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

• 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

4
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.

8
 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)

9
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

Satisfied Internal
Financial Effective Enabling
And External
Viability Processes Investments
Customers

10
Adapted from Strategy Maps, Kaplan and Norton, HBS Press 2004
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.
11
 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

12
 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?
13
Case Study: “County Community Hospital”

14
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.
15
 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
1. Process improvement/Make us more accessible (wait times, scheduling)/Do more
with less
2. Focus on customer service
3. Community focus
4. Ensure quality and safety
5. Develop the right partnerships with physicians and tertiary care centers – create a
community gateway to services
6. Ensure the right mix of services for the community
7. Cultivate an “ownership” culture

16
 Case: Building a Balanced Scorecard

1. Strategy Development 2. Strategy Map

Steering Committee Reconvene Steering Committee

Select Strategies Establish Cause & Effect Linkage
Determine Priorities Mission, Vision, and Establish Objective Owners
“Blocking & Tackling” Value Position

5. Continuous Review 3. Measures

New Management Meeting Define Measures

Communication -Accountability
Extend to Departments 4. Initiatives -Targets
-Sources
Define & Prioritize Initiatives
Finalize Scorecard
17
 Case: Steering Committee

• Administrator (Executive Sponsor)

• Manager, Quality Improvement (Champion)
• CFO
• VP, Nursing
• VP, Support Services
• Director, Clinics
• Primary Care Physician
• Board Trustee

18
 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.

19
 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.
20
Strategic
Vision
Vision

Financially, how do we
Financial Viability support the hospital’s
continued viability and
Growth Effectiveness investment in the future
(ability to meet the vision)?

As customers of the
Customer hospital’s services, what
Patients Physicians Community are our expectations?

Internal
Customer Process and Market
What processes must we
Service Productivity Strategies
excel at to meet
customer needs?

Service Physician Quality and Community

Strategies Collaboration Safety Focus

Enabling
Investment What type of culture,
(Employees) skills, training, and
People Culture Infrastructure technology are required to
support our processes?

2121
Strategic
County Community Hospital will contribute to the
Vision
the community by offering accessible
quality care tailored to the needs of our residents.

Financial Viability

Increase Improve Our

Revenue Cost Position

Customer Ensure Physician

Provide Patient Remain a
Satisfaction With
Access and Community
Access and Quality
Service Asset
of Services

Internal
Achieve
Organizational Develop Strong PCP Process Improvement:
Commitment to & Referral Partnerships Efficiency/Access
Services

Match Our
Exceed Quality
Services to Ensure community
& Safety Standards
Community Need focus

Employees &
Investment Recruit and Retain Ensure the Facility
Establish an
the Right Employees and Technology Meet
“Ownership” Culture
and Physicians 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 Weight Objective (Top 2) Weight

Financial 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%

23
 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.

24
 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

Description (include a formula if Time it takes from sign in to being seen by a provider in the ER. As the ER
Measure Name
applicable) accounts for 55% of our business, this is a critical touch point that must be
Emergency Department Wait Time streamlined.
This data comes from the ER registration system. New numbers are available
Version Date Data Source by the 15th of the following month (March data available by 4/15). Unit
2-Apr-05 secretary will enter the information.

Target Source (Benchmarks,

Owner Historical Trending will be used as this data is readily available and reflects our
historical, management opinion)
Bill Jones organization. Benchmarks will be investigated.

Objective for the Starting Target (When do we hit

Process Improvement - Access and
measure green?)
Efficiency 120

Starting Alarm (When do we hit

Lead or Lag?
red?)
Lead 240

Frequency? (Monthly, Current Value (Enter historical

Quarterly, Annual) information below)
Monthly 312
Units the measure uses
(example: %, days, $,
etc….) Minutes 25
 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.

26
 Case: Scorecard Draft
Perspective 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 project
Neutral
Customer 20% Provide Patient Access and Service 50% % Recommending Trending Up
Poor
Ensure Physician Satisfaction with 20% Satisfaction %
Access and Service Neutral

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

Poor

Internal Processes 35% Exceed Quality and Safety 16% Core Indicators (Index) Falls reduction team
Standards Neutral

Standards 1
Exceed Quality and Safety

Process Improvement - Access and 22%

2
Near Misses

ER Wait Time
sessions 3
Establish monthly education

ER Process Redesign
4
Average improved by 15 minutes
Good

Neutral
Efficiency
Develop Stronger PCP and Referral 10% Meeting Attendance - Establish communication plan Attendance at 75%!
Partnerships Physician Roundtable Good

Achieve Organization Commitment 17% % of Departments with Service plan orientation

to Customer Service Customer Svc plans Neutral

Match Our Services to Community 20% Transfers Cardiology expansion No change in transfers
Needs evaluation Poor

Match Our Services to Community Monthly Profile OB downsizing project Closer fit this month
Needs Neutral

Re-Establish Our Position in the 15% Education Attendance Establish government relations New classes exceeded plan.
Community position Good

Employees & 30% Recruit and Retain the Right 30% Vacancies Complete salary review
Investment Employees and Physicians Neutral

Recruit and Retain the Right Net Physician Need Develop PCP recruitment plan
Employees and Physicians Neutral

Establish an "Ownership" Culture 50% Review Status Implement new performance Most departments have
review structure 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 20% Age of Plant Facility evaluation Must set budget priorities
Meet Our Needs Poor

27
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)

28
 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

29
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.

30
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.

31
 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

32
 WEIGHTING
Strategic Metro Northeast Hospital will contribute to the
Vision Revitalization of the community by offering
Measures Initiatives Owner Status
Accessible quality care tailored to the
needs of our residents.

Financial Survival
10% •ER Visits •Daily Reporting •CFO TBD
Increase
Revenue
Improve our
Cost Position 10% • Agency Cost •Daily Reporting • DON TBD

Customer Provide patient

Access and • Wait Time •ER Task Force
Service 15% • Dir. ER TBD
Outliers •Communication plan

Internal • ER Task Force

• Triage Time • Urgent Care • Dir. ER TBD
Implementation
Process Improvement:
Efficiency/Access
40%

• Admit Time • Bed Task Force • CEO TBD

Employees & • % People

• BPR Project • PI Coordinator TBD
Investment Trained

Establish an 25%
“Ownership” Culture
• Absentee
Rate • Culture Training •Dir. HR TBD
33
 Building a Balanced Scorecard

1. Strategy Development 2. Strategy Map

Steering Committee Reconvene Steering Committee

Select Strategies Establish Cause & Effect Linkage
Determine Priorities Mission, Vision, and Establish Objective Owners
“Blocking & Tackling” Value Position

5. Continuous Review 3. Measures

New Management Meeting Define Measures

Communication -Accountability
Extend to Departments 4. Initiatives -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
 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

35
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.
36
 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.

37
 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

38
 What Comes Next?

Management Team Adoption

Communication

Cascading

Technology

39
 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.

40
 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 2. Service Line Cascading 3. Department Cascading

• Cascade the top • Cascade one service line • Fully Cascade 2
objective in each • Convene multi- departments (clinical,
perspective department team non-clinical)
• Have each department • Map processes • Full strategy map and
develop linked • Create strategy map and scorecard developed
objectives and scorecard • Set schedule to bring on
measures • Add 1 -2 more services additional departments
• Expand or change as • Cascade departments
necessary based on service lines

Easiest to Greatest Fits

implement potential value Kaplan/Norton
Fastest Model
results

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.

43
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. 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

45
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

46
Questions

?
47
48