0. Strength
Visionary
Long-range
Tenacity

1. Balanced Scorecards: A Smart Approach to Performance Improvement
WIPFLI.COM
July 19, 2005
Bob Stephen and Jill Zabel
Wipfli Health Care Practice

2. 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

3. Introduction Balanced Scorecard 101 Readiness Case Study Next Steps
Agenda
Introduction
Balanced Scorecard 101
Readiness
Case Study
Next Steps
Wrap-Up Q&A

4. 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

6. 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

7. 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

8. 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.

9. 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)

10. 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

11. Success depends on effort and a sound approach.
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.

12. 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

13. 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?

14. Case Study: “County Community Hospital”

15. 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.

16. Case: Customer Value Proposition and Strategic Themes
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
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

17. Case: Building a Balanced Scorecard
1. Strategy Development
2. Strategy Map
Steering Committee
Select Strategies
Determine Priorities
“Blocking & Tackling”
Reconvene Steering Committee
Establish Cause & Effect Linkage
Establish Objective Owners
5. Continuous Review
3. Measures
New Management Meeting
Communication
Extend to Departments
Define Measures
-Accountability
-Targets
-Sources
4. Initiatives
Define & Prioritize Initiatives
Finalize Scorecard

18. Case: Steering Committee
Administrator (Executive Sponsor)
Manager, Quality Improvement (Champion)
CFO
VP, Nursing
VP, Support Services
Director, Clinics
Primary Care Physician
Board Trustee

19. 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.

20. Objective Linking Process
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 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.

21. 21 Strategic Vision Vision Financial Viability Customer Internal
Financially, how do we support the hospital’s continued viability and investment in the future (ability to meet the vision)?
Financial Viability
Growth
Effectiveness
As customers of the hospital’s services, what are our expectations?
Customer
Patients
Physicians
Community
What processes must we excel at to meet customer needs?
Internal
Customer
Service
Process and
Productivity
Market
Strategies
Service
Strategies
Physician
Collaboration
Quality and
Safety
Community
Focus
Enabling Investment
(Employees)
What type of culture, skills, training, and technology are required to support our processes?
People
Culture
Infrastructure 21

22. 22 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
Improve Our
Cost Position
Customer
Provide Patient
Access and
Service
Ensure Physician
Satisfaction With
Access and Quality
of Services
Remain a
Community
Asset
Internal
Achieve
Organizational
Commitment to
Services
Develop Strong PCP
& Referral Partnerships
Process Improvement:
Efficiency/Access
Exceed Quality
& Safety Standards
Match Our
Services to
Community Need
Ensure community
focus
Employees & Investment
Recruit and Retain
the Right Employees
and Physicians
Establish an
“Ownership” Culture
Ensure the Facility
and Technology Meet
Requirements 22

23. 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).

24. 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:
Selected measures that exist currently or are based on existing information.
Measures must balance leading and lagging indicators.
Objectives are assigned 1 or 2 measures unless the steering committee agrees on more.
Measures must be defined and documented (Including Targets and Alarms).
Each measure is assigned an owner.

25. 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

26. 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.

27. Case: Scorecard Draft 1 2 3 4

28. Use the scorecard – keep it up to date
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)

29. 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

30. 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.

31. 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.

32. Example: For each critical strategy…
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)
Strategic thinking exercise should, in part, employ the use of scenarios
Scenarios - "What if" occurs
- how will we want to be positioned (proactive)
- what will be out response (reactive)
Housekeeping
Improve room turnaround times

33. Employees & Investment
WEIGHTING
Measures
Initiatives
Owner
Status
10%
ER Visits
Daily Reporting
CFO
TBD
Agency Cost
DON
15%
Wait Time Outliers
ER Task Force
Communication plan
Dir. ER
40%
Triage Time
Urgent Care Implementation
Admit Time
Bed Task Force
CEO
25%
% People Trained
BPR Project
PI Coordinator
Absentee Rate
Culture Training
Dir. HR
Strategic Vision
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
Internal
Process Improvement:
Efficiency/Access
Employees & Investment
Establish an
“Ownership” Culture

34. Building a Balanced Scorecard
1. Strategy Development
2. Strategy Map
Steering Committee
Select Strategies
Determine Priorities
“Blocking & Tackling”
Reconvene Steering Committee
Establish Cause & Effect Linkage
Establish Objective Owners
5. Continuous Review
3. Measures
New Management Meeting
Communication
Extend to Departments
Define Measures
-Accountability
-Targets
-Sources
4. Initiatives
Define & Prioritize Initiatives
Finalize Scorecard

35. 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

36. 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.

37. 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.

38. Initiative Selection:
Measures - Tips
Measure Selection and Definition:
1 – 2 measures per objective
Measures are fluid
Balance Lead (drivers) and Lag (outcomes)
Financial (Mostly Lagging)
Customer (Mostly Lagging)
Internal (Mostly Leading)
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

39. Management Team Adoption
What Comes Next?
Management Team Adoption
Communication
Cascading
Technology

40. 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.

41. 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.

42. What Comes Next: Cascading Options
Of the cascading options available, three should be considered.
4 Objective Cascading
Cascade the top objective in each perspective
Have each department develop linked objectives and measures
Expand or change as necessary
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
Department Cascading
Fully Cascade 2 departments (clinical, non-clinical)
Full strategy map and scorecard developed
Set schedule to bring on additional departments
Easiest to implement
Fastest results
Greatest potential value
Fits Kaplan/Norton Model

43. 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.

44. 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.

45. Wrap-Up: Check-List 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

46. 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

47. Questions ?