(11) Does a strategic focus make sense in a tactical business world?
(11) Does a strategic focus make sense in a tactical business world?
(11) Does a strategic focus make sense in a tactical business world?
The Balanced Scorecard, when focused on driving strategy, is the recipe for success, bringing together varying departments, all working to accomplish an overall mission. The Balanced scorecard will take your vision and translate that into terms and goals for all levels of the organization. Use the Balanced Scorecard to assist in breaking down barriers between departments. Use of strategic themes link separate operational units.
It is important to communicate and educate everyone in the organization. Understanding of the strategy is key, as well as how each individual contributes to the achievement of the strategy. Use regular management meetings to review status of measures and address the need to modify the strategic initiatives if performance is not improving. These meetings should be used as a learning opportunity, focused on team problem solving and adaptation to new situations. Improvement is the ultimate goal, and cannot be attained without executive leadership. Effective leaders provide an environment that values creativity and accepts “risk taking” as an integral part of change management. Executives also need to use the Balanced Scorecard to communicate successes and opportunities for improvement.
Charts the strategic direction of the organization Good strategic plan looks 3-5 years out The BSC is strategic vs. operational Develops organizational objectives and targets Links objectives to the vision/mission statements Clears barriers to scorecard progress Running interference when needed
The Core Team is ideally a cross-functional, mid-level management team that understands operational issues. Should include subject matter experts as needed.
SMDC was trying to work with a performance measurement tool in advance of crafting a focused business strategy Balanced Scorecard Collaborative was hired to help get SMDC on the right track with their BSC
The Balanced ScorecardThe Balanced ScorecardPresented ToAdnan AlshihaAdnan AlshihaPresented ByAlaoula Board MemberAlaoula Board Member
WorkshopWorkshopOutlineOutlineIntroduction to the Balanced ScorecardIntroduction to the Balanced ScorecardWhat is it?What is it?Why do it?Why do it?1-31-3Brayer BreakBrayer BreakBalanced Scorecard FundamentalsBalanced Scorecard FundamentalsThe Four PerspectivesThe Four PerspectivesMeasures, Targets and InitiativesMeasures, Targets and InitiativesRoles and ResponsibilitiesRoles and ResponsibilitiesBusiness StrategyBusiness Strategy
The Balanced ScorecardThe Balanced ScorecardWhat is it?What is it?Definition:Definition:The Balanced Scorecard is aThe Balanced Scorecard is amanagement tool that providesmanagement tool that providesstakeholders with astakeholders with acomprehensive measure of howcomprehensive measure of howthe organization is progressingthe organization is progressingtowards the achievement of itstowards the achievement of itsstrategic goals.strategic goals.
1992 1996 2000Balanced ScorecardBalanced ScorecardHistoryHistoryMeasurement andReportingAlignment andCommunicationEnterprise-wideStrategicManagementArticles in Harvard BusinessReview: “The Balanced Scorecard —Measures that Drive Performance”January - February 1992 “Putting the Balanced Scorecard toWork” September - October 1993 “Using the Balanced Scorecard asa Strategic Management System”January - February 1996 1996 2000Acceptance andAcclaim: “The BalancedScorecard” is translatedinto 18 languages Selected by HarvardBusiness Review asone of the “mostimportant managementpractices of the past 75years.“
• The Balanced Scorecard is the mainThe Balanced Scorecard is the mainmanagement tool that has been used bymanagement tool that has been used bysuccessful organizations in various fieldssuccessful organizations in various fields• Private and Public SectorPrivate and Public Sector• For- Profit and Not For- ProfitFor- Profit and Not For- Profit• Different industriesDifferent industries• These successful organizations placed theirThese successful organizations placed theirstrategies at the centre of their operations.strategies at the centre of their operations.Their strategies, guided Their day- to- dayTheir strategies, guided Their day- to- dayactivitiesactivities• In this workshop, we will learn more aboutIn this workshop, we will learn more aboutstrategy- focused organizations, and how tostrategy- focused organizations, and how todevelop Balanced Scorecardsdevelop Balanced ScorecardsThe Strategy-Focused-The Strategy-Focused-OrganizationOrganization
Organizations Often Have AOrganizations Often Have AGap Between Strategy andGap Between Strategy andActionActionStrategy Is a Step In a ContinuumMISSIONWhy we existVALUESWhat’s important to usVISIONWhat we want to beSTRATEGYOur game planSTRATEGIC OUTCOMESSatisfiedSHAREHOLDERSDelightedCUSTOMERSEfficient and EffectivePROCESSESMotivated & PreparedWORKFORCE
The Balanced Scorecard IsThe Balanced Scorecard IsA Bridge To Close That GapA Bridge To Close That GapStrategy Is a Step In a ContinuumMISSIONWhy we existVALUESWhat’s important to usVISIONWhat we want to beSTRATEGYOur game planBALANCED SCORECARDImplementation & FocusSTRATEGIC INITIATIVESWhat we need to doSTRATEGIC OUTCOMESSatisfiedSHAREHOLDERSDelightedCUSTOMERSEfficient and EffectivePROCESSESMotivated & PreparedWORKFORCEPERSONAL OBJECTIVESWhat I need to do
The Balanced ScorecardThe Balanced ScorecardWhat is it?What is it?The Balanced Scorecard:The Balanced Scorecard:• Balances financial and non-financial measuresBalances financial and non-financial measures• Balances short and long-term measuresBalances short and long-term measures• Balances performance drivers (leading indicators) with outcomeBalances performance drivers (leading indicators) with outcomemeasures (lagging indicators)measures (lagging indicators)• Should contain just enough data to give a complete picture ofShould contain just enough data to give a complete picture oforganizational performance… and no more!organizational performance… and no more!• Leads to strategic focus and organizational alignment.Leads to strategic focus and organizational alignment.
