During my carrier as practice owner and practice management consultant, I have worked with more than 130 practices primarily in the Scandinavian countries. Very often, the reason that the practice owner calls me in is that they are not performing very well financially. Understanding the business, using simple simulation models and working with key performance indicators (KPI) are key to this work. I often discover that if I use KPIs the right way, I can use it to motivate the whole team. On the opposite hand, I have often experienced practice owner demotivating their team through improper ways of using KPIs. In this talk, I will go through the basics of using KPIs as a tool to motivate veterinarians, nurses and technicians.

Important: In this lecture I focus on KPIs for motivating — not KPIs that I use for managing the business.

Creating a Common Understanding with Simulation Models

The basis of using KPIs in practice is that you make the team understand the business dynamics and how the different KPIs interact with each other. If they do not understand the numbers (and if they do not believe that they are correct), you cannot motivate them by KPIs. The three following models are my most frequently used for creating a common understanding and thus for using KPI in practice.

PraQtice Simulation Model

(Download at www.praqtice.dk)

This is a very easy model for everyone in the practice to understand and I use it as a basic model, for most activities in the practices, I work with. Numbers can be easily found from the accounts and practice management software. Some software programs though have problems identifying number of clinical visits. I suggest that you fill it in with your practice numbers and then experiment with changing numbers together with the staff (real time in Excel). I start by explaining how an EBITDA on at least 10% means job security and the possibility to buy the equipment that they would like to have. Then we start working through the numbers with special attention to clinical transaction value, visits per active client and number of active clients. I also have them to focus on staff costs in % of gross profit (total revenue minus cost of goods) bearing in mind that it does not motivate when you argue how to keep it low.

When I go through the model with the staff, I ask them to come up with realistic and motivating targets. Often they come up with way too high targets, and I will find myself negotiating lower targets.

Individuals Profit Model

The "Individuals profit model" is more tricky to implement as veterinarians often tend to get defensive and argue that it goes against team spirit. Thus, I have a lot of focus on introducing the model in a positive way.

The idea behind the model is that veterinarians have to understand that they are part of a business. They have to realize that no one is allowed to cost money and preferably they should bring in at least 20.000 euros per year. Most veterinarians are very competitive, and if they see that they are costing money, they make an extra effort trying to change the numbers.

The way I use the model is that I explain how I extract the numbers and fill them in an Excel sheet. In some practices, I allow everyone to see each other's numbers and in other practices, we only show them on an individual basis.

The key to this model is that we divide the "other staff costs" and "fixed costs" based on how much each of the vets uses. Often the one doing most surgery has a high turnover, but they also carry many expenses and so forth.

Turnover per Minute Seeing Clients

With this model, I try to make the team understand what the costs of running a practice are. When they have "4.3 Euro per minute" as a mantra, the exercise has been successful. I make sure that everyone understands how we get to the numbers.

What KPIs Do I Follow?

When I look at accounts and all, I look at a lot of different numbers and ratios, but in communication with staff and partners, I primarily look at the following categories and KPIs:

• KPIs for motivating the veterinary team
• Average clinical transaction value
• Dentals per 100 living patients
• Clinical visits per active client
• KPIs for keeping track of the business
• Weekly turnover compared to break even and/ or budget
• Staff cost in percent of turnover — cost of goods
• Net profit margin (or similar KPIs)

The top three KPIs that I use for motivation on a regular basis are (1) Average clinical transaction value; (2) Weekly profits; (3) Dentals.

How to Set the Targets

As you would rather follow your own goals than someone else's goals, I prefer setting the goals together with the staff. If they set them too low according to my expectations, of course I have to adjust them, but often they come up with reasonable goals.

People are motivated differently. Some prefer goals that they can easily achieve. Others need stretch goals that requires a lot. The key is to identify what goals work the best for the team and make your goals accordingly.

In making the goals, I often start using the praQtice simulation model and set the "number of active clients," "visits per active client," "average clinical transaction value" and "sales." Based on these numbers, we then discuss which actions it takes to reach these goals and set motivating targets for "dentals," vaccinations, etc.

Communicating the Results

It is vital to communicate the results in a positive way. Also if they are not as good as expected. Many practice owners do not have success using KPIs. Very often it is because of the negative way they are communicated.

I tend to vary the way I present numbers. Some are presented at gatherings/meetings and other are sent digitally to the staff. As many staff members are not very interested in looking at numbers, I present them with few numbers at a time and with lots of smileys and graphs. My experience is that Facebook is a perfect media for communicating the numbers. Create an internal Facebook group and start communication in a positive manner.

Explanation of the Important KPLs

Motivational KPIs

Average Clinical Transaction Value

This is by far the most important KPI. The number shows how much you work with the patients and how good you are at getting paid. Different systems calculate the KPI in different ways. The key is to get a number that is indicative on how much the vet brings in per consultation or visit. In my clinics the numerator includes honorary fee, medicine and utensils and the denominator equals the number of clinical invoices above 20 euros (in order to get rid of nail trims, etc.). The vets should be able to track their own performance regularly, and I communicate the number at least every other week. I track both team performance and individual performance.

Dentals per 100 Living Patients

This is a good example of that you make a good business out of being a good vet. Dental experts say that 90% of all cats and dogs need dental procedures. I ask the vets how many of the 90% they can find, how many they can "sell to" and finally what their dental KPI (% of dentals compared to patients seen — except euth) - should be. Most vets suggest that they would be satisfied with a number between 20–30. Then I show them the number for their practice. Most Danish and Norwegian clinics have a dental KPI of less than 10% and very often between 4–8%. Together we set a target and follow up on a monthly basis. My experience is that most software systems have a hard time coming up with accurate figures, thus I often choose to have the number calculated not as a percentage but as a fixed number. The number can then be followed up manually if the system is not accurate.

Clinical Visits per Active Client

This KPI indicates how good you are at bonding with your active clients and how good you are at following up.

KPI for Keeping Track of the Business

Weekly Turnover Compared to Break Even

In the simulation model, I get the budgeted annual turnover. This turnover is then broken down to a weekly turnover. On a regular basis, I post an update to the staff. In graphs I present the weekly turnover compared to last year and to budget. They are presented both "per week" and as "cumulated." Depending on my aim of the practice I differ between using "break even numbers" or the weekly turnover the practice needs in order to have a 10% EBIT.

Staff Cost in Percent of Turnover

Staff costs, including practice owner salary, are by far the biggest expense running a practice. In Denmark and Norway, practices spend between 60–70% of their net income (turnover minus cost of goods) on staff (salary, tax, education, etc.). I suggest that practice owners always keep a firm eye on the staff-% as a KPI.

Communicating this KPI to the staff is a difficult task as it is often heard as "you get paid too much." Nevertheless, I recommend having the discussion with the staff at least twice a year. In the management team you should follow up on this number on a monthly or quarterly basis.