john f. talbot, ph.d., executive vice president and senior

John F. Talbot, Ph.D., Executive Vice President and Senior Associate, OPEN MINDS2012 OPEN MINDS Best Management Practices InstituteFebruary16, 2012 / 9:15am

• How to develop a culture of organizational measurement

• The four cornerstones of metrics-based management

• The importance of strategic data-based decision making

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How To Develop A Culture Of Organizational Measurement

• Whatever gets measured…◦ Gets attention◦ Gets done

• If you don’t measure it, you can’t manage it

• Metrics-based management is a performance management system that relies on three components, each of which must be quantitatively and qualitatively expressed.◦ Current state: baseline measures of your

organization’s current performance◦ Desired state: where your organization wants to

be regarding key priorities◦ Bridging the gaps: a definitive plan for how you'll

move your organization to achieve the desired performance

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Opinions

Decisions

Opinions

Decisions

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Data

AnalysisDecisions

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1. Clear agreement on strategy among senior management

2. Effective communication of strategy throughout the organization

3. Good cooperation and teamwork among management

4. Information within the organization is shared openly and candidly

5. Unit performance measures are linked to strategic organizational measures

6. Individual performance measures are linked to unit measures

7. High levels of self-monitoring by employees

• Stage 1: Data Collection: Knowing what data needs to be captured and setting up the procedures for the same. This can be more challenging if it is to be enforced on a group or organization

• Stage 2: Initial Analysis: What reports can be generated? Is data correct? Is data being collected sufficient? Do the numbers make sense? Don't jump to conclusions based on initial analysis in your excitement

• Stage 3: Benchmarking: It is time to set goals by benchmarking the data with industry peers and market demand.

• Stage 4: Decision Making and Process Improvement: Take decisions based on data collected to alter your processes and also look at improvements in data being collected and ensuring quality of data..

• Stage 5: Follow up and continuous improvement: Follow up on the decisions taken for process improvement and measure effectiveness of the decisions after new numbers are available. Do this repetitively.

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Learning about markets, customers,

competitors, and processes

Measure the metric

Analyze the metrics

Identify improvement opportunities

Design and develop improvement

Launch the improvement

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• Executive team and board interaction• Business unit manager accountabilities• Supervisory positions and their reports

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• Cultural shift toward accountability for performance metrics – executive team, program managers, and supervisors

• Role of the manager is to ensure the targets are met – planning, human capital, processes, policies, etc.

• Metrics should be integral part of individual performance evaluations and compensation

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• Transactional leadership is about coping with complexity – purpose is to keep current system functioning and improve current system ◦ Planning and budgeting◦ Organization structure and staffing◦ Organizational controls, monitoring, and problem

solving• Transformational leadership is about coping

with change – purpose is to produce useful, non-incremental change system ◦ Setting a direction◦ Aligning people in the organization◦ Motivating people in the organization

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Traditional “The New Normal”Inwardly and historically focused

External market orientation

Slow to plan and make decisions Quick to plan and make decisions

Risk averse Risk tolerant

Few performance info systems Widespread real-time performance measurement

Performance data to execs Performance data to all staff

Compensation based on process and tenure

Compensation based on results

Centralized control Decentralized empowerment

Bureaucratic and multi-level Non-bureaucratic with few levels of management

Management training to senior staff only

Widespread staff management training

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The Four Cornerstones Of Metrics-based Management

Management Dashboards & AlertsManagement Dashboards & Alerts

Benchmarking & Performance TargetsBenchmarking & Performance Targets

Key Performance IndicatorsKey Performance Indicators

Routine Operational & Management ReportsRoutine Operational & Management Reports

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Start your metrics management approach by ensuring that staff have access to data via routine reporting to manage

day-to-day operations and supervise staff

• These ensure that all staff has access to the accurate, up-to-date information that they need to do their jobs on a daily basis.

• With roughly ninety percent of the reporting needs for organizations being planned and predictable, this simply means producing and using meaningful reports from the management information system and making certain that staff know how to use them.

