Step #1: Complete Business and Sales Planning

One of the biggest challenges to operating a TPA with consistent, high-quality service and strong financial results is the constant “push and pull” which occurs for attention, resources and focus among members of the management team. While the TPA industry was built on an entrepreneurial spirit and creative, nimble solutions, the most successful organizations are those built around planning and a structure allowing for informed decisions.

Within a couple of hours of interviewing TPA Managers, I gain a very good feel for whether the TPA runs off the “seat of their pants” or understands what will make the organization successful. Their answers to five questions establish the benchmark:

  1. When was the last time your organization spent a day totally focused on setting company goals and priorities and understanding what needs to occur to meet those goals?

  2. As a Manager, is it very clear to you what tasks your Department(s) must complete for the company to reach its goals?

  3. Is the accomplishment of reaching your goals something your team can handle within the Department or are you influenced by the activities and results of other Departments?

  4. From a budget perspective, what kind of investments are needed for you to be successful and what kind of ROI is expected if you are?

  5. How does sales and account management success impact your ability to complete your Departmental tasks?

Building a Culture of Open Communication and Accountability

Establishing a culture of support, accountability and disclosure within the organization must be driven from the top through a planning process that is linked to budgeting and ongoing monitoring of key business metrics. Planning begins with a comprehensive assessment and discussion of where the organization has been, and internal and external factors that may impact results. Dialogue must be open and honest, even if does not always reflect favorably. Few organizations have no dirty laundry, no issues with finger pointing, and have not failed deployment of at least one new service, technology or partnership. It is important to call “BS” when identified, but in a constructive way

Attendees must recognize the annual Planning Meeting as “guarded time.” They must prepare for the meeting and acknowledge that interruptions and distractions are not acceptable. I often recommend the meeting be held away from the office. Use of laptops and cell phones for non-urgent communication or work should be looked at very unfavorably.

Each planning meeting should include 3 sessions, each roughly 3 hours in length: “Setting the Table;” “Goal Setting” (Company and Departmental); and “Management through Metrics.”

Setting the Table

The first session represents the opportunity for each Manager to discuss high level issues and tell the story of their Department(s), including thoughts from middle managers and trusted “line” employees. I recommend providing attendees with topics to be discussed in advance so they can prepare. I would start with 6 more “open ended” questions:

  1. What are our organization’s greatest strengths and weaknesses?

  2. Now, answer the first question from the standpoint of our clients, prospects, brokers/ consultants and business partners/vendors…

  3. What have been our biggest challenges to revenue growth, either through new business or through our existing client base?

  4. Given all we know about industry trends, available automation and member engagement, on a scale of 1 to 10, how should we rate ourselves with respect to use of available technology and why?

  5. With staffing cost representing at least 40-50% of our operating expense, do we use those resources in the most effective manner possible?

  6. What are the biggest challenges you see in managing your Department(s) and meeting your Departmental Goals?

A fortunate or unfortunate (depending on perspective) bi-product of the first session is identification of team members that have no desire to be an effective member of the management team. Their feedback is minimal, shallow and lacks attention to detail. At a minimum, they have chosen not to prepare for the planning session. If a number of the company’s challenges are linked to that Manager, action will ultimately have to be taken.

Company Goal Setting

The first two goals for every TPA I have worked with are usually consistent and rightly so. Revenue is critical, and a company goal related to revenue is important. Profitability, or EBIDTA, is also critical because it fuels the TPA’s ability to invest and maintain stability.

As it relates to revenue, there is always a struggle whether to use total revenue or PEPM revenue as a measuring stick. PEPM revenue tends to reflect the TPA’s ability to demonstrate the value of its services; maintain a long-term client base; and develop and sell a broader-based portfolio of services to clients. On the other hand, total revenue reflects net growth or loss of covered headcount and/or PEPM revenue. Total revenue is one of the primary metrics used in assessing the financial value of a TPA.

Profit, or EBIDTA, is an excellent metric as it reflects total revenue plus the TPA’s ability to manage its operating expenses. Later blogs in this series will focus on management of operating expenses, but it is safe to say that tracking against a budget is one of the strongest indicators of an accountable TPA manager.

Revenue and Profitability are the easy choices. My experience is that TPAs focused only on those metrics have two problems. First, over time they lose sight of the fact the industry was built on innovation. Second, they often create “silos” within the organization where Departments focus on only efforts they can make to meeting revenue and profit goals. For that reason, I suggest adding no more than 2 additional Company Goals. Examples are:

  • A product development goal. For example, successful deployment of a new service (identified by the Team) with sales to XX existing clients and XX new clients; and

  • A quality improvement goal. For example, obtaining via survey client feedback on implementation-related satisfaction and obtaining a rating of at least 90% overall satisfaction.

Company Goals must be tracked on an ongoing basis (no less than monthly) with at least Senior and Middle Managers focused on progress. If an incentive compensation program is in place, it obviously should be linked to meeting the goals.

Departmental Goals

Once Company Goals are established, it is time for the Managers to think about how their Departments can support the Company Goals. Their thoughts should reflect technology, training, staffing, workflow/procedures, use of a vendor, client and participant service and communications. As a rule of thumb, each Department should develop no more than 3-4 tasks or actions per Company Goal. For each, interdependency on other Departments must be identified, budget implications expressed and a methodology (metrics) for measuring progress and completion identified.

The Company’s success or failure in meeting its Company Goals should be directly related to the percentage of Departmental Goals met or failed. On an ongoing basis, a result above or below goal can result in corrective action targeted at the Department(s) making the least amount of progress.

Managing through Metrics

As identified above, accountability for progress and completion of tasks is incredibly important to building a culture of working together for a strong foundation. In addition to the typical service and financial metrics used by the TPA for internal management and client reporting, each Departmental task or action must be measured related to progress of implementation and progress of result.

The next blog will address Step #2 in building a strong foundation, Maintaining a Disciplined Sales Approach.


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