Planning for a Crisis in Hospitals PDF

hospitals ways moned I revenue S Two lose TIME out α one p we Covid or BEHEW's Planning for a Crisis Covid-19 caught a lot of organizations off guard, but it did not have to. Preparation and preemption are the best predictors of success in a crisis. prophylaxis take action to prevent Even in a crisis, you can plan for the next phase of the crisis. How to stay and keep others informed during a crisis Information changes daily so you need to stay on top of it Do not assume all information is equal and beware of hype Expert opinion is still opinion Use living documents Beware of bureaucracy wsp p Do not let perfect be the enemy of good Organizational Priorities During a Crisis Take care of your employees’ needs Physical, mental, emotional, and financial Communications Clear, consistent communications supplies To Too much communication can be a problem tootools telehealth Clear policies havew pplthatgo Remote work, time off, travel Redundancy ppYer exoei.EE Supply chain, employees Flexibility Being µ a good citizen Organizational Priorities During a Crisis Redundancy Supply chain Employees Flexibility Things change Being a good citizen What can your organization do? Look for opportunities Innovation and entrepreneurship There will be winners and losers in every crisis Opportunities in a Crisis Crises push us outside of the box Nothing is taken for granted Nothing is off the table Crises create new needs What do you use today, that you never used before? Crises can change the rules – for the better Margaritas to go! Pharmacists and Point-of Care Testing ▪ Prior to COVID-19, approximately 16% of community pharmacies were operating as laboratories though the percentage varied widely by state. (Adams et al) ▪ The overwhelming majority had a Clinical Laboratory Improvement Amendments (CLIA) certificate of waiver, which allowed them to conduct simple, non-technical tests that the FDA had approved as waived tests (i.e. cholesterol screening, influenza, etc.) ▪ State regulations, training, and payment challenges were among the barriers to wider adoption. Pharmacists and COVID-19 Testing ▪ OASH issues guidance authorizing licensed pharmacists to order and administer COVID-19 tests, including serology tests, that the Food and Drug Administration (FDA) has authorized for emergency use. ▪ By doing so, such pharmacists will qualify as “covered persons” under the PREP Act. And they may receive immunity under the PREP Act with respect to all claims for loss caused by, arising out of, relating to, or resulting from, the administration or use of FDA-authorized COVID-19 tests. Pharmacists and COVID-19 Testing ▪ As ona result of the OASH Guidance: o Several states have removed regulatory barriers to pharmacist serving as laboratory managers or pharmacies acting as labs. o CMS has affirmed that pharmacist ordered tests would be eligible for reimbursement ▪ That includes other respiratory tests (i.e. influenza) used in conjunction with COVID-19 testing ▪ National pharmacy chains have partnered with public health officials to provide locations for COVID-19 testing. ▪ Many pharmacists have asked how they could help their communities by offering COVID-19 testing. Why are we here this semester? 770,000? – Annual injuries related to medication errors 7,000? – Annual deaths related to medication errors What s being done to eliminate the errors? IMPROVING THE QUALITY OF MEDICATION USE Source: Food and Drug Administration (FDA) website: http://www.fda.org Introduction to so Professionalism Professionalism: The 8 active demonstration of the traits of a professional Professionalism The words "profession" and "professional" come from the Latin word "professio," which means aI public declaration with the force of a promise. Professions are groups which declare in a public way that their members promise to act in certain ways and that the group and the society may discipline those who fail to do so. The profession presents itself to society as a social benefit and society accepts the profession, expecting it to serve some important social goal. LL The profession usually issues a code of ethics stating the standards by which its members can be judged. The traditional professions are medicine, law, education and clergy. From Jonsen, AR. Ethics in Medicine; Professionalism. http://depts.washington.edu/bioethx/topics/ profes.html The Marks of a Profession Are: m 1. Competence in aI specialized body of knowledge and skill; 2. An acknowledgment of specific duties and responsibilities toward the individuals it serves and toward society; 3. The right to train, admit, discipline pka and dismiss its members for failure to sustain competence or observe the duties and responsibilities. Financial Statements and Ratio Analysis Donald Klepser, e Ph.D., M.B.A. 1 Learning Objectives l Understand who uses financial information and why they use it l Explain the basic accounting equations l Describe the three basic financial statements including – how they are created – how they are used l Compute and interpret pharmacy financial ratios 2 What Are Financial Statements? l Report cards of the business financial performance l They t provide details about a business s: whatdowfor whatdo weowe – Resources and debts Capitalgains – Value to shareholders Y_dividers Income, expenses, and profitability U – – Use and sources of cash EEEE owners 3I 9 11 Who Uses Financial Statements? l Managers/Owners measure – Gauge performance – Make future decisions kids l Creditors what – Determine creditworthiness l Government – Internal Revenue Service (IRS) – Taxes 4 Who Uses Financial Statements? l For publicly traded companies there are other interested parties and requirements – Regulatory Agencies l Securities and Exchange Commission (SEC) – Stockholders l Worthy of investment – Specific accounting standards and reporting requirements 5 c Basic Accounting Equation we see entire maxuput l Assets = Liabilities + Owner s Equity – Assets are what the L company owns and uses to produce revenue (i.e. cash, equipment, inventory) – Liabilities are debts that the a company owes on its assets – Owner s equity (or net worth) are the claims the company has against itself asset 1 to gain Initial or subsequent investments l out Profits asset l 1 balances away always 6 take Where Does the Information Come From? l All financial transactions over a given period of time – Sales and purchases – Salaries – Rent – Loan payments and interest – May so be annually, quarterly, or monthly I 7 Important Financial Statements l Balance sheet – Example on page 237 (fig. 15-2) l Income statement – Examples on page 240 (fig. 15-3) and page 245 (fig. 15-6) l Cash flow statement – Example on page 232 (fig. 15-5) 8I Balance Sheet l Snapshot in time – Assets = Liabilities + Owners Equity (net worth) l Reflects the ability of a business to pay its at nu debts over time o o o l Always balances – Double entry guy 9 Balance Sheet - Assets 00biYngtath HOLE.ly l Ordered from most liquid to least liquid l Current assets – Assets that could be converted to cash within the m next business cycle probably within nextmonth – – Cash (i.e. cash, credit card payments) Accounts receivable (i.e.a third party payments) mom is – Inventory (i.e. drugs, other products) days 30 – Supplies (i.e. vials, bags) reimbursement d average sera 10 eapepai.EE Balance Sheet - Assets l Long term assets – Things that will not be sold or turned into cash in the near future – Land and building – Equipment and fixtures (i.e. computers, pill 9 counters) – Can be depreciated 11 I Balance Sheet - Assets l Other Assets – Typically prepaid expenses l Insurance policies l Prepaid rent I 12 Balance Sheet - Liabilities l Current Liabilities – Bills due within the next accounting period – Accounts payable (i.e.n wholesaler bills) – Notes payable (i.e. current year s loan payments) – Accrued expenses (i.e. owed wages) – Unearned revenues (i.e.h capitated payments) – Other short term payables (i.e. A taxes) 13 was B 8 Balance Sheet - Liabilities l Long term liabilities – Bills due after the next accounting period – Notes payable (i.e. loan amount due after the a current year) – Amount due in the M current year is moved to current liabilities 14 I Balance Sheet – Owner s Equity l Net worth is what actually belongs to thes owners after all liabilities have been satisfied – Contributed capital are the r investments of the owner s money – Retained earnings are profits reinvested in the M business – Dividends are