How open should you be about open book management?
The phrase "open book management" means many different things to different people, and in some arenas makes the staff cringe with fear of the charts posted on the wall and the monthly beatings which occur when they do not reach their assigned quotas.
In this short article, let me identify five critical "open book" factors that should be shared.
Procedure counts: The standards of care identify which wellness procedures are to be offered every time (e.g., sequential weight with Body Condition Score, dental grade, etc.), which procedures are linked (e.g., risk level to anesthetic protocol to pre-anesthesia lab), and which are followed (e.g., master problem list items, atypical labs, or even deferred or symptomatic care, that has an attending nurse assigned to follow the case until resolved). These "counts" are important to ensure everyone understands what is being measured is being managed.
Monthly budget goal: We use what we call a Dinner Bell Chart, which is a graph paper with zero in the bottom left corner, and monthly budget target about 80 percent of the way up the right-hand margin, connected by a straight line; the left-hand margin is divided incrementally to allow tracking of daily sales. This is a management budget, not a tax budget, so charity and ROI are included as line items in the budget (see the VPC Signature Series monograph, Profit Center Management, with a spread sheet budget diskette, for more details). Each day, the gross sales are plotted in a cumulative fashion (e.g., $2,300 on day one is plotted at $2,300; $3,450 on day two is plotted at $5,750, etc.). If the sales line starts to fall below the budget line, procedures are reviewed for standards of care, as well as the recovered pet and recovered client programs being assessed. At the end of the month, when the sales line finishes above the budget line, 15 percent of the excess monies are used for a celebration party.
Staff salary: This is used for quarterly recognition, and is simply the staff budget (e.g., 20 percent of gross sales) being compared to the W-2 payments (doctors and administration not included) for the same quarterly period. Any excess money (monies not paid in the W-2 taxable wages) becomes a "gainsharing" program: the money is divided immediately with 40 percent going to the staff, 30 percent going to the Christmas savings account sock, and 30 percent being set aside for Uncle Sam. This excess money is also the new hire budget, so the team knows exactly how many funds are available to bolster the staffing, and if they don't, and work harder, they get the funds. It is also important to note, they become aware of uncontrolled overtime eating into their recognition monies, so they are soon addressing any staffing inconsistencies.
Inventory targets: The "cost of goods sold" expense allowance becomes a target for inventory teams, since quarterly, they get 20 percent of the savings under the budget target. It is important to use historical data when starting this program, and not some arbitrary wish that has never even been close to reality. In most general companion animal practices, pharmacy and medical supplies start at about 13 percent of gross sales, while nutritional goods start at about 70 percent of food sales (see the VPC Signature Series monograph, Profit Center Management, with spread sheet budget diskette which drives these charting factors, for more details).
Safety budget: We like to give the uniform budget (about 0.4 percent of gross sales) to the Safety Committee (one person from each hospital zone). If the staff takes care of their uniforms, and there is budget money remaining on April 1 or October 1, the Safety Committee gets to allocate those funds for needed program support items in the practice (not a party).
Annually, in the fall, we would recommend the zone coordinators, doctors and CPA do an annual budget retreat. The hospital administrator runs a draft budget, based on projected growth and experiences to date. The team then talks of the new programs and renewed healthcare commitments, and that establishes the new budget for the coming year.