episode I believe was when purpose meets

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performance or when performance and purpose meet. But today he's joining us

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and he's running solo. And Jeff is a CPA. He's been in finance for quite a while.

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Quite a while. How long have you been in finance Jeff? Well I've been working as

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an accountant for over 30 years. Just one point of clarification. I'm a CPA but my

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designation is a chartered professional accountant. It's a Canadian designation.

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So just to make sure everyone's clear on that. Oh I got you. You have a special

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Canadian certification. That's right. Yeah. And you're also founder of a consulting

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business called Dynamic Strategy LLC. Correct. And how long has that business

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been in place? I started it in June and I decided to parlay my 30 plus years of

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accounting experience into helping other businesses with their strategy and

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operational planning. Gotcha. Gotcha. And so that today's episode is titled

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What's Your Number? And so some of the things we'll talk about today and the

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focus of our discussion will be you know why it's important to measure and report

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on activity. You know how metrics drive behavior. How to choose the right measure.

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Balance scorecards and things like that. Is that correct? That is correct. All right.

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Well I can't wait to get started. So first question. What do you mean when you

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ask what is your number? Well Jeff every business is unique and analysts group

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businesses into what they call peer groups for ease of comparison.

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However each business has unique factors that are key to their success.

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For an example United Airlines and Southwest Airlines are both in the

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same peer group for stock market measuring. But it would be reasonable for

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financial analysts to provide comparisons for their results and their

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strength of their investment quality for the two companies. But the specific

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factors that make those two airlines successful are drastically different.

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Southwest Airlines is a discount airline and they control costs by standardizing

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their planes, limiting the number of destinations that they fly to, and

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limiting it amenities. When I was flying with three young children Southwest was

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definitely my airline of choice because I valued cost over amenities. Fast

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forward to when I'm traveling as a business consultant. United is a full

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service airline and though many love to hate United they are one of the largest

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airlines in North America. They are they're more expensive to fly than

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Southwest in many instances but customers have more options, more

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amenities, and they have a loyalty program. So as a business traveler I fly

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almost exclusively with United because I value those amenities and the

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convenience more than the cost savings. So when I'm upgraded I have more space

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to work and rest and I arrive at my destination better prepared to do the

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business that I'm traveling for. Okay, all right, fair enough. So why is it

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important to measure and report on activities Jeff? So in simple terms you

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get what you're measuring. So when you have clearly articulated mission,

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understand what your factors that drive success are, and you communicate

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clearly what those what targets your organization has, and you have a system

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of reporting, then you have clarity of focus. You can measure your progress, you

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can align with bigger goals, and you can find guidance for decision-making based

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on those metrics. So when done consistently you can achieve increased

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productivity, motivation, and commitment in adaptation and resilience. So for

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example when I when I worked at a company that had a critical release they

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needed to send the first shipment of the by the end of the day for product launch

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success. Employees in different departments, the the accounting department,

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the purchasing department, the engineering department, we all left our

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normal daily tasks to support the production team in finishing that

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important first shipment because there was that clarity and urgency of that

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was generated by that target. And because the organization was clear on the

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objective and why it was so important, everyone really went to extraordinary

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measures to ensure the success of it. Gotcha. So how do you know what to

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measure Jeff? Well there is a difference between leading indicators and

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trailing indicators. That's important to really understand because leading

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indicators are predictive. They measure the activity that drives results.

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By contrast, lagging indicators measure historical results. For example a leading

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indicator might be the number of potential client conversations per day.

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You know that the number of clients you talk to will eventually turn into new

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clients that are engaged. Well the trailing indicator is that number

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of new clients. So as much as possible it's important to measure your leading

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indicators because they tend to be activity focused and within the control

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of whatever group is performing them. Whereas trailing indicators are an

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indicator of the results that are gained from it. I see. You know and as I'm

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listening to you Jeff, you know I'm wondering how do you know if I'm if

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you're measuring the right activities? That's a great question Jeff because

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you know you need to be careful what you measure. That the

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metrics in an organization really should support the purpose of the

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organization. Last time we talked about where purpose and performance

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meet this is really an extension of that conversation. For example it would be

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incongruous to have a metric that emphasized maximizing the number of

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patients seen if the mission of the organization was to take the time

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necessary for the patient to not feel rushed in an appointment.

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And so making sure that they match is really important. I see okay.

