Using the Balanced Scorecard as an FQHC Strategic Planning Framework

Bonita Springs, Florida July 29, 2008

Gregory Wolf

Senior Consultant and Chief Technology Officer

a Stroudwater Associates company

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

Today’s Agenda

• Balanced Scorecard Overview

 Balanced Scorecard Definition and Objectives  Linking FQHC Strategy to a Scorecard  Introduction to Strategy Maps

• Strategy Mapping Exercises • Candidate Indicators/Scorecard

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

The Balanced Scorecard is a framework that helps organizations translate strategy into operational objectives that drive both behavior and performance.

Kaplan and Norton’s The Strategy Focused Organization 3

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

The Balanced Scorecard measures strategy.

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC “Strategy has never been more important”

Business Week

“Less than 10% of strategies effectively formulated are effectively executed”

Fortune Magazine

“In reality, strategy is less than half the battle. .. In the majority of cases – we estimate 70% – the real problem isn’t [bad strategy]…. It’s bad execution.”

“Why CEO’s Fail,” Ram Charan and Geoffrey Colvin Fortune (6/21/99) 5

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

What is Strategy?

1. Strategy is the creation of a unique and valuable position.

2. Strategy requires trade-offs in competing –what NOT to do.

3. Strategy involves a “fit” among a hospital’s activities.

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

Why Do Strategies Fail?

The Vision Barrier

Only 5% of the work force understands the strategy

The People Barrier

Only 25% of managers have incentives linked to strategy

Four Barriers to Strategy Execution The Management Barrier

85% of executive teams spend less than one hour per month discussing strategy

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60% of organizations don’t link budgets to strategy

The Resource Barrier

Kaplan and Norton’s The Strategy Focused Organization

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

BSC Objectives

• Provide a framework to translate strategy into

operational terms

• Create a systems approach to form an

integrated Strategic Management Process

• Provide a tool for communicating the: – strategy – processes and systems required for implementing the strategy • Draw a cause and effect roadmap in a one page

strategy map

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC The Balanced Scorecard tracks performance of the factors that create long-term economic value in an organization

– Customer Focus: satisfy, retain and acquire customers in targeted segments – Clinical/Business Processes: deliver the value proposition to targeted customers – Organizational Learning & Growth – Financial Health and Accountability

Customers Finances People Processes

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC MISSION VALUES VISION

STRATEGY: Our game plan

The Balanced Scorecard

STRATEGIC INITIATIVES: What we need to do PERSONAL OBJECTIVES: What I need to do

Satisfied COMMUNITY STRATEGIC OUTCOMES Delighted CUSTOMERS Efficient & Effective PROCESSES Motivated & Prepared WORKFORCE

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

11 The Balanced Scorecard Provides a Four Perspective Framework for Boards to Translate Strategy Into Operational Terms

The Mission Vision and Values



Measurement is the language that gives clarity to vague concepts

Financial Perspective

What financial resources are required to fulfill our mission?

• Profitability • Growth • Operational Efficiency

Customer Perspective

What do customers want, need, or expect?

• Confidence • Service • Quality 

Measurement is used to communicate, not simply to control

Internal Perspective

To satisfy our customers, at which clinical/business processes must we excel?

• Patient Safety • Operational Improvement • MD Needs

Learning and Growth

What type of culture, skills, and technology are required?

• New Skills • Strategic Awareness • Technology

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

Southwest Airlines

Strategic Theme: Operating Efficiency Financial

Profitability Lower Costs Increase Revenue

Customer

Flight is on time Lowest prices

Statement of what strategy must achieve and what’s critical to its success How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives Internal

Fast ground turnaround

Objectives

• Fast ground turnaround

Measurement

• • On Ground Time On-Time Departure

Target

• • 30 Minutes 90%

Initiative

• Cycle time optimization

Learning

Ground crew alignment 12

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

Southwest Airlines

Strategic Theme: Operating Efficiency Financial

Profitability Lower costs Increased Revenue

Customer

Flight is on Time Lowest Prices

Internal Learning

Fast Ground Turnaround Ground Crew Alignment

Objectives Measurement Target Initiative

• • Profitability • More Customers • • • Fewer planes Flight is on time Lowest prices Fast ground turnaround • Market Value • Seat Revenue • • • • • Plane Lease Cost FAA On Time Arrival Rating Customer Ranking (Market Survey) On Ground Time On-Time Departure • • • 30% CAGR 20% CAGR 5% CAGR • #1 • #1 • • 30 Minutes 90% • • • Quality management Customer loyalty program Cycle time optimization program • Ground crew alignment • % Ground crew stockholders • % Ground crew trained • yr. 1 70% yr. 3 90% yr. 5 100% • ESOP • Ground crew training 13

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC PRESENT

(Event-Driven Learning)

Review Strategic Issues (30%) Discuss Implications (30%) Review Past Performance (40%) THE QUARTERLY REVIEW MEETING FUTURE

(Continuous Learning) •

Provide input to strategic issues currently being worked

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Dialogue about performance

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Explain anomalies

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Suggest solutions

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Identify issues

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Identify strategic issues for next discussion at next group meeting Review Strategic Issues (60%)

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Review performance data (available on-line) BETWEEN THE MEETINGS Discuss Implications (30%) Review Past Performance (10%) THE QUARTERLY STRATEGIC REVIEW MEETING

14 The Balanced Scorecard Collaborative

Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

Strategy Mapping Exercises

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC

RPM Briefing Book Review and Web Demo

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Balanced Scorecard Overview Bonita Springs Conference, Florida CHC Balanced Scorecard Report

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