Veterinary practice management by the open book

With a healthy back to carry his 180-pound frame through the defensive line, Ross D. Clark might never have made news in the veterinary world. He'd have been Emporia State Teachers College fullback Ross Clark, not Ross Clark, DVM, and from there, who knows? Green Bay Packer fullback Ross Clark, perhaps. And at Green Bay he would have played for coaching icon Vince Lombardi.

But his back was broken in a car accident his senior year of high school, so he turned down the Hornets scholarship and enrolled at Kansas State University instead. At the time, football was the only thing on his mind. "That's all I lived for," he says.

Without football as a career option, Dr. Clark focused on veterinary medicine. Ironically, the car accident set him on a journey that would make him, for many, the Vince Lombardi of veterinary practice management.

Today, Coach Ross is putting the final touches on a new playbook he thinks will help veterinarians win the game of practice management. It will be his eighth book, his fourth on management strategy. That's a lot of words for a man who says writing was his weakest subject in school; Composition 101 earned him the only C of his college career.

Book excerpt: Why open book opens the floodgates to success*

"I just didn't have anything to write about," he remembers. "The prof said, 'Go outside and write 1,000 words about the Formal Gardens.' To me, well, it was just a bunch of flowers."

Practice management proved to be much more than a bunch of flowers. Dr. Clark began writing management columns in Veterinary Economics in the early 1980s. In 1989 he wrote an article about his "12 Worst Management Mistakes." It was the most widely read article in the magazine's history up to that point, garnering a whopping 92 percent readership score.

The heart of his advice in 2012 will be familiar to anyone who has heard him speak since he began consulting and writing on management issues in 1981: Open your books and let the sun shine in.

OPEN YOUR EYES

Dr. Clark has refined his management thinking since the "12 worst" article went to press 22 years ago. No. 1 on that list was not scheduling enough staff meetings. And he still believes in weekly staff meetings. But an idea he encountered later crystallized his thinking: Veterinary practice is a team sport.

He came across the idea in 1994 when he read a groundbreaking book, The Great Game of Business: Unlocking the Power and Profitability of Open-Book Management (1992, Currency/Doubleday) by Jack Stack and Bo Burlingham. He was captivated by the story of how Stack and 11 other investors turned around their nearly bankrupt company, a subsidiary of faltering manufacturing giant International Harvester. Their resurrection secret, Stack wrote, was treating the business and the employees like a team locked in serious competition. The key insight was this: Nobody keeps the score secret when they play a game. Hits, runs, yards gained, even poker chips are always front and center for every player and fan to see.

"The way Ross puts it," Dr. Ron Hooley explains, "is that sometimes you're just shooting baskets in your backyard with your friends. Nobody's keeping score. But the minute somebody says, 'Let's go to 10,' your game goes up a notch." Dr. Hooley entered veterinary practice as a kennel attendant in 1982, graduated from Oklahoma State University in 1989, and has spent most of his career working with Dr. Clark. Last August he opened his own practice in Tulsa—River Trail Animal Hospital and Pet Lodge—with partner Dr. Roddy Roberts.

"Open book is such an obvious concept, it's hard to see why people don't get it," Dr. Hooley says. "You want people in your practice to be actively engaged in what you're doing. It's human nature to want to compete. Let's see who can make the most baskets, let's get in shape to win. That's where the energy comes from."

It's not difficult to see how the coach in Dr. Clark was energized by the ideas in The Great Game. Stack's company, Springfield Remanufacturing Corp., not only survived but thrived. The way Stack described his employees is poignant:

Our people work with plugs in their ears and leave the factory every day covered in grease. ... The Great Game takes down the walls. ... The best, most efficient way to operate a business is to give everybody in the company a voice in shaping how the company is run and a stake in the financial outcome, good or bad.

Dr. Clark was so taken with the book and its authors that he visited Springfield and later brought some of Stack's partners to Tulsa to speak with staff members of National PetCare Centers when they were starting the national chain. The ideas took root. "It was the greatest idea I'd heard in all these years thinking about management," Dr. Clark says. "It's built on a simple principle: Things that get rewarded get done. Things that get measured get done. If we emphasize in a meeting that our rechecks need to increase, that we're down in follow-ups, they go up."

When Dr. Clark tells the story of Springfield Remanufacturing, you can hear the enthusiasm in his voice. It's a David and Goliath story; the teammates are David and the very real prospect of failure is Goliath.