Measurement isMeasurement isthe language thatthe language thatgives clarity togives clarity tovague conceptsvague conceptsMeasurement isMeasurement isused toused tocommunicate, notcommunicate, notsimply to controlsimply to controlFinancial Perspective•Profitability•Growth•ShareholderValueThe VisionThe VisionCustomer Perspective•Price•Service•QualityInternal PerspectiveLearning and Growth•New Skills•ContinuousImprovement•IntellectualAssets“If we succeed,how will we lookto ourshareholders?”“To achieve ourvision, whatcustomer needsmust we serve?”“To satisfy ourcustomers andshareholders, atwhich businessprocesses must weexcel?”“To excel in ourprocesses, whatmust ourorganizationlearn?”•Cycle Time•Productivity•CostThe Balanced Scorecard Provides a FourThe Balanced Scorecard Provides a FourPerspective Framework to Translate StrategyPerspective Framework to Translate StrategyInto Operational TermsInto Operational Terms
The Revenue Growth Strategy“Improve stability by broadening the sourcesof revenue from current customers”The Productivity Strategy“Improve operating efficiency by shifting customers tomore cost-effective channels of distribution”ImproveReturnsImproveOperatingEfficiencyBroadenRevenueMixIncreaseCustomerConfidence inOur FinancialAdviceIncreaseCustomerSatisfactionThrough SuperiorExecutionIncreaseEmployeeProductivityAccess toStrategicInformationDevelopStrategicSkillsAlignPersonalGoalsFinancialPerspectiveCustomerPerspectiveInternalPerspectiveLearningPerspectiveCross-Sellthe ProductLineShift toAppropriateChannelProvideRapidResponseDevelopNewProductsMinimizeProblemsUnderstandCustomerSegmentsA Good Balanced Scorecard StrategyA Good Balanced Scorecard StrategyMap Tells the Story of Your StrategyMap Tells the Story of Your Strategy
A Good Balanced Scorecard Tells the StoryA Good Balanced Scorecard Tells the Storyof Your Strategy Through A Set of Linkedof Your Strategy Through A Set of LinkedCause and Effect HypothesesCause and Effect HypothesesF1 - Improve ReturnsF2 - Broaden Revenue MixF3 - Reduce Cost StructureC1 - Increase CustomerSatisfaction With OurProducts & PeopleC2 - Increase Satisfaction “Afterthe Sale”I1 - Understand Our CustomersI2 - Create Innovative ProductsI3 - Cross-Sell ProductsI4 - Shift Customers to Cost-Effective ChannelsI5 - Minimize OperationalProblemsI6 - Responsive ServiceL1 - Develop Strategic SkillsL2 - Provide Strategic InfoL3 - Align Personal GoalsReturn on InvestmentRevenue GrowthDeposit Service Cost ChangeShare of SegmentCustomer RetentionNew Product RevenueCross-Sell RatioChannel Mix ChangeService Error RateRequest Fulfillment TimeEmployee SatisfactionRevenue per EmployeeStrategicObjectivesStrategic Measurements(Lag Indicators) (Lead Indicators)Revenue MixDepth of RelationSatisfaction SurveyProduct Development CycleHours with CustomersStrategic Job Coverage RatioStrategic Info Availability RatioPersonal Goals Alignment (%)FinancialCustomerInternalLearning
