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Strength

Visionary

Long-range

Tenacity
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Balanced Scorecards: A Smart


Approach to Performance
Improvement
July 19, 2005
Bob Stephen and Jill Zabel
Wipfli Health Care Practice

WIPFLI.COM

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

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


Strategic Planning

Mission/Vision

Goals/Objectives (what we want to do)

Strategies (how we will do it)

Measures (how we know we did it)


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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
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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

- 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.

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

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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 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.
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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:

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 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

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.
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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 hospitals
continued viability and
investment in the future
(ability to meet the vision)?

Financial Viability
Growth

Effectiveness

Customer
Patients

Physicians

Community

As customers of the
hospitals 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?

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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

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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).

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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

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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

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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

Status

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

40%

Employees &
Investment
Establish an
Ownership Culture

Owner

10% ER Visits

Internal
Process Improvement:
Efficiency/Access

Initiatives

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

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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 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.
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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 organizationstart 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

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

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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 existthese
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.
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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