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You can assess whether you're measuring the right

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activities if they're aligned with your mission, your vision, and your purpose of

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course. And whether they contribute to the organization's objectives. You can

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measure whether they have a substantial impact on the outcome of the

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organization. You know it doesn't make sense to measure the finest little

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details. Measure the big things that are going to have an impact on the

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organization. And you can tell if you're measuring the right things if you have

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buy-in from your stakeholders. So a lot of it is spending the time up front

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talking to your employees, talking to your investors, talking to your

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stakeholders to make sure that you're measuring the right activities. Okay well

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that makes sense and it seems to me that this would be a bit of a continuous

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cycle of review to make sure that you know you would review it occasionally

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your metrics to make sure that you are measuring the right things and that they

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are still aligned with your mission and vision and purpose and those types of

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things. Is that right? Absolutely. There's a design thinking quote that I absolutely

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love. They say fail fast and cheap. So you really should be constantly

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analyzing what you're measuring. And if it's not serving its purpose then don't

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continue just because it's a metric. Change what you do. Got it. Got it. So once

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you know what you're going to measure how do you go about setting targets? So

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I'm sure you've heard of the good metrics being smart. Yeah.

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Good metrics drive behavior and so smart is an acronym for specific,

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measurable, achievable, relevant, and time-bound. So a specific goal is

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clear and well defined. A measurable goal is quantifiable. That the

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responsible party needs to be able to measure whether they are achieving that

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goal or not. Whereas achievable is goals that are realistic and attainable so

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that they'll be motivating. They'll need to be challenging enough

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to generate a stretch but not so challenging that they become demotivating

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to the person who's responsible. Right. A relevant goal is it should align with

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the objectives of the organization and make sense to both the individual and

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the organization. And of course there should be a time limit on them. Like

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just to say I'm going to generate a hundred referral partners doesn't mean

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anything unless you put a time frame on that and say I'm going to generate a

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hundred referral partners per month or per quarter or per year. Right. Right.

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Well that makes sense. You know it's interesting to think of smart goals in

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this context. You know being in HR for over 30 years I've often taught people

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to use smart goals with performance management for employees to measure

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their performance. What you're doing is taking that same concept and saying we

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can use this to make sure we're aligned and determine what the correct metrics

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are for our overall business goals. Correct. Good. Well can you recommend any

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tools that would help in setting up metrics? So the one that I really love is

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is the balance scorecard. There's many goal setting tools out there. The

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balance scorecard was developed by two people way smarter than me. In the 1990s

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Dr. Robert Kaplan and Dr. David Norton developed something that they called the

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the balance scorecard. And it's designed to help businesses avoid becoming

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too focused on one area of the business. It's really easy especially in a

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for-profit business to become ultra focused on the financial aspects. But

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right we as individuals tend to be ultra focused. We get an out of balance in all

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aspects of goal setting. And one example is you know weight loss. You see all

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kinds of especially coming up to Thanksgiving you see lots of weight

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loss programs. But when you get so focused on the goal of losing weight

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it's easy to focus just on the number of the scale. Maybe to the detriment of your

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physical fitness or your health healthy diet or or the sustainability of the

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weight loss. And so the same is true for organizations. When they become overly

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focused on one aspect of their performance they can lose sight of the

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other aspects that affect the organization's health. So balance scorecard

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is really that breaks it up into four different perspectives. There's a

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financial perspective which measures a lot of the trailing indicators.

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And it answers the question about how do I look to my shareholders or my

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stakeholders. And you know that's really important but not the only

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thing we should focus on. The customer perspective answers the question about

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how do we look to our customers. And in that perspective looks at the

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organization from the viewpoint of the customers and it includes measures

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related to customer satisfaction, loyalty, market share, and customer

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retention. Whereas internal process, this perspective assesses the

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efficiency and effectiveness of an organization with regards to their

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internal processes. Identifying critical processes and measures, key performance

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indicators related to how effective processes are. And it answers the

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question of what must we excel at to satisfy both our customers and our

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shareholders. And finally there's a learning and growth perspective

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which you as an HR guy would really appreciate. And that's really

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focuses on how the organization can adapt, innovate, and learn for its future

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success. And it measures things like employee satisfaction, training and

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development, and innovation. Might even measure time to market to measure how

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agile that company might be. And it answers the question is how can we

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continue to improve and create value with the future. Go ahead Jeff, I'm smart.

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Yeah so I really like the the framework that it that it sets out because it

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ensures that people like me who are financially focused don't become

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unbalanced in our approach. And that we make sure that our organizations have a

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balanced set of metrics. So there really should be like depending on the size of

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the organization but four to six KPIs in each each of those four quadrants would

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be would give you a good picture of how balanced your organization is. Okay so do

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you mind if I go back to these four and just delve into it a little bit deeper?