Objectives• Fast groundturnaroundStatementof whatstrategymustachieve andwhat’scritical to itssuccessTarget• 30 Minutes• 90%The level ofperformanceor rate ofimprovementneeded• Cycle timeoptimizationKey actionprogramsrequired toachieveobjectivesInitiativeMeasurement• On Ground Time• On-TimeDepartureHow successin achievingthe strategywill bemeasuredand trackedStrategic Theme:Operating EfficiencyProfitabilityFinancialLearningIncreaseRevenueGround crewalignmentLowestpricesLower CostsCustomerInternalFast groundturnaroundStrategy Map: Diagram of thecause-and-effect relationshipsbetween strategic objectivesFlightis on timeTheme Example from SouthwestTheme Example from SouthwestAirlines’ Balanced ScorecardAirlines’ Balanced Scorecard
The Balanced Scorecard Supports a CompleteThe Balanced Scorecard Supports a CompleteStrategic Management System by Linking Long TermStrategic Management System by Linking Long TermStrategy and Measures to More Tactical Planning &Strategy and Measures to More Tactical Planning &BudgetingBudgetingObjectives Milestones• PromoteABC CultureModel• EmployeeSatisfactionSurvey• EvaluatesurveyresponseInternalLearningCustomerAccountable• HRCommittee• $ xxxxResourceAlloc.Targets InitiativesMeasuresThemes/GoalsVisionMission• Meet accessexpectations• 3rdavailableappointment(% met)• ‘02 xx%• ‘03 xx%• ‘04 xx%• Accessproject• Meet monthlytarget• Deadlinemet• Mkg.Team• $ xxxxABCHospitalSystemwillprovideexcellentcareinourselectedspecialtyareaswhilemaintainingmarginandgrowingshareServetheneedsofpatientsexcellently1.Strengtheninnovation2.Improvecustomersatisfaction3.Assureconsistenthighquality4.ProvideoperationalexcellenceLonger Term (3-5 year) View Shorter Term (Annual) ViewStrategic Tactical• % patient mix • ’02 = 39%• ’03 = 40%• ’04 = 41%• Mix MarginsProject• Dept. Chairs• Complete by2003• $ xxxx• Assureoptimumpatient mix• ‘02 xx%• ‘03 xx%• ‘04 xx%Financial• Growrevenuefrom patientcare• % patientcare revenuegrowth• ‘02 xx%• ‘03 xx%• ‘04 xx%
The Balanced ScorecardThe Balanced ScorecardWhy do it?Why do it? To achieve strategic objectives. To provide quality with fewer resources. To eliminate non-value added efforts. To align customer priorities andexpectations with the customer. To track progress. To evaluate process changes. To continually improve. To increase accountability.
The BalancedThe BalancedScorecardScorecardWhy do it?Why do it?It works!It works!In just 90 days, Sandia Labs was able to redirect $190,000 in savings byIn just 90 days, Sandia Labs was able to redirect $190,000 in savings bydropping initiatives that didn’t fit their overall strategy.dropping initiatives that didn’t fit their overall strategy.““The BSC has forced our management team to focus beyond financialThe BSC has forced our management team to focus beyond financialmeasures… too often in the past we would get sucked into short-termmeasures… too often in the past we would get sucked into short-termthinking.”thinking.”““The BSC dramatically improved our data analysis… we don’t overreactThe BSC dramatically improved our data analysis… we don’t overreactnearly as much as we used to.”nearly as much as we used to.”