profits paid to the owners p 15 s Balance Sheet - Example l Small Time Pharmacy as of Sept. 31, 2008 l Assets – Cash = $41,200 – Accounts receivable = $92,149 – Inventory = $129,124 – Supplies = $10,950 – Net fixtures and equipment = $137,335 – Real Estate = $389,050 – Prepaid insurance = $48,692 16 Balance Sheet - Example l Liabilities – Accounts payable = $108,620 – Notes payable within 1 year = $16,230 – Accrued expenses = $52,320 – Taxes = $10,105 – Notes payable later than 1 year = $227,467 17 Balance Sheet - Example l Owner s Equity (net worth) – Contributed capital = $236,514 – Retained earnings = $147,200 – Dividends = $50,044 18 Balance Sheet - Example l Total current assets = $322,115 l Total long term assets = $526,385 l Total other assets = $0 l Total assets = $848,500 l Total current liabilities = $187,275 l Total long term liabilities = $227,467 l Total owner s equity = $433,758 l Total liabilities and owner s equity = $848,500 19 Income Statement l Also known as – Statement of operations – Statement of earnings – Profit and loss (P&L) statement l Combines all sales and expenses of business over a period of time into one document l Profitability is shown directly l Allows for comparison with other time periods and other firms 20 f Income Statement j l Net Profit = Revenue - COGS - Expenses – COGS = Cost of Goods Sold l Revenue - Rx s, OTC and other sales – Gross Margin = Net sales (Revenue) - COGS l Expenses - Costs necessary to make sales – Owner & employee salary – Rent - Utilities - Maintenance - Insurance… 21 Income Statement - Example l Small Time Pharmacy for the period ending Sept. 31, 2008 l Total Sales = $2,094,736 (100%) – Prescription = $1,561,596 (74.5%) – Other goods = $483,090 (23.1%) – Cognitive services = $50,050 (2.4%) l Cost of goods sold = $1,466,315 (70%) l Gross margin = $628,420 (30%) 22 Income Statement - Example l Expenses – Owner s salary = $117,021 (5.6%) – Employees wages = $211,842 (10.1%) – Rent = $22,995 (1.1%) – Utilities = $13,679 (0.7%) – Accounting, legal & professional = $16,379 (0.8%) – Taxes = $28,663 (1.3%) – Insurance = $1,843 (0.01%) – Interest paid = $5,733 (0.3%) 23 Income Statement - Example l Expenses (continued) – Repairs = $4,095 (0.2%) – Delivery = $12,284 (0.6%) – Advertising = $18,747 (0.9%) – Depreciation = $14,332 (0.7%) – Bad debts = $5,474 (0.3%) – Computer = $14,568 (0.7%) – Prescription containers = $18,663 (0.9%) – Miscellaneous = $5,000 (0.2%) 24 Income Statement - Example l Total expenses = $511,318 (24.4%) l Net profit (income) before taxes = $117,103 (5.6%) l Income tax expense = $44,545 (2.1%) l Net profit after taxes = $72,558 25 Comparative Income Statement l Looking back at the past three years – Are things getting better or worse l NCPA-Pfizer Digest in – Compare to similar pharmacies l May include prescription data eye – New and renewal – Average charge per prescription 26 Cash Flow Statement l The pharmacy s checkbook l Helps manager monitor the inflows and outflows of cash l Net profit from the income statement is not the same as the cash balance on the cash flow statement l No direct relationship between level of cash Ep and amount of profit 27 in Cash Flow Statement lemonade roars gaping l Includes cash from operations, financing, and investing l Cash Balance = cash inflows – cash outflows l Important because most transactions in ac pharmacy are made on credit – Purchases from wholesalers – Sales to insured patients 28 o Cash Flow Statement - Example l Small Time Pharmacy for the period ending Sept. 31, 2007 l Cash flows from operating activities – Net income = $117,103 – Adjustment to reconcile net income to net cash provided by operating activities Depreciation = $14,387 (note change from handout) 29 Cash Flow Statement - Example l Cash flows from operating activities – Changes in assets and liabilities l Accounts receivable = ($75,843) [increase is negative] l Inventory = ($68,515) [increase is negative] l Prepaid expenses = $6,262 [increase is negative] l Accounts payable = 8,067 [increase is positive] l Notes payable = ($2,477) [increase is positive] l Accrued expenses = $1,266 [increase is positive] – Net cash provided by operating activities = $195 30 Cash Flow Statement - Example l Cash flows from investing activities – Sale of equipment = $12,226 – Purchase of equipment = ($14,999) – Net cash provided by investing activities = ($2,773) l Cash flows from financing activities – Dividends paid to investors = ($42,847) – Net cash used in financing activities = ($42,847) 31 Cash Flow Statement - Example l Net decrease in cash = ($45,425) l Cash at the beginning of the period = $86,625 l Cash at the end of the period = $41,200 32 Financial Ratio Analysis l Technique to d express theS relationships among selected items in financial statements l Allows evaluation of financial performance l Provides benchmarks for comparison – Historical comparison (prior period) – Other pharmacies (NCPA-Pfizer Digest) l Not a substitute for knowing your business 33 I 6 to Financial Ratio Analysis resources using we l Profitability ratios are l Liquidity and solvency ratios we assets with l Turnover ratioswhat are we doing 34 Profitability Ratios l Gross margin ratio shows the level of each sales dollar available for expenses and profits l GM = (Sales – COGS)/Sales x 100% pH l Example GM = (2,094,736 – 1,466,315)/ 2,094,736 x 100 = 30% l Most community pharmacies 20-25% in quantity l Raise by purchasing wisely and negotiating contracts wisely win or age 35 no Efrain Profitability Ratios l Net profit ratio (profit margin) is the relationship between sales and profits before or after taxes (NCPA-Pfizer digest uses pretax) l NP = Net Income/Sales x 100% l Example NP = 72,558/2,094,736 x 100 = 3.4% l Usually range from 2-4% 36 Profitability Ratios invested l Return on Equity (ROE) money – ROE = Net Income/Owner s Equity x 100% l Return on Assets (ROA) – ROA = Net Income/Average Total Assets x 100% l Financial leverage – Financial Leverage % = ROE-ROA l Earnings per share (EPS) 37 Liquidity and Solvency Ratios l Current ratio measures the relationship between current assets and current liabilities l Current Ratio = current assets/current liabilities l Example CR = 273,423/187,275 = 1.46 l Average is around 3.4 l < 2 may be a sign of trouble paying debts on time l > 5 may be ineffective use of assets 38 Liquidity and Solvency Ratios l Quick ratio (acid test) is a more stringent measure of liquidity l Only cash, accounts receivable, and short term investments are included in Quick Assets a l Quick ratio = quick assets/current liabilities l Example QR = 133,349/187,275 = 0.71 l < 1 may mean trouble paying debts on time 1.5 is typical to do l investment Yes out Tforcard Cath 39 we 9Eur Liquidity and Solvency Ratios l Solvency ratios – How much debt does the firm have – Debt-to-total-assets ratio this l Total debt/Total assets x 100% about – Debt-to-equity cares l Total liabilities/Owners equity x 100% lender 40 Turnover Ratios l Provide an analysis of the number of times key accounts are replace during a year l Higher numbers are generally better l Inventory Turnover Ratio – Cost of Goods Sold/Average Inventory l Asset Turnover Ratio – Net Sales/Average Total Sales 41 Conclusions l Understanding basic accounting and financial statements allow pharmacy managers to make better decisions l Comparisons to past performance and industry averages are important for evaluating performance l FIND A GOOD ACCOUNTANT 42 Donald Klepser, Ph.D., M.B.A Personal Financial Management Learning Objectives At the end of today’s session students should be able to Describe why pharmacists should be knowledgeable about their personal finance situation Describe the components of the financial planning process Identify sources of credit and the cost of credit alternatives Describe the factors considered in getting a mortgage Compare and contrast methods for saving for retirement retirement sonar faith Financial Planning Pyramid retire a shoy Yunning is sands of Financial Planning Process Create and Reevaluate and Determine Develop Identify Evaluate implement revise Determine your Develop financial goals Identify alternative Evaluate alternatives Create and implement Reevaluate and revise financial situation courses of action a financial action plan your plan EEEE.EE Personal Financial Statements Balance sheet A snapshot of what is owned, owed, and left over Cash flow statement Inflow and outflow of cash during a time period Budget Spending plan Personal