Why Dispensaries Fail, (or simply limp along). By Arthur De Gennaro Published in the Spring, 2004 Issue of Administrative Eyecare It was ironic that the very day I was asked to write this article I had a discussion with a multi-site optical manager who works for a large ophthalmology practice in the Midwest.  We had recently completed our first year working together and were discussing some of the challenges we encountered that she had not anticipated when the project started.  This was a real learning exercise for her, as it is certain she will face these same situations again sometime in her business career. What were some of these issues and are they common to practices that consider turning their optical dispensaries toward maximal profitability?  And just how did we deal with them?   This article explores some of the problems we touched on that day, as well as others.  Oddly enough you will find ideas here that are applicable not only to your dispensary but to your overall practice as well.  After all, what is true in one area of a practice is usually true in other areas as well. What Exactly Is The Problem? It should almost go without saying that understanding what the problem is the logical place to start.  Unfortunately this is not always as easy to determine as it seems. Cause #1: Insufficient Management Controls It is not a revelation to say that businesses, and especially retail business like dispensaries, run on data and that data can be turned into reports.  In fact, the availability of nearly instantaneous, highly accurate management reports has allowed most businesses to make better, faster and more informed decisions.  This is more of a reality for the medical/surgical side of most ophthalmology practices.  Sadly, however, this is generally not true for the dispensaries that occupy them. The reasons for this are numerous, some of which are discussed below.  Suffice it to say that the first remedy is to: Solution #1: Create a series of management reports that tell you where your dispensary business is right now. Such reports as: Daily sales and collections. Add-On Sell-Throughs. Practice capture rates. Payroll efficiency. Cost of goods sold. Inventory valuation and piece count. are the mainstays of getting a grasp of the basics.  These reports must be seen regularly (notice that sales and collections are reported daily) and reacted to appropriately: information that is not acted upon quickly only uses up resources that could have been used for other purposes.  In the retail business of the optical dispensary, daily is not too often to react. Strategic Planning The data, then, will give you an idea of what the real problems are.  As most of you well know, that is the easy part.  Effecting change is another story, as the saying goes. I learned a long time ago that management is not a science but an art.  In a manner of speaking, managers are tinkerers.  What I mean is that managers configure and reconfigure their work environments based on the information they have in front of them at the time, hence the critical need for the reports mentioned above.  The hope is that the latest iteration of the business is the magic one that will bring about maximal sales, profits and a congenial working environment.  When that proves not to be true, managers go back to the data, hypothesize again and reconfigure.  Tinkering.   But tinkering, at a level, is the process of strategic planning, an essential and necessary process for every business. Cause #2: Lack of Focus on Process Assuming you have timely, reliable data, the next step is to create an action plan.  As odd as it may seem, this is an area where many ophthalmic administrators and managers fail.  The failure comes, not in correctly determining what needs to be done, but in not paying enough attention to the process of how things get done. This brings to mind a few questions, such as: What series of activities need to take place for the people in this practice to effectively change the organization’s approach to the dispensary? How will I know if we are being successful or if there are lingering problems? How much direct input should I have into this work? Solution #2a: Focus on the Fundamentals Just as in sports, the fundamentals are what cause people to win.  In the dispensary world those fundamentals are called: A written strategic plan. A sales forecast and budget. The types of reports mentioned above. A carefully crafted Things To Do list. There is not substitute for planning…everyone knows that, yet an alarming number of dispensary managers and ophthalmic administrators do not have a written, accepted plan.  By observation I would say that nearly every dispensary manager and most ophthalmic administrators I know did not attend business school and have only limited acquaintance with these techniques on a formal basis.  Add to this a healthy amount of skepticism for such academic type processes, a common personality trait among entrepreneurial types and people with high task orientations, and you have some reasons for the lack of formal planning activities.  This, however, causes them to make snap decisions and take risks that are not prudent.  