The Balanced Scorecard is a powerful management and performance improvement tool that has been used by organizations of all types since the early 1990s. Many healthcare organizations are using this approach as the cornerstone of their performance improvement programs. However, not every Balanced Scorecard implementation is successful. To increase the chances for success, providers must first examine their “organizational readiness” in order to identify the necessary process steps and answer to decide whether or not the hospital should even consider the Balanced Scorecard.
Dispelling Misperceptions
There is a common misperception that success in implementing a Balanced Scorecard relates to the availability of data, but data automation or the availability of metrics alone is not a predictor of success. To understand Balanced Scorecard readiness (as well as predictors of Balanced Scorecard success), it is important to understand that a Balanced Scorecard or any performance improvement system is ultimately a change process. Implementation will be successful only if strategy is translated into operational terms and is shared with the entire organization. This approach requires the openness to communicate potentially sensitive information as well as the need to concentrate on fewer—yet more focused—performance measures. Both of these require a mental shift in thinking for most health care organizations.
In our experience, two factors—–strategy and management commitment–are the key drivers of readiness and sustainability. If gaps exist in either category, the hospital is best served by either filling these gaps or perhaps looking at other performance improvement alternatives. The following sections discuss what to look for in each factor.
Factors that drive the success of a Balanced Scorecard:
- Strategy and consensus
- Management commitment
Factors that influence the speed of Balanced Scorecard implementation
Strategy and Consensus
The Balanced Scorecard is a tool to execute strategy, so it is critical that health care providers have developed high—quality current strategies—explicit or implicit—that are broadly understood by senior management. In assessing readiness, the first step is to determine if a strategy exists. If the strategy is not well defined or out of date, then the organization needs to focus on strategy development prior to embarking on a Balanced Scorecard.
In looking at readiness, it is also important to explore the degree to which senior leaders agree or disagree on the strategy and what it means. If there is any major disagreement or misunderstanding, senior leadership will need to spend more time discussing strategy and reaching a consensus. The development of a strategy map is a useful tool for helping senior leadership develop a strategic consensus. This level of consistent understanding is often hard to self-identify, because there will either be reluctance to admit disagreement or senior managers do not know that they disagree. There are two ways to approach the unknown:
- Ask each senior manager to provide their version of the strategic vision and critical strategic objectives. If these are inconsistent, it is a good indication that extra time will be needed for discussion and mapping the strategy.
- Build in project flextime. In other words, keep the initial meetings flexible so that different perspectives and visions of strategy can be addressed. It is better to confront these issues and shuffle project timelines, than to proceed with widely divergent views of where the organization is headed.
The good news is that the Balanced Scorecard and, specifically, strategy mapping can help refresh the organization’s strategy and bring all senior leaders to the same level of understanding. Strategy mapping is the first major step in the Balanced Scorecard process. In strategy mapping, strategic objectives are graphically depicted on one page showing cause and effect links. Assessing readiness in relation to commitment involves looking at whether senior management is willing to invest their time and effort to change the organization. At a more basic level, it is also important that senior management understands the true scope and rationale for using a Balanced Scorecard. The best way to approach this is to make sure that senior leadership is provided with education regarding Balanced Scorecard principles, its scope, and the process involved.
Assessing readiness in relation to commitment involves looking at whether senior management is willing to invest their time and effort to change the organization. At a more basic level, it is also important that senior management understands the true scope and rationale for using a Balanced Scorecard. The best way to approach this is to make sure that senior leadership is provided with education regarding Balanced Scorecard principles, its scope, and the process involved. Doing this helps to minimize misunderstandings (e.g., the belief that this is simply a benchmarking or quality project).
Have Past “Change” Initiatives Worked?
