Strategy Notes PDF

Strategy Most healthcare organizations have good strategic plans but what frequently fails is their execution This chapter demonstrates how the balanced scorecard can be an effective tool to consistently move strategy to execution First, we examine traditional mana...

Strategy Most healthcare organizations have good strategic plans but what frequently fails is their execution This chapter demonstrates how the balanced scorecard can be an effective tool to consistently move strategy to execution First, we examine traditional management systems and explore their failures Next, we review the theory behind the balanced scorecard and strategy mapping and explain the tools’ application to healthcare organizations  The Balanced Scorecard What gets measured gets managed  Roadblocks to Effective Strategy Execution The leadership team does not understand the strategy. The leadership team is overconfident. The organization is incapable of moving with speed and pace. The organization focuses on short-term goals. The strategy is too diffuse—it has too many goals. The communication of the strategy to the entire organization is poor. The strategy is not linked to organizational mission. Organizational leaders lack accountability. The Complex World of Today’s Healthcare Leader The day-to-day world of a current healthcare leader is intense Healthcare leaders often focus on urgent issues rather than strategy execution  Traditional Management Tools Operating Statistics Strategic Plan Operations Financial Management Results Control  Traditional Management Tools This management system frequently fails for a number of reasons Organizations are awash in operating data The strategic plans, financial reports, and operational reports created by different departments Each report reviewed by different managers Each report reviewed in different time frames No connection to each other  The Problem Poor linkage of strategic plan to operations and expected financial results; strategies are not “actionable” Strategies are not linked to departmental, team, and individual goals – simply reside on a shelf in the executive suite Time frame of strategy execution tends to be problematic Financial reports are generally timely and accurate but only reflect the current reporting period Strategies are not linked to both long-term and short-term resource allocation Feedback is tactical, not strategic (e.g., focuses on financial reporting only) The result—poor execution leading to poor outcomes  Balance on the Balanced Scorecard The key element of the balanced scorecard is balance. An organization can be viewed from many perspectives Four common perspectives: Financial stakeholders Customers Internal process and innovation Employee learning and growth Each perspective contains objectives, measures, targets, and actions Each measure in each perspective must be linked to the organization’s overall strategy The indicators that characterize performance in each of the four perspectives must be both leading (predicting the future) and lagging (reporting on performance today) Indicators obtained from both inside organization and external environment The Four Perspectives in the Balanced Scorecard Elements of the Balanced Scorecard Balanced scorecard is a key component in such a system and an effective tool for moving an organization’s strategy and vision into action Mission and vision and their relationship to strategy Perspectives Financial Customer Internal business process Learning and growing Strategic alignment—linking balanced scorecard measures to strategy Strategy maps Implementation of the balanced scorecard, including processes for identifying targets, resources, initiatives, and budgets Feedback and the strategic learning process—making sure the balanced scorecard works The Balanced Scorecard in Healthcare – Factors for Success Senior management support Central involvement of clinicians and some flexibility at lower levels Demonstration of empirical benefits Cascading [of the balanced scorecard] to lower levels Ongoing communication with all staff Regular management review and monitoring Supporting information technology for monitoring and reporting performance  Balanced Scorecard as a Strategic Management System Clarify and translate vision and strategy Communicate and link strategic objectives and measures Plan, set targets, and align strategic initiatives Enhance strategic feedback and learning  Feedback and the Strategic Learning Process Clarifying vision and strategy Communication and Strategic feedback linking strategy and learning Planning and target setting  Mission and Vision: Some Balanced Scorecard Examples Mission of Vincent Valley Hospital and Health System (VVH) is “to provide high-quality, cost-effective healthcare to our community.” Its vision is, “Within five years, we will be financially sound and will be considered the place to receive high-quality care by the majority of the residents of our community.” To accomplish this vision, VVH has identified several specific strategies: Achieve financial strength Develop reputation/brand Increase the volume of obstetric care Be able to demonstrate operational excellence Recruit five new primary care physicians Renegotiate health plan contracts to include incentives for improved chronic disease management Expand accountable care organization  With an effective strategic plan in place, the next step is to evaluate the plan’s implementation as viewed from each of the four perspectives (financial, customer, internal business process, and learning and growing) Placing a perspective at the top of a balanced scorecard strategy map means that results in this perspective include the final outcomes desired by an organization In most organizations, the financial view is the topmost perspective Therefore, the initiatives undertaken in the other three perspectives should result in positive financial performance for the organization  Financial Perspective Viewed from the financial perspective, the customer, operational, and learning and growing perspectives and their associated initiatives should lead to outstanding financial performance. If the organization is in a growth mode, its financial focus should be placed on increasing revenue to accommodate this growth. If it is operating in a relatively stable environment, the organization may choose to emphasize profitability. If the organization is stable and profitable, the focus can shift to investment—in both physical assets and human capital. Another major strategy in the financial domain is the diversification of revenues and expenditures to minimize financial risk  Customers—Market Segmentation In most healthcare operations, the customer is the patient Many hospitals and clinics also consider their community at large to be the customer. Physician is seen as the customer in many hospital organizations. Segment them into smaller groups What is the key value proposition to be delivered to the targeted market segment? Examples of Healthcare market segment: Patient with chronic illnesses (e.g., diabetes) Obstetric care Sports medicine services Cancer care Medicaid patients  Traditional Customer Measures Once market segments have been determined, a number of traditional measures of marketplace performance may be applied Market share, the most prominent Customer retention Customer acquisition Customer satisfaction Customer profitability  Customers: The Value Proposition Organizations create value to retain current customers and