Balanced Scorecard

As the debate over managed care continues, measuring quality has increasingly become a focus in health care. One approach to measuring quality is the use of a scorecard, which summarizes a critical set of indicators that measure the quality of care. The author describes the Balanced Scorecard (BSC), a tool developed for use in businesses to implement strategic plans for meeting an organization's objectives, and shows how the BSC can be adapted for use in behavioral health care. The scorecard addresses quality of care at five levels: financial, customer, outcomes, internalprocesses, and learning and growth. No more than four or five realistic objectives are chosen at each level, and an indicator for the achievement of each objective is designed. The BSC integrates indicators at the five levels to help organizations guide implementation of strategic planning, report on critical outcomes, and offer a report card for payers and consumers to make informed choices.
the balance scorecard offers a realistic model to base the companys strategic objectives, to put into practice the strategies, and to evaluate and assess performance based on the set objectives. There are four clear-cut standpoints from where the vision and mission statements are developed. These are the internal processes, financial, learning and growth, and customers. Internal processes correspond to the effect the quality of products and services brings to the consumers. It also aids in identifying business processes that should be operated on a continuously high standard of operation to satiate customers. Whether the organization is profit-driven or nonprofit-driven, expenses, funds, and budgets of the organization still requires monitoring. The financial viewpoint gives confirmation of whether the financial strategy of the organization is producing profits and reducing expenses. Learning and growth identifies staff characteristics and information technology the company should employ and acquire to attain the mission and provide satisfaction to the customers.

Customers in the profit-driven organizations sustain the financial standpoint. Customers in the nonprofit-driven organizations are the dominant factor because their prime objective is to provide satisfaction to the targeted constituents. Bullard recommended that to effectively implement and measure strategic objectives, a three to five year period is required contrary to the annual planning conducted by majority of the organizations that designs goals on a one to two year period only. .Mainly because of the volume of information to be processed in a balance scorecard, the three to five year lead time is to give adequate and realistic measurement to evaluate the effort brought about by the scorecard. There are steps required to implement the balanced scorecard: Create the mission statement, identify the vision, perform SWOT analysis, construct a map about the strategy, identify the theme/s of the strategy, and define objectives of the strategy and performance indicators. The mission statement should state why it exists in as brief and to the point as possible. It should also state how it can provide the most influence and impression on its stakeholders. For example, the mission statement of a restaurant can be to provide quality and delicious foods in affordable prices served in an ambient surrounding. The vision statement states what the organization intends to be in the future. In the restaurant example above, the vision statement can be to be the leader in the restaurant business locally and internationally. SWOT pertains to strengths, weaknesses, opportunities, and threats in the market. It helps identify the advantages as well as the stumbling blocks present in the organization that helps or prevents objectives from being actualized. The strategy map has ideas that are called the strategic themes, which are created to serve as identifiers of performance indicators. Two questions that need to be asked before the strategic planning process are: What is it? and Why is it important to the organization? Strategic themes distinguish very detailed things the organization must perform, conduct or implement to attain its mission statement. To obtain the success ratio, there is a need for performance indicators to be developed and applied. These indicators do not pertain to targets, quotas or any metrics. Rather, these indicators track whether a strategic objective is trending toward the positive or the negative. If trend is towards the

negative, the root cause of the negative trend should be determined. If trend is towards the positive, how to sustain the positive trend should also be identified.

