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Balanced Scorecards: A Smart Approach to Performance Improvement

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Title: Balanced Scorecards: A Smart Approach to Performance Improvement


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Balanced Scorecards A Smart Approach to
Performance Improvement
WIPFLI.COM
July 19, 2005 Bob Stephen and Jill Zabel Wipfli
Health Care Practice
3
Our Session Objectives
  • Understand the benefits of using the Balanced
    Scorecard.
  • Discuss the process
  • Readiness
  • Strategy Maps
  • Scorecard Development
  • Cascading
  • Using the Scorecard
  • Additional considerations

4
Agenda
  • Introduction
  • Balanced Scorecard 101
  • Readiness
  • Case Study
  • Next Steps
  • Wrap-Up QA

5
Introduction
  • Our Experience
  • 20 hospitals over the past 18 months
  • Wisconsin Office of Rural Health Project
  • Mississippi Delta Project
  • Other state offices/ performance improvement
    networks
  • Small and rural hospitals are at the forefront of
    Balanced Scorecard adoption in healthcare

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Prelude to the Balanced Scorecard
  • Mission/Vision
  • Goals/Objectives (what we want to do)
  • Strategies (how we will do it)
  • Measures (how we know we did it)

Strategic Planning
8
Why isnt completing a strategic plan enough?
Based on research by Kaplan and Norton, 90 of
all strategies fail.
In the majority of cases we estimate 70
the real problem isnt bad strategy but … bad
execution.
Fortune - Cover Story, June 1999 Why CEOs Fail
Malcolm Baldrige National Quality Award
Foundation survey 300 CEOs 72 felt executing
strategies was more important
9
Linking Strategy to Execution
For many health care organizations, the strategy
process ends with a written strategic plan. This
helps explain why the majority of all strategies
are never implemented.
Typical Barriers
Translation - Strategy is not connected to
operational or actionable issues. Measurement
and Focus - The organization measures what they
haveoften financial and historicalrather than
what drives strategy AND management spends too
little time discussing strategy. Alignment - Ther
e is no direct link between overall strategy
and - resource allocation. - key
initiatives. - department or personal
goals. Communication - The strategy is not
communicated or shared with key stakeholders
employees, physicians, or community Continuity -
Strategy is an event, not an ongoing process.
10
Balanced Scorecard
  • Translates mission strategy into a set of
    performance measures and strategically aligned
    objectives.
  • Links strategies and outcomes.

Four perspectives
Financial
Customer
Internal Processes
Learning Growth (Enabling Investments)
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How Does the Balanced Scorecard Work?
Mission Why we exist
Values Whats Important to Us
Vision What We Want to Be
Strategy How We Achieve Our Vision
Strategy Map Translate the Strategy
Balanced Scorecard Measure and Focus
Targets and Initiatives What We Need to Do
Cascading Scorecards and Initiatives What Our
Teams and Departments Must Do
Personal Objectives What I Need to Do
Strategic Outcomes
Financial Viability
Satisfied Internal And External Customers
Effective Processes
Enabling Investments
Adapted from Strategy Maps, Kaplan and Norton,
HBS Press 2004
12
Benefits
  • Hospitals with successful Balanced Scorecard
    implementations should expect to see improvements
    in organizational performance financial,
    quality, service.
  • BUT, actual results will depend on each
    hospitals situation (keep doors open, smooth
    transition)
  • Initially, most benefits will be intangible
    (increased communication, focus, understanding of
    strategy).
  • Success depends on effort and a sound approach.

13
Maximizing Value
The Balanced Scorecard can drive dramatic
performance improvement, but one recent study
suggests that many BSC implementations (up to
50!) do not meet expectations.
  • Successful implementations
  • Have strong executive sponsorship
  • Develop strategy maps with cause-and-effect links
  • Strong measures
  • Ties to action
  • Commitment to management use
  • Willingness to change

14
Readiness
  • Readiness
  • Lack of Barriers
  • Do we have a strategy?
  • Is leadership (CEO) on board?
  • Do we understand what this is?
  • Potential Value
  • Is there significant improvement opportunity
    (survey)?
  • Is our strategy understood?
  • How well do we use measurement?
  • Are our actions aligned with strategy?
  • Do we have a burning platform?

15
Case Study County Community Hospital
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Case County Community Hospital (CH) Situation
  • Rural provider
  • Depressed community
  • No competitors for 25 mile radius
  • Large competitors within commuting distance
  • Inefficient processes (long ED Wait times)
  • Staffing competition with large providers
  • Possible integration with physician clinic
  • Aging plant and equipment
  • Lack of management focus (fires and homeruns)
  • Case study is a composite of several customer
    organizations.