Credit/Debt Receive something now and pay for Almost always pay more than if you Good and Bad Debt it later had paid up front Student loans Interest What are you willing to go into debt for? When will you pay for it? YETT 19 Types of Credit/Debt Home mortgages Installment loans Revolving credit Secured and unsecured loans Credit lines? Fixed payments and fixed terms Credit cards Car loans, student loans Types and Cost of Credit Mortgage ~ Auto Loan ~ Student Loan 3% - 12% 0% - 15% ~ 2% - 12% Bank Credit Retailer Credit Pay Day Loan Card ~ 8% - Card ~ 20+% ~ 200+% 25% How Much Will You Pay? 30 year, $150,000 mortgage at 30 year, $150,000 mortgage at 7% 9% Monthly payment = $998 Monthly payment = $1,207 Total = $359,263 Total = $434,496 Interest = $209,263 Interest = $284,496 How much will you pay? 30 year, $150,000 mortgage $5,000 credit card purchase at 7% at 18% Monthly payment = $998 Minimum payment = 2.5% of Total = $359,263 balance Interest = $209,263 Years to pay = 30.75 Total = $14,464 Interest = $9,464 Whatʼs the difference? The house will likely be worth as much or more at the end of the 30 years. What types of debt does the government encourage? HOME EDUCATION ENERGY CERTAIN OWNERSHIP EFFICIENCY INVESTMENTS Buying a House Why is a home mortgage good debt? – Housing is a necessity and you would have to pay rent otherwise – Your home is an asset that should may appreciate in value (an investment) – The interest rate is relatively low compared to other forms of credit – Most mortgage interest is tax deductible Buying a House IS 300K u How much house can Rule of thumb: 2 to 2.5 times your gross income you afford? Not a bad idea to buy a little less What factors How much is the property worth? determine if you get a How much can you afford to pay? mortgage and what interest rate you pay? How likely are you to pay? How much is the property worth? Appraisal by a licensed Based on recent sales of comparable appraiser properties and the condition of the home In general, conforming first Will lend $80,000 on a home appraised at mortgages are limited to 80% loan to value (LTV) $100,000 There are mortgages that allow you to borrow up to 100% of the homes value How much can you afford to pay? Based on your verifiable gross Debt-to-Income Ratios income from all sources Some different rules for Mortgage payment of self-employed (principal, interest, taxes, and insurance) ~30% of monthly gross income All debt payments ~36% stop 0 How likely are you to pay? Credit Report Three credit reporting agencies Credit score based on paid any liens or judgments (bankruptcy, repossession) (remain for 7 years) past payment history (24 months) Past creditcard past loans how number of inquiries number of open accounts and their balances Credit Scores SCO Credit scores provide an Influences what credit is credit indication of the risk a Most commonly used score O available to you and at what Scores range from 300-850 lender would take in loaning is the FICO terms someone money Developed by Fair Isaac Credit Reports The credit report is the basis of the Three credit bureaus/three credit credit score reports Details your credit history Experian (www.experian.com) Reported to credit bureau by lenders TransUnion (www.transunion.com) Lists the types of credit you use Equifax (www.equifax.com) Length of time the accounts have been open Your payment history Credit Reports If you are turned down If you find an error on The credit bureau must You should check your for credit, you are your credit report, investigate and respond credit reports annually entitled to a free copy of contact the credit bureau within 30 days the report within 60 days immediately v Common errors: applied for credit under different names provided an inaccurate SSN clerical errors payments applied to incorrect accounts Five Categories in the FICO Score Source: myFICO http://www.myfico.com/CreditEducation/WhatsInYourScore.aspx Payment History (35%) One piece of 60-65% show no late payments the formula Does not mean you will get a “perfect score” time Score takes Payment info on many types of accounts Public record and collection items bills on into account Details on late or missed payments Paying How many accounts show no late payments Tips for Raising Score A Pay your bills on time If you miss a payment, get current and stay current Afridi The longer you pay bills on time the better the score Paying a collection or closing an account with delinquencies will not remove the account If you are having trouble making payments, contact your creditors Not immediate, but will help over time imalfeditscor af.gg Amounts Owed (30%) Owing some money is ok, but owing a great deal on many accounts is a problem Score takes into account The amount owed on all accounts The amount owed on different types of accounts Whether you have balances on certain types of accounts How many accounts have balances How much of the credit line is being used How much of installment loan is still owed Keep balances low on credit cards and other “revolving credit” Pay off debt rather than moving it around Tips for Raising Paying off debt is the best way to improve score Score Don’t close unused credit cards as short term strategy Don’t open new credit cards just to increase your available credit Length of Credit History (15%) In general, longer history improves your score Score takes into account How long accounts have been established, in general How long specific credit accounts have been established How long it has been since you used certain accounts Tip: Don’t open a lot of new accounts too rapidly w New Credit (10%) Opening and/or making multiple credit Score takes into account request represents greater credit risk How many accounts you have How long is has been since you opened a new account How many recent credit inquiries have you made Length of time since credit report inquiries were made by lenders Whether you have good recent credit history, following past payment problems Tips for Raising Score Do your rate shopping for a given auto or mortgage loan in a focused period of time Single loan versus multiple inquiries Re-establish your credit history if you have had problems Requesting you score will not affect your credit report and score If you go directly through the credit bureaus or authorized organization Tips for Raising Score Apply for and open new credit accounts only as needed Have credit cards, but manage them responsibly Good history is better than no history Closing an account does not make it go away Closing old accounts may lower your score Types of Credit in Use (10%) Not a key factor, but the credit mix will be more important if your credit report does not have a lot of other information Score takes into account What kinds of credit accounts you have, and how many of each (credit cards, retail accounts, installment loans, finance company accounts, mortgage loans) Final Thoughts on Credit Scores and Reports They are a snapshot, which means you All five categories are considered, but can improve them over time the best advice is to Pay bills on time Do not take on more debt than you can afford Saving and Investing Saving: setting aside current cash for future purchases Investing: attempting to grow current cash into more cash for future purchases Savings account annual return ~3% Trading risk for reward Why do banks pay interest on savings accounts? S&P 500 historical average ~ 12% Planning for Retirement 1 When should you start How will you save for How much will you saving for retirement? retirement? need to retire? It 8 Having a dollar today is worth more than receiving one at some time in the future Time Value of Start investing now!!! The rule of 70 Money 70/rate of return = number of years needed to double your money Does not include future contributions Ef Whatʼs the difference between a defined benefit and a defined contribution retirement package? Questions Is most employer based health insurance a defined benefit or a defined contribution? Shift in pension plans from a defined benefit to a defined contribution Risk and reward shifted to employee 401k plans Maximize the employer matching Retirement Diversify Planning Portable Individual retirement accounts (IRAs) What about independent pharmacists? How Much Money Will I Need? 1 2 3 Letʼs assume you want Do not want to You will need to plan to maintain your withdraw more than 4 for a minimum of 20 preretirement lifestyle or 5% from investment years income at portfolio annually retirement Where will the