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Long-range

Strength

Visionary

Tenacity

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Balanced Scorecards: A Smart Approach to Performance

Improvement

July 19, 2005

Bob Stephen and Jill ZabelWipfli Health Care Practice

WIPFLI.COM

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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

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Agenda

• Introduction

• Balanced Scorecard 101

• Readiness

• Case Study

• Next Steps

• Wrap-Up Q&A

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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

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“In the majority of cases – we estimate 70% – the real problem isn’t [bad strategy but] … bad execution.”

Fortune - Cover Story, June 1999“Why CEO’s Fail”

Based on research by Kaplan and Norton, 90% of all strategies fail.

Malcolm Baldrige National Quality Award Foundation survey:

300 CEOs72% felt executing strategies was more

important

Why isn’t completing a strategic plan enough?

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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 have—often financialand historical—rather than what drives strategyAND management spends too little time discussing strategy.

Alignment - There 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 keystakeholders – employees, physicians, or community

Continuity - Strategy is an event, not an ongoing process.

Linking Strategy to Execution

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• Translates mission & strategy into a set of performance measures and strategically aligned objectives.

• Links strategies and outcomes.

Financial

Customer

Internal Processes

Learning & Growth (Enabling Investments)

Balanced Scorecard

Four perspectives:

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How Does the Balanced Scorecard Work?

MissionWhy we exist

ValuesWhat’s Important to Us

VisionWhat We Want to Be

StrategyHow We Achieve Our Vision

Strategy MapTranslate the Strategy

Balanced ScorecardMeasure and Focus

Targets and InitiativesWhat We Need to Do

Cascading Scorecards and InitiativesWhat Our Teams and Departments Must Do

Personal ObjectivesWhat “I” Need to Do

Strategic Outcomes

FinancialViability

Satisfied InternalAnd External Customers

EffectiveProcesses

Enabling Investments

Adapted from Strategy Maps, Kaplan and Norton, HBS Press 2004

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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 hospital’s 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.

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The Balanced Scorecard can drive dramatic performance improvement, but

one recent study suggests that many BSC implementations (up to 50%!) do

not meet expectations.

Maximizing Value

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

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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?

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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.

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Case: Customer Value Proposition and Strategic Themes

Customer Value PropositionCustomer 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 Themes1. Process improvement/Make us more accessible (wait times, scheduling)/Do more

with less2. Focus on customer service3. Community focus4. Ensure quality and safety5. Develop the right partnerships with physicians and tertiary care centers – create a

community gateway to services6. Ensure the right mix of services for the community7. Cultivate an “ownership” culture

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1. Strategy Development 2. Strategy Map

3. Measures

4. Initiatives

5. Continuous Review

Mission, Vision, and Value Position

New Management MeetingCommunicationExtend to Departments

Steering CommitteeSelect StrategiesDetermine Priorities“Blocking & Tackling”

Reconvene Steering CommitteeEstablish Cause & Effect LinkageEstablish Objective Owners

Define Measures-Accountability-Targets-Sources

Define & Prioritize InitiativesFinalize Scorecard

Case: Building a Balanced 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 initiatives—obvious duplicates are combined and initiatives were sent to a parking lot during the first meeting.

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Objective Linking 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).

Case: Strategy Mapping Process

Although some of the map was pre-developed, the group activity was used to validate their strategic themes.

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Strategic Vision

Financial Viability

Customer

Internal

Enabling Investment(Employees)

Growth Effectiveness

Patients Physicians Community

Service Strategies

Customer Service

Process andProductivity

Physician Collaboration

Quality andSafety

Market Strategies

CommunityFocus

People Culture Infrastructure

Vision

What type of culture, skills, training, and

technology are required to support our processes?

What processes must we excel at to meet

customer needs?

As customers of the hospital’s services, what

are our expectations?

Financially, how do we support the hospital’s continued viability and

investment in the future (ability to meet the vision)?

