Lessons From Other Professions: How Not to Cut Costs: Pt 2 - FP Advance

Lessons From Other Professions: How Not to Cut Costs: Pt 2

BY brett

Lessons from Other Professionals: How Not to Cut Costs: Pt 1

Managing the costs of healthcare is a global problem, as evidenced in the Harvard Business Review article, which I discussed last week. You can find the original article here – it’s a great read if you have time.

In Part 2 of my series on the lessons we can learn from another profession, I look at how you use your resources, the importance of improving your processes and productivity, and take a look at how some simple benchmarking can help you identify areas to work on within your business. (If you need a refresher on Part 1, click here)

Mistake #3: Focusing too narrowly on procurement prices

Kaplan and Haas state in their article:

“Many hospitals focus too narrowly on negotiating price and fail to examine how individual clinicians actually consume supplies. As a result, they miss potentially large opportunities to lower spending.”

The lesson here is on examining how resources are used within your organisation. This doesn’t mean putting infantile limits on what resources your advisers and support staff can use, but instead really understanding what resources are needed to deliver an outstanding outcome for each client.

It also begs the question of client quality. Are you spending exactly the right amount of time and resources on delivering excellent client outcomes, but to clients that (to be brutally honest) are not good enough for such effort?

I realise a statement like this can be taken out of context, and I always get plenty of push back from advisers with a humanist value set. They believe everyone is worthy of their best efforts. I share these values, but I also try to mix it in with some common sense that says:

a) You can’t save the whole world, but you can make a significant contribution to a small part of it.

b) If you’ve studied and worked for 25 years to achieve your level of expertise, there’s no point wasting it on people who could be adequately served by a more junior adviser or business. Experts in any profession work at the top of their skill set, solving difficult cases and testing themselves for professional fulfilment. You should be doing the same.

Mistake #4: Maximizing client throughput

Kaplan and Haas state in their article:

“It would be absurd to try to increase the productivity of musicians by having them play faster. Yet health care executives force an increase in the number of patients seen by physicians each day by establishing productivity targets that limit office visits to fixed time periods, such as 15 minutes or a half hour. This apparent increase in productivity, however, is not sensitive to the impact of these seemingly arbitrary standards on patient outcomes.”

The reality for most financial planning firms is the exact opposite of this. Most firms I know are generally unconcerned with client throughput and the productivity issues raised by this (see mistake 1 from last week’s blog). They spend endless amounts of time on their clients – often at the expense of their personal time, family time and business profitability.

The real issue for financial planners here is ensuring that clients are correctly onboarded from Day 1. The HBR article cites the example of patients with kidney disease having better outcomes (longer lives and fewer complications) when dialysis was started with a surgical procedure rather than a catheter. Patients with optimal starts to treatment cost tens of thousands of dollars less per year. Yet more than half of U.S. dialysis patients start dialysis sub-optimally, with a catheter, which seems ridiculous.

I see similar issues occurring where clients are not taken through the ideal engagement process. Advisers attempt to cut corners by merging the initial meeting and fact finding meeting. Fact finders are not completed 100%, which leads to the back office team and the paraplanners trying to do their jobs with one arm tied behind their back. This kills productivity, is demotivating for the team and creates loads of re-work.

Creating and following an ideal engagement process ensures that everyone (advisers, paraplanners and administrators) can contribute to delivering a cost-effective, enjoyable, and outstanding client experience. Not only that, but when everyone follows these ideal processes, you deliver your best work. Clients recognise this, which leads to increased referral rates. Contrary to popular belief, it’s not the sparkling personalities of the advisers that lead to client referrals; it’s the results which come from a team effort.

A better relationship setup from the outset adds value for everyone, and reduces the potential for problems in the relationship further down the road.

Mistake #5: Failing to set benchmarks and standardise

Kaplan and Haas state in their article:

“High variation in clinical practices can occur even with outstanding institutions and clinicians. For example, Dr. John Noseworthy, the CEO of Mayo Clinic, recounted a cardiac surgeon saying to his group, “All five of us are very good at what we do, but we all do it differently. At least four of us must be doing it wrong.” Another surgeon responded, “Actually, probably all five of us. Let’s try to do it right.” Individual clinicians’ practices tend to go unquestioned (current practice has been described as ‘eminence based’, not ‘evidence based’).”

This issue also affects many financial planning firms. Most advisers are convinced their way is the right way. Rather than embrace the possibility of learning from each other or (better still), creating an optimal process by taking the best from all advisers within the firm, they fight for total control. This might feel like a good outcome for them individually (although I would argue that point), but it’s a disaster for the business.

Embracing the possibility of change can lead to spectacular outcomes. In the Mayo clinic example:

“Cardiovascular surgeons learned that they all used blood transfusions differently. They got together and within a year developed blood-products guidelines that everyone adopted. Transfusions fell by 50%, transfusion-related kidney disease fell by 40%, and Mayo saved $15 million over three years.”
If you get the chance to participate in a benchmarking survey, do it. But it’s what you do with the information that is most important. Look for areas where you’re performing poorly compared to industry standards, or to similar firms. Then see what you can do to re-vamp your approach and create standardised processes to improve your performance.
If you’re trying to achieve better business performance there is some great learning from this HBR piece.

Take some time to see if any of these issues are affecting you and your firm.

Even if all you do is address just one of these areas, I know you’ll see a material difference in the performance of your business.

Tweet: You can’t save the whole world, but you can make a significant contribution to a small part of it. @brettdavidson http://bit.ly/1L32268

“You can’t save the whole world, but you can make a significant contribution to a small part of it.”



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ABOUT BRETT DAVIDSON When you work with FP Advance you work with me, Brett Davidson, directly. My motto is ‘advise better, live better’ and I practice what I preach. I’m straight talking and get to the heart of an issue quickly. There’s no beating about the bush, just a focus on helping things improve. Ask my clients – what I teach works.