Execution of Strategy HasExecution of Strategy HasBecome the CorporateBecome the CorporateChallenge of Our Times!Challenge of Our Times!• ““Strategy has never been more important”Strategy has never been more important”Business WeekBusiness Week• ““Less than 10% of strategies effectively formulated are effectivelyLess than 10% of strategies effectively formulated are effectivelyexecuted”executed”Fortune MagazineFortune Magazine• ““The problem is that our age’s fascination with strategy and visionThe problem is that our age’s fascination with strategy and visionfeeds the mistaken belief that developing the right strategy willfeeds the mistaken belief that developing the right strategy willenable a company to rocket past competitors. In reality, strategy isenable a company to rocket past competitors. In reality, strategy isless than half the battle. .. In the majority of cases – we estimateless than half the battle. .. In the majority of cases – we estimate70% – the real problem isn’t [bad strategy]…. It’s bad execution.”70% – the real problem isn’t [bad strategy]…. It’s bad execution.”Why CEO’s FailWhy CEO’s FailRam Charan and GeoffreyRam Charan and GeoffreyColvinColvinFortune (6/21/99)Fortune (6/21/99)
The Results are WidespreadThe Results are Widespread1993 – $275 loss1998 – Top Quartile– $3b spin-offBrown & Root Engineering (Rockwater)Saint Mary’s/ Duluth Clinic Health SystemDuke Children’s HospitalSouthern CitrusCIGNA Property & Casualty Chemical BankATT Canada1993 – Losing money1996 – # 1 in Niche (growth & profits)1995 1998Profits1993 – X1998 – 20X1995 – $300M loss1998 – Customer base doubles1999 – $7b spin-off• Shipments on Spec• On Time Delivery• Rework• Absenteeism• Employee Turnover• Cost per Pound (¢)70%89%6%10%10028.897%98%2%1%3118.9Mobil US Marketing & RefiningCompetitive Rank (out of7,profit)19931995199619971998#6#1#1#1#16363ReadmissionReadmissionRateRate2525Length ofLength ofStayStay1111FamilyFamilySatisfactionSatisfaction2525OperatingOperatingMarginMargin% Improvement% ImprovementMeasureMeasure15%15%OverallOverallHospitalHospitalPointPointSatisfactionSatisfactionDecrease 16 daysDecrease 16 daysDays in ARDays in AR$18M since BSC$18M since BSCimplementationimplementationOperatingOperatingMarginMarginImprovementImprovementMeasureMeasure
Mission: What we doMission: What we doVision: What we aspire to beVision: What we aspire to beStrategies: How we accomplish our goalsStrategies: How we accomplish our goalsMeasures: Indicators of our progressMeasures: Indicators of our progressThe Strategy FocusedThe Strategy FocusedOrganizationOrganization
..the question..?..the question..?What is our strategy?What is our strategy?
Environmental ScanEnvironmental ScanStrengths WeaknessesStrengths WeaknessesOpportunities ThreatsOpportunities ThreatsValuesValuesMission &Mission &VisionVisionStrategic IssuesStrategic IssuesStrategic PrioritiesStrategic PrioritiesObjectives, Initiatives, and EvaluationObjectives, Initiatives, and EvaluationA ModelA ModelforforStrategiStrategiccPlanninPlanningg
Corporate CultureCorporate Culture• The beliefs and values shared by peopleThe beliefs and values shared by peoplewho work in an organisationwho work in an organisation How people behave with each otherHow people behave with each other How people behave with customers/clientsHow people behave with customers/clients How people view their relationship withHow people view their relationship withstakeholdersstakeholders People’s responses to energy use, communityPeople’s responses to energy use, communityinvolvement, absence, work ethic, etc.involvement, absence, work ethic, etc. How the organisation behaves to itsHow the organisation behaves to itsemployees – training, professionalemployees – training, professionaldevelopment, etc.development, etc.
Corporate CultureCorporate Culture• May be driven by:May be driven by:• VisionVision – where the organisation– where the organisationwants to go in the futurewants to go in the future• Mission StatementMission Statement – summary– summaryof the beliefs of the organisation andof the beliefs of the organisation andwhere it is nowwhere it is now
Corporate CultureCorporate Culture• May be reflected in:May be reflected in:– Attitude and behaviour of the leadershipAttitude and behaviour of the leadership– Attitude to the role of individuals in theAttitude to the role of individuals in theworkplace – open plan offices, team basedworkplace – open plan offices, team basedworking, etc.working, etc.– Logo of the organisationLogo of the organisation– The image it presents to the outside worldThe image it presents to the outside world– Its attitude to changeIts attitude to change
Corporate CultureCorporate CultureWhat corporateWhat corporateculture do you thinkculture do you thinkthe followingthe followingbusinesses havebusinesses havemanaged to develop?managed to develop?Virgin GroupCopyright: Joshua2150,http://www.sxc.huThe Body ShopCopyright: fadaquiqa,http://www.sxc.huMcDonaldsCopyright: alexalliedhttp://www.sxc.huNikeCopyright: alexbolhttp://www/sxc.hu
