Using the example of an optometrist's office that is facing a lot of competition, accounting professor Kay Stice explores how a key performance indicator impacts employees. In this video tutorial, he explains how KPIs and new measurements can impact employees, and customers.
- Now back to our optometrist office example. As a reminder, here's the new mission statement. Provide lifetime, high quality eyecare to individuals and families, with an emphasis on courteous, flexible service and respectful disclosure and consultation in terms of options and cost. Well, let's take a moment to determine whether this is a good mission statement. I think it is, because it tells us what the optometrist is and is not going to do. Notice the emphasis on quality service and lifetime relationships. This mission statement makes clear that the optometrist is not going to try to compete with the low cost providers, the supermarkets and the online sellers.
Instead, the optometrist is going to focus on service and developing long term relationships with customers. And what does a mission statement have to do with accounting, balanced scorecards and KPIs? A mission statement defines what actions an organization views as being important. It is then the job of the accounting system to measure and reward those actions. And here's one of the new key performance indicators, or KPIs that the optometrist is now going to track. Percentage of customers who must wait more than 15 minutes after appointment time before seeing the optometrist.
Now, to make things more specific, let's assume that the office receptionist has been made responsible for this KPI. Let's consider how his behavior might change once this measure begins to be discussed at weekly staff meetings. We will see how employees' behavior changes just because of a certain activity now being measured. Let's not worry about how we will measure these waiting times. Let's assume that we have a perfect measurement device that the receptionist can't manipulate. Perhaps it's as simple as patients being required to log in and out on a written log.
So with this measurement and evaluation system in place, instead of passively sitting behind his desk, the receptionist is going to constantly monitor the people in the waiting room. How long has each person been there? What time is their appointment? The receptionist now has a personal interest in each patient, and in his or her time. The receptionist would be very careful about scheduling, checking the details of each appointment to make allowances for consultations that might take extra time. If the receptionist can see that the optometrist and her staff are running late, the receptionist may decide to call scheduled patients and offer to reschedule.
Can you imagine how you would feel if you got a call from your optometrist or doctor or dentist that went as follows? Hey, the doctor's running late. Your time's important to us. Rather than come to the office and just sit in the waiting room for an extra 30 minutes, would you like to reschedule your appointment time? Now, I myself would be very impressed at the quality of service if I were to get such a call. Now, this is not a perfect measure. The receptionist may now have an incentive to spread the appointments too much, cutting down on the number of patients and so hurting revenue.
The optometrist will need to keep an eye on this. But the key point is this. The receptionist will now do his job differently, not because he's loyal to the optometrist, not because he's loyal to the patients, not because he has attended a series of seminars on customer service. No, the receptionist will proactively think of ways to serve the patients better because of the simple fact that a new accounting measure, a KPI, is now being tracked and then discussed in the weekly staff meeting. That's the power of accounting.
In this course, accounting professors Jim and Kay Stice explain what KPIs your business should consider in a balanced scorecard, from financial goals to employee and customer satisfaction. They describe how to craft a clear mission statement that complements your KPIs, and how to tie performance to incentives. Plus, get a look at KPIs in action, as Jim and Kay break down a case study examining a trucking company's balanced scorecard.
- The importance of KPIs and measuring performance
- Financial goals and measure
- Customer needs and satisfaction
- Employee growth
- Creating an effective mission statement
- Linking measurements and rewards
- Examining a KPI case study