money come from? Social Security (?) may account Equity in your home Personal savings, pension plans, for ~25% and retirement saving from 401k plans and IRAs Blueprint for Financial Security (Burns, 2001) 1 2 3 4 5 6 7 Spend less than Pay yourself first Take advantage Keep investment Owe as little as Diversify Trust the power you earn of free money expenses low possible investments of average Other Personal Finance Issues Student loans Repayment options Standard plan (usually 10 years) Extended plan Graduated plan Income contingent plan Interest Rates Deferment Consolidation Other Personal Finance Issues Planning for college 529 Plans Life insurance Term Permanent Get Financial Help Early in your career put together a professional team you can trust Lawyer Accountant Financial adviser Insurance agent Doctor Principles of Management and Organization Donald Klepser Ph.D., M.B.A. At the end of this session students should be able to – Define the terms management and manager – Describe the four basic management activities Learning – Discuss the resources that managers manage and the Objectives levels at which they perform their roles – Describe the purpose and steps required for developing a strategic plan – Differentiate a vision statement from a mission statement Management Tootelian and Gaedeke (1993) – “A process that brings together resources and unites them in such a way that, collectively, they achieve goals or objectives in the most efficient manner possible.” A process is method of doing something We use processes everyday Management to perform both simple and Is a Process complex tasks Simply having a process for doing something does not make for good management Management requires resources The resources are what we have to perform the task What are some resources we manage? Resources Resources are (usually) scarce That makes them valuable What do we want to get from our resources? Why are we using our resource to perform a particular task? Achieving Management is about utilizing Goals and the resources to achieve a goal Objectives or objective Part of the management process is identifying and communicating what that goal or objective is. Simply put, efficiency is about using the fewest resource to achieve the stated goal or objective Efficiency How do prescriptions get filled in most community pharmacies? Why? Who’s a Manager? Anyone who performs management Separate management from authority activities and administrative positions Not only administrators, “the boss”, and “the man” All pharmacist regardless of job responsibilities or position are managers The Three Dimensions of Management ACTIVITIES THAT RESOURCES THAT LEVELS AT WHICH MANAGERS PERFORM MANAGERS NEED MANAGERS MAKE DECISIONS Management Activities Cycle Plan Control Organize Lead Planning Predetermining a course of action based on one’s goals and objectives Formal versus informal Many factors to consider What resources are available Internal environment External environment Organizing The arrangement and relationship of activities and resources that are necessary for the effective accomplishment of a goal or objective Making sure you have what you need to follow through on your plan Obtaining resources Gathering information Leading Bringing Leading Bringing about purposeful action Leading versus commanding toward some desired outcome A manager does not need to be a commander Also called directing May be you doing something yourself May be you working with others Also called evaluation Reviewing the progress that has been made toward the goals and objectives set out in the plan Controlling Not only what happened but also why it happened Quality control The activities should be performed in order Plan > Organize > Lead > Control Management Activities Should also be cyclical What you learn from the control stage should influence future planning Resources That Are Managed Managing Money Customers pay Employees are paid money for goods money for their and services services Measuring money Money can be is often used to converted to other measure resources performance Managing People Very little is done by a Most organizations rely on People can be one of the single person on an island people working together to most difficult resources to anymore achieve a goal replace perfectly Managing Time Time may be the most There are a finite number Time wasted or not used is limiting of all the resources of hours in a day gone forever Managing Materials MOST PHARMACIES WILL SPEND DRUG COSTS CONTINUE TO RISE THE NUMBER OF PRODUCTS IS MORE ON DRUG PRODUCTS ALSO INCREASING THAN ANYTHING ELSE Managing Information We are in the information age Why are Google or Nvidia worth more than the 5 biggest automakers combined? The amount and types of information available today can be overwhelming Pharmacists today are primarily information providers Levels of Managment Individual Interpersonal Organizational Individual Management SELF-MANAGEMENT MOST FREQUENTLY ALMOST EVERY DECISION OCCURRING YOU MAKE REQUIRES INDIVIDUAL MANAGEMENT Interpersonal Management Interaction between the manager and one other person Boss and employee Pharmacist and patient Parent and child Also occurs very frequently Organizational Management This is what most people think of when they hear the word management Actions that affect groups of people Corporate downsizing Implementing a new policy at work Deciding where the groups is going for lunch Occurs less frequently Strategic Planning “A goal without a plan is just a wish.” Antoine de Saint-Exupery Planning NOT GOING TO COVER ALL OF THE FOCUS ON STRATEGIC PLANNING, BUT WE WILL TALK MORE ABOUT TYPES OF PLANNING THE STEPS WOULD BE SIMILAR FOR ORGANIZATIONS NEXT TIME ANY TYPE OF PLANNING INCLUDING PERSONAL PLANNING Strategic Planning Steiner, Miner, and Gray (1982) The process of selecting an organization’s goals, determining the policies and programs necessary to achieve specific objectives en route to those goals, and Establishing methods necessary to ensure that policies and programs are implemented Strategic Planning LONG TERM PURPOSE IS TO ENSURE THE INCLUDES ALL ASPECTS OF HOW DOES THE ORGANIZATION IS DOING THE ORGANIZATION ORGANIZATION INTERACT THE RIGHT THINGS NOW WITH ITS ENVIRONMENT AND IN THE FUTURE Strategic Planning for a Community Pharmacy it WHAT BUSINESS IS THE BUSINESS OF HOW DOES THE ANSWER TO THAT THE PHARMACY? QUESTION INFLUENCE EVERYTHING THE PHARMACY DOES? see Steps in the Planning Process Define a singular Assess the current purpose or desired Establish goals situation result Establish objective Define Identify strategies that support responsibilities and to reach those goals progress towards timeline for each goals objective Write and Monitor progress communicate the toward meeting plan goals and objectives Vision and Mission VISION: WHAT THE MISSION: THE PURPOSE OF BOTH ARE USED TO USED TO CREATE ORGANIZATION WANTS TO THE COMPANY COMMUNICATE THE MOMENTUM AND BE AT SOME POINT IN THE ORGANIZATION’S “STORY” MOTIVATE THOSE WITHIN FUTURE THE ORGANIZATION Vision Statement Even if the vision is complex and It should motivate and multidimensional, the make people strive for vision statement should greater things be concise O It is both the beginning and end points of the It defines the strategic planning organization’s mission process UNMC College of Pharmacy Vision A preeminent College of Pharmacy. A nationally and internationally recognized community of leaders, who are scientists, educators, practitioners and students, guided by the highest ethical standards, committed to advancing basic, clinical and translational science, dedicated to excellence in the education of pharmacy professionals and other health professionals, graduate and post-graduate students, and the public in an interprofessional learning and practice environment, and committed to excellence in patient care including underserved populations, in order to improve human health. Mission Statement Defines what the A statement of the company does, is, or present should be. Creates a sense of Should differentiate common purpose the organization from within the organization its competitors Suggested elements of a community pharmacy mission statement (Hagel, 2002) – Intended customers Mission – Core values of the organization Statement – Key services and products provided – Benefits incurred by customers – Desired public image of the organization UNMC Mission Statement Walgreens Mission Statement Walgreens mission is to offer customers the best drugstore