Lab Manager | Run Your Lab Like a Business

Taking Care of Business

The leadership challenges of running a successful lab

by Bernard B. Tulsi
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Increasingly, both new and seasoned managers of labs of all sizes and disciplines are facing steep learning curves. In the quest to run their labs like businesses, managers are discovering that they need to be conversant with a host of new technologies such as artificial intelligence and laboratory automation (and workforce displacement), block chain systems, green lab technologies, and a variety of fast-changing communication tools, among others.

It’s a given that accuracy, efficiency, and competitiveness rely on state-of-the-art instrumentation; accredited methods and procedures; and the optimal use of energy, water, reagents, and consumables. If these are not integrated and implemented effectively, however, the technical viability of the operation, as well as its legal, financial, and economic sustainability, could be undermined. As a result, lab leaders must have more than a passing familiarity with legal questions—complying with regulations, developing robust processes, registering and safeguarding intellectual property, when applicable—and a solid grasp of financial and budgetary questions that form the basis of cost controls; service (test) offerings; price-setting; and future investments in equipment, facilities, and the engagement of talented personnel.

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On the subject of talent acquisition, Dr. Wendy Becker, Professor of Management, Shippensburg University (Shippensburg, PA), who specializes in Industrial/Organizational Psychology, says, “Keeping pace with changes in technology is a leadership challenge that centers on prioritizing employee training and professional development.” Her own work with laboratories centers around human resource management, employee selection and training, experiential learning, evaluation of training, and employee selection system design. While squarely positioning human resource training and development as key aspects for labs seeking to stay ahead of rapid technological changes, Becker notes, “Different disciplines in the forensic sciences [my specialty] require different approaches to training personnel to keep abreast of technology change— and these approaches depend upon the relative degree of academic/experiential learning required to attain competency in the discipline. For example, forensic biology may require greater emphasis on academic knowledge, while questioned documents have historically centered on experience-based learning.

“Approaches to employee training can include professional conferences and seminars, apprenticeships, residencies, internships, instructor-led, and independent and distributed learning. Unfortunately, employee training and professional development are often the first line items to be cut or reduced from the lab budget. Managers must champion lab employees as assets to be protected in this regard.”

On how to ensure that labs stay current with technology and relevant practices, Joe McGann, Regional Vice President, Accumen, Inc. (San Diego, CA), who has three decades of experience in the lab industry focusing on hospital and health system labs, says, “Aside from trade shows and association meetings— which are always a good source of information—visiting other labs to see their operations, processes, and related equipment can provide valuable insight.

“In addition, observing different ways to provide the same service is always educational. Most labs welcome their peers and are more than willing to share and even show off their pride and joy.”

Lab operations constantly seek effective ways to evaluate return on investment (ROI) when acquiring or building new facilities or units and when acquiring costly equipment. McGann says, “With the rapid changes in technology, there are numerous factors to consider when evaluating the potential acquisition of expensive equipment. With respect to the standard ROI calculation, it is important to ensure that the time horizon used is reasonable and that labs are not committing themselves to long-term contracts whereby they are unable to stay abreast of the technological changes because they have financially locked themselves into a long-term contract.”

Becker says that when the mix includes people, figuring out investment returns can be challenging. “While the value of calculating ROI is understood today, most organizations still find themselves struggling to move from operational reporting to analytics—especially with regard to understanding people as assets in the lab. For example, structured training programs are often more efficient than unstructured mentor training.

“The danger is that as mentors are often the most productive casework scientists, their time spent in unstructured training of new personnel can decrease the overall productivity of the lab. Time to competency is a measurable behavioral analytic in the lab. Intangible people assets are also important and undervalued—professional relationships between practitioner forensic scientist peers, students, academic faculty, and researchers.” Lab managers today know that their businesses are expected—indeed, it’s an imperative—to deliver maximum value to their customers or other end users. McGann says, “The customers of laboratory services can vary. The three main customers of [clinical] labs include the provider, the patient, and the patient’s insurance company, and each of these customer’s needs are somewhat different. The provider and patient need timely, quality results. In the age of consumerism, the patient needs access and financial transparency. The insurance company needs data.

“In this era of value-based reimbursement, labs need to be able to provide all of the above, and at the same time be part of showing how they improved patient outcomes in ways that reduce health care costs.”

