Article Date: 6/1/2010

Why Doing Nothing Is Your Worst Option
loyalty

Why Doing Nothing Is Your Worst Option

The final part of this three-part series exposes the costs of failing to foster loyalty in your practice.

APRIL JASPER, O.D., West Palm Beach, Fla.

A number of business leaders have fallen into the trap of maintaining the status quo. They've decided that if they just keep doing what they have always done, they will get what they have always gotten. In other words, they let themselves believe that conditions are good enough now, and as a result, they do nothing to try to improve them.

Research has documented that this "do nothing" philosophy plays a significant role in the downturn and steep decline of many businesses. In this article, I'll demonstrate why this "do nothing" philosophy is deleterious to patient/employee loyalty in any enterprise, especially a service-based profession, such as optometry.

Reviewing loyalty

We've established in prior articles ("The Essential Elements of Loyalty," March OM and "How to Create Loyalty In Your Practice," April OM) that a main focus in our business should be the development of loyal patients. In the March article, we discussed the need to measure this loyalty factor with surveys. According to Fred Reichheld, an author and researcher in the field of customer loyalty, the most important question on the customer survey and the employee survey is simply, "How likely is it that you would recommend this company to a friend or colleague?" Mr. Reichheld explains in his book, The Ultimate Question: Driving Good Profits and True Growth (Harvard Business Press, 2006), that when surveyed on a scale of zero to 10, those patients who answer nine or 10 (the most loyal patients) are considered "Promoters" of your business, and those who answer from zero to six are considered "Detractors." Mr. Reichheld goes on to say that "Promoters" have the highest repurchase rates and account for more than 80% of referrals, while "Detractors" account for more than 80% of negative word-of-mouth comments. Practices that have a high percentage of "Promoter" patients, he says, will also have a high percentage of "Promoter" employees.

If you think all employees are "Promoters," you'll be surprised to read that researchers from Bain & Company, a global business and strategy consulting firm, found that only 19% of employees are "Promoters," or, only 19% of employees can be counted on to provide enthusiastic referrals for the business that employ them. Employees who are not "Promoters" are more likely to leave the company when they receive a better offer from another company. A "do nothing" philosophy only perpetuates more "Detractors" and causes a decrease in the number of "Promoters." What is this lack of "Promoters" in our business costing us? Let's consider the question in these terms: What does doing nothing to develop loyal patients and employees ultimately cost us?

The cost of nothing

Ken Blanchard Companies, a management training and leadership development company, has developed an online calculator that quantifies the cost of doing nothing (see www.costofdoingnothing.com) in actual dollars. This calculator also estimates the amount of money you can save if you improve. For the purpose of this article, we'll discuss only the costs of doing nothing. Mr. Blanchard says you can break down the costs into three categories:

► Employee productivity
► Employee turnover
► Customer loyalty

Let's examine each of these to determine how they impact our practice. (As the following numbers are based on averages, I encourage you to calculate each for your unique organization to gain a better understanding of your practice's costs.)

Employee productivity:
In 2002, Proudfoot Consulting, an operational improvement firm, conducted a survey of 1,300 private-sector companies from the world's seven leading economies. The results of this survey showed that, on average, only 59% of work time is productive. According to Proudfoot, the three major causes of poor productivity are:

► Insufficient planning and control (43%)
► Inadequate management (23%)
► Poor work morale (12%)

These results don't indicate that people aren't working hard. they simply tell us, according to Tor Dahl, former president of the World Confederation of Productivity Science (WCPS), that through no fault of their own, most people aren't working on the right things in the right way. A conservative estimate of what this is costing businesses is between 5% and 10% of gross revenues, according to the WCPS.

Employee turnover:
The costs of employee turnover, according to Ken Blanchard Companies, include:

► Covering the vacant position until it's filled
► Finding a replacement
► Training the new employee

According to Seymour Burchman, a principal at the global management consulting firm Sibson & Company, "Employee turnover has a significant effect on companies' top lines by inhibiting their ability to keep current customers, acquire new ones, increase productivity and quality and pursue growth opportunities." This cost as a percentage of income, according to Sibson & Company, is 16% to 20%.