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Certainly go ahead. The financial perspective I mean that that makes sense

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you know you're taking a look at your trailing indicators and how well

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you've done financially right? Yeah. So that makes sense. The customer

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perspective when you're wanting to get the customer perspective can you give us

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some ideas on the best way to do that or some examples of where you've seen that

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done before? Yeah if you if you take a step back and think about your business

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as far as how how does my customer perceive the organization? And I used to

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work for a company where every month we did a financial review with the CEO and

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his final question to all of us was are your customers thrilled to do business

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with you? And so that's a step back and say okay well what are my processes and

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policies and procedures that impact how the customer experiences our business?

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And for example if you have a business that's really client-focused really

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wanting to make the customer thrilled to do business with you but you have all

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kinds of upfront policies and procedures that prevent a smooth conversation with

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the customer then you're you've got a broken process. So measuring things like

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customer satisfaction or customer retention is is really important. A lot

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of people use what's called a net promoter score where they contact the

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customer after the transaction to find out about their experience and rate the

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the experience of the customer. Okay so you see that a lot even in health care

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right? I mean you get something from the dentist if you've been to the dentist or

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a doctor's office or whatever and it's basically asking you to give them a

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review. Yes yes absolutely. Can I can I tell you a little story? Sure. Several

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years ago when we lived in Canada we had to bring my daughter into the emergency

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room and in Canada being socialized medicine there's some inefficiencies in

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the process. Quality of health care is fantastic. The the process needs work and

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so we went into the the emergency room and we stood in line we told the the

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intake nurse what what the issue was. She took down some basic information and

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then sent us to the next line to wait in line to finish the the intake process.

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After which we sat in the the waiting room for several hours and finally

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seeing a doctor right? Okay right. So if you look at that from the customer's

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perspective we've got a sick child who needs to see somebody in the process is

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to wait in line only to wait in line again and then to wait in the waiting

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room. You can see how that might be frustrating and so measuring what it's

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like to be a customer is just so important to the process. Yeah yeah it

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sounds as though they were measuring your persistence. So Jeff I have another

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question for you. When you when you speak of internal process perspective can you

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give us an example of how you've approached that in other organizations

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and maybe some of the tools that you use to get a better perspective on your

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internal process effectiveness and efficiency. I have a thought but I wanted

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to hear yours first. So internal process is really what are the the processes

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that support both the customer experience and the shareholder experience.

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And so so measures like production efficiency might be an internal

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process. Things like if you're an insurance company using the the time to

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claim settlement is a key indicator as far as how profitable the insurance

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company will be because the longer a claim stays outstanding the more

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expensive it's going to be. So got it okay yeah I understand yeah I was

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thinking in terms of you know process improvement tools like lane or value

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stream mapping or something like that help you understand where your bottle

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legs and processes are. That is a very good point Jeff yeah both both lean and value

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mapping are excellent tools to understand where the waste and inefficiency is in a

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business and they can generate some really good internal perspectives. Got it

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got it. Well Jeff I think I'm out of questions. I really appreciate you

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joining us today. Can you let the listeners know how to contact you should

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they have any further questions or would like to discuss this topic in more detail

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with you. Of course my email address is is a little bit complicated and I trust

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you'll put it in the notes but it is Jeff with a G G E O F F dot Smith S M I T H

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at dynamic strategy LLC dot com. Perfect perfect well Jeff thank you again I hope

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you have wonderful holidays give your wife Brenda Lee a hug for me and thanks

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so much and you're always welcome. Will do and I appreciate it Jeff. Okay before

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we wrap it up here's a little commercial about flagship talent solutions and then

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a joke for today. At flagship talent we work with our clients to find and place

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the right talent. What do we mean by the right talent? We mean we find talent who

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will commit to your organizational goals and align with your values and behavior

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expectations. Talent who will perform to your expectations. Talent who will stay

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and grow with your organization. How are we different from our competitors? We

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offer the lowest fee structure in the industry. We offer the best talent

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guarantee in the industry. We provide selection and interviewing support to our

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clients at no additional fee. We want to save you money, deliver high quality

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talent, become an extension of your organization and be your preferred

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provider of talent acquisition solutions. To learn more contact Jeff Parsons by

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email at Jeff at flagship talent com or by phone at 1-800-530-4189

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extension 101. Okay let's wrap it up with a laugh. So why are elves such great

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motivational speakers? Thought I'd use a Christmas joke today. Why are elves such

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great motivational speakers? Because they're so full of elf confidence.

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Until next week, goodbye.