Strategic PlanningStrategic Planning• First Stage of StrategicFirst Stage of StrategicPlanning may involve:Planning may involve:• Futures ThinkingFutures Thinking– Thinking about what theThinking about what thebusiness might need tobusiness might need todo 10–20 years aheaddo 10–20 years ahead• Strategic IntentsStrategic Intents– Thinking about keyThinking about keystrategic themesstrategic themesthat will informthat will informdecision makingdecision making• ““The thicker the planningThe thicker the planningdocument, the more uselessdocument, the more uselessit will be”it will be”– (Brent Davies: 1999)(Brent Davies: 1999)Taking time to think and reflectmay be more important than manybusinesses allow time for!Copyright: Intuitives, http://www.sxc.hu
Strategic PlanningStrategic Planning• The VisionThe Vision– Communicating to all staff where theCommunicating to all staff where theorganisation is going and whereorganisation is going and whereit intends to be in the futureit intends to be in the future– Allows the firm to set goalsAllows the firm to set goals• Aims and Objectives:Aims and Objectives:– AimsAims – long term target– long term target– ObjectivesObjectives – the way in which you are going– the way in which you are goingto achieve the aimto achieve the aim
Strategic PlanningStrategic Planning• Once the direction is identified:Once the direction is identified:Analyse positionAnalyse positionDevelop and introduce strategyDevelop and introduce strategyEvaluate:Evaluate:– Evaluation is constant and the results ofEvaluation is constant and the results ofthe evaluation feed backthe evaluation feed backinto the visioninto the vision
SWOTSWOT StrengthsStrengths – identifying existing– identifying existingorganisational strengthsorganisational strengths WeaknessesWeaknesses – identifying existing– identifying existingorganisational weaknessesorganisational weaknesses OpportunitiesOpportunities – what market opportunities– what market opportunitiesmight there bemight there befor the organisation to exploit?for the organisation to exploit? ThreatsThreats – where might the threats– where might the threatsto the future success come from?to the future success come from?
PESTPEST Political:Political: local, national and internationallocal, national and internationalpolitical developments – how will they affect thepolitical developments – how will they affect theorganisation and in what way/s?organisation and in what way/s? Economic:Economic: what are the main economic issues –what are the main economic issues –both nationally and internationally – that mightboth nationally and internationally – that mightaffect the organisation?affect the organisation? Social:Social: what are the developing social trendswhat are the developing social trendsthat may impact on how the organisationthat may impact on how the organisationoperates and what will they mean for futureoperates and what will they mean for futureplanning?planning? Technological:Technological: changing technology can impactchanging technology can impacton competitive advantage very quickly!on competitive advantage very quickly!
PESTPEST• Examples:Examples: Growth of China and India as manufacturing centresGrowth of China and India as manufacturing centres Concern over treatment of workers and theConcern over treatment of workers and theenvironment in less developed countries who may beenvironment in less developed countries who may besupplierssuppliers The future direction of the interest rate, consumerThe future direction of the interest rate, consumerspending, etc.spending, etc. The changing age structure of the populationThe changing age structure of the population The popularity of ‘fads’ like the Atkins DietThe popularity of ‘fads’ like the Atkins Diet The move towards greater political regulation ofThe move towards greater political regulation ofbusinessbusiness The effect of more bureaucracy in the labour marketThe effect of more bureaucracy in the labour market
Five-ForcesFive-Forces• Developed by Michael Porter: forces that shape and influenceDeveloped by Michael Porter: forces that shape and influencethe industry or market the organisation operates in.the industry or market the organisation operates in. Strength of Barriers to EntryStrength of Barriers to Entry - how easy is it- how easy is itfor new rivals to enter the industry?for new rivals to enter the industry? Extent of rivalry between firmsExtent of rivalry between firms – how competitive– how competitiveis the existing market?is the existing market? Supplier powerSupplier power – the greater the power, the less– the greater the power, the lesscontrol the organisation has on the supply of itscontrol the organisation has on the supply of itsinputs.inputs. Buyer powerBuyer power – how much power do customers– how much power do customersin the industry have?in the industry have? Threat from substitutesThreat from substitutes – what alternative products– what alternative productsand services are there and what is the extentand services are there and what is the extentof the threat they pose?of the threat they pose?