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Strategic Vision

Financial Viability

Customer

Internal

Employees & Investment

IncreaseRevenue

Improve OurCost Position

Provide Patient Access and

Service

Ensure PhysicianSatisfaction With

Access and Qualityof Services

Remain aCommunity

Asset

Match Our Services to

Community Need

Achieve OrganizationalCommitment to

Services

Process Improvement:Efficiency/Access

Develop Strong PCP& Referral Partnerships

Exceed Quality& Safety Standards

Ensure communityfocus

Recruit and Retainthe Right Employees

and Physicians

Establish an“Ownership” Culture

Ensure the Facility and Technology Meet

Requirements

County Community Hospital will contribute to thethe community by offering accessible

quality care tailored to the needs of our residents.

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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).

Perspective Weight Objective (Top 2) WeightFinancial Viability 15%

Increase Revenue 50%Improve cost position 50%

Customer 20%Provide Patient Access and Service 50%Be a Community Asset 30%

Internal 35%Process improvement - Access and Efficiency 22%Match services to community needs 20%

Employees & Investment 30%Establish an ownership culture 50%Recruit and retain the right employees/physicians 30%

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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:1. Selected measures that exist currently or are based on existing

information.2. Measures must balance leading and lagging indicators.3. Objectives are assigned 1 or 2 measures unless the steering committee

agrees on more.4. Measures must be defined and documented (Including Targets and

Alarms).5. Each measure is assigned an owner.

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Case: Measure Definition

Measure Name

Emergency Department Wait Time

Description (include a formula if applicable)

Time it takes from sign in to being seen by a provider in the ER. As the ER accounts for 55% of our business, this is a critical touch point that must be streamlined.

Version Date2-Apr-05

Data SourceThis data comes from the ER registration system. New numbers are available by the 15th of the following month (March data available by 4/15). Unit secretary will enter the information.

OwnerBill Jones

Target Source (Benchmarks, historical, management opinion)

Historical Trending will be used as this data is readily available and reflects our organization. Benchmarks will be investigated.

Objective for the measure

Process Improvement - Access and Efficiency

Starting Target (When do we hit green?)

120

Lead or Lag?Lead

Starting Alarm (When do we hit red?)

240

Frequency? (Monthly, Quarterly, Annual)

Monthly

Current Value (Enter historical information below)

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Units the measure uses (example: %, days, $,

etc….) Minutes

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.

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Case: Scorecard DraftPerspective Weight Objective Weight Measure Initiative Comment Status 

Financial Survival 15% Increase revenue  50% Net Revenue    Poor

      Improve our cost position  50% Cost/Adjusted Admission Agency reduction projectNeutral

Customer   20% Provide Patient Access and Service  50% % Recommending    Trending UpPoor

      Ensure Physician Satisfaction with Access and Service 

20% Satisfaction %   Neutral

      Become a Community Asset  30% Out-Migration    Q3 Data shows slight improvementPoor

Internal Processes   35% Exceed Quality and Safety Standards 

16% Core Indicators (Index) Falls reduction teamNeutral

Exceed Quality and Safety Standards 

Near Misses Establish monthly education sessions Good

      Process Improvement - Access and Efficiency 

22% ER Wait Time ER Process Redesign Average improved by 15 minutesNeutral

      Develop Stronger PCP and Referral Partnerships 

10% Meeting Attendance - Physician Roundtable

Establish communication plan Attendance at 75%!Good

      Achieve Organization Commitment to Customer Service 

17% % of Departments with Customer Svc plans

Service plan orientationNeutral

      Match Our Services to Community Needs 

20% Transfers Cardiology expansion evaluation

No change in transfersPoor

Match Our Services to Community Needs 

Monthly Profile OB downsizing project Closer fit this monthNeutral

      Re-Establish Our Position in the Community 

15% Education Attendance Establish government relations position

New classes exceeded plan.Good

Employees & Investment

30% Recruit and Retain the Right Employees and Physicians 

30% Vacancies Complete salary reviewNeutral

Recruit and Retain the Right Employees and Physicians 

Net Physician Need Develop PCP recruitment planNeutral

      Establish an "Ownership" Culture  50% Review Status Implement new performance review structure

Most departments have implemented. Need new intiaitve. Good

Establish an "Ownership" Culture  Employee Survey Question 7 Deliver culture training New survey next month Neutral

      Ensure the Facility and Technology Meet Our Needs 

20% Age of Plant Facility evaluation Must set budget prioritiesPoor

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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)

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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

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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.