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1. Caseload report 2. Staff productivity report3. Care access measures reports4. Waiting list5. Closed case notification6. Care provider and program admissions

report by client7. External referral report8. Internal referral report

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9. No-show and cancellation report10. Discharge report11. Consumer demographics reports12. Mandated treatment monitoring reports13. Medication profile and report14. Daily census15. Tickler report16. Crisis call tracking

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17. Aged trial balance report18. General ledger posting report19. Missing demographics report20. Missing service authorizations report21. Service authorization warning report22. Outcome reports23. Average length of stay report24. Dismissal report

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• Internal reports are reports identified for use by the agency staff to manage operations.

• External reports are those required periodically by outside parties (such as state agencies).

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• Additionally, reports are given a preliminary priority level by the management team.

• The priority levels are as follows:◦ Priority One – An essential report that must be

operational on the day the organization begins to use its new software application.◦ Priority Two – A non-essential report, but highly

desired as soon as possible after the new software implementation.◦ Priority Three – A non-essential report, but

anticipated as part of a longer term expansion of management reporting and enhanced operations

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• Key performance indicators (KPIs) are financial and non-financial measures used by management team to ensure that organization is on track with strategic objectives

• KPIs represent those data points that measure the “health” of your organization

• KPIs are typically tied to an organization's strategy using concepts or techniques such as the Balanced Scorecard

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• A ideal KPI is a key part of a measurable objective, which is made up of a direction, KPI, benchmark, target, and time frame.

• For example: "Increase average revenue per customer from $30 to $50 by 2008." In this case, 'Average revenue per customer' is the KPI.

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• A KPI should follow the SMART criteria. • This means :◦ The measure has a Specific purpose for the

business.◦ It is Measurable to really get a value of the KPI.◦ The defined norms have to be Achievable.◦ The KPI has to be Relevant to measure (and

thereby to manage).◦ It must be Time phased, which means the value or

outcomes are shown for a predefined and relevant period.

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• Lagging indicator

• Coincident indicator

• Leading indicator

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• Provide a way to see if our strategy is working• Focus employees' attention on what matters

most to success• Allow measurement of accomplishments, not

just of the work that is performed• Provide a common language for communication• Are explicitly defined in terms of owner, unit of

measure, collection frequency, data quality, expected value (targets), and thresholds

• Are valid, to ensure measurement of the right things

• Are verifiable, to ensure data collection accuracy

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• Monitor representative metrics of organization’s performance

• Proactively address problems (“leading indicator” concept)

• Use as guide to selecting issues for further exploration

• To stretch to better performance!

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• The first Balanced Scorecard was created by Art Schneiderman in 1987 at Analog Devices

• He participated in an unrelated research study in 1990 led by Dr. Robert S. Kaplan and during this study described his work on Balanced Scorecard.

• Kaplan and David P. Norton included anonymous details of this use of Balanced Scorecard in their 1992 article The Balanced Scorecard - Measures that Drive Performance" (Harvard Business Review).

• In 1996, they published the book The Balanced Scorecard: Translating Strategy into Action

• Due to these works, Kaplan and Norton are often seen as the creators of the Balanced Scorecard concept

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• Design of a balanced scorecard ultimately is about the identification of a small number of financial and non-financial measures and attaching targets to them, so that when they are reviewed it is possible to determine whether current performance 'meets expectations.

• The idea behind this is that by alerting managers to areas where performance deviates from expectations, they can be encouraged to focus their attention on these areas, and hopefully as a result trigger improved performance within the part of the organization they lead.

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• Translating the vision into operational goals• Communicating the vision and link it to

individual performance• Feedback and learning, and adjusting the

strategy accordingly

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• Based on assumption that focusing on financials alone is path to failure

• Balanced set of KPI reflect four key management perspectives◦ Financial performance◦ Customer performance◦ Organizational innovation◦ Internal operations (clinical and administrative)

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• Encourages the identification of a few relevant high-level financial measures

• Choose measures that help inform the answer to the question "How do we look to shareholders?“

• Timely and accurate funding data will always be a priority

• Emphasis on financials alone leads to the "unbalanced" situation with regard to other perspectives

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• Encourages the identification of measures that answer the question "How do customers see us?”