attract new ones Require product and service attributes Price leader for outpatient imaging ER – speed of delivery is critical Customer relationship More personal relationship of provider to patient (e.g., primary care) or not (e.g., anesthesiology) Image and reputation are strong influences in consumer behavior and can be competitive advantages for specialty care  Hospital Example Developed a value proposition for its obstetric services Market segment: pregnant women ages 18–35 Product attributes for this market Quick access to care Warm, welcoming facilities Customer relations Strong relationships with nurses, midwifes, and doctors Image High-quality care Excellent referrals and transport for high risk  Hospital determined the following metrics to measure each attribute: 1) The time from arrival to care in the obstetric suite 2) A patient survey of facility attributes 3) A patient survey of satisfaction with staff 4) The percentage of high-risk newborns referred and transported, and the clinical outcomes of these patients  Internal Business Process The third perspective in the balanced scorecard is internal business processes or operations—the primary focus of this book Identify Create the Product/ Market Service Innovation Build Product/ Deliver Service Operations Service Process Post-Sale Services  Innovation Any well-functioning healthcare organization has in place a purposeful innovation process Identify a potential market segment Two primary questions must be answered: 1) What benefits will customers value in tomorrow’s market? 2) How can we innovate to deliver these benefits? Once these questions have been researched and answered, related products can be created If a new service is on the clinical leading edge, it may require additional research and testing A more mainstream service calls for competitor research and review of the clinical literature  Measures for Product Development Standard innovation measures used in many industries outside healthcare include: Percentage of sales from new products Percentage of sales from proprietary products Number of new product introductions per year Time to develop new products Time to break even (development cost = accumulated profit)  Operations Process The case for process improvement and operations excellence is made throughout this book Process optimization Statistical process control Lean Six Sigma Quality function deployment Real-time simulation and control  Post-Sale Services Poorly executed in most of healthcare delivery organizations Most common post-sale contact with patient is incorrect bill Patient with Follow-up information on services Reminders to patients with chronic diseases Feedback on product performance to drive improvement Well-designed patient experience surveys “From your perspective, how could our organization improve?” “How else can we serve your healthcare needs?”  Challenge of External Operational Metrics Today and into the Future Influence of value purchasing on business process perspective Value purchasing emphasizes meeting external goals Complicates strategy maps 2019 CMS implementation of Merit-Based Incentive Payment System (MIPS) for physician compensation MIPS introduces many new metrics and publicly reported quality measures MIPS contains more than 200 metrics Temptation to develop strategy linking physician payment to MIPS metrics Temptation to develop overly complex scorecards  Learning and Growing Perspective The final perspective from which to view an organization is employee learning and growth To execute a strategy well, employees must be motivated and have the necessary tools to succeed Three critical aspects of learning and growing: employee skills and abilities, necessary information technology (IT), and employee motivation Results Employee Employee Retention Productivity Employee Satisfaction Staff Information Technology Employee Competencies and Data Motivation  Employee Motivation - Measures of Employee Satisfaction A progressive culture and motivated employees are clearly competitive advantages Level of involvement in decision making Recognition for doing a good job Amount of access to information Level of encouragement of creativity and initiative Support for staff-level functions Overall satisfaction with the organization Turnover rate Absenteeism rate Training hours per employee  Drivers of Learning and Growing Reskilling Level and intensity of reskilling Number of employees involved Information systems capabilities Motivation, empowerment, alignment Suggestions and involvement in decisions Team performance and rewards Personal alignment and rewards These three aspects of learning and growing—employee skills, IT, and motivation— all contribute to employee satisfaction. A satisfied employee is productive and tends to remain with the organization. Employee satisfaction, productivity, and loyalty make outstanding organizational performance possible. Strategic Alignment: Linking Measures to Strategy Cause-and-effect relationship Outcomes and performance drivers Link to financials  Cause-and-Effect Relationships A strategy is set of hypotheses about cause and effect (“if, then” statements—e.g., “If the wait time in the emergency department is decreased, then the patient will be more satisfied.”) Every measure selected for a balanced scorecard should be an element of a chain of cause-and-effect relationships that communicates the organization’s strategy Outcomes and Performance Drivers Measures can be categorized into two types of indicators Outcome indicators – “Lagging indicators” Result from earlier actions Examples: profitability, market share, patient satisfaction Performance drivers – “Leading indicators” Predict the future Are specific to strategy Examples: emergency room wait time, remodeling on time lines Need equal mix of both types Suggested maximum is 20 measures Simple indicator such as time to next appointment for patient scheduling actually tracks many complex processes in an organization  Link to Financials Financial goals are topmost in balanced scorecard Each other strategy eventually needs to link to financial goals Some healthcare organizations make the customer/patient topmost  Strategy Maps and Initiatives Method to graphically display initiatives, outcome, and performance driver indicators A set of initiatives should be linked Can be small action or major project “If, then” statements Links to top quadrant results (finance, customer) Causal pathways need to be clear and quantitative, if possible Metrics Leading Lagging Dates  General Strategy Map Improve Finance financial results Improve marketing Customers and customer service Improve Business operations Processes Learning Provide employees and Growth with skills, tools, and motivation  Obstetric (OB) Service Strategy Map Increase net revenue Finance of OB product line: Goal = 10% Measure market share: Goal = 5% increase Customers Measure patient Measure patient satisfaction Measure patient satisfaction (facilities): (perceived clinical quality): satisfaction (high touch): Goal: >90% Goal: >90% Goal: >90% Remodel OB Contract for emergency Begin tours and survey: Business suite: transportation: Goal = patient Processes Goal = complete Goal = 10 runs/month satisfaction >90% by November 1 Learning Customer service training: and Growth Goal = 90% avg. score  Emergency Department (ED) Strategy Map Increase net revenue of ED product line: Finance Goal = 10% Measure market share: Goal = 5% increase Customers Measure patient wait time: Goal: