McKinsey 7-S Framework

Critical Success Factors & their Measures of Performance

Critical Success Factors Financial image Measures Price / earnings ratio

Technological reputation
Market share Risk Profit Staff morale Performance

Quality / reliability
Change in market (each product / service) Years of experience Customer relations Profit margin Turnover, absenteeism Budgeted / actual

Key Areas & Measures

Organizational Process Governance & Strategic Management Critical Questions What markets do we serve? What are the priorities of those markets? What is the total funding level available? Have we chosen the correct partners? Key Measures Outcomes quality Patient satisfaction Market share by service Unit cost Profitability Outcomes measures by disease entity Patient satisfaction data by sites of care Measurements of preventable diseases & prevention programs Worker & physician satisfaction 360-degree review Recruitment & retention data Profit by service line Forecast of capital requirements Balance sheet indicators Governing board & user satisfaction with market data & forecasts Historic accuracy of forecasts & implemented proposals

Clinical Quality

Are we achieving optimum outcomes? Are patients delighted with services? Are we providing effective prevention? Can we compete for the best caregivers? Are our caregivers satisfied? Do we have competitive unit costs for clinical services? Can we generate enough capital to remain competitive?

Clinical Organization

Financial Planning

Planning & Marketing

Do we have data to support strategic analysis? Are we investing in the right services & equipment? Do we have effective communication with our markets? Do we have useful data for patient care? Do we have quantitative data describing our work processes? Do we have historical data for trend analysis & benchmarks for comparison? Do we have the right numbers of the right people? Do we have competitive compensation programs? Do we have excessive turnover & absenteeism? Do we have the right facilities / locations? Are our plant costs competitive? Are plant services satisfactory? Are supplies costs competitive?

Information Services

Caregiver satisfaction with online data Satisfaction of work improvement teams Ability to produce historical & benchmark information on activities & service lines Turnover, vacancy, & absenteeism rates Worker satisfaction with compensation Costs of benefits & incentive programs Occupancy of facilities Costs of plan operations Costs of supplies Failure rates and complaints about plant services

Human Resources

Physical Infrastructure

Functional Indicators: Human Resources Management

Main goal: Ensure that institution has an adequate number of qualified personnel at work Indicators Percentage of filled positions Staffing ratio Turnover Overtime rate Development rate Formula Filled / Authorized positions Work hours / service unit Losses / Mean personnel strength Overtime work hours / Total work hours Persons trained in service / Mean personnel strength

Upgrading rate

Persons upgraded / Mean personnel strength

Functional Indicators: Financial Management

Main goal: Ensure institution has financial solvency
Indicators Accuracy in forecasting Formula Forecast workload / Actual workload Budgeted staffing / Actual staffing Budged expenditures / Actual expenditures Budged revenue / Actual revenue Current assets / current liabilities Total debt / Total assets Current assets / Total assets

Financial Ratios: Current Debt Composition

Turnover
Operating Margin Breakeven Occupancy

Patient revenue / Total assets Total revenue / Equity

Net patient revenue / Gross patient revenue Percent occupancy where revenue = expense

Functional Indicators
Indicator Formula Logistics Management. Main goal: Ensure the availability of required supplies and equipment Supply service level Unit costs Requisitions filled / requisitions submitted Supply cost / admission

Food Service. Main goal: Provide good food at reasonable costs Patient and staff satisfaction Efficiency Number of complaints / 100 meals served Cost / meal served Work hours / meal served

Medical Records. Main goal: Ensure prompt completion of medical records Efficiency Cost per discharge Labor hours per discharge Average time required to retrieve old medical records for use by the clinical staff

Retrieval time

Laboratory and Radiology. Main goal: Ensure prompt and accurate diagnostic services Utilization rate Laboratory procedures / admission Radiology procedures / admission Lab and x-ray procedure / outpatient visit Cost / procedure Labor hours / procedure

Efficiency

Functional Indicators
Indicator Formula Nursing Services. Main goal: Provide effective nursing services to support care plans for patients which result in favorable outcomes

Length of stay
Case flow Efficiency

Average daily census / average daily admissions

Annual admissions / number of operating beds Nursing care cost / patient day Nursing hours / patient day

Clinical Staff. Main goal: Provide appropriate clinical services to patients which result in improved health status
Productivity Average number of hospital admissions / clinician / year Average number of clinic visits / clinician / year Average expenditures / clinician / year Average revenue / clinician / year

Functional Indicators: Clinic Services

Main goal: Provide clinic services to the satisfaction of patients & staff Indicators Formula

Waiting time

Average number of days to get an appointment Average number of minutes waiting to see a clinician
Average patient / clinician contact time Repeat visit / total visits Encounters / clinician / hour Direct cost / clinic visit Labor hours / clinic visit

Consultation interval Repeats visits Clinicians utilization Efficiency

Performance Measures: Cost

Operating margins Cost per case: by DRG, MD FTEs / adjusted occupied bed Span of control (manager FTE / Staff FTE Length of stay Admissions Primary care providers / subspecialists

