Well over half of American corporations are using some version of Robert S. Kaplan and David P. Norton's “Balanced Scorecard” (BSC) approach to strategic planning. The BSC also has become de rigueur for most progressive behavioral healthcare organizations, as it provides the framework for the long sought after “dashboard” of critical performance metrics and a method for identifying truly strategic themes. Other advantages include its intense focus, the synergy it promotes, and its ability to be effectively communicated to all levels of the organization. This article gives you an idea about how the BSC (and a related concept, strategy maps) can help you formulate a more focused organizational strategy.
The Balanced Scorecard
From its beginning, as a method of assigning value to both financial and nonfinancial aspects of an enterprise, the BSC has had great appeal in providing a practical tool for strategy development and implementation. Starting with a seminal Harvard Business Review article and then mushrooming through a series of articles and books, the BSC is now a full-fledged industry in its own right.
The BSC approach is essentially a strategic management system. It encourages managers to intensely focus on a small number of critical performance metrics that drive success. Instead of short-term financial gain, the BSC promotes long-term sustainable growth through “balancing” the financial perspective with customer, internal process, and learning/growth perspectives.
Figure 1 displays the BSC of Vinfen, the largest human services provider in Massachusetts. Using the four perspectives, Vinfen has identified 13 key areas in which it needs to excel to attain its overall goal of “breakthrough” performance: partnering with payers to provide the best possible service. Breakthrough performance occurs when an organization does something different that results in a significant gain (greater than 50% improvement). The strategic question becomes, “At what must we excel from each of the four perspectives in order to achieve breakthrough performance?” Examples of breakthrough performance in behavioral health include a 50% improvement in billable hours produced, a 50% reduction in the cost in a unit of a specific service, a 60% increase in first-party collections, or a 75% reduction in the use of restraints.
Fledgling BSC users will be tempted to use the four perspectives simply as a convenient way to organize traditional goals and objectives, but this neglects the great advantage of the BSC approach—the linkage of objectives and the creation of synergy. All objectives must be strategic (not just operational) and reinforce each other. The BSC can help an organization condense and integrate (modulate) the huge number of goals and objectives that many organizations acquire as bureaucratic baggage over the years.
A functional BSC typically will limit the overall number of strategic objectives to around 12 or fewer. Trying to juggle a large number of nonstrategic objectives prevents the creation of the intense focus needed to excel. It also makes the BSC more difficult to communicate to staff and board members.
Marty Martini, PhD, is vice-president of behavioral health and BSC coordinator for Vinfen. Vinfen has been using the BSC for the past four years with great success, winning the National Council for Community Behavioral Healthcare's Negley President's Award three times. “I see the benefit of the Balanced Scorecard to our organization everyday,” Dr. Martini says.
Sharon Raggio, MBA, LMFT, LPC, chief operating officer of Pike's Peak Behavioral Health Group (PPBHG) in Colorado Springs, Colorado, says that her organization has been using the BSC for four years, as well. The Pike's Peak Mental Health Center, a member of PPBHG, won a prestigious Ernest Amory Codman award in 2005 from the Joint Commission on Accreditation of Healthcare Organizations for its successful implementation of a recovery-based substance abuse program (see the March 2006 issue of Behavioral Healthcare, page 36). Raggio says the BSC is an excellent tool that helped her organization transform a major change effort (converting to a recovery model) into the “bite-sized chunks” necessary for implementation.
Early in their BSC consulting work, Kaplan and Norton noticed that executives “instinctively” started drawing arrows to link objectives among the four BSC perspectives. They soon incorporated this visual aid into their coaching and christened the diagram a “strategy map” that describes cause-and-effect relationships among BSC objectives. They now believe the strategy map is as important as the BSC.
Figure 2 displays PPBHG's basic strategy map. This simple but elegant diagram illustrates the linkages between objectives from the four BSC perspectives. Synergy is illustrated, as the various strategies support and reinforce each other. For example, unit cost is directly linked to staff training, improved access, and increased productivity. Well-trained staff are more productive, and increased access is associated with more potential service units. All together this results in a lower unit cost.
“Vinfen uses the strategy map as a guide to direct the organization toward its strategic goals,” says Dr. Martini. “The strategy map outlines strategic themes within each perspective that support the organization's breakthrough objective for the year and ultimately supports the mission, vision, and values of the organization.