September 25, 2020

Critical Criteria Are

In a previous post, The ABCs that consume your day, I mentioned the importance of identifying and monitoring the critical criteria of your business. I will now address that topic and provide you with some examples that include a bird, valve stems, a rusty floorboard, and doggy pooh.

Critical criteria are the indicators that can warn you when something dreadful is about to happen. Everyone is familiar with the canary in the coal mine that stops singing and dies when the levels of methane gas begin to rise. Unfortunately most business owners are not given such a clear and unambiguous warning.

So how can valve stems sound the alarm? I had a friend who managed a tire installation business and his critical criterion for the diligence of his sales staff was the ratio of new valve stems to new tires. He explained that every new tire deserved a new valve stem, so a ratio less than one-to-one indicated that his sales staff was not being thorough. I did wonder if a ratio greater than one-to-one indicated a problem with his installation crew.

In my own experience as the owner of a small animal veterinary hospital I found that some criteria were important, but not all were equally helpful. We tracked monthly criteria such as the number of new clients and pets, average transaction fee, percent of pets that were overdue for vaccinations, number of cats seen, number of dogs seen, and a few dozen others. The limitation of these criteria was that they were valuable for documenting what had happened, but were not timely enough for real-time management decisions.

So what is a valve stem equivalent in a veterinary hospital? According to one practice I worked with it was the ratio of stool samples to patient visits. The first thing that less-than-stellar receptionists often forget to tell a client is: Please bring a sample of your pets stool when you come in. Who would blame them? Right? Nobody wants to mess with that stuff; not even the client. However, forgetting to mention that to a client does make you wonder what other healthcare needs were not discussed. In this particular situation, the receptionist was the one who answered the phone, did check-ins and check-outs, set up the stool samples, and often restrained pets during examination and treatment. So, how would you interpret the results of this critical criterion? Less-than-Stellar or Overworked!!!

Now it’s time to get personal. Considering all of the data and information that you are inundated with in your business, what can you identify as your critical criteria? What gives you enough warning to act before your “coal mine” blows up? You need to identify and monitor these measures in order to exercise meaningful real-time control – and perhaps even optimization. You see, optimization first requires the ability to control, and then sufficient visibility from your critical criteria to make appropriate changes. Anything less is tinkering.

I almost forgot about the rusty floorboard. I was one of the fortunate few to bond with a 1973 Chevy Vega. During our sixth year together a mysterious lane indicator emerged. I could actually look down where the floorboard had rusted through and when the car veered too far to the left, the painted hash marks on the road would begin flashing through the opening. Once again, even though the flashing indicator was a warning, it wasn’t soon enough for me to make adequate real-time management decisions. I eventually replaced it with a much more reliable system – my lovely wife in the passenger seat. She was highly motivated, provided excellent visibility, and had a personal interest in the outcome. If you have people like her in your business – listen to them – they may be your best and most reliable critical criteria indicators.

Have a great day!
Rick

P.S. A useful criterion to monitor in a small business such as a veterinary hospital is the percentage of the daily deposit that is cash, checks, or credit cards. If someone is not ringing up receipts for cash sales and is pocketing the cash, it will be reflected in these percentages. Don’t forget to account for seasonal trends.