Performance Measures: Service

Time to answer lights Time to get admitted Time to get an appointment Time to get into the ER Operating Room turnaround time OR: on-time vs. late starts Patient satisfaction scores Staff satisfaction scores

Performance Measures: Quality

Untoward events: falls, infections, etc. Law suits Re-admission rates C-section rates # denied admissions, delayed days Functionality (quality of life)

2007 Comparisons of McDonalds Performance on Three Measures of Profitability with the Performance of the Industrial Composite, the Restaurant Industry, and Wendys
19.4% 15.9% 11.4% 7.3% Industrial Composite 11% 12.3% 13.6% 13.5% 18.9% 16.4%

Restaurant Industry

Wendys

4.7% Industrial Composite McDonalds Restaurant Industry Wendys

Industrial Composite

Restaurant Industry

7.1%

McDonalds

Wendys

Net Profit Margin

Return on Investment

Return on Stockholders Equity

McDonalds

Key-Result Objectives
Key Area Objective Measure of Performance 1. Marketing
a. b. c.

Sell at least 200,000 laser surgery equipment Increase sales to $1.5 billion Reduce inventories Upgrade quality Promote Project Laser Smooth Skin Gradually reduce number of employees in the U.S. Division

a. b. c. a. b. a.

Sales data Dollar sales data Inventory records Quality review R&D expenses Employment levels

2. Innovation

a. b.

3. Human organization

a.

4. Financial resources

a.

Improve cash position

a.

Liquidity ratios

5. Physical resources

a.

b.

Build new assembly plant in Andover Expand production facilities Increase staff productivity

a.

b.
a.

Construction completion reports Construction completion reports Output per employee

6. Productivity

a.

7. Social responsibilities

a.

Contribute to local communities

a.

Contribution data

8. Profit

a.

Return earnings per share to $53.60

a.

Profit data

Medical Staff Needs for a Community Hospital

Specialty Projected Physician FTE Need Projected Physician FTE Supply FTE Surplus / (Deficit)

Adult Primary Care Primary service area Secondary service area A Secondary service area B Secondary service area C Obstetrics / Gynecology Medical Specialties Cardiology Gastroenterology Neurology Pulmonary Surgical Specialties General surgery Neurosurgery Orthopedics Plastic surgery 9.9 2.4 12.5 3.2 7.4 0.9 7.8 4.4 (2.5) (1.5) (4.7) 1.2 25 9.0 5.4 5.4 3.4 13 5.5 6.9 3.0 5.2 (3.5) 1.5 (2.4) 1.8 65 9 13 11 46 2 1 0 (19) (7) (12) (11) (12)

Organization Capacity Profile

Managerial Factors
Corporate image, social responsibility
Use of strategic plans and strategic analysis Environmental assessment and forecasting Speed of response to changing conditions Flexibility of organizational structure Management communication and control Entrepreneurial orientation Ability to attract and retain highly creative people Ability to meet changing technology Ability to handle inflation Aggressiveness in meeting competition

0%

Weak

Neutral

Strong

100%

Competitive Factors
Product strength, quality, uniqueness Customer Loyalty and satisfaction Market Share Low selling and distribution costs Use of experience curve for pricing

0%

50%

100%

Use of cycle of products and replacement cycle

Investment in new product dev. by R& D High Barriers to entry into organizations markets Advantage taken of market growth potential Supplier strength and material availability Customer Concentration

Strategic Advantage Profile

Note: + indicates strength; 0 indicates neutral; - indicates weakness
Internal Area Marketing Competitive strength or weakness + Product line is extensive & service is excellent - Channels of distribution are weak in the Southwest - No R&D performed + Excellent sourcing for materials - Facilities are old & becoming outdated 0 Size of organization is about average for the industry 0 Profits have been consistent but average - Union employees complain frequently + Balance sheet shows ability to obtain needed capital; low debt-equity ratio, high working capital position, and favorable stock price

R&D Operations Corporate resources

Finance

BCGs Growth / Share Matrix

High Stars A select few (net users of resources)

Remainder divested Low Question Marks

Low

Market Growth Rate

High

Cash Cows

(net suppliers of resources)

Dogs Harvested or liquidated

Relative Competitive Position (Market Share)

Four Basic Types of Unbalanced Portfolios

Problem Action Typical Symptoms Typical Corrective

Too many losers

Inadequate cash flow Inadequate profits Inadequate growth Inadequate cash flow Inadequate profits Inadequate growth Excessive cash flow Excessive cash demands Excessive demands on management Unstable growth & profits

Divest / liquidate / harvest losers Acquire profit producers Acquire winners Divest / harvest / liquidate selected question marks Acquire winners Nurture / develop selected question marks Divest selected developing winners if necessary Acquire profit producer

Too many question marks

Too many profit producers

Too many developing winners

Life Cycle

Maturity

Decline Growth

Market Development