17
Case Customer Value Proposition and Strategic
Themes
  • Customer Value Proposition
  • Customer Intimacy CH will satisfy its customers
    by providing access to the services required by
    the community. Members of the community will
    seek out CH because of our understanding of the
    unique needs of the population.
  • Strategic Themes
  • Process improvement/Make us more accessible (wait
    times, scheduling)/Do more with less
  • Focus on customer service
  • Community focus
  • Ensure quality and safety
  • Develop the right partnerships with physicians
    and tertiary care centers create a community
    gateway to services
  • Ensure the right mix of services for the
    community
  • Cultivate an ownership culture

18
Case Building a Balanced Scorecard
1. Strategy Development
2. Strategy Map
Steering Committee Select Strategies Determine
Priorities Blocking Tackling
Reconvene Steering Committee Establish Cause
Effect Linkage Establish Objective Owners
3. Measures
5. Continuous Review
New Management Meeting Communication Extend to
Departments
Define Measures -Accountability -Targets -Sources
4. Initiatives
Define Prioritize Initiatives Finalize
Scorecard
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Case Steering Committee
  • Administrator (Executive Sponsor)
  • Manager, Quality Improvement (Champion)
  • CFO
  • VP, Nursing
  • VP, Support Services
  • Director, Clinics
  • Primary Care Physician
  • Board Trustee

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Case Submitted Strategic Objectives
  • Lower days in A/R
  • Control costs
  • Reduce employee turnover
  • Reduce agency use
  • Clean the building
  • Renovate 2nd floor
  • Reduce Emergency Department wait times
  • Upgrade radiology
  • Reduce costs
  • Focus on safety
  • Improve community reputation
  • Invest in the quality program
  • Stop or slow out-migration
  • Start dialysis program
  • Improve customer satisfaction
  • Recruit internal medicine PCPs
  • Re-start the urgent care program
  • Renovate the operating rooms
  • Upgrade OR equipment
  • Develop an alliance with University Hospital

This list contains duplicates and
initiativesobvious duplicates are combined and
initiatives were sent to a parking lot during the
first meeting.
21
Objective Linking Process
Case Strategy Mapping Process
  • To link objectives to the map, a relatively
  • simple process is employed
  • The strategy map framework is displayed on a flip
    chart page.
  • Objectives are placed on Sticky notes.
  • Members stick notes to appropriate map location.
  • Objectives are grouped.
  • Total number is reduced as necessary to 12-16
    objectives.
  • Each objective is assigned an owner with
    accountability (and responsibility for definition
    and naming).

Although some of the map was pre-developed, the
group activity was used to validate their
strategic themes.
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Strategic Vision
Vision
Financially, how do we support the hospitals
continued viability and investment in the future
(ability to meet the vision)?
Financial Viability
Growth
Effectiveness
As customers of the hospitals services, what are
our expectations?
Customer
Patients
Physicians
Community
What processes must we excel at to meet customer
needs?
Internal
Customer Service
Process and Productivity
Market Strategies
Service Strategies
Physician Collaboration
Quality and Safety
Community Focus
Enabling Investment (Employees)
What type of culture, skills, training, and
technology are required to support our processes?
People
Culture
Infrastructure
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23
Strategic Vision
County Community Hospital will contribute to
the the community by offering accessible quality
care tailored to the needs of our residents.
Financial Viability
Increase Revenue
Improve Our Cost Position
Customer
Provide Patient Access and Service
Ensure Physician Satisfaction With Access and
Quality of Services
Remain a Community Asset
Internal
Achieve Organizational Commitment to Services
Process Improvement Efficiency/Access
Develop Strong PCP Referral Partnerships
Match Our Services to Community Need
Exceed Quality Safety Standards
Ensure community focus
Employees Investment
Recruit and Retain the Right Employees and
Physicians
Establish an Ownership Culture
Ensure the Facility and Technology
Meet Requirements
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24
Case Prioritization
  • Prioritization is used for validation,
    communication, and focus.
  • Process employed
  • All divide 100 points among 4 perspectives.
  • Divide 100 points among objectives in each
    perspective.
  • Scores are averaged and discussed (simple voting
    could also be used).

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Case Measures
  • Each objective owner was asked to identify at
    least 2 measures for each objective. Other
    participants provided input as well. (Measure
    Inventory)
  • Steering committee met to identify measures for
    each objective.
  • Rules Employed
  • Selected measures that exist currently or are
    based on existing information.
  • Measures must balance leading and lagging
    indicators.
  • Objectives are assigned 1 or 2 measures unless
    the steering committee agrees on more.
  • Measures must be defined and documented
    (Including Targets and Alarms).
  • Each measure is assigned an owner.

