Strength
Visionary
Long-range
Tenacity
0
Balanced Scorecards: A Smart
Approach to Performance
Improvement
July 19, 2005
Bob Stephen and Jill Zabel
Wipfli Health Care Practice
WIPFLI.COM
1
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
2
Agenda
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Introduction
Balanced Scorecard 101
Readiness
Case Study
Next Steps
Wrap-Up Q&A
3
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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5
Prelude to the Balanced Scorecard
Strategic Planning
Mission/Vision
Goals/Objectives (what we want to do)
Strategies (how we will do it)
Measures (how we know we did it)
6
Why isn’t 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 isn’t [bad strategy but] … bad execution.”
Fortune - Cover Story, June 1999
“Why CEO’s Fail”
Malcolm Baldrige National Quality Award Foundation survey:
300 CEOs
72% felt executing strategies was more important
7
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 have—often financial
and historical—rather than what drives strategy
AND 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 key
stakeholders – employees, physicians, or community
Continuity
- Strategy is an event, not an ongoing process.
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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
What’s 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
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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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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:
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–
–
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
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•
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•
•
•
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•
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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 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.
1.
2.
3.
4.
5.
6.
7.
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
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Case: Building a Balanced Scorecard
1. Strategy Development
Steering Committee
Select Strategies
Determine Priorities
“Blocking & Tackling”
2. Strategy Map
Mission, Vision, and
Value Position
5. Continuous Review
New Management Meeting
Communication
Extend to Departments
Reconvene Steering Committee
Establish Cause & Effect Linkage
Establish Objective Owners
3. Measures
4. Initiatives
Define Measures
-Accountability
-Targets
-Sources
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
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•
•
•
•
•
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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Case: Strategy Mapping Process
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).
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 hospital’s
continued viability and
investment in the future
(ability to meet the vision)?
Financial Viability
Growth
Effectiveness
Customer
Patients
Physicians
Community
As customers of the
hospital’s services, what
are our expectations?
Internal
Customer
Service
Service
Strategies
Enabling
Investment
(Employees)
Process and
Productivity
Physician
Collaboration
People
Market
Strategies
Quality and
Safety
Culture
What processes must we
excel at to meet
customer needs?
Community
Focus
Infrastructure
What type of culture,
skills, training, and
technology are required to
support our processes?
2121
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
Customer
Internal
Provide Patient
Access and
Service
Achieve
Organizational
Commitment to
Services
Ensure Physician
Satisfaction With
Access and Quality
of Services
Remain a
Community
Asset
Develop Strong PCP
& Referral Partnerships
Exceed Quality
& Safety Standards
Employees &
Investment
Improve Our
Cost Position
Recruit and Retain
the Right Employees
and Physicians
Match Our
Services to
Community Need
Establish an
“Ownership” Culture
Process Improvement:
Efficiency/Access
Ensure community
focus
Ensure the Facility
and Technology Meet
Requirements
2222
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
Financial Viability
Customer
Internal
Employees & Investment
Weight
15%
Objective (Top 2)
Weight
Increase Revenue
Improve cost position
50%
50%
Provide Patient Access and Service
Be a Community Asset
50%
30%
Process improvement - Access and Efficiency
Match services to community needs
22%
20%
Establish an ownership culture
Recruit and retain the right employees/physicians
50%
30%
20%
35%
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
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
Measure Name
Emergency Department Wait Time
Version Date
2-Apr-05
Owner
Bill Jones
Objective for the
Process Improvement - Access and
measure
Efficiency
Lead or Lag?
Lead
Frequency? (Monthly,
Quarterly, Annual)
Monthly
Units the measure uses
(example: %, days, $,
etc….) Minutes
Description (include a formula if Time it takes from sign in to being seen by a provider in the ER. As the ER
applicable) accounts for 55% of our business, this is a critical touch point that must be
streamlined.
This data comes from the ER registration system. New numbers are available
Data Source by the 15th of the following month (March data available by 4/15). Unit
secretary will enter the information.
Target Source (Benchmarks,
Historical Trending will be used as this data is readily available and reflects our
historical, management opinion)
organization. Benchmarks will be investigated.
