Using the Balanced Scorecard as an FQHC Strategic Planning Framework

1. Using the Balanced Scorecard as an FQHC Strategic Planning Framework Bonita Springs, Florida July 29, 2008 Gregory Wolf Senior Consultant and Chief Technology Officer a Stroudwater Associates company

2. Today’s Agenda • Balanced Scorecard Overview • Balanced Scorecard Definition and Objectives • Linking FQHC Strategy to a Scorecard • Introduction to Strategy Maps • Strategy Mapping Exercises • Candidate Indicators/Scorecard

3. The Balanced Scorecard is a framework that helps organizations translate strategy into operational objectives that drive both behavior and performance. Kaplan and Norton’s The Strategy Focused Organization

4. The Balanced Scorecard measures strategy.

5. “Strategy has never been more important” Business Week “Less than 10% of strategies effectively formulated are effectively executed” Fortune Magazine “In reality, strategy is less than half the battle. .. In the majority of cases – we estimate 70% – the real problem isn’t [bad strategy]…. It’s bad execution.” “Why CEO’s Fail,” Ram Charan and Geoffrey Colvin Fortune (6/21/99)

6. What is Strategy? Strategy is the creation of a unique and valuable position. Strategy requires trade-offs in competing –what NOT to do. Strategy involves a “fit” among a hospital’s activities.

7. The Vision Barrier Only 5% of the work force understands the strategy The People Barrier The Management Barrier Only 25% of managers have incentives linked to strategy 85% of executive teams spend less than one hour per month discussing strategy 60% of organizations don’t link budgets to strategy The Resource Barrier Why Do Strategies Fail? Four Barriers toStrategy Execution Kaplan and Norton’s The Strategy Focused Organization

8. Provide a framework to translate strategy into operational terms Create a systems approach to form an integrated Strategic Management Process Provide a tool for communicating the: strategy processes and systems required for implementing the strategy Draw a cause and effect roadmap in a one page strategy map BSC Objectives

9. The Balanced Scorecard tracks performance of the factors that create long-term economic value in an organization Customer Focus: satisfy, retain and acquire customers in targeted segments Clinical/Business Processes: deliver the value proposition to targeted customers Organizational Learning & Growth Financial Health and Accountability Customers Finances Processes People

10. MISSION VALUES VISION The Balanced Scorecard STRATEGIC OUTCOMES SatisfiedCOMMUNITY Delighted CUSTOMERS Efficient &EffectivePROCESSES Motivated &PreparedWORKFORCE STRATEGY: Our game plan STRATEGIC INITIATIVES: What we need to do PERSONAL OBJECTIVES: What I need to do

11. The Balanced Scorecard Provides a Four Perspective Framework for Boards to Translate Strategy Into Operational Terms The Mission Vision and Values Financial Perspective • Profitability • Growth • Operational Efficiency What financial resources are required to fulfill our mission? Customer Perspective • Measurement is the language that gives clarity to vague concepts • Measurement is used to communicate, not simply to control • Confidence • Service • Quality What do customers want, need, or expect? Internal Perspective • Patient Safety • Operational • Improvement • MD Needs To satisfy our customers, at which clinical/business processes must we excel? Learning and Growth • New Skills • Strategic Awareness • Technology What type of culture, skills, and technology are required?

12. Statement of what strategy must achieve and what’s critical to its success How success in achieving the strategy will be measured and tracked The level of performance or rate of improvement needed Key action programs required to achieve objectives Objectives Measurement Target Initiative • On Ground Time • On-Time Departure • 30 Minutes • 90% • Cycle time optimization • Fast ground turnaround Southwest Airlines Strategic Theme: Operating Efficiency Financial Profitability Lower Costs Increase Revenue Customer Flight is on time Lowest prices Internal Fast ground turnaround Learning Ground crew alignment

13. Southwest Airlines Strategic Theme:Operating Efficiency Objectives Measurement Target Initiative Financial • Market Value • Seat Revenue • Plane Lease Cost • 30% CAGR • 20% CAGR • 5% CAGR • Profitability • More Customers • Fewer planes Profitability Lower costs Increased Revenue • FAA On Time Arrival Rating • Customer Ranking (Market Survey) • #1 • #1 • Quality management • Customer loyalty program • Flight is on -time • Lowest prices Customer Flight is on Time Lowest Prices • On Ground Time • On-Time Departure • 30 Minutes • 90% • Cycle time optimization program Internal • Fast ground turnaround Fast Ground Turnaround • % Ground crew stockholders • % Ground crew trained • yr. 1 70%yr. 3 90%yr. 5 100% • ESOP • Ground crew training • Ground crew alignment Learning Ground Crew Alignment

14. FUTURE (Continuous Learning) • Dialogue about performance • Explain anomalies • Suggest solutions • Identify issues • Identify strategic issues for next discussion at next group meeting DiscussImplications (30%) • Review performance data (available on-line) Review PastPerformance (10%) THE QUARTERLY STRATEGIC REVIEW MEETING BETWEEN THE MEETINGS PRESENT (Event-Driven Learning) Review StrategicIssues (30%) Review StrategicIssues (60%) • Provide input to strategic issues currentlybeing worked DiscussImplications (30%) Review PastPerformance (40%) THE QUARTERLY REVIEW MEETING The Balanced Scorecard Collaborative

15. Strategy Mapping Exercises

16. RPM Briefing Book Review and Web Demo

17. Balanced Scorecard Report