service in America. We are guided by a century-old tradition of fairness, trust and honesty as we continue to expand our store base and offer career opportunities to a fast-growing and diverse group of men and women. Our goal is to develop people who treat customers - and each other - with respect and dignity. We will support these efforts with the most innovative retail thinking, services and technology. The success we achieve will allow us to reinvest in our future and build long-term financial security for our employees and our shareholders. Walgreens Company Overview http://www.walgreens.com/help/faq/faqById.jsp?faqId=ourcompany_corpmission.xml To reach a certain vision, the organization must set and reach one or more goals Relationship between Each goal has a strategy for reaching it Vision, Goals, Objectives, Strategy, and Mission The strategy can be defined by intermediate objectives A set of tasks (or tactics) are used to meet the objectives Walgreens Strategy Walgreens strategy for future store and earnings growth includes five components: – Organic store growth. While we'll consider acquisitions, there's no doubt that organic growth is the superior expansion road. – Market share increases through innovation and execution, such as our online digital photo introduction and technology to assist Medicare Part D prescription patients. – A "nimble elephant." We leverage our size for economy of scale, while reacting quickly to our customers' changing needs. – Healthcare offerings beyond traditional pharmacy. We're an industry leader in this area as we integrate Walgreens Health Services' healthcare offerings with our retail pharmacies. – Attracting and retaining top talent. Walgreens Company Overview http://www.walgreens.com/about/press/facts/fact2.jsp Barriers to Planning Failure to Organizational Lack of commit politics planning skills enough time Failure to plan Constantly Failure to far enough changing implement into the future environment Failure to Lack of monitor support at the progress top Limitations to Planning Planning is just one activity of Planning involves uncertainty Garbage in > garbage out management Writing the vision and mission statements Plan is only as good as the information and is just the beginning effort that went into them Organiza(onal Behavior and Market Leadership Models Donald Klepser, Ph.D., M.B.A. Learning Objec(ves At the end of this session the student should be able to – Describe the basic components of an organiza(on – Compare and contrast the diﬀerent elements of formal and informal organiza(onal structures – Iden(fy the three market leadership opera(ng models and their organiza(onal implica(ons ShiD in the Pharmacy Workforce Pharmacist are professionals Most of you will not own your own pharmacy Regardless of your career path (hospital, community, etc.), you will be an employee Will there be conﬂict between your professional autonomy and your status as an employee? What’s an Organiza(on? Why should you care about organiza(onal behavior? What’s an Organiza(on A group of individuals working to reach a common goal Can be big or small Can be for proﬁt or not-for-proﬁt Why Should You Care about Organiza(onal Behavior? Understanding how organiza(ons func(on – Can improve job sa(sfac(on and performance – Helps you become a beUer manager – Improves your organiza(on’s performance – Becomes more important as pharmacists work for larger and larger organiza(ons Components of an Organization (Jones, 1981) External Climate Structure Goals Values Values The center of an organiza(on – Reason for the organiza(on’s existence – Its philosophy – Its purpose May be stated in the vision statement Should be the guiding force of the organiza(on Do you know your organiza(on’s values? Goals How the organiza(on’s visions get ar(culated These are more tangible and achievable What happens if an organiza(on’s goals are at odds with its core vision? Structure Used to make the goals a reality and the organiza(onal opera(onal Includes – Repor(ng rela(onships – Communica(on paUerns – Decision making procedures – Responsibility/accountability – Norms – Reward structures Structure Produces the climate of the organiza(on Why is this important? Have you ever heard someone say, “That’s not how we did it at my last job”? Climate The psychological atmosphere of the organization – Amount of trust – Employee morale – Level of support Affected by organizational culture – System of shared meaning held by members of the organization – How things are done around here External The environment in which the organiza(on operates Constantly changing Requires ﬂexibility How has the environment that pharmacists work in changed? Organiza(onal Structure Three major aspects (Robbins, 1992) – Diﬀeren(a(on: the degree to which units are dissimilar Horizontal, ver(cal, spa(al – Formaliza(on: the degree to which jobs in the organiza(on are formalized – Centraliza(on: Extent to which decision making is concentrated at a single point Horizontal Diﬀeren(a(on How many diﬀerent types of people or units are included in the organiza(on Who works in a pharmacy? Hospital? Do all of Walgreen’s units have the same focus? How does this aﬀect management? Ver(cal Diﬀeren(a(on Depth of the organiza(onal hierarchy – Chain of command – Number of levels on the organiza(onal chart How would the organiza(onal chart of an independent pharmacy compare to a large publicly held chain? How does this impact management and decision making? Independent Community Pharmacy Owner/Pharmacist Staff Pharmacist/Manager Part Time Pharmacist Staff Staff Technician Chain Pharmacy (Simpliﬁed) Stock Holders Board of Directors President/CEO Vice President of Operations Regional Manager (x20) Store Manager (x15) Department Manager Pharmacy Manager Department Manager Staff (inclduing pharmacists) Spa(al Diﬀeren(a(on The degree to which an organiza(on’s units are spread across several loca(ons Single independent pharmacy versus a na(onal retailer How does this aﬀect management? Formaliza(on The presence of rules (organiza(onal control) Procedural speciﬁca(ons Standardiza(on Varies greatly between organiza(ons Should pharmacists have to punch a (me clock? Centraliza(on Who has decision making authority? Not the same as spa(al diﬀeren(a(on How could centraliza(on aﬀect a chain pharmacies implementa(on of MTMS? Other Organiza(onal Structure Principles Division of labor Unity of command – Matrix organiza(ons Span of control Departmentaliza(on – Func(onal silos Informal Organiza(onal Structure Communica(ons – The grapevine – Gossip – Rumors – Feedback Norms – Do people stay late or leave when the whistle blows? Knowing who gets things done Ques(ons? Market Leadership Models Most of the organiza(ons you work for will be trying to maximize “proﬁts” Many will have compe(tors trying to “beat” them Very few organiza(ons aspire to be average All companies can be grouped into three diﬀerent categories according to their values and goals Opera(onal excellence (Best Total Cost) Product leadership (Best Product) Customer in(macy (Best Total Solu(on) Best Product Product Leadership Product Differentiation Operational Customer Competence Responsiveness Operational Excellence Customer Intimacy Best Total Cost Best Total Solution Taken from Page 45 (Figure 5) Every company's goal in pursuing leadership in the market is: To develop a par(cular strength in delivering value to it's customer Narrow business focus into that strength Develop a matching opera(on model to deliver that value Opera(ng Model Choice of Value Discipline – Shapes company’s plans and decisions – Colors the whole organiza(on from culture to public stance – Deﬁnes the very nature of the company Opera(on Processes (Diﬀerent Values = Diﬀerent Processes) Opera(onal Excellence Companies demonstrate three common traits Three Traits – Quality Represents the Best Value – Price – Ease of Purchase Opera(onal Excellence Execute extraordinarily well – Guaranteed Low Price and or Hassle Free Service Wal-Mart Example Opera(onal Excellence Processes – End – to – End Product Supply & Basic Service Op#mized/Streamlined to minimize costs and hassle – Ops are Standardized, Simpliﬁed, Tightly Controlled, and Centrally Planned Management – Focus on Integrated Reliable, fast transac(ons and compliance to norms and goals – Minimize waste, eﬃciency is rewarded Replicate their formula Nothing repeats like a Success! Once a formula is defined, perfected, and widely known the company should replicate. It has already done the