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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.

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Example: For each critical strategy…

Level Goal/Strategy

Hospital Goal: Process Improvement

Nursing Care/ER Reduce ER Wait times

(See example)

Housekeeping Improve room turnaround times

Case: Cascading Starts in Month 9

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Strategic Vision

Financial Survival

Customer

Internal

Employees & Investment

IncreaseRevenue

Provide patient Access and

Service

Process Improvement:Efficiency/Access

Establish an“Ownership” Culture

Metro Northeast Hospital will contribute to theRevitalization of the community by offering

Accessible quality care tailored to the needs of our residents.

Improve ourCost Position

WE

IGH

TIN

G Measures Initiatives Owner Status

10% •ER Visits •Daily Reporting •CFO TBD

10% • Agency Cost •Daily Reporting • DON TBD

15%• Wait Time

Outliers•ER Task Force•Communication plan

• Dir. ER TBD

40%

• Triage Time• ER Task Force• Urgent Care

Implementation• Dir. ER TBD

• Admit Time • Bed Task Force • CEO TBD

25%

• % People Trained • BPR Project • PI Coordinator TBD

• Absentee Rate • Culture Training •Dir. HR TBD

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1. Strategy Development 2. Strategy Map

3. Measures

4. Initiatives

5. Continuous Review

Mission, Vision, and Value Position

New Management MeetingCommunicationExtend to Departments

Steering CommitteeSelect StrategiesDetermine Priorities“Blocking & Tackling”

Reconvene Steering CommitteeEstablish Cause & Effect LinkageEstablish Objective Owners

Define Measures-Accountability-Targets-Sources

Define & Prioritize InitiativesFinalize Scorecard

Building a Balanced Scorecard

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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

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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 important—make 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 maps—one for communication and one for the Balanced Scorecard development.

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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.

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Measures - Tips

• Measure Selection and Definition:– 1 – 2 measures per objective– Measures are fluid– Balance Lead (drivers) and Lag (outcomes)

o Financial (Mostly Lagging)o Customer (Mostly Lagging)o Internal (Mostly Leading)o 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

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What Comes Next?

Management Team Adoption

Communication

Cascading

Technology

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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.

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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 organization—start with pilots or a limited cascaded scorecard.

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What Comes Next: Cascading Options

Of the cascading options available, three should be considered.

1. 4 Objective Cascading• Cascade the top

objective in each perspective

• Have each department develop linked objectives and measures

• Expand or change as necessary

3. Department Cascading• Fully Cascade 2

departments (clinical, non-clinical)

• Full strategy map and scorecard developed

• Set schedule to bring on additional departments

2. 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 implementFastest

results

Greatest potential value

Fits Kaplan/Norton

Model

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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 exist—these can provide easier scorecard maintenance and support collaboration.

• One certified solution, QPR Scorecard, is being demonstrated in the solution center.

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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.

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Wrap-Up: Check-List

1. Leadership buy-in is critical

2. Strategy must exist

3. Provide education before starting

4. Strategy translation is the foundation of a successful scorecard

5. Choose appropriate measures that tell the strategy story (even if only 60%!)

6. Get to green: initiatives are essential

7. The hard (and valuable) work is just beginning once the scorecard is created

8. Cascading should begin once the high-level scorecard is operational

9. Initial benefits are often intangible (but valuable!)

10. Keep it simple

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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

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Questions

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