26
Case Measure Definition
Process Improvement Look for measures that
indicate drivers of performance or reflect direct
improvement from high importance
initiatives. Considered Number of PI projects,
PI results for highest profile projects (ER),
Percent of departments with PI plans Selected
Results for ER project (Wait time) Next Step
Assign accountability, define, and set
targets/alarms
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Case Initiatives
  • A list of all current and proposed initiatives is
    developed prior to the third Steering Committee
    meeting.
  • Each objective/measure owner is asked to identify
    initiatives associated with their objective (or
    with an anticipated impact on measures).
    Initiatives selected should help the measure
    become or stay green.
  • Steering Committee approves initiatives for
    objectives with the highest priority (as
    appropriate).
  • Remaining objectives have initiatives assigned by
    the owner. These will be discussed as
    appropriate.
  • The initiatives are used to populate the first
    draft scorecard.

28
Case Scorecard Draft
1
2
3
4
29
Case Next Steps
  • Use the scorecard keep it up to date
  • Restructure management meetings the scorecard
    is the agenda
  • Communicate to all stakeholders
  • Start to cascade to departments (5 priorities)

30
Case New Management Meeting Sample Agenda
  • Review changes and priorities
  • Priority initiatives
  • Recent changes (Red and Green)
  • Current business grouped by
  • Financial Viability
  • Customer
  • Internal Processes
  • Enabling Investments
  • Changes to Scorecard
  • Communication

31
Case Roll-Out
  • The scorecard is introduced to key stakeholders
    once the steering committee is ready
  • Managers receive education during manager
    meetings (month 4)
  • Management brings the scorecard to employees and
    physicians at scheduled meetings (month 6)
  • The high-level scorecard is posted outside the
    employee entrance to the cafeteria. (month 6)
  • The Board begins to see the BSC in month 9.

32
Case Cascading
  • Cascading is the process of creating scorecards
    (linked to the hospital scorecard) at lower
    levels of the organization.
  • Cascading should begin once the high-level
    scorecard is running smoothly.
  • Avoid overwhelming the organization start with
    pilots or a limited cascaded scorecard.

33
Example For each critical strategy…
Case Cascading Starts in Month 9
Level
Goal/Strategy
Hospital
Goal Process Improvement
Nursing Care/ER
Reduce ER Wait times (See example)
Housekeeping
Improve room turnaround times
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Strategic Vision
Metro Northeast Hospital will contribute to
the Revitalization of the community by offering
Accessible quality care tailored to the needs
of our residents.
Financial Survival
Increase Revenue
Improve our Cost Position
Customer
Provide patient Access and Service
Internal
Process Improvement Efficiency/Access
Employees Investment
Establish an Ownership Culture
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Building a Balanced Scorecard
1. Strategy Development
2. Strategy Map
Steering Committee Select Strategies Determine
Priorities Blocking Tackling
Reconvene Steering Committee Establish Cause
Effect Linkage Establish Objective Owners
3. Measures
5. Continuous Review
New Management Meeting Communication Extend to
Departments
Define Measures -Accountability -Targets -Sources
4. Initiatives
Define Prioritize Initiatives Finalize
Scorecard
36
Strategy Mapping Checklist
  • What are the critical steps involved with
    strategy mapping?
  • Steering Committee (5-8 members)
  • Pre-Work
  • Reading (introduction to Balanced Scorecard and
    Strategy Maps)
  • Review the strategy and develop/refine customer
    value propositions
  • Develop a draft strategy map framework (or use
    the template)
  • Solicit top 5-10 strategic objectives from each
    participant
  • The Meeting
  • Plan on 6 hours
  • Start with education
  • Confirm the strategy map framework
  • Define customer value propositions
  • Place objectives on the map
  • Group and define objectives
  • Prioritize perspectives and objectives
  • Assign owners for each objective

37
Strategy Mapping Tips
  • Objectives should be high-level consolidate
    detailed objectives where possible.
  • The total number of objectives should be between
    12 and 18.
  • Start with good customer value propositions.
  • When finished look for gaps (objectives that have
    no links to/from other objectives).
  • Language is importantmake sure the map uses
    language consistent with the hospital.
  • Each objective must have an owner responsible for
    its definition and identification of draft
    measures.
  • Prepare to have 2 strategy mapsone for
    communication and one for the Balanced Scorecard
    development.

