Powerpoint Template

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Using the Balanced Scorecard to Build A
Strategy-Focused Healthcare Organization
For more information, contact Kate
OBrien 781.402.1143 Kobrien_at_bscol.com
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Todays Agenda

• Introduction to Balanced Scorecard Collaborative
• Overview of the Balanced Scorecard Background
  and Concepts
• Case Example Saint Marys/Duluth Clinic Health
  System
• Implementing the Balanced Scorecard At Your
  Hospital
• Questions and Answers

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Introduction to Balanced Scorecard Collaborative
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Execution of Strategy Has Become the Corporate
Challenge of Our Times!

• Strategy has never been more important
• Business Week
• Less than 10 of strategies effectively
  formulated are effectively executed
• Fortune Magazine
• The problem is that our ages fascination with
  strategy and vision feeds the mistaken belief
  that developing the right strategy will enable a
  company to rocket past competitors. In reality,
  strategy is less than half the battle. .. In the
  majority of cases we estimate 70 the real
  problem isnt bad strategy. Its bad
  execution.
• Why CEOs Fail Ram Charan and Geoffrey
  Colvin Fortune (6/21/99)

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Executing Strategy in the Healthcare Environment
Is Even More Challenging

• Hospitals need a clearly articulated strategy to
  effectively manage
• Increasing competition, consolidation, and new
  healthcare delivery strategies
• Evolving regulatory standards and public policy
• Conflicting needs from clinicians,
  administrators, government and regulatory
  agencies, insurance providers, and boards
• Changing expectations of multiple customer
  groups (e.g., patients, referring physicians,
  payers)

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BSCol Offers a Variety of Services to Achieve Our
Mission
Our Mission To facilitate the worldwide
awareness, use, enhancement, and integrity of the
Balanced Scorecard as a value-added management
process
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Balanced Scorecard History
Measurement and Reporting
Enterprise-wide Strategic Management
Alignment and Communication
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The Results are Widespread
CIGNA Property Casualty
Chemical Bank
1993 275 loss 1998 Top Quartile
3b spin-off
Profits 1993 X 1998 20X
Brown Root Engineering (Rockwater)
ATT Canada
1993 Losing money 1996 1 in Niche
(growth profits)
1995 300M loss 1998 Customer base
doubles 1999 7b spin-off
Saint Marys/ Duluth Clinic Health System
Southern Citrus
1995
1998

• Shipments on Spec
• On Time Delivery
• Rework
• Absenteeism
• Employee Turnover
• Cost per Pound ()

70 89 6 10 100 28.8
97 98 2 1 31 18.9
Duke Childrens Hospital
Mobil US Marketing Refining
Competitive Rank (out of 7,profit)
1993 1995 1996 1997 1998
6 1 1 1 1
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Overview of the Balanced Scorecard
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Organizations Often Have A Gap Between Strategy
and Action
Strategy Is a Step In a Continuum
MISSION Why we exist
VALUES Whats important to us
VISION What we want to be
STRATEGY Our game plan
STRATEGIC OUTCOMES
SatisfiedSHAREHOLDERS
Delighted CUSTOMERS
Efficient and EffectivePROCESSES
Motivated PreparedWORKFORCE
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The Balanced Scorecard Is A Bridge To Close That
Gap
Strategy Is a Step In a Continuum
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What Is a Balanced Scorecard?
At the highest level, the Balanced Scorecard is a
framework that helps organizations put strategy
at the center of the organization by translating
strategy into operational objectives that drive
both behavior and performance.
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The Balanced Scorecard Provides a Four
Perspective Framework to Translate Strategy Into
Operational Terms
The Vision
Financial Perspective

• Profitability
• Growth
• Shareholder Value

If we succeed, how will we look to our
shareholders?
Customer Perspective

• Measurement is the language that gives clarity to
  vague concepts
• Measurement is used to communicate, not simply to
  control

To achieve our vision, what customer needs must
we serve?

