Optimise practice profit with a balanced scorecard

In the past, you could simply concentrate on being a brilliant clinician and the money would flow in as a result. Now overheads are higher, there is much more competition and social media can instantaneously make (or break) your reputation. Now you have to make strategic long-term plans and undertake tactical marketing activity to attract and retain profitable clients. This means for the majority of us with no formal commercial training, a tried and tested business performance management process is required, such as the balanced scorecard (BSC).

Proven results regardless of business size or sector

The principle of selecting key parameters to measure and track had been present in organisational research throughout the latter half of the 20th century, although Robert Kaplan and David Norton finessed and popularised these theories in 1990 into the now familiar BSC.

A BSC process collects data for a number of financial and non-financial measures and assesses each against a pre-determined target value or industry standard. The rigour, transparency and cost-effectiveness of this process has led to its widespread use around the world, in businesses of every size, in every sector.

In the UK, Onswitch has used the BSC review for several years as part of its fixer programme, and the insight gained continues to drive real and measurable improvements in many practices across the country.

Principles of a balanced scorecard

Kaplan and Norton hypothesised four steps for a business to develop robust performance management:

• Creating goals that lead towards the organisation’s vision.

So if your practice’s strategic plan is to specialise in equine care, your goals might be to appoint a new equine vet by the end of the year and increase the number of equine clients by 20 per cent within two years.

• Communicating the company’s vision and linking it to individual performance.

Taking the same example, here you might challenge each vet to undertake one equine CPD course within six months, or ask everyone to improve their numbers for worm burden testing by 10 per cent.

• Business planning and target setting.

This is the real crux of BSC, where SMART (specific, measurable, achievable, realistic and time-bound) targets are set. These targets apply to all members of the team and should feature prominently throughout the practice – posters and charts keep them front of mind. Progress is reported at team meetings and appraisals are informed by their wider goals. All your management efforts should ultimately feed into these targets.

• Feedback loop – learning and adjusting the process as required.

As with any process involving people, there will be potential improvements and learning points that should be incorporated into the ongoing BSC review. The real beauty of the process is there is no “one size fits all” model; each business can identify the specific parameters it wants to measure within the overall aforementioned framework, which means creating your own bespoke practice scorecard is actually just as insightful as the trends it identifies.

Developing a balanced scorecard

So, theory aside, how do you go about designing a BSC to help your practice give focus in the right areas and reap the resulting rewards?

The Onswitch balanced scorecard measures data from four core areas:

• customer;

• staff;

• finance; and

• operational effectiveness.

In each of these broad areas we have identified specific measures that can be used by practice managers to keep track of business performance, as well as to monitor the consequences arising from staff actions and outside influences. By recording anonymised data from the practices we work with, we have created a set of targets that allow managers to see, often for the first time, how their practice compares with the national average. Some examples are given in ^{Table 1}.

It’s easy to see how your practice could measure each of these areas every quarter, assessing your performance against these targets and plotting changes over time. With real data at your fingertips, you’ll be able to spot any downward shifts in performance quickly and put measures in place to address these negative trends. Progressive practice managers share their BSC outcomes with the whole team, because everyone has a part to play in upholding and improving practice performance.

BSC isn’t just some dry academic model – this approach really does work.

Case study: Crown and Kessock, Inverness, Scotland.

Darren Mackintosh implemented a BSC review process during his tenure as group general manager at the Highlands veterinary group, Crown and Kessock vets. He chose to focus on four core areas and measured performances in each:

• People. The practice focused on helping the right people perform to the best of their ability in the right jobs, with regular appraisals of a consistent structure, clear career progression, weekly meetings, open communication and generous CPD budgets.

• Customers. The practice began collecting feedback regularly from clients, both through a questionnaire and a client forum. Their suggestions could then be visibly acted on. The customer care team received training to boost their skills and monthly mystery shopping calls were introduced to quantify their service delivery.

• Quality. Crown and Kessock developed a modern positioning, with fresh branding applied consistently to all client communications and a real focus on online presence. Social media became a core part of the practice’s marketing strategy – being cheap and highly effective.

• Profit. The practice identified a series of financial key performance indicators (KPIs) that are now measured and reported monthly, with individual ownership given for specific areas. Stock holding, pharmaceutical product rotation and bulk-buying discounts received particular focus.

Darren is in no doubt the focus the BSC approach brought to Crown and Kessock was instrumental in delivering real results.

He said: “The balanced scorecard process allowed us to identify four key areas where we wanted to make a step change in practice performance. By measuring specifics we were able to regain control, as well as gain a sense of proportion – suddenly our goals seemed more achievable when we could measure real progress towards them. The team was really enthusiastic about the whole process and everyone felt a real sense of ownership in understanding where their individual actions benefited the practice and its clients.

“Through the balanced scorecard process we achieved some significant wins:

• turnover increased nine per cent across the three practices;

• net profit was up 35 per cent across the three practices;

• drugs costs increased by just two per cent, despite a significant turnover increase;

• staff turnover remained low at one per cent;

• active client numbers were up four per cent; and

• transactions were also up four per cent.

“Without the balanced scorecard, our management team would have expended valuable time, money and energy in areas that delivered disproportionately lower benefits for the practice, which means the process has been a resounding success on every level,” he declared.

To get the balance right at your practice, the solution is obvious – get a balanced scorecard.