Worse still is that these same decisions have a tendency to be revisited often and directions changed with little or no notice.  The result is organizational instability, which in turn results in people disengaging and not using their creativity or initiative. Assuming a strategic plan is in place, the next order of business is to write out a, Things To Do list for each project.  This can be is as simple as writing down on a scrap of paper all of the things that need to be done in order to accomplish a particular task.   The list is then prioritized and resorted by what events/activities proceed others.   Other, more sophisticated techniques are available as well.  Storyboards, Gantt charts and flow charts are other well known tools.  All of them have the common attribute of forcing each individual in the workgroup to wrestle with the process of how something gets done.  This is so because it gets down to the nuts and bolts of resource allocation (time, talent and assets) and the esoterics of asking human beings to work together, which by its very nature assumes tolerance and a willingness to supplement others through the use of our own abilities. Solution #2a: Focus on People Which brings us to the next issue, people.  It is my experience that the human element in the performance of all businesses, ophthalmology dispensaries notwithstanding, is often overlooked.  To illustrate the point, I ask you to consider the following questions: How many hours have you budgeted for each dispensary and other employees to obtain company sponsored, off the floor, out of production, training this year?   Are these costs in your formal budget? Does your dispensary and other departments function as a self-directed work team? Does each department meet as a group at least once every two weeks?   How does information flow through the practice, both ‘up the ladder’ and ‘down the ladder’? If a change in the dispensary were decided on today by the practice’s owner(s), how would it be communicated to those involved?  How would management know that the change had effectively taken place and is being performed within the accepted work standard on a continuing basis? Do you have an interdepartmental committee that handles problems that require cross-departmental problems? Is someone in the practice responsible for ‘employee fun’ or morale? The answer to these questions is all too often, no.  The reason most commonly given is that there is not enough time for training or meetings: we’re too busy or too short of staff.  Not enough time for training?  Meetings?   If those words just rang in your ears I urge you to turn those words over in your mind a number of times.  In response I say, if the business of a business is conducted through human beings, then it is only logical that training and meetings must be the number one priority, not an afterthought.  This is simply because training is how people learn new skills and meetings are how people learn about changes, share ideas, work out problems, synergize and solidify as a working team.  These processes cannot be circumvented without a subsequent loss of efficiency.  Their absence always signifies less than maximal performance and sometimes causes disastrous results. Cause #3: Resistance to Change Probably the single most significant determining factor in reengineering a dispensary is the degree to which the host medical practice’s owners embrace change.  Time and again I have been confronted by a significant gap between what owners say they want to accomplish and how much change they are personally willing to make in their personal daily routines or those closest to them.   Owners are not unique in this regard, every employee will vary in their willingness to accept each change as it presents itself.  In my experience it is best to anticipate resistance, avoidance, outright hostility, passive aggression and opting out (quitting) and to be prepared to deal with them successfully.   Solution #3: Anticipate and Prepare for Change We are in a rapidly changing profession, what Wall Street analysts call ‘a growth industry.’  (To the point, consider that dispensaries were considered taboo just a little over ten short years ago.)  This is so because of the graying of the population, a result of the Baby Boom, and the introduction of more and improved refractive techniques.  I see nothing on the horizon that says that ophthalmologists, as a group, will not experience incredible growth over the next 20 years, much of which will result in burgeoning dispensing businesses.  It seems apparent then, that all of us would do well to teach our people to prepare for more and rapid changes.  As we said above, this will not happen without a deliberate decision to do so and a plan of action to make it happen. For this purpose some readily accessible aids that help organizations confront and embrace the idea of change are available.  Who Moved My Cheese? is a thin little book that now populates bookstore shelves and readily comes to mind.  In the labyrinth of the maze the four mice learn to deal with the moving of ‘their’ cheese, the extended metaphor for what each of us wants out of life.  Fish, is another program popular with ophthalmic administrators.  