Required InputsRequired Inputs• Changing strategy will impact on the resourcesChanging strategy will impact on the resourcesneeded to carry out the strategy:needed to carry out the strategy:• Specifically the impact on:Specifically the impact on: Land – opportunities for acquiring land forLand – opportunities for acquiring land fordevelopment – green belt, brownfield sites,development – green belt, brownfield sites,planning regulations, etc.planning regulations, etc. Labour – ease of obtaining the skilled andLabour – ease of obtaining the skilled andunskilled labour requiredunskilled labour required Capital – the type of capital and the cost of theCapital – the type of capital and the cost of thecapital needed to fulfil the strategycapital needed to fulfil the strategy
EvaluationEvaluation• Data from sales,Data from sales,profit, etc. used toprofit, etc. used toevaluate theevaluate theprogress andprogress andsuccess of thesuccess of thestrategy and tostrategy and toinform of changesinform of changesto the strategy into the strategy inthe light of that datathe light of that data Information from a wide variety of sourcescan help to measure and inform the impactand direction of the strategy.Copyright: Mad7986, http://www.sxc.hu
Types of StrategyTypes of Strategy• Competitive AdvantageCompetitive Advantage – something– somethingwhich gives the organisationwhich gives the organisationsome advantage over its rivalssome advantage over its rivals• Cost advantageCost advantage – A strategy to– A strategy toseek out and secure a costseek out and secure a costadvantageadvantageof some kind - lower averageof some kind - lower averagecosts, lower labour costs, etc.costs, lower labour costs, etc.
Types of StrategyTypes of Strategy• Market Dominance:Market Dominance:• Achieved through:Achieved through:– Internal growthInternal growth– Acquisitions – mergers and takeoversAcquisitions – mergers and takeovers• New product development:New product development:to keep ahead of rivals and set theto keep ahead of rivals and set thepacepace• Contraction/ExpansionContraction/Expansion ––focus on what you are good at (corefocus on what you are good at (corecompetencies) or seek to expandcompetencies) or seek to expandinto a range of markets?into a range of markets?
Types of StrategyTypes of Strategy• Price LeadershipPrice Leadership – through– throughdominating the industry – othersdominating the industry – othersfollow your price leadfollow your price lead• GlobalGlobal – seeking to expand– seeking to expandglobal operationsglobal operations• ReengineeringReengineering – thinking outside– thinking outsidethe box – looking at news ways ofthe box – looking at news ways ofdoing things to leverage thedoing things to leverage theorganisation’s performanceorganisation’s performance
Types of StrategyTypes of Strategy– Internal business level strategies –Internal business level strategies – DownsizingDownsizing – selling off unwanted parts of– selling off unwanted parts ofthe business – similarthe business – similarto contractionto contraction DelayeringDelayering – flattening the management– flattening the managementstructure, removing bureaucracy, speed upstructure, removing bureaucracy, speed updecision makingdecision making RestructuringRestructuring – complete re-think– complete re-thinkof the way the business is organisedof the way the business is organised
The Five Principles1. Translate the strategy tooperational terms.2. Align the organization to thestrategy.The Strategy FocusedThe Strategy FocusedOrganizationOrganizationSource: The Strategy Focused Organization, Norton & Kaplan
The Five Principles (cont.)3. Make strategy everyone’s job.4. Make strategy a continual process.5. Mobilize change through executiveleadershipThe Strategy FocusedThe Strategy FocusedOrganizationOrganizationSource: The Strategy Focused Organization, Norton & Kaplan
The BalancedThe BalancedScorecard and The BigScorecard and The BigPicturePicture•Activity Based Costing•Economic Value Added•Forecasting•Benchmarking•Market Research•Best Practices•Six Sigma•Statistical Process Control•Reengineering•ISO 9000•Total Quality Management•Empowerment•Learning Organization•Self-Directed Work Teams•Change ManagementMissionandVisionBalancedScorecardStrategicPlanning
Strategic DirectionCreate EnvironmentFor ChangeStrategicStrategicPerformancPerformanceeManagementManagementSystemSystemLinking it all together….Communicate StrategiesDefine ObjectivesImplement BSCBalanced ScorecardMeasure PerformanceImprove ProcessesEvaluate and AdjustContinuous ImprovementRedefine Initiatives
FINANCIAL/REGULATORYTo satisfy our constituents,what financial & regulatoryobjectives mustwe accomplish?CUSTOMERTo achieve our vision,what customer needs mustwe serve?INTERNALTo satisfy our customers andstakeholders, in which businessprocesses must we excel?LEARNING & GROWTHTo achieve our goals, howmust we learn, communicateand grow?THE BALANCED SCORECARDHE BALANCED SCORECARD
Customer PerspectiveCustomer Perspectiveo Customer Satisfaction (Average)o Satisfaction Gap Analysis (Satisfaction vs.Level of Importance)o Satisfaction Distribution (% of each area scored)Possible Performance MeasuresPossible Performance MeasuresTo achieve our vision, what customer needsmust we serve?