Customer loyalty:
Mr. Reichheld has developed what he calls the Net Promoter Score (NPS) as his way to quantify customer loyalty. The NPS is essentially the number of "Promoters" in your business minus the number of "Detractors," or: P � D = NPS.

Mr. Reichheld's research concludes that the companies with the best growth have a NPS between 50% and 80%, while the average business has an NPS between 5% and 10%. Some of the companies with the highest NPSs are Costco, Amazon.com, ebay.com, Chick-fil-A, and Apple Computer, Inc. Studies have shown that every 1.3% increase in customer loyalty scores correspond with a subsequent increase in revenue growth of 0.5%.

In other words, if you increase your patient loyalty by 20%, you'll increase your gross revenue by 7.5%. On the other hand, if you have a decrease in patient loyalty percentage, you'll see an eventual corresponding decrease in revenue through time.

When you put all these factors together and calculate Mr. Blanchard's "cost of doing nothing," it becomes clear that even the best practices have room for improvement, as the following two examples illustrate.

Example 1: In a practice that grosses $600,000 in annual revenue that has six employees and a 5% turnover rate, a loyalty percentage of 75% and a productivity rate of 70%, the total cost of doing nothing amounts to $88,327.

Example 2: In a practice that grosses $600,000 in annual revenue that has six employees and a 20% turnover rate, a loyalty percentage of 65% and a productivity rate of 65%, the total costs of doing nothing equals $150,000.

If we understand the cost of doing nothing, and are convinced of the need to make changes, where do we begin?

10 steps toward loyalty

These steps can foster loyalty in your practice:

1. Use surveys. Have your employees take the survey we discussed (see April OM). Also, survey at least 20 of your top patients — those who visit your practice most often, refer the most patients to you and spend the most money in your office. Evaluate the results of the surveys to determine where you need to make changes.

2. Establish a mission statement. Be certain that every aspect of the mission statement is in line with what your patients and employees would determine as important in building strong relationships that create loyalty.

3. Create a group of likeminded people. Search both inside and outside of optometry to identify leaders whom you can meet with two-to-four times a year to come up with new ideas. Also, revisit older ideas to determine whether they're still in line with your mission statement and current best practices.

4. Create a library of real life stories. These should demonstrate the loyalty-creating practices you're trying to instill in everyone in your organization. Stories make learning easier, so use them to enhance your teaching experiences. Write them down, and refer to them often.

5. Accept your responsibility as a leader and teacher. Recognize that you lead both staff and patients. Understand that leading means that you will make changes. Every discussion and meeting with your team should include a key principle and strategy as well as actions to establish this principle in your practice.

6. Resolve that as the leader, you're held to a higher standard. You must "walk the talk." This means holding high the principles that you've established and a willingness to stand by them.

7. Study the experts. Read, read and read more. This includes current writings as well as books from past generations. Authors such as Napoleon Hill (Law of Success: The Master Wealth-Builder's Complete and Original Lesson Plan for Achieving Your Dreams (Tarcher 2008,) and Think and Grow Rich (Cru-Guru, 2009), still have a lot to teach us.

8. Write what you learn.Write experiences down for your team. Write about those people whom you've inspired (by taking the path of patient loyalty), and write about those whose lives you've changed. This practice can motivate your team.

9. Be consistent with your actions. Know that your progress will only accelerate as you find ways to increase your loyalty to others. If your goal is to make others more loyal only to better your practice, then you won't succeed. Concentrate on enriching the lives of others and making their lives more meaningful.

10. Be patient. As Mr. Reichheld says, "the basic premise of building loyalty is that it is a logical strategy for the pursuit of self-interest when self-interest is defined in the context of lifelong success, not success just for today, this quarter, or this year." OM

Dr. Jasper is in private practice in West Palm Beach, Fla. She graduated from Nova Southeastern University and completed a residency in ocular disease at the Brockton/West Roxbury VA Medical Center. She is a fellow of the American Academy of Optometry, trustee for the Florida Optometric Association and a VisionSource administrator. E-mail her at drjasper@aeswpb.com.


Optometric Management, Issue: June 2010