Although not change specific, participants are trained to ‘choose your attitude’, which readily relates to how they feel about change. Cause #4: Management’s Resolve As we said above, the difference between what we say and what we are willing to do can be light years apart.  In the reengineering of a dispensary this usually manifests itself when the first employee clearly demonstrates that they are either unwilling or incapable of making the changes that Management has set out.  The decision should be easy, put the employee into a counseling program and, if they do not respond, terminate their employment.  In reality this rarely happens, as Management will tend to want to give that employee a number of second chances.  This can be a good decision in some practices but usually turns out to be a bad one for most. To complicate matters even more, there are sacred cows to be considered.  Let’s take the case of Mary.  She has been an ophthalmic tech for Dr. Arthur for ten years and has managed to become nearly indispensable to him.  Will Dr. Arthur intervene if and when Mary parries adopting the latest changes in the pretest regime brought about by the dispensary project (lifestyle inventory form, eyewear analysis, etc)?  If Dr Arthur does, it will create a double standard that will dilute or devastate the entire reengineering project. Or let’s take the case of Joe, who is the highest producer in the dispensary.  The problem is that Joe knows he is the highest producer and has taken advantage of the situation by choosing which customers he will service, taking long breaks and abusing the personal time off policy.  The practice is now faced with the dilemma of terminating Joe and, thereby, decreasing its revenues and profits. Solution #4: Be Firm but Fair The answer to this issue lies in how the practice views itself, which begs the question, what is the definition of a corporation?  As a rule then, work standards should never be negotiable.  A willingness to allow wide variations in the need for compliance only creates dissention, hostility and other negative responses in the workgroup and tends to encourage team members to disengage.  The answer then is to apply the new work rules and work standards firmly but fairly.  No exceptions.  No sacred cows.  Those may seem like harsh words but the truth is that once a problem employee is gone the dispensary and practice quickly learn how to get along without that person: they accommodate. Cause #5: Lack of Consensus Intramural squabbles come in different varieties.  Some are at the executive level, where partners differ on what things should be done and/or how the things that should get done should be done.  In other cases the differences of opinion are between the practice’s owners and its department heads.  In many cases these differences of opinion result in inaction, when the inability to gain consensus results in a multitude of action items getting tabled for indefinite periods of time. This situation can also result in polarization, as owners and department heads openly criticize each other, often in front of their employees.  This has a tendency to incentivize the staff to ‘choose up sides’.  With dispensary projects those ‘sides’ tend to be the ophthalmic techs versus the opticians in a game of ‘them against us’. Solution #5: Building Trust I truly believe that one of the critical differences between ophthalmic administrators and dispensary managers that are in maintenance mode and those that creatively effect change is their ability to build a relationship of trust and confidence with each employee in the workgroup.  This is no easy feat, primarily because of the incredible diversity of human beings and the broad spectrum of our goals, needs and wants.   Building consensus then, may in large part be linked to the ability to establish such trust and confidence relationships with the dispensary employees, the ophthalmic techs, the front desk assistants and the doctors.  In this regard, dispensary managers and ophthalmic administrators would be well advised to consider ways to broaden their own comfort zones: the broader ones own comfort zone, the easier it is to understand where someone else is coming from when they are out of theirs. Conclusion Dispensary reengineering projects face many difficulties, some of them unique and some of them common with other areas of practice life.  As a rule, many of those difficulties can be anticipated and planned for through the use of some time-honored techniques, such as those described above.  With a sincere desire to embrace change, to encourage personal and professional growth and a willingness to honor the uniqueness and contribution of each individual on the work team, success is within reach. Arthur De Gennaro is President of Arthur De Gennaro & Associates, LLC, an ophthalmic practice management firm that specializes in optical dispensary issues.  He is the author of the book, The Dispensing Ophthalmologist, which is slated to be released by the American Academy of Ophthalmology in the Spring of 2008.  He can be reached at 803-359-7887, arthur@adegennaro. com or through the company’s website, which is www.adegennaro.com