"We try in our company to make sure everybody has a stake in the outcome," he says. "We try to take care of the four primary stakeholders. The pets need to do well. The clients must feel they're treated well. Then we take care of the team. You need to pay them well, they need to have benefits, you need to keep them happy, and you need to keep them involved. Of course the veterinarians have to do well. We pay them 20 percent of their production plus bonuses. And the practice owners have to do well; they're the investors with money at risk.

"We have a meeting every week, and we share the numbers. The idea is like capturing lightning in a bottle," Dr. Clark says.

OPEN YOUR WALLET

The bonus system Dr. Clark uses today is clearly understood by his team members. Bonuses are distributed quarterly. If the practice exceeds the 20 percent margin, one-half of the remaining EBITDA (earnings before interest, taxes, depreciation, and amortization) is divided among team members. Higher-paid employees get a larger share than lower-paid employees. Last year's bonuses at just one location amounted to $50,000 to team members and $50,000 to owners and investors. Some employees, he says, have added as much as $1,500 to their annual incomes through the bonus system.

Team members benefit, but so does the practice. Dr. Clark offers an example about pet food sales that still has him shaking his head. The margin on pet food sales, he explains, is about 30 percent. And when he and his staff tallied up the cost of pet food sales at the end of a recent quarter, it came out at exactly 70 percent of sales. "That means we didn't lose anything," he says. "Nobody walked out the door with a few cans under their coat. Now that's really hard to do."

In simple terms, he says, open-book management gets everybody interested in controlling costs and driving income, not just the owners.

Dr. Hooley sees the same effect. His staff members at River Trail Animal Hospital remind him when meetings are scheduled. Using the ideas of open-book management, he says, has made his new 11,000-square-foot hospital "a fun place to work."

"If we look at the numbers and we've had a record day, the team gets excited," Dr. Hooley says. "They know the numbers. Open-book management turned this into a game. They get energy from that. And happy people make happy clients."

Of course, Dr. Clark's success isn't all about open books, Dr. Hooley says. Some of it is due to Ross Clark the person. Dr. Hooley was a kennel attendant the first time he heard his future mentor speak. Dr. Clark was consulting there and giving a pep talk to the staff, and Hooley was a high school student considering veterinary medicine as a career.

"I was disillusioned with veterinary practice at the time," he recalls. "Then Ross came in. The energy he brought revitalized my idea about becoming a veterinarian." Later, Dr. Hooley did a preceptorship at Dr. Clark's hospital. When he graduated, Dr. Clark advised him to spend some time in a veterinary hospital before committing to employment there. It was good advice. He worked free for a week at his first workplace, a Louisiana practice, and then realized it wasn't for him. He returned to Tulsa and worked part-time for Dr. Clark, then full-time. He followed Dr. Clark into the world of corporate veterinary practice and only recently followed him out.

"Ross is successful because he's concerned about the people who work for him," Dr. Hooley says. "That means he's able to keep the right people around him. And they're willing to do that extra thing. I really didn't know how unusual he was until I met other people in his position. Ross is generous to the people who work with him, and they know it's not a one-way street like it is in a practice where the owner just wants to make money. When Ross recognizes talent in people, he puts his energy into them, knowing they'll be rewarded and consequently he will, too."

OPEN YOUR MIND

Although Ross Clark came to veterinary medicine because of football—or the lack thereof—his career choice wasn't arbitrary. His brother was a veterinarian, and Ross spent summers in Cooperstown, N.D., where his brother practiced large animal medicine. When he came back from one of those summers, he made two career decisions. The first was that he'd be a small animal veterinarian.

"Ugh," he shivers, the memory more than 50 years old but apparently still fresh. "I didn't have dreams of standing in a barn with the temperature 10 below zero and my arm up a cow's butt."

The second decision was just as unequivocal. Ross admired and appreciated his brother and other large animal veterinarians, but he wouldn't be anything—large animal vet, small animal vet, baker, or banker—in Cooperstown. "That was my brother's bailiwick but it wasn't mine," he says. "I wanted to get off the farm and into a warmer state."

His first job after graduating from Kansas State in 1963 was at a small animal hospital in Chicago. He went, he says, for two reasons: "It was a huge practice, it paid very well, and it saw a lot of cases. And they had a Playboy Club in Chicago."