• Price
• Service
• Quality

Internal Perspective
To satisfy our customers and shareholders, at
which business processes must we excel?

• Cycle Time
• Productivity
• Cost

Learning and Growth

• New Skills
• Continuous Improvement
• Intellectual Assets

To excel in our processes, what must our
organization learn?
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A Good Balanced Scorecard Strategy Map Tells the
Story of Your Strategy
The Revenue Growth Strategy
The Productivity Strategy
Improve stability by broadening the sources of
revenue from current customers
Improve operating efficiency by shifting
customers to more cost-effective channels of
distribution
Improve Returns
Financial Perspective
Improve Operating Efficiency
Broaden Revenue Mix
Increase Customer Confidence in Our Financial
Advice
Increase Customer Satisfaction Through Superior
Execution
Customer Perspective
Internal Perspective
Cross-Sell the Product Line
Shift to Appropriate Channel
Provide Rapid Response
Develop New Products
Understand Customer Segments
Minimize Problems
Increase Employee Productivity
Learning Perspective
Develop Strategic Skills
Align Personal Goals
Access to Strategic Information
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A Good Balanced Scorecard Tells the Story of Your
Strategy Through A Set of Linked Cause and Effect
Hypotheses
Strategic Measurements
StrategicObjectives
(Lag Indicators)
(Lead Indicators)

• Return on Investment
• Revenue Growth
• Deposit Service Cost Change

• Revenue Mix

F1 - Improve Returns F2 - Broaden Revenue Mix F3
- Reduce Cost Structure
Financial
C1 - Increase Customer Satisfaction With Our
Products People C2 - Increase Satisfaction
After the Sale

• Share of Segment
• Customer Retention

• Depth of Relation
• Satisfaction Survey

Customer
I1 - Understand Our Customers I2 - Create
Innovative Products I3 - Cross-Sell Products I4
- Shift Customers to Cost-Effective Channels I5
- Minimize Operational Problems I6 - Responsive
Service

• New Product Revenue
• Cross-Sell Ratio
• Channel Mix Change
• Service Error Rate
• Request Fulfillment Time

• Product Development Cycle
• Hours with Customers

Internal

• Strategic Job Coverage Ratio
• Strategic Info Availability Ratio
• Personal Goals Alignment ()

L1 - Develop Strategic Skills L2 - Provide
Strategic Info L3 - Align Personal Goals

• Employee Satisfaction
• Revenue per Employee

Learning
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Theme Example from Southwest Airlines Balanced
Scorecard
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The Balanced Scorecard Supports a Complete
Strategic Management System by Linking Long Term
Strategy and Measures to More Tactical Planning
Budgeting
Longer Term (3-5 year) View
Shorter Term (Annual) View
Vision
Objectives
Milestones
Accountable
Initiatives
Themes/ Goals
Mission
Resource Alloc.
Targets
Measures

• 02 xx
• 03 xx
• 04 xx

• Grow revenue from patient care

• patient care revenue growth

Financial

• Meet access expectations

• 3rd available appointment ( met)

• Access project

• Meet monthly target

• Mkg. Team

• xxxx

• 02 xx
• 03 xx
• 04 xx

Customer
1. Strengthen innovation 2. Improve customer
satisfaction 3. Assure consistent high quality 4.
Provide operational excellence
ABC Hospital System will provide excellent care
in our selected specialty areas while maintaining
margin and growing share
Serve the needs of patients excellently