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In the early 1990s, researchers Robert Kaplan and David Norton of the Harvard Business School determined that 90% of their private sector clients were unable to implement their own strategic objectives into daily operations (Niven, 2003). According to Kaplan and Norton (1992), the reasons why those organizations failed to realize ongoing, sustainable results are the same reasons why, over 20 years later, strategic planning efforts in many of today s public and nonprofit organizations continue to fail: conflicting and competing work priorities, declining revenues or sources of funding, more work done with less staff, increased costs, and lack of an effective approach to plan and execute strategy. While the success of private sector firms is measured by return on investment and profit margins, success in public and nonprofit organizations is primarily realized through constituent satisfaction and cost containment. Even though organizational structures, methods of operations, and values may differ among private, public, and nonprofit organizations, the challenge of performing and implementing strategic planning is common to all of them. Whether an organization is profit or people-driven, Kaplan and Norton s Balanced Scorecard provides a practical model for managers to define strategic themes and objectives, to implement strategy through all levels of the organization, and to measure performance. Simply stated, the Balanced Scorecard is a tool managers can employ to measure an organization s operational success through direct cause-and-effect linkages back into daily operations (Huselid, Becker, & Beatty, 2005).

What is it and how can it help me?

You can use the balanced scorecard to clarify your teams vision and strategy for improvement, turning them into clear objectives and measures. When does it work best? Organisations can use the balanced scorecard to ensure a whole system approach to preventing bottlenecks. To avoid the risk of creating bottlenecks, for example in diagnostic services such as pathology or imaging for example ensure that you refer to these departments as you plan and carry out your service improvement work How to use it Producing a balanced scorecard for an organisation as complex as an NHS trust is a major piece of organisational development work. It links directly to the work of the Healthcare Commission and its monitoring work at an organisation wide level. However, it is common practice to cascade balanced scorecards down to directorate and departmental levels. This means that the scorecard can dominate the monitoring activity of managers. The main stages in designing and implementing a balanced scorecard are: 1. Establishing a sound strategic foundation for the balanced scorecard 2. Producing a multi dimensional strategic summary 3. Setting objectives for each balanced scorecard perspective 4. Linking objectives via cause and effect 5. Determining measures for each objective 6. Setting targets for each measure in the balanced scorecard 7. Identifying strategic initiatives to deliver targets 8. Full implementation of the balanced scorecard The quality of metrics adopted can be assured using the performance measures sheet. The original authors, Kaplan and Norton define the balanced scorecard as follows: The balanced scorecard translates an organisations mission and strategy into a comprehensive set of performance measures that provide the framework for a strategic measurement and management system. The balanced scorecard retains an emphasis on achieving financial objectives, but also includes the performance drivers of those financial objectives. The scorecard measures organisational performance across four balanced perspectives: financial, customers, internal business processes and learning and growth. You should aim to develop specific performance measures relating to these four areas according to your needs and circumstances, and by considering the following questions:
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Financial: to succeed financially, how should we appear to our stakeholders? In the public sector, the financial perspective tends to emphasise cost efficiency

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Customer: to achieve our vision, how should we appear to the customers/patients/departments that we work with? Internal business processes: to satisfy our stakeholders and customers /patients/departments which internal processes must we excel at? Learning and growth: to achieve our vision, how will we sustain our ability to change and improve?

Figure 1

You then analyse each area to identify the key processes and metrics. This is most effective when it involves a wide range of staff. Figure 2

Examples What next? You should review the objectives and metrics in your organisations balanced scorecard to identify where they:
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Exist to support reducing waiting times government targets Are not explicit in a scorecard but support the achievement of targets Exist but hinder achievement of targets Are missing entirely from a scorecard

For example, a pathology department might measure the request to reporting time to GPs which would support the 18 week target. But its usefulness depends on the target time which triggers corrective action. If this has not been explicitly set, then the benefit is not made clear. On the other hand, the department may have a financial target to reduce costs by maintaining high vacancies to the detriment of waiting times. You will probably find it easier to spot supportive and hindering metrics and targets than missing targets. As with all business tools, if you are to use it successfully, you need full buy-in from staff and managers. Some heads of department may have adopted a balanced scorecard approach for their department independently of the rest of the organisation. If you are involved in change management for service improvement, it is worth asking managers if this is the case. You can then work with them on this methodology. It is probably worth carrying out a stakeholder analysis to identify the people that you need to involve, or at least influence.