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.
“The strategy map provides you with a strategic blueprint that drives your organization's strategy,” Dr. Martini continues. “The drawback is that sometimes the cause-and-effect relationships between objectives can get very confusing for staff to interpret. However, whenever we got stuck in our strategic planning process, we always reverted back to the strategy map to get us grounded again.”
Raggio also believes that strategy maps can be difficult to understand, but she says that as her organization implemented scorecards and strategy maps, they became easier to use. This difficulty stems from several factors. First, strategy maps are static snapshots of a dynamic process and are not able to incorporate all the richness of the action they represent. Because of this, most maps have at least some “loose ends” so that all the components do not fit neatly together. People with low tolerance for ambiguity might have problems dealing with this aspect of strategy maps. People not visually oriented in their thinking also might have problems using strategy maps, and they perhaps should consider another strategic planning method. Strategy maps always should have a corresponding written description available for team members that relate better to words than pictures.
While some team members may see just text boxes and lines in these maps, others see the dynamic relations between aligned strategies. For example, strategy maps can show how customer service training objectives support customer satisfaction and ultimately customer retention. Such maps also can help an organization identify an isolated strategy not effectively linked to the rest of the scorecard. For example, some organizations may establish an objective to have a strong Internet presence that is not aligned with or supported by any other objectives, such as technical training, improved technical infrastructure, recruitment of technically proficient staff, etc.
As organizations’ objectives change, so do their strategy maps. At LifeSpring, Inc., a comprehensive behavioral health organization serving southern Indiana, strategy maps are updated at an annual strategic planning retreat. After a day of reviewing data and reports, and hearing guest speakers describe current and future trends, the organization spends the next day revising its strategy maps, which are used to generate BSC objectives. One of strategy mapping's main benefits for LifeSpring is that it forces the organization to commit to a focused strategic course of action, rather than trying to be “all things to all people.”
The following guidelines for behavioral healthcare administrators who are building their own strategy maps are adapted and expanded from Mohan Nair's recent book Essentials of Balanced Scorecard:
Designate a handpicked team that represents the entire organization.
Invest sufficient time and resources for this project.
Meet in an off-site conference facility to avoid distractions.
Use your preferred techniques (brainstorming, fish bone diagrams, etc.) to develop ideas.
Identify and show key perspectives, cause-and-effect relationships, and initial key metrics.
Encourage listening and interactive discussion to develop new and deeper insights.
Consider the use of a consultant or facilitator.
Ensure the team is given time for preparation and assigned appropriate readings in scorecard and strategy approaches for the organization and the competition.
Strive to make the process creative and enjoyable.
Strive to make a complex business process simple in terms of expression of strategy.
Strive to create a visual representation of the strategy that can legitimize and capture the commitment of others within the organization.
Consider assigning an individual to maintain and update the strategy map.
Use the map to communicate organizational strategy, as this picture is worth a thousand words.
Vinfen's Dr. Martini asserts that, “The development of the strategy map is the most important part of the BSC development and ultimately of your strategic planning process.” For many strategy maps can help answer the behavioral healthcare manager's most elusive question: Where can I best spend my time and resources?
This article is just a taste of scorecards and strategy maps. Scorecards and strategy maps can evolve into complex diagrams to best optimize an organization's strategic planning process. If you would like more complex examples of these concepts, please contact me at firstname.lastname@example.org.Terry L. Stawar, EdD, is President and CEO of LifeSpring, Inc., a community mental health center serving six counties in southern Indiana. He has been active in community mental health for more than 30 years. Dr. Stawar wrote about strategic marketing in the February 2006 issue of Behavioral Healthcare, page 17.
- Kaplan RS, Norton DP. The Balanced Scorecard: Translating Strategy Into Action. Boston:Harvard Business School Press; 1996.
- Kaplan RS, Norton DP. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Boston:Harvard Business School Press; 2001.
- Kaplan RS, Norton DP. Strategy Maps: Converting Intangible Assets Into Tangible Outcomes. Boston:Harvard Business School Press; 2004.
- Nair M. Essentials of Balanced Scorecard. Hoboken N.J.:John Wiley and Sons; 2004.
- Niven PR. Balanced Scorecard Diagnostics: Maintaining Maximum Performance. Hoboken N.J.:John Wiley and Sons; 2005.
- Niven PR. Balanced Scorecard Step-by-Step for Government and Nonprofit Agencies. Hoboken N.J.:John Wiley and Sons; 2003.
- Olve NG, Petri CJ, Roy J, Roy S. Making Scorecards Actionable: Balancing Strategy and Control. Chichester West Sussex England:John Wiley and Sons; 2003.
Figure 1. Vinfen's BSC.
Figure 2. PPBHG's basic strategy map.
The Balanced Scorecard Collaborative, Inc. (http://www.bscol.com) is dedicated to the worldwide awareness, use, enhancement, and integrity of the BSC as a value-added management process. It provides advisory, educational, online, and training services.
The Balanced Scorecard Institute (http://www.balancedscorecard.org) provides training, consulting, and guidance to assist government agencies and companies in applying BSC best practices in performance measurement for strategic management and transformation.
The Balanced Scorecard User Group (http://www.scorecardsupport.com) is a peer-to-peer support community dedicated to the BSC approach to strategic management. A wide range of features are available, designed to enable members to mutually assist each other in understanding and implementing this method. Access and membership are free.
ScorecardforSkills.com (http://www.scorecardforskills.com) helps organizations measure and demonstrate the relationship between their workplace education investments, including workplace basic skills, and measures of organizational performance. By working through this site, you will be able to produce your own BSC.