• Multiple customers:◦ Consumers and families◦ Payers and funders◦ Other community stakeholders

• These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs

• Typically these are satisfaction and outcome measures

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• Encourages the identification of measures that answer the question "What must we excel at?“

• This perspective refers to internal business processes and operations.

• Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission).

• Typically, these include metrics measuring the health of our various administrative departments and other key operations

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• Encourages the identification of measures that answer the question "Can we continue to improve and create value?“

• This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement.

• Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed.

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• Increase focus on strategy and results• Improve organizational performance by

measuring what matters• Align organization strategy with the work

people do on a day-to-day basis• Focus on the drivers of future performance• Improve communication of the

organization’s vision and strategy• Prioritize projects / initiatives

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• Revenues by line of business • Expenses by line of business • Profit/loss by line of business • Unit cost by service by site• Cash reserves

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• Number of referrals by referral category • Discharges by reason category • Number of complaints• Number of critical incidents• Return rate after intake by site

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• Number of new hires• Number of terminations• Rolling turnover rate (3-month) by site by

category• Percent claims denied• No show rate for intake• No show rate for MDs• Percent of staff who met clinical productivity

requirements by site

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• Number of crisis responses, after hours• Number of crisis responses, daytime• Percent of crisis responses resulting in

hospitalization• Quality of care metrics

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• Number of linkages and new resources in community

• Number of new programs implemented• Expense reductions due to improved

processes

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Operating UnitPerformance Indicators

Organization StrategicPlan & Objectives

Operating Unit Plan & Objectives

Program Plan& Objectives

Overall AgencyPerformance

Organization-WidePerformance

Indicators

Program-SpecificPerformance Indicators

• The third cornerstone is using benchmarks and performance targets to challenge and drive continuous improvement in service quality and operations.

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• To compare with other firms in your industry• To develop cross-industry comparisons• To develop points of reference or standards

of practice• To make best-in-class determinations• To develop best practices

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• Establish your KPIs• Conduct research to find appropriate

benchmarks• Compare your KPIs with benchmarks• Analyze gaps• Modify your KPIs as needed◦ Incremental versus stretch targets

• Continued measurement

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• Best in class within behavioral health• Best in class in healthcare• Best in class in other industries

Beware the “benchmarking mediocrity” trap!!

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The Importance Of Strategic Data-Based Decision Making

• The last phase in implementing metrics-based management is to make certain that your managers and staff cannot miss key performance information by using some form of a management dashboard.

• Typically, management dashboards or alerts include discrete performance metrics that measure critical operational components of your organization.

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• A computer interface that organizes key performance indicators in an easy to read format, displaying the information that executives need to run an organization.

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1. An intuitive graphical display that is thoughtfully laid-out and easy to navigate

2. A logical structure that makes information easily accessible

3. Little or no user training is required4. Data displays that can be customized and

categorized to meet the specific needs of each user.

5. Regular and frequent updates of dashboard information for accuracy and relevance to current conditions

6. Information from multiple sources, departments, or markets can be viewed simultaneously

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• Step One: Select metrics for the dashboards◦ Use select KPIs or other performance measures for

the management team dashboard◦ Select job specific metrics for managers and other

operational staff• Step Two: Select a reporting services tool to

create your dashboards:◦ The purpose of these tools is to simply "get out"

what was "put in” to your data systems.• Step Three: Test drive the dashboards and

train staff how to use them.

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2012 Planning & Innovation InstituteJune 6-8, 2012 – New Orleans, Louisiana

2012 Executive Leadership InstituteSeptember 12-14, 2012 – Gettysburg, Pennsylvania

2012 Technology & Informatics InstituteOctober 17-18, 2012 – Baltimore, Maryland

2013 Performance Management InstituteFebruary 14-15, 2013 – Clearwater, Florida

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john f. talbot, ph.d., executive vice president and senior

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