Heather Driscoll: Good afternoon, everybody, and welcome this week’s edition of the Strategic Thinker. For those of you who may be newer to Spark, we focus on the Dental Enterprise Value Matrix, which is really a way of determining what drives value in dental group practices. So, we tend to keep our focus on these 4 quadrants: Cultural, Financial, Personnel, and Process. Again, in an effort to make sure that our focus really stays on the things that have the greatest return. So, I’m joined today by my great colleague, Drew Schaefer. How are you doing, Drew?
Drew Schaefer: Great, Heather.
Heather Driscoll: Awesome. So, we are going to be talking about really a little bit of both the financial and process quadrants. Drew is our finance guy, and our topic today is timely for our own dental organization, but seems to be a bit of a conversation throughout the groups we’re working with in Spark as well. So Drew, we’re going to talk about practice performance and specifically this point in the middle of the year where some people may be reassessing their goals, and ultimately what those activities and how those activities really can potentially impact our outlook on the value of our enterprise. So, being one of the keepers of our process for goal setting, Drew, I’m interested in knowing your thoughts around the importance of the alignment of our strategic plan and our financial projections, and really what that looks like from a goal-setting standpoint. What are your thoughts really on practice performance and this point in the year and how all of this comes together?
Drew Schaefer: Yeah, well typically groups do a strategic plan at least once a year. And, a lot just do once a year before the year started. So, now that we’re 8 months in, there’s been a lot of change, whether it’s change within our control with in our practice, there’s economic changes, last year there was Covid. So, it’s a good time to kind of reassess what your assumptions were when you made that plan and really how you’ve delivered on that, and whether what you set last year is still reasonable, and getting to your ultimate long-term vision.
Heather Driscoll: Yeah, absolutely. And, certainly the last probably 18 months has been a little bit more turbulent (laughs) I would say than a lot of years in dentistry. And so, some of the changes in our dental organizations have been completely out of our control, but sometimes we fall short or we’re not as aligned as we thought we were with our overall strategic plan and financial projections. And, I always think it’s important if you’re not, do you really understand why and what happened? Almost as important as being able to perform to the standards you put out there is really understanding the why or the why not. So, the next question that really comes up mid-year for organizations that have both goals and budgets, are they one and the same? And, if they’re not, and I know in your mind Drew they’re really not, so what in the world is the difference?
Drew Schaefer: I think, from my perspective, especially the larger an organization gets, the more important and the more the goals and budgets really diverge. Budgets are important from kind of a one-year look to get to your longer strategic plan financially. And, it’s really evaluating the individual components, the key people, the key expenses and investments that will end up delivering the ultimate profitability or size of the organization. And, it’s pretty granular in that aspect and they need to be realistic and attainable, whereas goals, they should more or less align in theory with the trajectory of the organization. But, there are different anomalies to where you can really try to incentivize through goals or other structures to outperform your budget, so to speak. And, really get to that longer-term vision a little quicker while also having more opportunities for your team members and providers to share in success above that as well.
Heather Driscoll: Yeah, absolutely. And so, sometimes when our environment changes within the practice, there’s always the question about whether or not our goals or our budget should change in concert with the constraints of the practice or practices. So, I’m interested in knowing your thoughts, Drew, on when you might be willing to make an argument that modification should take place to one or the other, goals or budgets, or both. What are your thoughts?
Drew Schaefer: Yeah, I think the key reason to justify change in either or both is really a change in capacity. If you had a couple of ops that weren’t equipped when you originally did your budget and you’ve equipped two more ops, really the expectation should be a lot higher at that point so that you’re getting a return on that investment. Or, if you add a provider, or any of those capacity issues… provider hours, I guess, is probably the better term. So, it’s really setting an expectation above that original budget or goal that, like I said, ensures a return on that physical investment in money and people’s time, etc. To the contrary, I think there’s lots of temporary things where sometimes teams can get a little deflated and say, “Well, our goal and budget is unattainable because…” a good example right now is keeping a full staff. How can we reach this goal if we don’t have enough dental assistants, for example, to really deliver the patient care. And, I think that’s when you can keep high expectations, but also do other measurements such as production per business assistant and set some more individual goals as well. And, focus on how to kind of overcome some of those temporary things to ultimately stay on track for the goal and budget.
Heather Driscoll: Yeah, absolutely. And, I think for leaders specifically at the practice level, you’re really wanting, or more naturally inclined, to make modifications more regularly because of those temporary changes in constraints. And, realistically from maybe a bigger-picture view, the fact of the matter is there are still debts to be serviced and returns for shareholders and things like that. And so, the caution of really sporadically making changes specifically to the financial plan or the budget itself, you know, a little bit more caution to be had there. I can also appreciate though, on the flip side, that if there really has been something that significantly has impacted your ability to deliver patient care, even if it’s temporary, goals that seem completely unattainable can be a bit demotivating. And so, just being comfortable with potentially some temporary changes, to your point, maybe there’s now a focus on more individual performance or something that really does reflect a bit more of what your team is capable of in that moment without really unraveling and undoing your entire strategic and financial plan. Certainly there’s a happy medium in there somewhere.