leg work. Opera(onal Culture Disciplined teamwork Excellence Process focused Conformance, one-size- fits-all mindset Management Organization Core Process Systems Product delivery and Centralized functions Command & control basic service cycle High skills at the core Compensation fixed to Built on standard, no of the organization cost and quality frills fixed assets Transaction profitability tracking Information Technology Integrated, low-cost transaction systems Mobile and remote technologies Product Leadership Con(nually Pushes it’s products in to the realm of the unknown, untried, and/or highly desirable It’s the customer’s best product period – Crea(ve – Commercialize Ideas Quickly – Relentlessly pursue ideas Open-mindedness to new ideas Product Leadership Opera(ng Processes – Focus on core processes of inven(on, product development, and market exploita(on – Loosely knit, ever changing to adjust to entrepreneurial ini(a(ves Management Systems – Results driven – Measure and Reward new product success – Don’t punish the experimenta(on to get there Product Leadership Culture – Encourages Individual Imagina(on – Accomplishment – Out-of-the-box Thinking – Mindset to create the future Product Culture Leadership Concept, future driven Experimentation, out of the box mindset Attack, go for it, win! Core Process Management Organization Invention, Systems Ad-hoc, organic, cellular Decisive, risk oriented commercialization High skills in loose- Reward individual Market exploitation knit structure innovation capacity Disjoint work procedures Product life cycle profitability Information Technology Person-to-person communications systems Technologies enabling cooperation and knowledge management Customer In(macy Bonds with customers Customers Wants – Thrive on customer loyalty Cul(vate Customer Rela(onships Consider Customer Lifelong Value Obsession with Core processes of solu(on development Customer In(macy Delegates decision making to employees to close customer contacts Management Systems – Crea(ng results for carefully selected and nurtured clients Culture – Embraces speciﬁc solu(ons – Deep and las(ng client rela(onships Customer In(macy Customer in(macy is based on the idea of marke(ng the individual needs of a par(cular customer and not the whole market segment. The Opera(ng Model of Customer In(macy Expert at their customer’s business & crea(ng solu(ons Unmatched value Evolu(onary improvement, not revolu(onary Solu(on! Solu(on! Solu(on! What separates the mighty from the might-be’s? Customer In(macy Culture Client & Field Driven Variation: Have it your way mindset Management Core Process Systems Organization Client acquisition & Revenue & share of Entrepreneurial development wallet driven client teams Solution development Rewards based partially High skills in the field Flexible & responsive on client feedback work procedures Lifetime value of client analysis Information Technology Customer databases linked internal/external Knowledge base built around expertise Organiza(onal Implica(ons Each discipline demands different things: Product Leadership Culture Operational Excellence Competencies Customer Intimacy Human Capital Practices Operational Product Customer Excellence Leadership Intimacy Value Best total cost Best product Best total Proposition solution Golden Rule Variety kills Cannibalize Solve the efficiency success with client’s broader breakthroughs problem Core Process End-to-end Invention Client product delivery Commercializa - acquisition & Customer tion development service cycle Market Solution Exploitation development Improvement Process Product Problem Levers redesign technology expertise Continuous R&D cycle time Service improvement customization Major Shift to new Jump to new Total change in Improvement asset base technology solution Challenges paradigm Treacy, Pg. 194 Learning Objectives At the end of this section the student should be able to – Identify the distinguishing characteristics of services – Discuss the characteristics of good customer service – Describe the standards for evaluating customer service Business Sectors The three principal sectors of Pharmacy is a service business industrialized economies are Extractive (mining and farming) Manufacturing Service Characteristics of Services Customer is a participant in the process Produced and consumed at the same time Perishable Location is dictated by the consumer Characteristics of Services Economies of scale are difficult to achieve Standardization is difficult Labor-intensive Output is difficult to measure Services Are Intangible There may be a tangible expression The core service is intangible of the service (e.g. the prescription) (cognitive evaluation and judgment) “You’ll never have a product or price advantage again. They can be easily duplicated, but a strong customer service culture cannot be copied” Jerry Fritz How true is this in pharmacy? Importance of Customer Service It costs six times as much to attract a new Service failures are unavoidable, but they customer than it does to retain an don’t have to lead to a lost customer. existing one. Customer Reponses to Service Failure When a customer confronts a service failure, they can choose to take action or do nothing. Many customers are passive about their dissatisfaction and say or do nothing but they will decide whether to continue to use the organization providing the service or not. Generally, those who take action are more apt to continue to use the organization's services than those who do nothing (a reason why it's good to encourage complaints). Customer Responses Four categories of response types have been When a customer decides to take action, he/she identified: may choose to complain to the provider, complain Passives. to family and friends, or complain to a third party. Voicers. Irates. Activists. Passives They often doubt the These are the ones who do effectiveness of complaining and nothing. think the consequences aren't worth the time and effort. Usually these folks are less Others have personal values or alienated than the more norms against complaining. extreme types. Voicers These customers actively complain to the These customers are the organization's This group believes complaining has social service provider but usually not to third best friends because their complaints benefits and that the consequences of parties, and usually don't switch allow the service provider a second their complaining can be positive. providers. chance. Irates THESE CUSTOMERS COMPLAIN TO THEY MAY FEEL ALIENATED AND ARE THEY ARE LESS LIKELY TO GIVE THE FRIENDS AND RELATIVES AND USUALLY DEFINITELY MORE ANGRY WITH THE PROVIDER A SECOND CHANCE. SWITCH PROVIDERS. PROVIDER THAN EITHER OF THE FIRST TWO. Activists These customers have an above average propensity to complain on all dimensions. They will complain to the provider, tell others, and complain to third parties. They have an optimistic sense of the potential positive consequences of all types of complaint action. Sometimes they can become "terrorists," that is, they may take extreme actions destructive of property and sometimes outside the law. What Is Good Customer Service? Will we all agree? Do we all know the difference between good and bad service? Recognizing good customer service is intuitive Give the customer what she wants…consistently Good Customer Service (Karr and Blohowiak, 1977) 01 02 03 04 05 06 Solving customer Solving customer Providing people Providing people Treating people Correcting problems with no problems who know what empowered to with dignity and mistakes when hassle promptly they are doing solve problems empathy they are made The Service Encounter The interaction between the service organization, service provider, and the customer “The moment of truth” (Norman, 1984) How do you manage this EMPOWER EMPLOYEES interaction? Empowering Employees Requires an organization to share – Info about the organization’s performance – Rewards based on the organization’s performance – Knowledge that allows employees to understand and contribute to organizational performance – Power to make decisions that influence organizational direction and performance Benefits of Empowering Employees QUICKER RESPONSE TO QUICKER RESPONSE TO EMPLOYEES FEEL BETTER EMPLOYEES EMPLOYEES BECOME CUSTOMER NEEDS DISSATISFIED ABOUT THEIR JOBS AND INTERACTING WITH SOURCE ON CUSTOMERS THEMSELVES CONSUMERS WITH INNOVATION AND MORE WARMTH AND IMPROVEMENT ENTHUSIASM Standards for Evaluating Service Reliability Responsiveness