Hi and welcome to Be the Flagship with our podcast host Jeff Parsons. This is
where we tackle the day-to-day talent management challenges you face,
particularly in hospice and small health care organizations. And now over to our
host. Take it away Jeff. Hello and thank you. I'm Jeff Parsons, host of Be the
Flagship where our focus is on talent in the hospice and small health care space.
Today our topic is financial metrics and the importance of having the right
metrics for your small health care business. And joining us today we have
Jeff Smith, an expert in the subject. Jeff has joined us in a previous episode
along with his dear wife. The episode I believe was when purpose meets
performance or when performance and purpose meet. But today he's joining us
and he's running solo. And Jeff is a CPA. He's been in finance for quite a while.
Quite a while. How long have you been in finance Jeff? Well I've been working as
an accountant for over 30 years. Just one point of clarification. I'm a CPA but my
designation is a chartered professional accountant. It's a Canadian designation.
So just to make sure everyone's clear on that. Oh I got you. You have a special
Canadian certification. That's right. Yeah. And you're also founder of a consulting
business called Dynamic Strategy LLC. Correct. And how long has that business
been in place? I started it in June and I decided to parlay my 30 plus years of
accounting experience into helping other businesses with their strategy and
operational planning. Gotcha. Gotcha. And so that today's episode is titled
What's Your Number? And so some of the things we'll talk about today and the
focus of our discussion will be you know why it's important to measure and report
on activity. You know how metrics drive behavior. How to choose the right measure.
Balance scorecards and things like that. Is that correct? That is correct. All right.
Well I can't wait to get started. So first question. What do you mean when you
ask what is your number? Well Jeff every business is unique and analysts group
businesses into what they call peer groups for ease of comparison.
However each business has unique factors that are key to their success.
For an example United Airlines and Southwest Airlines are both in the
same peer group for stock market measuring. But it would be reasonable for
financial analysts to provide comparisons for their results and their
strength of their investment quality for the two companies. But the specific
factors that make those two airlines successful are drastically different.
Southwest Airlines is a discount airline and they control costs by standardizing
their planes, limiting the number of destinations that they fly to, and
limiting it amenities. When I was flying with three young children Southwest was
definitely my airline of choice because I valued cost over amenities. Fast
forward to when I'm traveling as a business consultant. United is a full
service airline and though many love to hate United they are one of the largest
airlines in North America. They are they're more expensive to fly than
Southwest in many instances but customers have more options, more
amenities, and they have a loyalty program. So as a business traveler I fly
almost exclusively with United because I value those amenities and the
convenience more than the cost savings. So when I'm upgraded I have more space
to work and rest and I arrive at my destination better prepared to do the
business that I'm traveling for. Okay, all right, fair enough. So why is it
important to measure and report on activities Jeff? So in simple terms you
get what you're measuring. So when you have clearly articulated mission,
understand what your factors that drive success are, and you communicate
clearly what those what targets your organization has, and you have a system
of reporting, then you have clarity of focus. You can measure your progress, you
can align with bigger goals, and you can find guidance for decision-making based
on those metrics. So when done consistently you can achieve increased
productivity, motivation, and commitment in adaptation and resilience. So for
example when I when I worked at a company that had a critical release they
needed to send the first shipment of the by the end of the day for product launch
success. Employees in different departments, the the accounting department,
the purchasing department, the engineering department, we all left our
normal daily tasks to support the production team in finishing that
important first shipment because there was that clarity and urgency of that
was generated by that target. And because the organization was clear on the
objective and why it was so important, everyone really went to extraordinary
measures to ensure the success of it. Gotcha. So how do you know what to
measure Jeff? Well there is a difference between leading indicators and
trailing indicators. That's important to really understand because leading
indicators are predictive. They measure the activity that drives results.
By contrast, lagging indicators measure historical results. For example a leading
indicator might be the number of potential client conversations per day.
You know that the number of clients you talk to will eventually turn into new
clients that are engaged. Well the trailing indicator is that number
of new clients. So as much as possible it's important to measure your leading
indicators because they tend to be activity focused and within the control
of whatever group is performing them. Whereas trailing indicators are an
indicator of the results that are gained from it. I see. You know and as I'm
listening to you Jeff, you know I'm wondering how do you know if I'm if
you're measuring the right activities? That's a great question Jeff because
you know you need to be careful what you measure. That the
metrics in an organization really should support the purpose of the
organization. Last time we talked about where purpose and performance
meet this is really an extension of that conversation. For example it would be
incongruous to have a metric that emphasized maximizing the number of
patients seen if the mission of the organization was to take the time
necessary for the patient to not feel rushed in an appointment.