38
Measurement and Initiatives Checklist
  • What Are the Critical Steps Involved in Selecting
    Measures and Initiatives?
  • Pre-Work
  • Strategy map confirmation
  • Define the objectives
  • Identify possible measures or inventory
    existing measures
  • Identify existing and proposed hospital-wide
    initiatives
  • The Meeting(s)
  • Plan on 4-6 hours for measures and up to 4 hours
    for initiatives
  • Start with education (measures, targets, and
    alarms)
  • Select 1-2 measures for each objective
  • Identify frequency, source, and owner of each
    measure
  • Define measures (measure dictionary)
  • For prioritized objectives, identify initiatives
    that will move the measure to green (or keep it
    there) as time permits, identify assign
    initiatives to other important objectives
  • Define initiatives
  • It is better to have a measure that tells 60 of
    a story than no measure at all.

39
Measures - Tips
  • Measure Selection and Definition
  • 1 2 measures per objective
  • Measures are fluid
  • Balance Lead (drivers) and Lag (outcomes)
  • Financial (Mostly Lagging)
  • Customer (Mostly Lagging)
  • Internal (Mostly Leading)
  • Enabling Investment (Mostly Leading)
  • Look for ease of collection (existing)
  • Initiative Selection
  • Not every objective in the financial and customer
    perspectives will have an initiative
  • An initiative may link to more than one objective

40
What Comes Next?
Management Team Adoption
Communication
Cascading
Technology
41
What Comes Next Roll-Out (communication)
  • Communication is vital in the roll-out of the
    Balanced
  • Scorecard. It is helpful to set targets
  • When do we share the scorecard with managers?
    Employees? Physicians?
  • What settings are most appropriate?
  • When is the appropriate time to bring the
    scorecard to Board meetings?

It is often beneficial to wait 3 to 6 months
before starting to bring the scorecard to
stakeholders. This provides time to work out the
process and become fully engaged.
42
What Comes Next Cascading
  • Cascading is the process of creating scorecards
    (linked to the hospital scorecard) at lower
    levels of the organization.
  • Cascading should begin once the high-level
    scorecard is running smoothly.
  • Avoid overwhelming the organizationstart with
    pilots or a limited cascaded scorecard.

43
What Comes Next Cascading Options
  • Of the cascading options available, three should
    be considered.
  • 4 Objective Cascading
  • Cascade the top objective in each perspective
  • Have each department develop linked objectives
    and measures
  • Expand or change as necessary
  • Department Cascading
  • Fully Cascade 2 departments (clinical,
    non-clinical)
  • Full strategy map and scorecard developed
  • Set schedule to bring on additional departments
  • Service Line Cascading
  • Cascade one service line
  • Convene multi-department team
  • Map processes
  • Create strategy map and scorecard
  • Add 1 -2 more services
  • Cascade departments based on service lines

?Easiest to implement ?Fastest results
?Greatest potential value
?Fits Kaplan/Norton Model
44
What Comes Next Technology
  • Technology can be a distraction if pursued too
    early.
  • Most hospitals will be able to effectively use
    Excel-based scorecards. These tools allow for a
    high level of sophistication.
  • For those hospitals ready for large-scale
    cascading, a technology solution can be
    beneficial. Benefits are most visible to those
    with an existing scorecard.
  • Many off-the-shelf solutions existthese can
    provide easier scorecard maintenance and support
    collaboration.
  • One certified solution, QPR Scorecard, is being
    demonstrated in the solution center.

45
Wrap-Up
  • The Balanced Scorecard is a powerful management
    tool to help execute strategy.
  • There are three steps in the Balanced Scorecard
    building process
  • Translate the strategy into a strategy map.
  • Select measures.
  • Prioritize and define initiatives.
  • For greater effectiveness, keep the process
    simple.
  • The scorecard building process is just the
    beginning.

46
Wrap-Up Check-List
  • Leadership buy-in is critical
  • Strategy must exist
  • Provide education before starting
  • Strategy translation is the foundation of a
    successful scorecard
  • Choose appropriate measures that tell the
    strategy story (even if only 60!)
  • Get to green initiatives are essential
  • The hard (and valuable) work is just beginning
    once the scorecard is created
  • Cascading should begin once the high-level
    scorecard is operational
  • Initial benefits are often intangible (but
    valuable!)
  • Keep it simple

47
Wrap-Up Resources
  • Balanced Scorecard Step-by-Step, Paul Niven,
    2002, John Wiley Sons (He has two other good
    books available)
  • Performance Drivers, Olive, Roy, and Wetter,
    1997, John Wiley Sons
  • The Strategy Focused Organization, Kaplan and
    Norton, 2001, Harvard Business School Press
  • www.Wipfli.com

48
Questions
?
49
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