I have breaking news from the Next Level Executive Global HQ in Charlotte…
Last week I sent out “part one” of this essay and remarked that I had around 6 people who reliably read these things. I got back not one, but two – that’s RIGHT, TWO – people who replied, “make it 7!” Thanks to Chris Pham and Scott Haberman, my newsfeed has virality.
That’s right, you’re reading the new Next Level “Hockey Stick” newsletter – which is sponsored by Royal Classic Typewriters (a division of Kodak)…eehh…
I think I just lost two subscribers, so I’m back to net zero growth. OK, let’s get on with it.
So, the push to write this two-part essay is as follows. Most of you know I’m not very optimistic about the near-term economic horizon. We’ve been on an historic run of over a decade-and-a-half of practically unabated economic expansion (save for a temporary pause due to a global pandemic). No one who entered the working world after 2010 has experienced anything remotely close to an economic downturn. And “Half Cycles” don’t continue forever.
I went on to provoke a few people when I said that I am actually happy about what I think is an oncoming period of uncertainty.
The driving reason for that mentality is because it’s harder for leaders to make an impact in their business when a rising tide is lifting all boats. Employees and customers alike lack urgency, and when “everything is good,” little change occurs.
That’s not the case when uncertainty creeps in and adversity starts to rear its ugly head.
We’re there now. Here are a few more points to consider in determining if yours is a business built to execute – and whether you’re equipped to lead it.
Marketing Metrics: Scalable vs Un-scalable
New patients are the lifeblood of every healthcare practice. When we look at internal referrals (from our existing patient base), those are high trust, high value patients. We need to convert them into accepted treatment at a very high level because they’re already high trust. Failure here is akin to missing a layup. We want to think about how we can always encourage our existing patients to refer their friends and family, and we want to thank them excessively when they do. We want to nurture our existing patient base to become advocates for the practice.
If there’s a downside, it’s that referrals are not a scalable aspect of marketing. While we should do anything and everything to encourage internal patient referrals, they are all but impossible to predict for the future. We can’t count on them for the growth of the business. For that reason, we have to invest more money in marketing.
When we spend more in marketing to attract new patients, it may be a more scalable strategy, but these patients are lower trust. For that reason, we have to focus on our new patient experience and conversion systems.
The number of new patients we need is a bare minimum of 20 per month for every full-time equivalent doctor in our group.
The ideal number is closer to 30 to 40 per month per full-time doctor. A business that executes well will convert in excess of 30 new patients per month per full-time doctor.
Talent Management
If yours is a growing group practice, you’re in the “talent management” business; you just don’t know it yet.
It is the responsibility of us as business owners and leaders to constantly be evaluating our team, then upgrading it whenever and wherever possible. Arguably, if you are going to continue to grow your business (expand the days and hours; take full advantage of the fixed capacity constraints; generate revenue numbers that are at or above industry norms; etc.), you need to do it with the best people possible.
The “best people possible” are probably working somewhere else right now. They’re probably not currently unemployed. This is a critical mindset shift.
A recruiting effort focused on true execution starts with making connections to quality people and nurturing those leads to hopefully attract them into your group when you do have an opening that comes around, not simply relying on a posting on Indeed or a recruiter to furnish available candidates. If they’re available, they’re probably available for a reason. On the other hand, if you start to make connections with people who are employed currently, but maybe not in their final job, it is an opportunity to add to the better talent ranks of your business.
A business that executes well treats “talent management” as a full-time endeavor (where we never take our foot off the gas) and plays the long game by building relationships with people who are currently employed elsewhere.
Productivity & Time
The second side of this as it relates to associates is not just the recruiting piece, but what the doctor development component. The role of Chief Clinical Officer is critically important in every healthcare group practice because he or she not only sets the clinical standards for the group, but they are also charged with creating a development program that results in master clinicians.
Master clinicians create greater outcomes for patients and the business alike.