Financial / RegulatoryFinancial / RegulatoryPerspectivePerspectiveo Cost / Unito Unfunded Requirements or Projectso Cost of Serviceo Budget Projections and TargetsPossible Performance MeasuresPossible Performance MeasuresTo satisfy our constituents, what financial andregulatory objectives must we accomplish?
nternal Perspectiventernal Perspectiveo Cycle Timeo Completion Rateo Workload and Employee Utilizationo Transactions per employeeo Errors or ReworkPossible Performance MeasuresPossible Performance MeasuresTo satisfy our customers, in which businessprocesses must we excel?
Learning and GrowthLearning and GrowthTo achieve our goals and accomplish core activities,how must we learn, communicate and work together?Possible Performance MeasuresPossible Performance Measureso Employee Satisfactiono Retention and Turnovero Training Hours and Resourceso Technology Investment
Why Measure?Why Measure?• To determine how effectively andTo determine how effectively andefficiently the process or serviceefficiently the process or servicesatisfies the customer.satisfies the customer.• To identify improvement opportunities.To identify improvement opportunities.• To make decisions based on FACT andTo make decisions based on FACT andDATADATA
Measurements Should:Measurements Should:• Translate customer expectations into goals.Translate customer expectations into goals.• Evaluate the quality of processes.Evaluate the quality of processes.• Track our improvement.Track our improvement.• Focus our efforts on our customers.Focus our efforts on our customers.• Support our strategies.Support our strategies.
TargetsTargets““If you don’t know where you’re going,If you don’t know where you’re going,you’re probably not gonna getyou’re probably not gonna getthere.”there.”Forrest GumpForrest Gump
TargetsTargets• Targets need to be set for allTargets need to be set for allmeasuresmeasures• Should have a “solid basis”Should have a “solid basis”• Give personnel something for whichGive personnel something for whichto aimto aim• If achieved will transform theIf achieved will transform theorganizationorganization
TargetsTargets• Careful not to developCareful not to developmeasures/targets inmeasures/targets ina fragmented approach:a fragmented approach:i.e. Asking people to increasei.e. Asking people to increasecustomer satisfaction has tocustomer satisfaction has tobe backed up with thebe backed up with theknowledge, tools, and meansknowledge, tools, and meansto achieve that target.to achieve that target.
InitiativesInitiativesOnce measures and targets areOnce measures and targets areestablished, it is the responsibility ofestablished, it is the responsibility ofmanagement to determinemanagement to determine HOWHOW thetheorganization will achieve its goals.organization will achieve its goals.Measures are used to determine theMeasures are used to determine theeffectiveness of strategic initiatives.effectiveness of strategic initiatives.
The Leadership TeamThe Leadership Team• Develops the division’s vision,Develops the division’s vision,strategy and goalsstrategy and goals• Develops organizational objectivesDevelops organizational objectivesand targetsand targets• Provides leadership, endorsementProvides leadership, endorsementand vision for the projectand vision for the project• Clears barriers to scorecardClears barriers to scorecardprogressprogress
The Core TeamThe Core Team• Drafts the strategy map andDrafts the strategy map andscorecardscorecard• Works with employees to developWorks with employees to developmeasures supporting strategicmeasures supporting strategicobjectivesobjectives• Works with the Leadership Team toWorks with the Leadership Team toplan and implement the Balancedplan and implement the BalancedScorecard in the FAS DivisionScorecard in the FAS Division
Y1999Y1999 CORPORATE LEVEL BALANCED SCORECARCORPORATE LEVEL BALANCED SCORECARFinancial Customer Operational People TechnicalIndica-torTar-getFY99FinalIndica-torTarget Stat-usIndica-torTarget Stat-usIndica-torTarget Stat-usIndica-torTarget Stat-usAdjustedDischarges23,890 23,592 PatientSatis-factionChoose keyfocus areasforimprove-mentC ArrangingCareDetermine outpatientphone model,conduct pilotsC CulturalDevelop-mentCompletecommuni-cationsstrategyC QualityImprove-mentImplementsystem-widegovernancestructureCEncounters 912,188 892,243 EmployerSatis-factionCompletesurveydevelop-ment in CY1999CY Determine outpatientmodel forregistration &schedulingC CompletephysiciansurveyC Completeexternal qualityreport in CY1999CYCost perAdjustedDischarge6,964 7,535 HEDISIndicatorsSelectindicatorsfordevelop-ment planM ProvidingCareDetermine model forpatient deliverysystem for clinicaldivisionsC CompleteemployeesurveyC Meet or