Starting Target (When do we hit
green?)
Starting Alarm (When do we hit
red?)
Current Value (Enter historical
information below)
120
240
312
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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 Draft
Perspective
Financial Survival
Customer
Internal Processes
Weight
Objective
15%
Increase revenue
20%
35%
Weight
Measure
50% Net Revenue
Improve our cost position
50%
Cost/Adjusted Admission
Provide Patient Access and Service
50%
% Recommending
Ensure Physician Satisfaction with
Access and Service
20%
Satisfaction %
Become a Community Asset
30%
Out-Migration
Exceed Quality and Safety
Standards
16%
Core Indicators (Index)
1
Exceed Quality and Safety
Standards
30%
Comment
Status
Poor
Agency reduction project
Neutral
Trending Up
Poor
Neutral
Q3 Data shows slight improvement
Falls reduction team
3
Near Misses
Establish monthly education
sessions
4
22%
ER Wait Time
ER Process Redesign
Develop Stronger PCP and Referral
Partnerships
10%
Meeting Attendance Physician Roundtable
Establish communication plan Attendance at 75%!
Achieve Organization Commitment
to Customer Service
17%
% of Departments with
Customer Svc plans
Service plan orientation
Match Our Services to Community
Needs
20%
Transfers
Cardiology expansion
evaluation
No change in transfers
Monthly Profile
OB downsizing project
Closer fit this month
Education Attendance
Establish government relations New classes exceeded plan.
position
Re-Establish Our Position in the
Community
15%
Recruit and Retain the Right
Employees and Physicians
30%
Net Physician Need
Neutral
Good
Neutral
Poor
Neutral
Good
Complete salary review
Develop PCP recruitment plan
Neutral
50%
Establish an "Ownership" Culture
Ensure the Facility and Technology
Meet Our Needs
Average improved by 15 minutes
Good
Neutral
Recruit and Retain the Right
Employees and Physicians
Establish an "Ownership" Culture
Vacancies
Poor
Neutral
Process Improvement - Access and
Efficiency
Match Our Services to Community
Needs
Employees &
Investment
2
Initiative
20%
Review Status
Implement new performance
review structure
Most departments have
implemented. Need new intiaitve.
Employee Survey Question 7 Deliver culture training
New survey next month
Age of Plant
Must set budget priorities
Facility evaluation
Good
Neutral
Poor
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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 highlevel scorecard is running smoothly.
• Avoid overwhelming the organization –
start with pilots or a limited cascaded
scorecard.
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Case: Cascading Starts in
Month 9
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
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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
WEIGHTING
Strategic
Vision
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
• Triage Time
• ER Task Force
• Urgent Care
Implementation
• Dir. ER
TBD
• Admit Time
• Bed Task Force
• CEO
TBD
• % People
Trained
• BPR Project
• PI Coordinator
TBD
• Absentee
Rate
• Culture Training
•Dir. HR
TBD
Internal
Process Improvement:
Efficiency/Access
40%
Employees &
Investment
Establish an
“Ownership” Culture
25%
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Building a Balanced Scorecard
1. Strategy Development
Steering Committee
Select Strategies
Determine Priorities
“Blocking & Tackling”
2. Strategy Map
Mission, Vision, and
Value Position
5. Continuous Review
New Management Meeting
Communication
Extend to Departments
Reconvene Steering Committee
Establish Cause & Effect Linkage
Establish Objective Owners
3. Measures
4. Initiatives
Define Measures
-Accountability
-Targets
-Sources
Define & Prioritize Initiatives
Finalize Scorecard
34
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
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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)
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

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.
41
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
2. Service Line Cascading
• Cascade one service line
• Convene multidepartment team
• Map processes
• Create strategy map and
scorecard
• Add 1 -2 more services
• Cascade departments
based on service lines
3. Department Cascading
• Fully Cascade 2
departments (clinical,
non-clinical)
• Full strategy map and
scorecard developed
• Set schedule to bring on
additional departments
Easiest to
Greatest
Fits
implement
Fastest
results
potential value
Kaplan/Norton
Model
42
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.
44
Wrap-Up: Check-List
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
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
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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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