For forensics labs, Becker says that customer working groups (CWGs) can facilitate effective communication between labs and lab customers from the criminal justice community. “Representatives from law enforcement agencies, citizens, prosecutors, defense attorneys, and judges make up the CWG. Key steps include the CWG working together to develop a mission statement, policy, procedures, and regular communication and outreach activities.”

To establish and maintain a business-like posture that is distinct from their peers, lab leaders constantly seek ways to differentiate themselves and highlight their strengths. McGann says that to emphasize their value proposition, labs need to collectively and consistently implement and sustain four main factors to differentiate themselves and flourish:

“Ensure the trains run on time all the time—in other words, consistent reliable service.

“Service needs to be coupled with quality that must be shared with all customers.

“The service and quality need to be provided at a competitive rate. Therefore, since the revenue factor is, for the most part, fixed and established by the payers, a lab’s cost base of operations needs to be lean, cost efficient, and effective.

“And last, labs need to be able to provide data in a format that is needed by the insurers’ beneficiaries.”

“From the private sector, the concept of employee selection and training as an important aspect of an organization’s brand may help labs differentiate themselves,” says Becker. “What I mean is that labs can distinguish themselves by hiring and training effectively. People assets—the intellectual capital of the employees who are selected and retained—are inimitable, meaning they can’t be copied or reproduced.

“For example, lab managers can use performance management strategies to help employees develop their technical expertise—and that will help retain key personnel. Labs can develop innovative approaches to design and deliver new technology, such as mobile and virtual training, simulations, online courses, and social-learning tools, such as wikis and communities of practice. The intellectual capital of the lab, unlike equipment or a new procedure or facility, cannot be reproduced.”

Turning to the crucial questions of effective budget management and revenue and earnings growth, McGann says, “In order to be competitive and/or stay competitive, lab managers need to run their labs like a business and therefore the need for timely financial information is crucial—and just as important is the need for the information to be acted upon.

“Lab managers need to ensure that they are getting all the data in order to properly manage their budget. Examples include volumes by payer, reimbursement by payer, productivity in both the pre-analytical and analytical departments of the lab, and client profitability, among others. This information will shine the light on where to focus the budgetary efforts; alternatively, without this level of information, especially in larger labs, if there are budgetary problems, the lab manager will not efficiently know where the efforts need to be focused.”

“The fiscal environment in public service agencies relies upon external policy realities and the state of the economy, with fiscal constraints ever-present. Public agencies must be the best stewards of the taxpayer dollar, providing the best forensic services in a timely and quality manner,” says Becker.

“Labs can be considered as business entrepreneurial ventures with business plans. Lab managers can receive professional development in fiscal management; for example, a master’s in business administration or a certificate program. Managing requires measuring key performance indicators so that managers can move from a reactive posture to proactive management of the lab,” adds Becker.

On how labs should go about setting up and analyzing these performance metrics, McGann says, “Similar to managing a budget effectively, access to key and timely performance metrics is critical. As I noted earlier, part of the value proposition of a successful lab includes consistent service and quality metrics. However, labs should not try to measure every service and quality metric or the dashboard can become diluted. Collaboration with the physician customers to determine what is important to them is fundamental. Once the few key metrics are established, the lab can concentrate on ensuring the consistent delivery. “Just as important is communication of the results with not only the entire lab, but the physician customer as well. The physician needs to know that you are measuring and analyzing the agreed-upon metrics, and acting upon them accordingly if need be.”

Becker notes that, “In our book, Forensic Laboratory Management: Applying Business Principles, Mark Dale and I discuss seven key areas to develop in a lab management performance model. These are: law enforcement requirements, costs, capabilities, cost-benefit metrics, performance, benchmarking, and return on investment.

“As one example, benchmarking involves identifying the key metrics that can be compared with other similarsized labs serving similar law enforcement agencies in scope and geopolitical service area. Benchmarking allows laboratories statistical comparisons of data that can serve as a management tool for laboratory managers. Individual labs can request peer lab contacts with best practice agencies for facilitating discussion.

“Benchmarking requires forming trust relationships between partners and sharing confidential data, while keeping metrics useful and easy to monitor. Many labs willingly share their best practices for the greater good,” Becker concludes.