Assurance Empathy Tangibles Perform service Willingness to help Knowledge and courtesy Caring individualized Appearance of facilities, dependably and promptly of employees attention equipment, & personnel accurately Measuring Service Quality It is based on the customer’s The expectation becomes the perception relative to their standard expectations Expectations come from previous experiences and the Evaluated continuously experiences of others Quality of Expectations for Perceptions of = - Service the Service Service Frustration = Expectations - Delivery Service Recovery How to recover from service failures A process that begins with the recognition of a mistake or failure Trying to retain customer Good service recovery can be seen as more favorable than never having a problem Customer Expectations When customers complain, they have high expectations of what will happen. They expect justice and fairness in handling their complaints in three ways. They will judge the response as to its: Outcome fairness Procedural fairness Interaction fairness Outcome Fairness - The outcome or compensation should fit the level of their dissatisfaction Future free Money Apology services Reduced Repairs Replacements charges Procedural Fairness Customers want easy access to the complaint They want procedures characterized by clarity, process and want it handled quickly preferably speed, and absence of hassles by the first person they encounter. Interaction Fairness Customers expect to be treated This form of fairness can politely, with care and honesty. dominate all the others Professional Service IS THE AGENTS AND LEARNED DOES IT CHANGE THE SERVICE PATIENT/STUDENT/CLIENT INTERMEDIARIES YOU PROVIDE? ALWAYS RIGHT? Questions? Managing People Donald Klepser, Ph.D., M.B.A Learning Objec2ves At the end of this session the student should be able to – Explain the importance of talent management – Differentiate Management and Leadership – Discuss the practices used by leaders in performance appraisal Managing People As in the entertainment industry, employees are the talent that drives the organiza2on Unfortunately, it is the only resource that can decide if it wants to stay with the organiza2on It is, therefore, impera2ve to manage that talent well Managing People “We must realize that people are the organiza2on…. It's cri2cally important to the success of the ins2tu2on. Employee loyalty and sa2sfac2on is what makes this place hum.” Chancellor Harold M. Maurer, M.D., UNMC Today, April 15, 2002 Imperatives for Talent Management Elevate talent management to a burning organizational priority Source great talent, then develop it aggressively Opportunity for Leadership McKenzie & Company, Talent War, 1998 Talent Commitment and Retention Most influential factor: – Conflicts with supervisors Simple training helps a lot – Develop a performance culture Cultures that don t recognize merit are demoralizing – Deal with low performers to keep the good ones Peter Cappelli, The New Deal at Work , Harvard Business School Press, 2001 New Deal at Work Trust is short-term Employees – Want criteria spelled out – Want to build skill set – Want to know how they are doing Peter Cappelli, The New Deal at Work, Harvard Business School Press, 2001 Cost of Not Managing Talent The incurred costs associated with – Poor employee retention – Poor safety records – Poor per-person productivity – Lost work days …are hidden, but, significant The Gallup Organization, 2000 The Cost of Talent Turnover Category x Annual Salary Front-line.41 Professionals 1.77 Managers 2.44 The Conference Board, 1999 Understanding the Playing Field Levels of Performance 2. These employees will respond to consistent: 1. These Planning employees Feedback desire to Reward/Recognition contribute Lower 10% Middle 80% Upper 10% Not Meeting Meets All or Most of Expectations Clearly Exceeding Does so in response to effective Requires formal Does so in spite leadership intervention of inadequate leadership What Committed Employees Say I know what is expected of me I have the materials and equipment I need to do my work right At work, I have the opportunity to do what I do best every day In the last seven days, I have received recognition or praise for doing good work My supervisor, or someone at work, seems to care about me as a person There is someone at work who encourages my development The Gallup Organization, Q12 Items, 2001 What Committed Employees Say At work, my opinions seem to count The mission or purpose of my company makes me feel my job is important My associates or fellow employees are committed to doing quality work I have a best friend at work In the last six months someone at work has talked to me about my progress In the last year, I have had opportunities to learn and grow The Gallup Organization, Q12 Items, 2001 How Do We Foster this Commitment? Focus on supervisors (and managers) Reviews and appraisals…a good place to start Peter Cappelli, The New Deal at Work, Harvard Business School Press, 2001 Management versus Leadership Good managers are not necessarily good leaders and vice versa GeWng the most out of people requires more than management It requires that managers be leaders Management versus Leadership Manage – : to handle or direct with a degree of skill: as a : to make and keep compliant Lead – 1 a : to guide someone or something along a way c : to guide a dance partner through the steps of a dance Management versus Leadership Manager – Promoting stability and smooth operations – Maintenance of status quo Leader – Articulating a mission or a goal and knowing how to bring everyone on board to get it accomplished – Partner in the dance, influencing the outcome Leadership versus Management Characterized by – – Front-end planning – Broadened definition of job roles – Ongoing dialogue and feedback – Systemic view of many contributing performance factors – Linkage of personal achievement to organization success Management versus Leadership Performance INPUTs TRANSFORMATION OUTPUTs Management End-of-Process Inspection Leadership Front-end and Continuing Participation Performance is a Function of Leadership How Who Accountability Adaptability What Communication Knowledge Skills Customer/Quality Focus Outcome Inclusiveness Abilities Attributes Occupational Knowledge/ Technology Orientation Job Result Team Focus Leadership Measuring an Employee s Performance What are we really measuring… The supervisor s/manager s demonstration of leadership practices Leadership Practice Communication What are We Communicating? Feedback Topic Focus Source Question Job Fulfillment of Job analysis, Am I being effective Responsibilities assigned description, other in my role? duties documents Achievement Campus, What am I against goals Department, and accomplishing and Objectives Team goals how does it relate to campus and team goals? Key behaviors Performance Am I exhibiting Competencies contributing to Leadership behaviors that make successful Competencies for a productive work performance and Key environment? outcome Behaviors Performance Appraisal Practices Feedback Appraise (a part of Feedback Planning Recognition and Recognition) & Reward Performance Period Performance Appraisal: Planning Goal setting Clarification of competency key behaviors Assignment and clarification of job responsibilities Identify and address developmental needs Takes time and effort…but…worth the investment! Performance Appraisal: Planning Ongoing throughout the performance period Practice as opposed to an event Dialogue as opposed to forms and ratings Information that enables maintenance of a high probability of success Largest gap between belief and practice Lack of planning exacerbates poor feedback Performance Appraisal : Recognition & Reward Favorable impact linked with personal interaction (motivation and appreciation) Specific and timely Monetary and non-monetary …ability to speak is one of the best motivational tools they have… Annual pay increases not clearly connected to any particular accomplishment. Results Leadership Leader Behavior Outcome Practice Planning Setting goals/expectations Clarity re job Clarifying Duties Specifying Competencies and expectations Key Behaviors Feedback Maintenance of ongoing Clarity re job dialogue expectations Recognition & Monetary Clarity re Non-monetary Rewards acknowledgement valued behaviors praise, etc Recognition & Reward Ques2ons Budgeting Donald Klepser, Ph.D., M.B.A Learning Objectives At the end of this session, the student should be able to – Describe the