exceedstandards forSMDCaccreditationCCost perEncounter215 252 Com-munityServiceCompletereportingprocess andinventoryC Complete systemstrategy forambulatory surgeryC Completeplan tomaintainCatholic-ityC Informa-tionTechnol-ogyComplete ITstrategic planin CY 1999CYOperatingMargin2.0 1.3 Commun-ity Aware-nessCompletesurvey inCY 1999CY Docu-mentingandTrackingCareComplete plan fordecentralized codingand charge entryC EmployeeRelationsStrategyAccom-plish “payequity”C Complete Y2Kcompliance by12/99CYExcessMargin3.8 3.3 MarketShareCompletebaselineC Innova-tion andProgramDevelop-mentComplete feasibilitystudy for a women’shealth centerC Synchro-nizeemployeebenefitsC MedicalEducation& ResearchCompletereport offunded grantsandpublicationsCDays Cashon Hand103.6 108.6 Complete plan for ageriatrics programC FacilitiesPlanningCompletePerkins & WillplanMDays inAccountsReceivable77.7 82.8Return onInvestment3.4 2.9“C” = task completed; “CY” = Calendar Year 1999 task; “M” = task modifiedFinance section: Target met; Target not met
The Strategy Map: CauseThe Strategy Map: Causeand Effect Relationshipsand Effect Relationships• What will drive margins?What will drive margins?– Managed growth in high marginManaged growth in high marginprograms/service linesprograms/service lines• How?How?– Attract targeted patientAttract targeted patientpopulation through targetedpopulation through targetedreferring physicians who valuereferring physicians who valueleading edge technology &leading edge technology &expertiseexpertise• What will the internal focus be?What will the internal focus be?– Ensure clinical excellenceEnsure clinical excellencethrough leading edge programsthrough leading edge programsand techniques in focusedand techniques in focusedspecialty areasspecialty areas– Align research priorities toAlign research priorities tosupport leading programs andsupport leading programs andstay out front in treatmentstay out front in treatmentmethodsmethods• Will our people be prepared toWill our people be prepared todo that?do that?– Yes, with appropriateYes, with appropriatetechnologytechnology– Yes, by recruiting criticalYes, by recruiting criticalexpertiseexpertiseMaximize HighMarginOpportunitiesStrong FinancialBaseFinancialFinancialCustomerCustomerSpecialty Care PatientsReferring ProvidersLeading EdgeTechnologyLeading EdgeExpertiseInternalInternalContinuallyDevelopClinicalExcellenceDevelopLeadingEdgePrograms/TechniquesLearning & GrowthLearning & GrowthDevelop CriticalStaffingResource PlansAlign ResearchPrioritiesImplementTechnologyto SupportProcessesand ProgramsImplementManagedGrowth
The BalancedThe BalancedScorecard as aScorecard as aManagement SystemManagement SystemBSC reviewed regularly to enhanceBSC reviewed regularly to enhanceoperational decision-makingoperational decision-making• Success of initiatives assessedSuccess of initiatives assessedbased on DATA… not opinionsbased on DATA… not opinions• Leading indicators evaluated toLeading indicators evaluated toconfirm accuracy of assumptionsconfirm accuracy of assumptions
The Balanced Scorecard asThe Balanced Scorecard asa Management Systema Management SystemThe BSC is a “Living Document” thatThe BSC is a “Living Document” thatrequires regular revision of objectives,requires regular revision of objectives,measures and initiatives:measures and initiatives:• How are we doing?How are we doing?• Are we measuring the right things?Are we measuring the right things?• What initiatives do we need to get usWhat initiatives do we need to get uswhere we want to go?where we want to go?• Have our organizational goals changed?Have our organizational goals changed?
Rapid Deployment Case Study:Rapid Deployment Case Study:Major Federal OrganizationMajor Federal OrganizationNeedApproachBenefits•Definition of “Corporate” strategy•Rapid roll-out and broad reach•Develop internal capabilities to sustain momentum•Develop Corporate Balanced Scorecard•Define template for rolling out BSC•Train subordinate units•Streamline project management•Quality checks•Online education•Clear guidance from Corporate•Active involvement from client teams•Rapid deployment with minimal resources•Quality control
Advantages to thisAdvantages to thisApproachApproach• Simple to Use and UnderstandSimple to Use and Understand• Based on Vision and StrategyBased on Vision and Strategy• MultidimensionalMultidimensional•Quantitative and Qualitative MeasuresQuantitative and Qualitative Measures•Current and FutureCurrent and Future• Provides Measurement of and Method forProvides Measurement of and Method forImproving our ServicesImproving our Services• Ties QI initiatives togetherTies QI initiatives together• Serves as a Communication ToolServes as a Communication Tool