Because Balanced Scorecard creates a fundamental change in how a health care organization looks at itself and measures performance, it is important to look at how the organization handles and manages change. What were the results of past change initiatives? Did they work? Were the results sustainable? Once the senior leadership team and line managers have insights about past efforts and education on what a Balanced Scorecard effort entails, they need to be evaluated to determine whether they are willing to make the commitment to the process and whether issues that stalled past change initiatives can be overcome. If the answer is not a resounding “yes” it may be best to reassess and wait for a better time when leadership is able to make a greater commitment. Sometimes it is best to wait until a “burning platform” (i.e., significant challenge such as an ownership change, a merger, or financial crisis) emerges to drive the process. In the meantime, conducting organization wide education on Balanced Scorecard concepts and principles and developing and introducing a preliminary “dashboard” or other types of metrics can be useful interim steps until the organization is ready to embrace a more formal process.
Getting “Ready”
If the indications are that the organization is not yet ready, there are things that you can do to get ready. The following checklist offers some suggestions for doing so.
Figure 1
Ten Recommended Steps Prior to Launching a Balanced Scorecard.
- Identify an executive sponsor of the process. This is someone who is involved in strategy development and can offer executive commitment.
- Identify a project champion to assist the executive sponsor. This person (typically a manager or staff employee) assists in the assessment and provides operational support.
- Share Balanced Scorecard educational materials with the leadership team.
- Have sponsor and champion confirm the state of the hospital’s strategy. (How current is it? Do objectives exist? Is it widely accepted?)
- Look at past change initiatives and identify reasons the projects succeeded and failed.
- Meet with the leadership team to confirm strategy findings, discuss the Balanced Scorecard materials, and solicit their commitment to implement a Balanced Scorecard. Make sure past change initiatives are part of the discussion. If commitment is shaky or not there, do not proceed.
- “Audit” measurement and alignment activities. Identify sources of measurements and state of alignment in budgeting, department and employee evaluations, and meeting focus.
- Begin to shape the roll-out process and add more time to the beginning stages if the strategy is missing or not fully developed.
- Build measurement and alignment strengths into the process.
- Communicate the scope and goals of the process to managers.
Measurement and Alignment
While Strategy and Commitment drive the ultimate success of a Balanced Scorecard project, it can also be helpful to look at existing measurement and alignment within the hospital. These two areas are where a health care organization is likely to experience the greatest long-term benefit. Measurement, in addition to required and operational reporting, becomes more focused and fluid; and there is a clear understanding why a measure is being used. Core activities will also become aligned to strategy—this includes budgeting, department performance, and even management meetings.
Given that we expect to see change and improvement in measurement and alignment, it is helpful to have a baseline—where are we now? Where were we prior to our Balanced Scorecard? If little or no change is experienced, leadership can look for obstacles or issues within the process.
Also, this look at measurement and alignment can help identify strengths to build on or weaknesses that should be targeted in the process. For example, a budgeting process that ties to strategic objectives can be linked to the Balanced Scorecard. This will ideally help to gain broader acceptance for the new tool. On the other hand, issues with “excessive measurement” or departments feeling disconnected from strategy provide opportunities to focus communication on Balanced Scorecard benefits relative to these problems. This communication may accelerate buy-in as staff and managers will see the Balanced Scorecard as solving a concern.
Given that we expect to see change and improvement in measurement and alignment, it is helpful to have a baseline—where are we now? Where were we prior to our Balanced Scorecard? If little or no change is experienced, leadership can look for obstacles or issues within the process.
Also, this look at measurement and alignment can help identify strengths to build on or weaknesses that should be targeted in the process. For example, a budgeting process that ties to strategic objectives can be linked to the Balanced Scorecard. This will ideally help to gain broader acceptance for the new tool. On the other hand, issues with “excessive measurement” or departments feeling disconnected from strategy provide opportunities to focus communication on Balanced Scorecard benefits relative to these problems. This communication may accelerate buy-in as staff and managers will see the Balanced Scorecard as solving a concern.
Conclusion
There are multiple ways to take and apply the topics covered in this article. An organization can informally assess its readiness or might choose to utilize outside experts or a survey instrument. Regardless of methodology, a readiness assessment is valuable for any hospital considering or even beginning the stages of developing a Balanced Scorecard.
Bob Stephen (703-250-2578) is a senior consutlant with Wipfli.