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Performance Measurement Strategies that Improve Your Bottom Line

It’s often said that “you can’t manage what you can’t measure.”  That seems to be more true today in our complex and inter-connected world than ever before.  But, many leaders are drowning in data, wondering not just how to measure what they manage, but how to manage their measures!  The phenomenon is sometimes called “DRIP” – being data rich, and information poor.

To understand the whole picture, smart organizations begin by aggregating their key performance indicators (KPIs) in a central repository.  That way, there’s a single “source of truth” and a way to monitor trends over time.  It also provides the opportunity to have data that covers the entire breadth of the business, not just one facet.  One common approach to making sure all the bases are covered is the use of a “balanced scorecard.”

The modern balanced scorecard was originated in the early 1990s by Dr. Robert Kaplan and Dr. David Norton as a performance measurement framework that combined traditional financial measures with strategic measures to provide a “balanced” view of an organization’s performance.  It has its roots in pioneering work done by General Electric and French process engineers in the 1950s on performance measurement.

Balanced scorecards traditionally look at organizations from four perspectives:

  1. Learning & Growth – Includes measures of employee training and competence along with measures of organizational cultural and attitudes.
  2. Business Process – Includes mission-specific measures of how well the organization is running and achieving its goals.
  3. Customer – Includes measures of customer and stakeholder satisfaction and loyalty, segmented for deeper understanding.
  4. Financial – Includes tradition measures of financial health like revenue, expenses, and profit along with more modern measures of risk and cost-benefit.

With a framework like a balanced scorecard driving what you measure, the next step is to ensure you understand what the measures are telling you.  The popular Baldrige framework uses an approach called “LeTCI” to evaluate performance measures:

  • Levels (Le) – The organization’s current level of performance (i.e., Where are you now?).
  • Trends (T) – The rate of improvement (slope) or sustainability of improvement (i.e., Are you getting better, worse, or sustaining?).
  • Comparisons (C) – How the organization’s performance compares to competitors or industry benchmarks (i.e., How do you rank against your peers?).
  • Integration (I) – How the result measures segment relevant data, predict future performance, and fit together to work in unison across the organization to support organization-wide goals (i.e., Do your measures all work together to tell the same story and point the organization in the right direction?).

One important part of LeTCI that is often over-looked is the “C” – making relevant comparisons to others.  If you’re a runner who cut your mile time from 12 minutes to 10 minutes to 8 minutes, you’re probably pretty happy with your level (Le) and trend (T).  But if you’re racing against a pack of 6 minute-milers, then you’re not going to be very happy with where you finish.  Understanding both your performance and where you rank against others is not only important to your improvement efforts, but it might also be critical to your bottom line.  For hospitals, percentile rankings are already used to help determine reimbursement levels for payments from Medicare.  So, you have to know not just where you stand, but where you stand against everyone else if you want to maximize your reimbursement.

So, how do you get a handle on it all?  Try these three steps to put it all together:

  1. Start With Your Mission – You can never go wrong by starting with your organization’s mission. What are you trying to accomplish and what measurements tell you whether you’re succeeding or failing?  If you start with those measures, you can delve deeper into the organization by looking at how each component (department, team, person) contributes to the mission-critical KPIs.
  2. Focus & Organize – Use a tool like the balanced scorecard to help you organize your measures into meaningful categories. Assign responsibilities (or owners) for each measure.  Set goals for each measure based on how they impact the delivery of service.  And, keep the number of measures small by asking: Does this really help me meet my mission, optimize my business processes, serve my customer, grow my employees, or achieve financial success?
  3. Aggregate & Analyze – Store your measures in one place with as much accessibility to your team, as possible. Make sure you analyze your data to understand levels, trends, and comparisons to improve performance.  Don’t forget that just improving your performance doesn’t necessarily mean you’re leading the pack.  Be sure to find relevant comparisons to others to truly know how you stack up.

If you need help choosing what to measure, building your own balanced scorecard, or just deciphering your data, please let us know.  We can help you turn data into information, improving patient outcomes and your bottom line.

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