And so making sure that they match is really important. I see okay.
You can assess whether you're measuring the right
activities if they're aligned with your mission, your vision, and your purpose of
course. And whether they contribute to the organization's objectives. You can
measure whether they have a substantial impact on the outcome of the
organization. You know it doesn't make sense to measure the finest little
details. Measure the big things that are going to have an impact on the
organization. And you can tell if you're measuring the right things if you have
buy-in from your stakeholders. So a lot of it is spending the time up front
talking to your employees, talking to your investors, talking to your
stakeholders to make sure that you're measuring the right activities. Okay well
that makes sense and it seems to me that this would be a bit of a continuous
cycle of review to make sure that you know you would review it occasionally
your metrics to make sure that you are measuring the right things and that they
are still aligned with your mission and vision and purpose and those types of
things. Is that right? Absolutely. There's a design thinking quote that I absolutely
love. They say fail fast and cheap. So you really should be constantly
analyzing what you're measuring. And if it's not serving its purpose then don't
continue just because it's a metric. Change what you do. Got it. Got it. So once
you know what you're going to measure how do you go about setting targets? So
I'm sure you've heard of the good metrics being smart. Yeah.
Good metrics drive behavior and so smart is an acronym for specific,
measurable, achievable, relevant, and time-bound. So a specific goal is
clear and well defined. A measurable goal is quantifiable. That the
responsible party needs to be able to measure whether they are achieving that
goal or not. Whereas achievable is goals that are realistic and attainable so
that they'll be motivating. They'll need to be challenging enough
to generate a stretch but not so challenging that they become demotivating
to the person who's responsible. Right. A relevant goal is it should align with
the objectives of the organization and make sense to both the individual and
the organization. And of course there should be a time limit on them. Like
just to say I'm going to generate a hundred referral partners doesn't mean
anything unless you put a time frame on that and say I'm going to generate a
hundred referral partners per month or per quarter or per year. Right. Right.
Well that makes sense. You know it's interesting to think of smart goals in
this context. You know being in HR for over 30 years I've often taught people
to use smart goals with performance management for employees to measure
their performance. What you're doing is taking that same concept and saying we
can use this to make sure we're aligned and determine what the correct metrics
are for our overall business goals. Correct. Good. Well can you recommend any
tools that would help in setting up metrics? So the one that I really love is
is the balance scorecard. There's many goal setting tools out there. The
balance scorecard was developed by two people way smarter than me. In the 1990s
Dr. Robert Kaplan and Dr. David Norton developed something that they called the
the balance scorecard. And it's designed to help businesses avoid becoming
too focused on one area of the business. It's really easy especially in a
for-profit business to become ultra focused on the financial aspects. But
right we as individuals tend to be ultra focused. We get an out of balance in all
aspects of goal setting. And one example is you know weight loss. You see all
kinds of especially coming up to Thanksgiving you see lots of weight
loss programs. But when you get so focused on the goal of losing weight
it's easy to focus just on the number of the scale. Maybe to the detriment of your
physical fitness or your health healthy diet or or the sustainability of the
weight loss. And so the same is true for organizations. When they become overly
focused on one aspect of their performance they can lose sight of the
other aspects that affect the organization's health. So balance scorecard
is really that breaks it up into four different perspectives. There's a
financial perspective which measures a lot of the trailing indicators.
And it answers the question about how do I look to my shareholders or my
stakeholders. And you know that's really important but not the only
thing we should focus on. The customer perspective answers the question about
how do we look to our customers. And in that perspective looks at the
organization from the viewpoint of the customers and it includes measures
related to customer satisfaction, loyalty, market share, and customer
retention. Whereas internal process, this perspective assesses the
efficiency and effectiveness of an organization with regards to their
internal processes. Identifying critical processes and measures, key performance
indicators related to how effective processes are. And it answers the
question of what must we excel at to satisfy both our customers and our
shareholders. And finally there's a learning and growth perspective
which you as an HR guy would really appreciate. And that's really
focuses on how the organization can adapt, innovate, and learn for its future
success. And it measures things like employee satisfaction, training and
development, and innovation. Might even measure time to market to measure how
agile that company might be. And it answers the question is how can we
continue to improve and create value with the future. Go ahead Jeff, I'm smart.
