Why you should try open-book management starting today, for the financial health of your practice
Open-book management is certainly not a new concept. In fact, it has been discussed since the nineties, but there are still many veterinary practice owners that are either not familiar with the term or extremely resistant to the idea. While it may sound a little “too open” to some people, there are actually some pretty great benefits to practicing this model that shouldn’t be ignored.
What is open-book management?
The general idea is to give your employees financial information about how your business is performing so that they can make better decisions and become more invested in the company’s financial success. But it can get much more in depth, depending on how far you want to go with sharing information with your team. Some businesses provide their staff with detailed financial information, about the entire business, or parts of the business. For our purposes here, we will focus on the sharing of basic financial information and how that could benefit your veterinary practice.
Why employers resist open-book management and why they shouldn’t
We have lived in the culture of “I am the boss, you are the employee and you do what I say” for many, many years. Some would argue that this model has worked successfully, and they fear that changing it or giving any company insights to “subordinate employees” could compromise their authority. These folks tend to think that financial information and the health of the business should be classified information and should be privy only to management and ownership. They fear that lines of hierarchy could become blurred and employees may start stepping over the management line if they are granted access to this type of information. There are also those that fear that inside company information will be “leaked” to competitors and that would hurt the company.
Open-book management strengthens the employer/employee relationship
The playing field has definitely changed over the years and management specialists have put more and more emphasis on the importance of valuing one’s employees. Part of doing so is to make your employee understand that you are invested in them as an integral part of the team and are not regarding them as a replaceable hired hand. Happy employees are good employees and will generally perform better. When you invest in them, they invest in you.
Here’s where open-book management helps by creating a critical element that builds your relationship as employer and employee—TRUST. When you give your employees important insight into private matters such as company performance and finances, you are demonstrating trust, and this shows respect. You are respecting that they have the ability to both understand and use the information and also that they will keep it private. When your team understands that you trust and respect them and that you want them to have an understanding of the financial health of the practice, the relationship is strengthened. Employees who feel valued by their employer take pride in their work and perform better.Open-book management builds TRUST between employers and employees, and this demonstrates respect. Employees who feel trusted and respected by their employer are happier, take pride in their work and perform better. Click To Tweet
Employees already know what your revenue is. Why not fill in the blanks?
Another key point to mention here is that your employees already know what kind of money you bring in. Day sheets are generally not considered top secret, and your receptionists likely see your daily total income. We all know we are not a highly paid field and lots of veterinary clinics wish they could pay their staff more. Do you think your employees ever wonder why they aren’t paid more money when they see what comes in?
Your staff who enter charges are also seeing what client bills look like. Do you think they have any idea what the clinic bills look like? They likely have no idea what you are spending on drugs and supplies, let alone payroll. Many employees also have no idea how much money it costs to employ people. They don’t consider payroll taxes, health insurance, or other benefits as part of their “wages”.
Wouldn’t it give your team perspective if you showed them what percentage of revenue payroll and benefits actually represents? You could even show them total dollars without giving away specific staff or department information. How about showing them how much you spend on supplies? It’s always interesting to analyze a single invoice and show them how much it cost you to provide those services. By reviewing every part of the invoice from the staff time spent to the supplies and tests, you could then show them how much of a client bill is actually profit. I bet they would be amazed!
Empower your employees to become part of the problem-solving solution
Employees who are aware of their company’s health have the ability to make better decisions. When they understand how much money was spent on supplies last month, they become less wasteful. If you present a budget vs actual report to your team and explain that you are beyond your budget for supplies—let’s say office supplies for example—they suddenly pay attention to how much they are using. Not only can they make an attempt to reign in the usage, but you can brainstorm with them on how they think they can use less and become more efficient. Now in this case you are using open-book management to control an expense and meet a budget, but you’ve also empowered your employees to become part of the problem-solving solution, and that shows that you trust and value their opinion and skills. Two birds with killed with one stone!
Use open-book management to set and reach goals
You can also use open-book management to set and drive goals for your employees. Sure, you can set goals without sharing financial information but happy, invested employees can help you develop and reach goals, possibly more successfully than you would be doing it on your own. When you help your team understand how money and key performance indicators work and what they mean, they have a better understanding of how their individual jobs effect the business. By sharing “before and after” performance data with them, they can clearly see the impact of their actions (and hopefully success!). Client compliance, new client numbers, and patient visits can all be increased and measurably tracked and shared with team members. This would be a great place to utilize your reports from VetSuccess. These reports can easily be shared with your staff and the visualizations make the story the data is telling very clear.
Still on the fence about open-book management?
If you are still on the fence about sharing your financial information with your staff, consider the following. Open-book management doesn’t mean that you sit down with your team and show them things like how much DVM wages are for the year or what the owner’s salary is. But you can show them data that is relevant and appropriate. How about showing them what last month’s income was and how much went towards the cost of goods and services? Don’t you think that might make an impact? You can show them numbers as percentages if that would make you feel more comfortable. A percentage still gets the point across!
Here’s how you can get started
In my monthly staff meetings, I share what our gross percentage increase in revenue for the month was compared to the same month in the previous year, as well as a year-to-date comparison. I don’t give them numbers, just a percentage, but it clearly tells them how we did. I also make it a point for them to know how substantial our expenses are, and I have no problem sharing actual numbers with them. I think they should know how much we spent on hospital supplies in the previous month so that they are not careless and wasteful! They also very much appreciate that we are willing to share information with them and it makes them feel good that we have confidence enough in them to do so.
So, don’t be hesitant! It doesn’t have to be scary or uncomfortable. Start small with sharing information like a gross percentage revenue comparison and some expenses and see how your staff responds. You may be surprised to find that they are quite interested, and you’ll see how open-book management can work for you! Give it a shot! What have you got to lose?
Meg Oliver, CVPM is the practice manager at a three-doctor, small animal and exotics practice in Syracuse, New York. She can be reached at firstname.lastname@example.org.