• patient mix

• 02 39
• 03 40
• 04 41

• Mix Margins Project

• Dept. Chairs

• Complete by 2003

• xxxx

• Assure optimum patient mix

Internal

• Promote ABC Culture Model

• Employee Satisfaction Survey

• Evaluate survey response

• HR Committee

• xxxx

• 02 xx
• 03 xx
• 04 xx

• Deadline met

Learning
Tactical
Strategic
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The Mobil Story (US Marketing Refining)
1993-1998
Productivity Strategy Maximize utilization of
existing assets and integrate the business to
reduce total delivered cost.
Growth Strategy Improve quality of revenue by
understanding customer needs and differentiating
ourselves accordingly.
Financial Perspective
Return on Capital
Increased from 6 to 16
Competitive Position(profitability)
From last (1993)to first (95, 96, 97, 98)
Volume Growth
Reduce Cash Expenses
Improve Cash Flow
Exceeds industry by 2-2.5 annually
Down by 20
From -500 M/Yr to 700 M/Yr
Customer Perspective
Customer Satisfaction
Continuous improvement for 3 consecutive years
Internal Perspective
Product Innovation
Customer Management
Speedpass Active
Dealer Quality
Perfect Orders
Increasing at rate of 1M per year
Continuous improvement for 4 consecutive years
Continuous improvement for 4 consecutive years
Operational Excellence
Good Neighbor
Quality
Capacity Utilization
Safety
Environmental
Lost work incidents down from 150 to 30 per year
Continuous improvement for 4 consecutive years
Annual value of lost yield reduced from 175m to
50m
Number of incidents reduced by 63
Learning Growth Perspective
Motivated Prepared Workforce
Strategic Awareness
Annual employee survey shows awareness of
strategy increased from 20 to 80
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Case Study St. Marys/Duluth Clinic Health
System
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SMDC Health System Overview

• Merged Several Organizations
• St. Marys Medical Center- 380 beds
• Miller Dwan Medical Center - 166 beds
• St. Marys Hospital of Superior - 55 beds
• Pine Medical Center- 30 acute beds, 86 skilled
  nursing beds
• 25 community clinics throughout northern
  Minnesota, Wisconsin, and Upper Michigan

• Merged Cultures
• More than 4,000 employees
• 352 employed physicians representing 40 medical
  specialties
• Catholic and non-Catholic hospitals

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SMDC Developed A Strategic Plan As A First Step
As A Newly Merged Organization

• A very comprehensive plan 350 initiatives!
• People not clear on their roles to execute the
  strategy
• Executive Leadership Team mired in operational
  fire-fighting and day-to-day details
• Board of Directors unfocused and confused about
  their role
• Management and employees did not understand the
  strategic direction of the organization
• Gradual decline of margin

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The CEO Read The BSC Book And Decided To
Implement SMDCs BSC By Themselves

• Progress
• Began tracking organizational performance on more
  than a financial basis
• Pitfalls
• Functioned primarily as a new kind of dashboard
  report
• Rather than a new way of running the
  organization, BSC became one more thing to do

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The Strategy Map Evolved The BSC Process...and
Drove SMDC Results

• Value propositions provided clarity

Payers
Specialty Care Patients Referring Providers
Primary Care Patients
Operational Excellence
Product Leadership
Customer Intimacy
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The Strategy Map Cause and Effect Relationships
Strong Financial Base
Financial

• What will drive margins?
• Managed growth in high margin programs/service
  lines
• How?
• Attract targeted patient population through
  targeted referring physicians who value leading
  edge technology expertise
• What will the internal focus be?
• Ensure clinical excellence through leading edge
  programs and techniques in focused specialty
  areas
• Align research priorities to support leading
  programs and stay out front in treatment methods
• Will our people be prepared to do that?
• Yes, with appropriate technology
• Yes, by recruiting critical expertise

Implement Managed Growth
Maximize High Margin Opportunities
Customer
Specialty Care Patients Referring Providers
Leading Edge Technology
Leading Edge Expertise
Continually Develop Clinical Excellence
Internal
Develop Leading Edge Programs/ Techniques
Align Research Priorities
Learning Growth
Implement Technology to Support Processes and
Programs
Develop Critical Staffing Resource Plans
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FY 2002 Strategy Map
Vision SMDC is a values-driven, integrated
organization which will be recognized for
excellence in customer service, quality patient
care, financial strength, and support of
community health
FINANCIAL To financially sustain our Mission,
on what must we focus?
Build a Strong Financial Base to Sustain our
Mission and Achieve our Vision
Deliver Cost Efficient Care
Implement Managed Growth
Maximize High Margin, Market Opportunities 1
Specialty Care Patients / Referring Physicians
Primary Care Patients
Payers
CUSTOMER To achieve our Vision, how should we
appear to our customers?