Yeah so I really like the the framework that it that it sets out because it
ensures that people like me who are financially focused don't become
unbalanced in our approach. And that we make sure that our organizations have a
balanced set of metrics. So there really should be like depending on the size of
the organization but four to six KPIs in each each of those four quadrants would
be would give you a good picture of how balanced your organization is. Okay so do
you mind if I go back to these four and just delve into it a little bit deeper?
Certainly go ahead. The financial perspective I mean that that makes sense
you know you're taking a look at your trailing indicators and how well
you've done financially right? Yeah. So that makes sense. The customer
perspective when you're wanting to get the customer perspective can you give us
some ideas on the best way to do that or some examples of where you've seen that
done before? Yeah if you if you take a step back and think about your business
as far as how how does my customer perceive the organization? And I used to
work for a company where every month we did a financial review with the CEO and
his final question to all of us was are your customers thrilled to do business
with you? And so that's a step back and say okay well what are my processes and
policies and procedures that impact how the customer experiences our business?
And for example if you have a business that's really client-focused really
wanting to make the customer thrilled to do business with you but you have all
kinds of upfront policies and procedures that prevent a smooth conversation with
the customer then you're you've got a broken process. So measuring things like
customer satisfaction or customer retention is is really important. A lot
of people use what's called a net promoter score where they contact the
customer after the transaction to find out about their experience and rate the
the experience of the customer. Okay so you see that a lot even in health care
right? I mean you get something from the dentist if you've been to the dentist or
a doctor's office or whatever and it's basically asking you to give them a
review. Yes yes absolutely. Can I can I tell you a little story? Sure. Several
years ago when we lived in Canada we had to bring my daughter into the emergency
room and in Canada being socialized medicine there's some inefficiencies in
the process. Quality of health care is fantastic. The the process needs work and
so we went into the the emergency room and we stood in line we told the the
intake nurse what what the issue was. She took down some basic information and
then sent us to the next line to wait in line to finish the the intake process.
After which we sat in the the waiting room for several hours and finally
seeing a doctor right? Okay right. So if you look at that from the customer's
perspective we've got a sick child who needs to see somebody in the process is
to wait in line only to wait in line again and then to wait in the waiting
room. You can see how that might be frustrating and so measuring what it's
like to be a customer is just so important to the process. Yeah yeah it
sounds as though they were measuring your persistence. So Jeff I have another
question for you. When you when you speak of internal process perspective can you
give us an example of how you've approached that in other organizations
and maybe some of the tools that you use to get a better perspective on your
internal process effectiveness and efficiency. I have a thought but I wanted
to hear yours first. So internal process is really what are the the processes
that support both the customer experience and the shareholder experience.
And so so measures like production efficiency might be an internal
process. Things like if you're an insurance company using the the time to
claim settlement is a key indicator as far as how profitable the insurance
company will be because the longer a claim stays outstanding the more
expensive it's going to be. So got it okay yeah I understand yeah I was
thinking in terms of you know process improvement tools like lane or value
stream mapping or something like that help you understand where your bottle
legs and processes are. That is a very good point Jeff yeah both both lean and value
mapping are excellent tools to understand where the waste and inefficiency is in a
business and they can generate some really good internal perspectives. Got it
got it. Well Jeff I think I'm out of questions. I really appreciate you
joining us today. Can you let the listeners know how to contact you should
they have any further questions or would like to discuss this topic in more detail
with you. Of course my email address is is a little bit complicated and I trust
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
at dynamic strategy LLC dot com. Perfect perfect well Jeff thank you again I hope
you have wonderful holidays give your wife Brenda Lee a hug for me and thanks
so much and you're always welcome. Will do and I appreciate it Jeff. Okay before
we wrap it up here's a little commercial about flagship talent solutions and then
a joke for today. At flagship talent we work with our clients to find and place
the right talent. What do we mean by the right talent? We mean we find talent who
will commit to your organizational goals and align with your values and behavior
expectations. Talent who will perform to your expectations. Talent who will stay
and grow with your organization. How are we different from our competitors? We
offer the lowest fee structure in the industry. We offer the best talent
guarantee in the industry. We provide selection and interviewing support to our
clients at no additional fee. We want to save you money, deliver high quality
talent, become an extension of your organization and be your preferred
provider of talent acquisition solutions. To learn more contact Jeff Parsons by
email at Jeff at flagship talent com or by phone at 1-800-530-4189
extension 101. Okay let's wrap it up with a laugh. So why are elves such great
motivational speakers? Thought I'd use a Christmas joke today. Why are elves such
great motivational speakers? Because they're so full of elf confidence.
Until next week, goodbye.