An execution business develops the skillsets of the most capable associates to allow them to do progressively more complicated treatment that’s also more fulfilling for them as healthcare providers. Couple that with a typically higher dollar revenue volume tied to that hour of chair time and it helps us to lift the top end of the business while retaining our best talent. You can make a good case that it also is the best thing for the patient because they get to solve all their different treatment needs under one roof with us and not have to go anywhere else to get it.
Doctor development is a critical piece of every business that’s focused on execution.
Leadership, Ownership & Diffusion of Responsibility
The vast majority of the people in my audience are “Founder – Owner – Operators” of groups and practices. They all started out by “doing the craft” that created the bulk of the revenue of the business. Many are now in some stage of bringing in and developing capable associates (as I mentioned in the prior two sections). At some point in time, it’s prudent to consider creating an opportunity for a select handful to become partners in the business. Put another way…
Key provider turnover is a killer as it relates to stability and hinders high levels of execution due to inconsistency of results.
As your business grows in size and might, it becomes more stable in some ways, but equally more stressful in others. Creating minority partners can alleviate some of the stress borne out of fear of losing a high-quality associate that you spent the time, money and effort to develop. Stability counts for a lot. So does a general diffusion of leadership responsibility.
You currently wear a lot of leadership hats in your business – possibly even all of them. A business gets to be more enjoyable to own when you don’t feel like you have to do everything and you get to hand off the things you don’t like or aren’t good at. A few minority partners can be your built-in pressure relief valve at times.
There are a few keys to keep in mind on minority partners:
- An associate must prove themselves to be worthy from both a work ethic (productivity and capability) fit as well as a cultural fit.
- I walk through an entire module on “alignment” in the program, so be sure to spend the time having the uncomfortable conversations up front with the candidate.
- Consider the potential number of associates you want to avail of the opportunity along with the percentage ownership for each to determine the impact on your ability to maintain voting control of the organization.
- Think about the “administrative roles” that you may ask any of them to pick up off of your shoulders and evaluate their true leadership characteristics.
A business that executes well typically builds from both operational and clinical strength, both of which are accentuated by multiple owners sharing responsibilities beyond their primary role.
Building a “Fortress Balance Sheet”
I recently listened to an interview of Jamie Dimon, CEO of the bank JP Morgan Chase, on the Acquired podcast. [if you’re looking for another podcast that’s almost as good as mine, you should check it out…um, right.] Dimon has been at the helm there since 2006. He has literally “seen it all” and is frequently THE person people turn to for economic trends and how they impact the banking world. Several times in the interview, he refences the bank’s ability to withstand tidal shifts (see: Global Financial Crisis and housing market collapse) as well as be patient in making opportunistic acquisitions (see: Bear Stearns and First Republic Bank…among many others). One familiar refrain he states often is his discipline to build something he calls a “fortress balance sheet.”
A fortress balance sheet is the foundation of a business that is built for the long haul because it is conservative enough to have a robust cash position as well as to avoid fundamental internal flaws such as misaligned compensation structures that fall outside of the risk tolerance of the organization. We should all take a play out of Mr. Dimon’s playbook.
Cash on balance sheet is the mark of execution. Having cash on balance sheet creates flexibility. It means that we can deploy that cash in times of adversity or a slight downturn in the business as well as when we are required to make further investments in the business for growth purposes.
If you don’t have cash on balance sheet, then you don’t have any margin for error in terms of the way the business operates in covering its cost structure.
The margins in healthcare businesses are a lot thinner than we even realize. Having a “slush fund” of cash on balance sheet in a growing business is of paramount importance. The number you want to aim for is a bare minimum of two times your monthly operating expenses.
(Total Annual Expenses (including DR Comp) / 12 months) * 2
Take the total expenses of the business for all 12 months (inclusive of doctor compensation) and come up with an average, then multiply by at least two. To have a bare minimum of two times your monthly operating expenses and cash reserves is a prudent strategy and a good fallback position. More is typically better.
A business that executes well creates and maintains a fortress balance sheet with a minimum of two months’ worth of operating cash reserves.