rationale for using different types of budgeting systems – Understand the variety of budget schedules that make up the master budget – Explain the process of capital budgeting – Discuss the assumptions and predictions involved in budgeting What is a Budget? A COMPREHENSIVE, QUANTITATIVE SPECIFY HOW RESOURCES WILL BE BUSINESS PLAN ACQUIRED AND USED DURING A GIVEN PERIOD OF TIME Purposes of Budgeting Systems Supporting Assigning Planning communication resources and coordination Assessing Benchmarking performance and conferring rewards Planning Main purpose of any budget Forces the manager to How many prescriptions will be anticipate what might filled? happen in the future What staffing will be required? Supporting Communication and Coordination Makes manager aware of the plans made by others Hospital pharmacy and nursing within the organization Requires relationship building Assigning Resources RESOURCES ARE LIMITED BUDGETS ALLOW FOR OPTIMAL ALLOCATION OF ASSIGNING OF RESOURCES RESOURCE TO COMPETING USES Benchmarking Budgets are A benchmark subject to for actual revision results Assessing Performance and Conferring Rewards Comparing the actual results to budgeted results helps managers to evaluate individuals and organizations The Master Budget (or Profit Plan) All-inclusive set of interdependent budgets Covers all parts of a pharmacy’s operations A specified period of time Short range budget Long range budget Rolling (or revolving) budget Steps That Make up the Master Budget Sales (Revenue) Budget Revenues provide Sales forecast of the means to pay Starting point products and for expenses and services provide profits Forecasting can be Generally builds on complicated and the previous year’s should be done sales thoughtfully Factors to Consider in Forecasting Sales PAST SALES LEVELS DEMOGRAPHIC AND ECONOMIC TRENDS OTHER FACTORS AND TRENDS TECHNOLOGICAL IN THE INDUSTRY EXPECTED TO AFFECT CHANGES SPECIFIC SALES POLITICAL AND LEGAL EVENTS Factors to Consider in Forecasting Sales Intended pricing policy of the pharmacy organizations Planned advertising and promotion of products and services Expected actions of competitors New pharmaceutical care services planned Research studies Sales Expense Budget TRY TO KEEP RELATIONSHIP ITEMIZE ALL EXPENSE ITEMS ANNUAL AND MONTHLY BASED ON PAST DATA AND BETWEEN SALES REVENUE INVOLVED IN THE SALE OF INDUSTRY TRENDS AND EXPENSE WITHIN A PRODUCTS AND SERVICES CERTAIN RANGE Production Budgets A detailed plan for using basic factors (material, labor, etc) to produce a product or service Starts with sales forecasts Determines the resources needed to produce the sales Must consider factors that may affect production costs Accounts Payable & Accounts Receivable Budget Required because most Use historical data from Estimate the timing of pharmacy transactions take customers and suppliers to payments closely to identify place on a credit basis determine payment terms potential cash flow issues Cash Flow Budget Forecast of the cash receipts and Cash receipt level depends on Cash payments level depends on cash payments for the budget period Sales forecast, credit terms offered by the Forecast of production costs and company, and experience in collecting expenses, capital expenditures, and credit accounts receivable terms of suppliers Budgeted Financial Statements Final portion of the master budget Budgeted income statement Budgeted balance sheet Budgeted cash flow statement Intended to illustrate how a pharmacy’s financial statements will look if things go according to plan Used to generate to following year’s sales revenue budget Capital Investments Expenditures made to Require long-term May have to decide Should increase cash flows acquire or improve long- financing between capital items and net income or provide term assets (e.g. building) some non-financial benefit Capital Investments Payback period - length of Return on investment time required to recoup (ROI) - the average net the entire cost of the income expressed as a investment percentage of the average Shorter is better amount invested Present value of future cash flow - the amount an informed investor would pay today for the right to receive the future amount Behavioral/Ethical Issues in Budgeting Participative Budgeting People will perform better if they are involved in setting the goal (empowered) Involve all personnel in budgeting process Uses consensus building rather than top down edicts May be difficult to reach a decision Budgetary Slack Padding The difference between the real estimate and padded estimate is the budgetary slack Underestimating revenue Overestimating costs Budgetary Slack Used to cope with uncertainty Because cost projections are often cut in the cost- allocation process Leads to a vicious cycle Evaluations based on exceeding revenue or keeping costs below budgeted levels Evaluating Performance Based on Actual Results Compared to Budgeted Levels Provides an incentive to pad the May be an incentive to manipulate A solution may be to tie incentives to budget actual results not only achieving budgeted projections, but also on the accuracy of the projections Questions? Inventory/Order Management in Community Pharmacy Donald Klepser, Ph.D., M.B.A Learning Objectives After this lecture, students should be able to – Explain the importance of inventory management to a pharmacy both financially and operationally. – Calculate inventory turnover rates and explain its meaining. – Describe three methods of inventory management. – Differentiate between FIFO and LIFO and how they impact income. Inventory: Definition Inventory: It is all the resources that we hold for future use or sale, including raw materials, supplies, partially transformed goods and finished goods ready to be sold. Inventory Turnover Ratio How quickly inventory is sold off and replaced with new inventory during a specific period of time. Cost of Goods Sold (Beginning Inventory+ End Inventory) ÷2 Inventory Turnover Ratio A higher number means that the inventory is being turned more often This is really how often you are converting your inventory into cash (i.e 12 turns=1 turn/month) Turnover Comparison High Turnover Low Turnover Total Sales 100% 100% Cost of Goods Sold 72.5% 69.2% Gross Margin 27.5% 30.8% Empl Wages 7.6% 9.6% Rent/Misc. 9.7% 13.2% Total expenses 17.3% 22.8% Total Income 10.2% 8.0% Total Inventory 6.1% 18.3% Inventory Turnover 11.9 3.8 times Goldilocks Story Inventory Too Much Too Little Just Right Accounts Customer Meeting Customer Cash Flow Hidden Costs Payable Hidden Costs Satisfaction Demands in a Decreases Of Duplication Increases Decreases Timely fashion Bulk purchase discounts Labels, vials, time, etc. Good Inventory Management means having the right amount of inventory, in the right place, at the right time. Hidden Costs Financing Insurance Cost- Fire, Theft Obsolescence- No longer usable, outdated, etc. Opportunity cost- Lost use of money because it is tied up in inventory Tracking Inventory 1- Perpetual - running count of items used 2- Physical - someone to actually check counts 3- Combination of Both - most used method Vendor Managed Inventory Some wholesalers/vendors are offering a just in time managed inventory Works through EDI Positives Negatives Price Updates Very Important issue Facts: -30 brand name drugs most frequently used by elderly rose by 4.3 times the rate of inflation in 2003. On average, the cost of these 30 heavily prescribed drugs increased by 6.5 percent from Jan 2003 to Jan 2004, while the rate of inflation, was 1.5 percent. - Prices of drugs from 2001-2004 increased by 3.6 times the rate of inflation, or 21.6 percent. (inflation was 6%) Price Updates (cont’d) Facts: - Not only did the prices of the drugs increase rapidly but more often. (ie.Toprol XL 50mg increased seven times during the three years -2001-2004) (Families USA, June 2004) Accounting FIFO LIFO -First In First Out -Last In First Out - The inventory that is - The inventory that is purchased first is the purchased last is the inventory that sells first to inventory that sells first to customer. customer. - When prices are rising- - Tax advantage during results in a higher income periods of rising prices- figure than LIFO inflation Ordering Inventory Factors - Season - One of a kind items/cost of storing - Death - 3 month supply/mail order Facts and Future Trends By 2008, worldwide sales of generic drugs grew by more than 20% a year and reached $80B. Sales of generics h

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