Drew Schaefer: And, you don’t want to lower the standard either to where… let’s say you’re understaffed and you add somebody in, I think people are much more willing to lower the expectation than get that expectation increased and back on track, so it’s all longer-term vision.
Heather Driscoll: So, if we decide to make a change, one of the things that I think we often fall short of - I know I’m often guilty of this - is if there’s a change, and you just stated a perfect example, did we communicate it so that when there’s another change and maybe the expectations are increased again, that everybody understands the “why”. Again, maybe there’s a change in staffing, or we really truly don’t have the provider mix that we thought we were going to have when we created the strategic plan, you may make the decision to change your goals or even maybe your budget, but if people don’t really understand the thought process behind that, and all of a sudden the number on the white board in the morning huddle just changes, we don’t want that to send the wrong message. So, are we communicating when changes are made so that people really understand the thought process that went into them?
Drew Schaefer: Yeah, I think the key part of that is also making sure you’re communicating the financial elements that are in the control and purview of whoever is receiving that information as well.
Heather Driscoll: Yep, absolutely. Yeah, not everybody in the practice maybe needs to know that a projection that’s being sent to the bank is changed, right? That really doesn’t have any impact on their day-to-day performance, but just making sure that the right people are informed when changes are made. So, if we go down this route, Drew, and we decide to make some changes, what are some of the implications to consider for the rest of the year and for maybe the end of the year when we’re refocusing on creating a plan for the following year?
Drew Schaefer: Yeah, I think whenever you make a mid-year change, especially if it’s downward, I think you should automatically be finding what your plan is to get back to where you were so you can get back to that longer-term vision. Short term there’s always going to be implications as far as your point to sending financials to the bank, if you have any element of debt service, you understand the impacts of that from a debt-service, from a distribution-ownership perspective. And, there’s also typically some element that affects employee compensation, whether it’s bonuses, etc. And, being sensitive to what individuals are capable of influencing and making sure that, not to harp on it, but going back to the short-staffed example, if everybody’s working harder trying to pick up slack, that you’re also not so short-sighted that you kind of reevaluate the bonus structure to make sure that aligns to keep the people that are there working harder, motivated, and a good morale as well.
Heather Driscoll: Yeah absolutely, so really kind of the long and short of it is that we’re not saying that change should never be made, right? We really do think that your strategic plan, your goals, your budgets, everything really should be aligned with the reality of your situation, but decisions like that shouldn’t be made lightly as well. Another thing that we tend to recognize is that people will have planned something, whether it’s strategic investment, overall growth in general, an acquisition, whatever it might be… and sometimes we’re at this point in the year and we may or may not be achieving the goals we set out for ourself, or in some cases, we’re ahead of where we set out, and not always do we look back and understand why. So, can you think of some examples where people have almost forgotten some of their strategies or plans for the year and it’s really kind of clouded their vision as to why they’re performing the way they are?
Drew Schaefer: Yeah, I think it’s very easy to set a plan and a budget at the beginning of the year and really just focus on performance to budget for that year. And, typically groups have to make some minimal investment in the organization to maintain their current brand standard, to keep up with technology and current advancements in the industry. And so, I think it’s very easy to set a plan and then get so busy in the day-to-day that you forgot about these investments that really were going to take your practices to the next level or help providers in their delivery of patient care, getting more efficient on costs and time, and you forget that you set aside $100,000 to invest in this equipment to help make that more achievable as well as make it a better place to work. And so, I think this is the time of year where it’s good to revisit that. Obviously, this late in the year you’re not going to get the full year’s advantage of it, but you also don’t want to get into planning for the next year and say, “Oh, we were going to do that, we should probably do that next year,” and kick it down the road. So, kind of looking at the last 4 months of the year, looking at some key busy times and when it would be best to implement new things. And of course, at the end of the year a lot of these suppliers have some good financing options as well, so being more strategic on that instead of getting an ad and saying, “Oh, we’ve got to do this tomorrow,” and very reactive in nature.
Heather Driscoll: Yep, absolutely. So again, I know as an organization, we’re pretty big fans of a plan. I think it helps to take the surprise out of performance when you really do plan for something, whether it’s an investment of equipment or the addition of people or a provider, and again not so concerned that you may or may not be performing exactly to plan, but really just making sure we understand the “why’s” behind it. And, if you do decide to make a change, is it a short-term change? Is it something that’s going to impact long-term performance? And again, just being intentional with your strategy there and how you communicate your strategy. So, I always appreciate this time of year, Drew, because I know for us, we’re getting closer and closer to budget season, which means we need to get more and more clear about our long-term vision and our goals and objectives. So, appreciate you taking the time to talk through this today. Any final thoughts?
Drew Schaefer: Yeah, the key to budgets is just to remember that as soon as you publish it, it’s wrong. And so, just keeping that in mind and don’t adjust your budget to performance, keep a level head, and keep a bigger, longer-term picture.
Heather Driscoll: Yep, absolutely. That’s a great reminder. Alright, well thanks everybody for joining us today, this has been this week’s Spark Strategic Thinker, and for more resources, you can certainly visit us at SparkDentalNetwork.com. So, thanks for joining me Drew!
Drew Schaefer: Thank you, Heather.
Heather Driscoll: Bye.