Messaging & Propaganda
The final piece of building an execution business is a topic that is a bit more difficult to define. Appropriately enough, it’s your ability to communicate clearly and with a high degree of frequency.
I don’t think that group practice owners consider this a necessary skill. I can speak from firsthand experience that it’s not only necessary, but critical. In fact, I believe that so much that it’s going to be a center piece of my upcoming “CEO Working Group Session” in L.A.
Unfortunately too many people feel that as long as they’re just providing quality services to patients and generating a decent level of income, then everything’s going to be okay. In today’s world of pressure, stress, hyper-competition, thinning margins, diminishing buying power around inflation, and everything else, your people want to be led. They want to join great businesses. They want to be part of something bigger than themselves and they want to buy into a vision.
Your people want to know that the work they do matters to the people above them – meaning you and your leadership team.
In part one, I told the story about my interaction with Steve Armstrong, CFO of Patterson, and his willingness to take the time to answer questions. He engaged me and asked how things were going in Richmond or in New York or in Charlotte. He wanted to know what were some of the challenges I was confronting. He wanted to know how the branch was performing. He wanted to know what he could do to help. Whenever the branch that I was leading received an award, he would give me an attaboy and a pat on the back. That made me feel larger than life.
And your teammates, no matter who the individual is or what role they occupy or how long they’ve been with you, want to feel like what they do matters to the boss. That’s most of you in this audience. Your ability to communicate with somebody one-on-one; to engage them; to give them a pat on the back; and to lift them up when they’ve had a bad day is critical to your future success.
Your ability to stand in front of your group when it’s all together under one roof and communicate the message of the vision of where you’re going this year and what you’re going to do to create success in the future is critically important to your overall effectiveness as a leader.
Your ability to communicate challenges around the small departmental groups that you interact with in the business is critically important. Your ability to communicate verbally from a stage and your ability to send a succinct text message to somebody to tell them great job today must become a superpower. Your ability to record a video on your phone about where you think you’re going to be going this year or send an email with specifics around where the business is and what you need out of someone moves the needle.
Your ability to communicate at multiple levels through multiple media to different people at different stages is a direct reflection on your leadership ability. If you don’t accept that, then you don’t understand the fundamental cornerstone of how businesses achieve greater results and execute at a higher level. And ultimately, if you can’t communicate with people individually or in a group setting to paint the vision and to get people to buy into what you want to achieve, you’re never going to build a business that executes at a high level.
Communication is critically important at all levels of healthcare practices, be it the patient level, the small team level, or the enterprise level. Any business that executes has a leader that can communicate effectively what they’re trying to execute on and where they’re going together.
YOU: Professional Development
I mentioned last week that I gave my group a reading assignment in advance of our upcoming CEO Working Group Session and I referenced the book “It’s Your Ship” by Captain Mike Abrashoff. The second book we’re reading is “Leading Change” by John Kotter. The book is almost 15 years old, but firmly resides in my “Top 10” for a reason. You should read it as well.
At the end of the book, Kotter talks about the dynamics of what he calls “The 21st Century Executive” and their ability to navigate quickly changing and often chaotic landscapes. Does that sound like our current scenario?
Here is how he defines the “Prototype” of the 21st Century Executive:
- They win because they outgrow their rivals
- They develop the capacity to handle a complex and changing business environment
- They continuously learn to be leaders
- They solicit opinions and feedback from others, and they listen carefully
He concludes by saying: “…people who are making an effort to embrace the future are a lot happier than those who cling to the past.” That’s simple without being simplistic.
In these two essays I’ve shared 10 to 12 different aspects of what I consider to be an execution business. I’ve shared “the what” of it all. But “the who” is you. Are you surrounding yourself with the right advisors? Are you making the investment of time and money in your own professional development? If you’re not, then don’t expect anyone else to do so.
Fundamentally, the cornerstone of every execution business is a leader who is a lifelong learner who seeks to increase their competitive capacity.
And that’s what is required in today’s world.
Now go grind some beans.