After a year he moved to another busy practice, this time in a warmer climate in Mesa, Ariz. There he met his future wife, a Kansas girl, and soon he was back in the Midwest. In Tulsa he started Woodland Animal Hospital, later Woodland Pet Care Centers. By the time he'd written about his "12 worst management mistakes," Dr. Clark had turned Woodland into a model practice for the profession and was in demand for seminars and speeches. He was one of six founders of National PetCare Centers (NPC) in 1996, where he managed 21 of the eventual 72 hospitals. Then, in 2004, that chain merged with Veterinary Centers of America (VCA), and Dr. Clark found himself knee-deep in real corporate practice.

The one-size-fits-all decision-making, however, didn't always suit him. Dr. Clark tells the story of managing a large practice in Dallas that was stuck with the same $1,000 petty cash limit per month as smaller practices in the chain—many one-eighth the size of the largest. The specialists at the largest practice had to pay for MRIs at the local hospital out of their own pockets, he says, then get reimbursed. "The accounting folks at headquarters couldn't get that through their heads," he says, "so it took several months to get that policy changed."

Dr. Clark left NPC and bought two of its smaller Oklahoma hospitals on the way out right after the merger with VCA in 2004. "The two I bought were the smallest in the area that NPC owned," he says. "We took one to being pretty much the largest one in Tulsa. That doesn't happen just by accident." Today, he owns or co-owns three hospitals and three pet resorts.

One key to the success of those practices, he says, is that the hospital directors and managers ask their team members how to solve problems. For example, Dr. Clark and his partners recently built a new Woodland West facility, and with its increased costs, the practice hasn't paid a bonus since the move-in 18 months ago. So Dr. Clark gave raises, which set back the profit date even farther.

"We asked people, 'What can we do? We've got a problem here,'" he says. "They came up with some good ideas. Now we're going to get there in June or July 2012. Getting back to a bonus in two years after moving in is due to the excellent performance by our team."

OPEN UP YOUR FINANCES

Practice growth plays an important role in Dr. Clark's thinking. But at the same time, he thinks going all-out for growth can be a mistake. "What I learned from the big national companies is to try to get your arms around the business first," he says. "Get your arms around what you have now and then go for growth."

On the other hand, he says, veterinarians often overlook growth when thinking about the financial health of their practices. "They talk a lot about their net: 'I have 22 percent net,' 'I have 26 percent net.' That's wonderful, but I'd rather have 18 percent of $3 million than 24 percent of $300,000. A lot of them are milking their practices. They're not putting enough back into the company."

Thinking about net and growth led Dr. Clark to design the "Clark Heat Index," a number he proudly says that no accounting firm has yet adopted. The Clark Heat Index is the percentage of net plus the percentage of growth. "I think 22 percent net is great, but 15 percent net and 30 percent growth—a 45 percent Clark Heat Index—is fantastic," he says.

Despite Dr. Clark's obvious success with open-book management, the philosophy does have its detractors. Dr. Clark says many practitioners are simply afraid to open the books. They think employees will be offended by what the owners take home and think it's better if they simply don't know. "What they don't realize is that their employees probably think DVMs are doing better than they are," he says.

However, knowing what the boss makes is only a small part of what Dr. Clark means by open-book management. In fact, he's translated the entire system for the veterinary profession in his new book, Open-Book Management for Veterinary Hospital Teams (tentatively due out from Veterinary Economics and Advanstar Veterinary later this year).

A major component of his system is a set of "scorecards" he created to use at weekly staff meetings. These cards track just about everything—rechecks, transactions, new clients, veterinary production, staff hours per "dog day" for boarding efficiency, and staff hours per transaction for veterinary hospital efficiency. Scorecards, he says, are "the No. 1 component of open-book management."

But as a good coach, Dr. Clark knows it takes more than keeping score to build a winning team. He sees the value of training and learning, a key concept in the story of Springfield Remanufacturing Corp.

"You don't lose employees if you're training them," Dr. Clark says. In a chapter in his upcoming book, Dr. Clark pulls all his management ideas into a single sentence: "We create partnerships by opening the company books, paying for performance, not titles, and sharing the bad times as well as the good."

When Dr. Clark was a boy he had a trash route and a paper route, and he was already thinking about owning his own business. One reason he chose veterinary medicine, he says, is that he figured it was one of the last professions where a person could own an independent business.

"I'm always looking for answers," he says. "I stop in at veterinary hospitals on vacation to get ideas. For me, it's a passion. I'd rather talk about this stuff than go to cocktail hour."

Veterinary Economics special assignments editor John Lofflin is a freelance writer in Kansas City, Mo., and a journalism teacher at Park University in Parkville, Mo. Send your comments to ve@advanstar.com.