If you own or manage a veterinary hospital, you’ve asked these questions:
- How much money are we making?
- Where did it all go?
- How can we manage it better?
These questions seem simple but the answers can be very revealing about business protocols and operations.
One of the biggest expenses a veterinary hospital faces is that of human resources. A high-quality, productive team does not come easy and turnover is expensive. A well-trained, well informed team that is afforded a healthy work environment will produce for the practice. So it seems obvious that nurturing and training the team on basic business operations is a worthwhile investment for two reasons. First, it strengthens the bond between the team and the practice leading to increased loyalty and performance. Second, the business will prosper under the guidance of a dedicated and informed team.
One training technique that I have found very beneficial is that of open book management. By allowing the team to be a part of the questions above gives the team the opportunity to help embrace their role in protecting the practice and it increases their accountability.
Open Book Management Definition
So what is open book management? According to BusinessDictionary.com:
Philosophy of involving every employee in making a firm more successful by sharing financial and operational information. OBM involves four basic practices (1) training employees so they become business literate and can understand financial statements, (2) empowering them to use that information in cost cutting and quality improvement, (3) trusting them as business partners on equal footing, and (4) rewarding them fairly for the firm's success.
Open Book Management Pros
Team members see money coming in but rarely have the opportunity to truly understand where it goes. Teaching them about income versus expenses is a powerful lesson. It defuncts their impressions that cash is plentiful (although it may be) and educates them on the cost of doing business. Gary Glassman, a CPA at Burzenski & Company PC, specializes in veterinary practice management, and believes that “Many times staff do not understand what it costs to run a hospital and feel like the owners are making money hand over fist when this is typically not the case. They do not have an appreciation of what it costs to run a hospital and why the hospital needs to charge the prices it does.”
The idea of sharing financial data may be scary to you or the hospital owner. Perhaps there is fear that private information will find its way into the wrong person’s knowledge base. Before you shy away from this powerful training technique, consider what Certified Public Account, Kristen Meierer, has to say. Meierer believes that “sharing financial data with the team can help align the goals of the employees with the goals of the company and create a team culture.”
In choosing what data you wish to share, the manager and the practice owner should discuss how open they are comfortable being. Remember you can customize what you report, withholding any data that you just aren’t comfortable revealing. Some data may be sensitive and therefore could be consolidated into a blanket category. If you are uncomfortable sharing actual numbers, there is also the option to express categories as a percentage of income and a percentage of gross. Glassman recommends that if you are going to disclose payroll information, you should do so “based upon overall payroll and always by percentage to gross income not by dollar amounts. For instance: gross payroll is 40% of sales.” Summarizing categories such as salaries and wages enlightens the team to understand what a large percentage labor represents without knowing who makes what.
Perhaps you don’t want to share the financials with the entire team. Or maybe your team is large and it is difficult to get the information out to everyone. In this case, consider training the team leaders and empower them to take it back to their departments.
Accounting can be intimidating to team members that are not trained to understand financial documents. You do not have to overwhelm them with every line of the profit and loss statement. Instead introduce the idea slowly and perhaps in a consolidated format. The foundation lesson is income versus expenses – where did the money go and how can it be managed better by the entire team? Breaking it down into segments/categories eases their learning curve and gives them something more specific to work on.
How Your Team Can Thrive With OpenBook Management
Your hospital is not going to get rich from rationing cleaning supplies. However sharing financial data allows team members to be conscious of their activities. In turn they can save money by using supplies more wisely and also by utilizing technology. In my office, our team was able to save over $600 a year in printing costs simply by emailing invoices to clients. There is no cost to email, the clients actually tend to appreciate the e-invoice and — added bonus — we help the environment at the same time. Percentage wise $600 is a small number but small numbers can have significant impacts. You team members will feel that they accomplished something extra which builds morale. Be sure to keep them updated and congratulate them on their success.
To build motivation, set a goal for the team and offer an incentive for achieving that goal. Remember to keep the time period short enough to maintain momentum. For example, you notice that the cost of goods is elevated. Discuss these numbers with your team and set a goal. Perhaps you’d like to lower your cost of goods by 2 percent for the next month. Demonstrate for the team how a 2-percent reduction over the course of a year can equal thousands of dollars in savings. There are many ways to accomplish this and your team will surely come up with some creative ways to better manage the inventory. If that 2-percent reduction is achieved, then the team has earned a reward— maybe you have lunch catered in or give everyone a gift card to a store of their choosing. Meierer says that “having a bonus system in place related to P&L performance increases employee engagement and provides incentive to help achieve company goals.”
What if times haven’t been prosperous or financial management has been out of order and the financial reports are not painting the prettiest of pictures? Will the team become paranoid about their security? I say they will not if you coach them through it, emphasizing historical information, plans to improve, embrace their ideas, and discuss trends in the industry and the economy in general. Your presentation must assure their stability and promote their role in improvement. When they know that you want, need and value them they will join you on the journey to repair and flourish.
Overall, I know that veterinary team members are caring and sensitive people full of passion and a desire to succeed. Under your leadership, they can and will learn as many ways as possible to serve the client, the patient and the practice. Open book management, even with limited or consolidated data, gives them one more tool to improve their performance and that helps them and the practice grow.