Excellent service
Personal relationships
Leading edge technology
Leading edge expertise
Innovative programs
Low cost service
Strive for Operational Excellence
Provide Outstanding Customer Service
Continually Develop Clinical Excellence
Optimize Staff Efficiency
Clinical Practice Management
INTERNAL To satisfy our customers, at which
operational processes must we excel?
Align research priorities with targeted growth
areas
Redesign operations for efficiency and
effectiveness
Easy Access
On-Time Service
Develop state of the art techniques and programs
Strategic Program Development
LEARNING GROWTH How will we sustain our
ability to change and improve?
Instill a Climate for Change
Implement Technology
Skill Competency Development
Implement technology to support internal processes
Develop Critical Staffing Resource Plans
Develop a Quality Mindset
Clearly communicate expectations and
accountabilities aligned with strategic priorities
Instill a climate of pride in the organization
commitment to the mission
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SMDC Ensured Alignment Between Their Planning
Process and Balanced Scorecard Program

• At budget time, the Executive Team
• Revisits the strategy map to reaffirm strategic
  objectives
• Reviews measures to assure they are truly
  measuring progress against the objectives
• Sets targets for next fiscal year
• Develops and funds initiatives to deliver the
  targets

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The Balanced Scorecard Introduced A New Era Of
Accountability and Strategic Direction at SMDC

• Monthly executive leadership Strategic Operating
  Review meetings
• review monthly performance indicators
• discuss progress against initiative completion
• majority of the meeting spent discussing
  strategic issues
• VP-level weekly initiative progress meetings
• Line management and employees attend weekly
  management briefing meetings

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SMDC Achieved Outstanding Results Using the
Balanced Scorecard

• Aligned the entire organization through a common
  set of well understood objectives
• Created a platform for developing a single
  organizational culture
• Increased executive, management, and
  physician/staff accountability with clearly
  defined targets
• Utilized as an effective communication tool for
  governance, administration, management, and
  employees
• 20 million dollar financial turnaround and
  return to profitability

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Implementing the Balanced Scorecard At Your
Hospital
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BSCol Offers The Brand, Know-How, and Proven
Track Record To Help Organizations Achieve Results
Conferences
Publications
Create Awareness
Standards Certification
Management Consulting
Ensure Integrity
Support the Use
Training
Partner Programs
Enhance the Approach
Design Communities
Best Practice Program
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Rapid Deployment Case Study Major Federal
Organization
Need

• Definition of Corporate strategy
• Rapid roll-out and broad reach
• Develop internal capabilities to sustain momentum

Approach

• Develop Corporate Balanced Scorecard
• Define template for rolling out BSC
• Train subordinate units
• Streamline project management
• Quality checks
• Online education

Benefits

• Clear guidance from Corporate
• Active involvement from client teams
• Rapid deployment with minimal resources
• Quality control

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To Learn More About The Balanced Scorecard, Join
BSC Online at www.bscol.com

• Benefits
• Educate yourself on the Balanced Scorecard
• Learn from Best Practice Companies
• Keep informed of cutting edge thinking from the
  experts
• What you get
• Balanced Scorecard e-learning modules by Dave
  Norton
• Multi-media cases featuring our Hall of Fame
  success stories
• Free Monthly Netconferences addressing BSC issues
  
• Answers to Frequently Asked Questions
• A monthly e-mail briefing from Drs. Kaplan and
  Norton

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Questions and Comments