They say if you want to improve something, start measuring it. School grades, weight, financial results; we measure a lot. But, do you measure what really counts-the activities that ultimately determine results? Do you know what key activities determine your results-that help you effectively manage the organization? Are you measuring them? And, how should you use these metrics to impact future performance?
Every organization measures those popular and easy to compute key outcomes: income, expenses, growth, production time and costs, etc. But those results are outputs from old activity-maybe several years old. Those measurements are like looking out the car’s rear view mirror. Can you use metrics as an early warning, or “trip wire” to alert you to trouble before it even hits your bottom line? Think fuel gauge and check engine light…I say yes, but you have to know what to measure.
I ran an insurance company whose claims costs were rising at increasing at alarming rates relative to inflation and new claims being reported. Measuring the final total cost of closed claims is helpful but those costs were based on activities over the last 5+ years. I needed to know how to slow down the costs of claim handling right now while still provide top level defense services to our insureds.
We determined our key measurements were…stay with me now…: average cost of pending claims per file, average cost of pending claims per claim rep, and per defense attorney; and, average length of time a claim file is open. If we could bring those down, and still deliver our high levels of service, we could better manage our claim costs.
We started measuring each of these factors and began communicating our findings to our staff and outside attorneys on a monthly basis. Everyone helped create this measurement system so they knew these results were fact-based. This helped avoid the problem of people questioning the output.
Communicating this data to all involved people allowed them to understand how their individual work product impacted our global results. Before too long, we began seeing positive results. By the end of the first year we brought down average costs by 18% and reduced the time a file is open by 15%. This had a significant impact on our results when converted to dollars and cents.
Now, we could have verbally attacked our staff and outside attorneys, threatened them, etc but we did not. We wanted them to partner and figure out how to help solve this shared problem. After all, they were closest to the problem…and its solution. They came through with flying colors!
We eventually extended the concept of metrics to the entire organization and started measuring many other factors. We created two new reports: a weekly Flash Report and Monthly Benchmark Report. They both measured factors we felt were indicative of how we were doing and what our ultimate results would be from those activities.
Our thinking was, if these factors were good, we felt our execution was acceptable (at least on the right trend line) and our future end results would be favorable. If they showed unacceptable trends, we had sufficient early warning such that we could take whatever appropriate action was called for.
Eventually we were able to decrease overhead by 20% while maintaining our excellent client satisfaction rating from our clients. In fact, our policy renewal rate was higher from clients who HAD experienced a claim with us (96%) than those insureds who had not (92%).
If you want to improve your organization’s performance, call me and let’s talk about this.