Seven Habits of Highly Effective Home Care Managers

by Dexter W. Braff

The best performers are indeed different, often because they manage differently. In representing many of the "best and the brightest" as well as conducting interviews of industry leaders for best practices seminars, we have seen that the overachievers tend to share many of the same management traits. Here then, the seven habits of highly effective home care managers.

They are People-Centric. The best route to performance excellence is effective management of people. Even the capital markets - known for its impersonal focus on revenues and profits - are increasingly scrutinizing "people issues" in evaluating firms. In fact, according to the Herman Trend Alert, "specialists who establish, review, and modify [credit ratings and interest rates for health care companies] now include issues like workforce stability and vacancy rates in their evaluations."[1] Intuitively, you know this one. But the best home care managers have put people issues at the very center of their strategic plans. They have developed an expanded view of remuneration that, in addition to salary, includes incentive pay, professional development and training, technological support, emotional support, and unique perks. To attract the best employees - and retain the good ones they have - many are strategically branding their organizations, not only as a quality provider, but as the "Employer of Choice" in their area. A designation, by the way, that companies can actually compete for in many cities. To improve the odds of identifying the best potential employees, many firms are using psychological tests to identify candidates with psychological profiles similar to their best performers. And others have adopted staffing practices where they will hire the "best of the best" when these candidates are available, not only when they have a position open. Such is a service industry where it is as critical to bank good people as it is to bank profits.

They Focus. The best home care managers understand the extraordinary value that comes from focus. For example, in a recent article appearing in Harvard Business Review on merger and acquisition strategies and the benefits of focusing on narrow customer segments, the authors stated that "it is far from rare for the most profitable 20% of a company's customers to contribute more than 100% of its profits, sometimes more than 200% (emphasis added), and for its least profitable 20% of customers to generate losses of an equal amount."[2] So time and again, the best performing managers and companies identify focus areas - and ruthlessly stick to it. Most commonly, akin to the customer segmentation described above, we see focus on narrow product lines and services, such as respiratory or rehab services for home medical equipment providers, specialty drugs for infusion therapy providers, and orthopedic patients in the home health arena. But focus can come in other forms. Some providers focus on narrow geographic markets, others by payer, and others by combinations of each. By doing so, they gain the marketing clout of a specialist - "we do it (whatever it is) better than anyone else, because it is the only thing we do." Furthermore, when you only have to develop and implement clinical and operational formularies for a few products or services, deliver to a tight geographic market, or bill one type of payer, you can reap extraordinary gains in productivity and efficiency. And in highly focused organizations, employees "always" know what to do, as strategic decisions are always made within an identified, focused, context.

They Monitor. Once clear management objectives - which flow easily in focused organizations - are communicated, the best performers vigorously monitor performance. But recognizing that information overload can paralyze an organization, these managers are highly selective in what they monitor, often looking at as few as 10 key measures. These "flash reports" are generally only one page long - which increases the likelihood that they will actually be read - and are often prepared on a daily basis. Rather than track revenues, which obscures where revenue growth comes from - particularly important for focused product providers - many firms track only a few specific revenue lines. For HME providers that rely on rental revenues, they primarily monitor new starts that are the best predictor of future growth. With respect to expense management, firms frequently monitor performance in relationship to the most significant expense in most health care firms - personnel. Most commonly, we see revenues per employee. But we also see gross profit per employee, which enables firms to monitor trends in revenues, cost of goods sold, and productivity, in one combined measure. In addition to revenue and expense measures, the best performers aggressively monitor cash collection activities, traditionally in the form of days sales outstanding. But the most enlightened firms also look carefully at measures such as days in pending, and cash as a percentage of revenues, where revenues are staggered 30-90 days to reflect normal cash conversion cycles. And one other thing. The best companies do not rely solely on industry benchmarks to assess their level of accomplishment. Rather they rely on internal benchmarking, where the objective is sustained performance improvement.

They Communicate. No surprise here. Many firms believe they communicate well with their employees. But going far beyond weekly staff meetings, the best performers take communication to an entirely different level. For example, remember those "flash reports" described above? Many firms display these measures prominently for all employees to see, both to emphasize their importance and to facilitate greater "buy-in". Similarly, rather than keep financial statements locked in the board room, many industry leaders distribute sanitized versions of the statements (without confidential salary information) to all employees in order to breathe life into the link between their activities and profits. Many firms even conduct daily "call-outs" where customer service reps literally call out performance numbers at the end of the day. And finally, they work hard to create corporate cultures that vividly reflect the manner in which they do business, which ultimately serves as a constant reminder about what is important to the organization.

They Reward. With organizations that effectively communicate and monitor focused objectives, the natural progression is to offer incentive programs that reinforce performance towards those ends. Although many firms offer incentive programs, the best execute these programs extremely well. First and foremost - and not surprisingly - the programs are highly focused. For example, many respiratory providers only pay sales commissions for Medicare oxygen, CPAP, BiPAP, and nebulizer medication patients. Second, they are carefully constructed to reward the right activity, which is often more difficult than it sounds. For example, since sales reps are responsible for generating new referrals, the best incentive programs pay only on new start-ups vs. residuals from re-rentals of focused products. Consider collection programs. Offering incentives to billing personnel to reduce days sales outstanding can lead to improved cash collections (intended), or, a flurry of write-offs (the oft unintended result). So many of the best performers offer collection incentives based on reaching percentage of revenue collection milestones. Third, to keep the link between performance and reward constantly in-mind, rather than pay incentives quarterly, or worse, annually, they pay them monthly. Fourth, the best incentive programs are simple and easily calculated so that employees always know how well they are doing. And finally, the best managers offer targeted incentive programs to virtually all levels of employees to further build a corporate culture of performance excellence.

They Sell. When we see firms that have achieved substantial and consistent growth or have strategically altered their product mix, in virtually every situation the firm has made an extraordinary commitment to developing a professional sales force. And when we say force, we mean it, as in it is not uncommon for the best performers to have one or more reps for each $1 million in revenues. And - note the thread between the Seven Habits - these reps are carefully selected, extremely well trained, strategically monitored, and highly incented on achieving focused objectives, without caps on how much they can make. One other observation. During our "Best Practice" interviews, another pattern emerged. Most of the best performers seem to be concentrating their sales efforts on physicians, rather than institutional discharge planners, in order to capture potential clients earlier in the referral process. As such, these sales reps adopt a higher end, "consultative sell", and further distinguish themselves as being more than mere "donut pushers".

They Network. Lastly, a trait that was somewhat unexpected. Most of the best performers we have come in contact with are extraordinarily involved in their State and National Associations, and not necessarily for the reasons you might expect. While part of their interest lies in shaping the legislative and regulatory arenas in which they operate, the best managers use these forums to aggressively network with their colleagues, to learn what strategies work - and don't work - for them, and to stimulate new ways of thinking about their organizations. Furthermore, with a strong network, we found many instances where managers in non-competitive situations developed mentor-mentoree relationships that often included on-site visits for the specific purpose of sharing best practice information. As entrepreneurs in close knit organizations often suffer from an unhealthy in-breeding of thoughts and ideas, networking can be a critical element in a firm's success.

Certainly there are other management traits that are important. But virtually all of the best performers we have come to know possess and embrace each of the above. As such, they're not a bad place to start.

1 "Workforce Issues Moving to the Bottom Line"; Herman Trend Alert; March 26, 2003

2 "M&A Needn't Be a Loser's Game"; Harvard Business Review; June 2003