On Thanksgiving Day, my wife and I were at the airport waiting to board the plane that would take us to meet our newest grandson. Behind us, the father of a family told his children that, years ago, a book showed how a large organization saved a million dollars by recirculating paper clips. He went on to relate that the message for them was to be mindful of the little things, like the “million-dollar paperclip.”
My first thought was that the man must be a management consultant. He even had his notebook computer in hand. Then his admonition to his children sparked another thought: In home care, we have “million-dollar minutes.”
It takes a lot of paper clips and a lot of minutes to be worth a million dollars. However, activities consume minutes, and it is amazing how repetitious some of our activities are. If you want to reduce costs, reduce the time it takes to perform an activity or reduce the number of times it is performed, or do both.
Examples of how repetitious some activities are and the cost-cutting opportunities that are available include:
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A company with $10 million in annual revenue takes seven minutes to work one denial. They work about 20,000 denials per year. Then they work aged accounts at 10 minutes each and do that 23,000 times per year. They want to make sure the script doesn't fall from the file, so an employee fastens it, using one minute for each script. During the last 12 months, the company filed 26,000 scripts.
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A $2-million company issues 1,300 purchase orders each year for rehab equipment alone. It takes 20 minutes to issue one P.O. Scheduling one evaluation uses up 10 minutes, and the company schedules 1,100 per year. Getting a return authorization from a manufacturer takes 30 minutes, and that is done 200 times per year.
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Another company with $2 million in annual revenue makes 3,500 deliveries per year. It takes 3.5 minutes to pull the order, and 45 minutes for each delivery and set-up.
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A fourth company that brings in $9 million annually uses 13 minutes to enter the average order, and they do it 64,000 times per year. Collecting a CMN uses 10 minutes of their time, and they do that 2,900 times a year. Posting payments uses one minute and is performed 162,000 times per year.
Please do not consider these numbers as benchmarks or industry norms. Each of these companies has unique characteristics that make these numbers equally unique.
The point with these numbers is to show that there are million-dollar minutes. Eliminating just one minute from one activity that is repeated thousands of times per year and repeated year after year equals a lot of money.
The companies referenced have a cost-per-man-hour that ranges from $25 to $35. If the average is $30 per man-hour, then each man-minute costs about 50 cents. So, saving one minute from an activity that is repeated 10,000 times a year could save $5,000 each year it is repeated.
It is common for a home care company to be performing 40 to 60 activities that belong to 10 to 16 processes. Each of these activities consumes time and is repeated hundreds or thousands of times each year. Time can be saved by re-engineering processes and activities to reduce the time they consume and the number of times activities must be performed.
Consider the company that uses 13 minutes to complete an order. If they re-engineer the activity so that it takes only 10 minutes, they could save $96,000 year after year. If the company that issues 1,300 purchase orders for rehab each year could reduce the incidence to 1,000 times per year, they could save $3,000 a year for a number of years.
This would also reduce the incidence of other activities such as paying invoices, which would save even more money.
Consider that each full-time employee (at 40 hours per week, 50 weeks per year) provides 120,000 minutes per year. Multiply that by the number of employees in your company, and it is easy to see a lot of minutes are being purchased.
Not every company will find a million-dollar minute, but most companies can find a lot of savings one minute at a time.
Wallace Weeks is founder and president of Weeks Group Inc., a Melbourne, Fla.-based strategy consulting firm. He can be reached at 321/752-4514 or by e-mail at wweeks@weeksgroup.com.
