By Carol Duncan Clayton, Ph.D., Senior Associate, OPEN MINDS
As management guru Peter Drucker said, “What gets measures is what gets done.” The surest way to ensure implementation of the strategic plan is to translate the plan objectives into quantifiable metrics and to hold executive team members and managers and staff at all levels accountable to achieving those metrics. The question our team at OPEN MINDS often gets is “But what metrics should we set for the strategic plan?” While there is no formula or template, following a defined process will result in establishing meaningful measures of success. We’ve defined the 12-step process to becoming a data-driven organization (see 12 Steps To Creating Your Data-Driven Organization). And here, we narrow down the steps pertinent to setting strategic plan metrics.
Once the strategic plan is finalized and approved, with clear overarching objectives and strategic initiatives, executive teams should follow a five-step process to establish metrics—break down objectives into key performance indicators (KPIs) for each business unit or domain, work with business unit leaders to establish KPIs, determine how data will be measured and shared, cascade the metrics down to the individual level, and establish a review and action framework for when targets are not being achieved.
Translate Strategic Objectives Into Key Performance Indicators
Ideally, your strategic plan should have no more than three to five overarching objectives for the organization as a whole. And a well-constructed strategic plan should identify a handful of key strategic initiatives designed to achieve those objectives. Strategies are the plan for “how” your organization is going to accomplish the objectives—not the action items. Strategic initiatives can include developing new services lines, expanding into new markets, pursuing acquisitions, improving margins on selected services, changing business development strategies, etc.—all dependent on the specific organization and its specific objectives.
The overarching objectives should be broken down into key performance indicators for each business unit or domain for every one of the strategic initiatives. A key performance indicator (KPI) is a metric used to measure and track progress toward achieving a specific objective. KPIs are quantifiable, measurable, and intended to indicate if an organization is hitting its targets. Ideally, KPIs should specify a frame of comparison—the current level of something and what it will increase or decrease to and by when.
For example, a strategic objective to “Become the market leader in providing xx type of services in xx region” could break down to outcome measures for the clinical, marketing, and customer service units. For the clinical unit, KPIs could be “Reduce hospital readmissions by xx% from current levels” or “Proactive outreach to xx consumers with PHQ-9 scores above xx” or “Establish workflows and protocols to adopt xx new evidence-based practices” For the marketing unit, KPIs might look like “xxx website visitors in 2021, resulting in xx inquiries about services.” A business development unit’s performance may be measured in terms of new payer contracts procured, rate increases negotiated, or number of visits resulting from community partner referrals. For customer service, the KPIs may relate to how quickly calls are answered, reduced wait times for appointments, a certain number of positive online review by consumers, or improvement in net promoter score. For the technology department, the objective might translate to a performance metric such as “Set up online appointment scheduling capability and train xx staff.” For the finance department, the KPI may be to “Reduce the billing cycle by xx days.”
My colleague and OPEN MINDS Senior Associate Ken Carr recommends sample KPIs in six performance domains—high performance on payer contracts, the speed and cost factors, the consumer experience, clinically cutting-edge, and financial sustainability (see Experience Alone Is Not Enough For Decisionmaking: Using Metrics To Develop & Evaluate Your Strategic Plan).
Depending on your strategic objectives, there are six core areas in which KPIs should be established to determine organizational strengths and growth, according to OPEN MINDS Chief Executive Officer Monica E. Oss (see For The Next Normal, Ready = Resilient). Portfolio strength is determined by analyzing revenue and profitability by service line and payer and determining the degree to which an organization is vulnerable to specific market shifts. Customer strength is determined by consumer and payer ratings and measures—net promoter score, consumer experience, HEDIS measures, STARS ratings from the Centers for Medicare and Medicaid, and other consumer and payer metrics. Marketing strength is your organization’s ability to reach prospective customers. Financial strength is the financial “reserves” available to your organization to withstand unexpected market shifts. Value-based reimbursement strength is the ability of an organization to successfully move beyond cost-based and volume-based reimbursement models. And innovation strength is measured in an organization’s demonstrated ability to respond to customer requests and take new services to scale.
Allow Business Unit Leaders To Drive KPIs But Provide Guidance
One key question is who should establish metrics and KPIs. Ideally, the managers of each business unit in a provider organization are best suited to do this. However, the executive team should work closely with these managers to make sure they understand the organizational strategic objectives and how those apply to their business unit. Managers should be able to provide clear rationale for how every KPI they recommend links to one or more strategic objectives. A framework and examples will guide the managers in the right direction. They also need to understand how their unit’s KPIs will tie into those of other units and where collaboration will be needed to set and achieve goals jointly. The executive team should also clarify expectations—should KPIs be aspirational or stretch goals or should they be limited by current level of performance, will the appropriate resources and support be available if stretch goals are set, what are the consequences of non-performance etc. How to encourage managers to “think big” without causing negative stress through unattainable goals is a challenge to be addressed through an iterative process.
Ultimately the executive team, and the Chief Executive Officer specifically, is responsible for final approval of the KPIs. But engaging business unit and frontline managers up front will help to secure buy-in. Moving to a metrics-based system of performance will likely involve a major cultural shift for most specialty provider organizations—and the executive team should drive this shift with firmness and tact.
Define The Pathways To Collect, Measure, & Share Data
Managers who recommend KPIs should provide clarity on where the data for measurement will be sourced from, how often it is collected, and who will process the data. The executive team should develop an organization-wide system of dashboards and reporting, defining frequency of reporting and levels of access.
It’s important to get everyone on the same page about how each metric is defined, how it’s displayed, and whether the planned representation yields the desired takeaways for each manager. Keep the data visual and finding a quick way to draw attention to trends and anomalies is of utmost importance.
Everything on the dashboard has to be automated. If data needs to be complied manually, put it on a waiting list until it can be automated. Nobody wants one more thing to do—and any data that needs to be hand tabulated ends up not being collected, or being so delayed that it loses value. While there are sophisticated dashboards and programs and platforms to manage those dashboards, starting simple is always best—there is a lot you can do with Microsoft Excel and PowerPoint. Microsoft PowerBI is also a good data visualization and connection tool, with affordable prices for initial out of the box solutions. And your electronic health record system can likely be leveraged for many of the reports you need—so talk to your vendor about what is possible. But remember, “form follows function” and keep the data easy to understand and easy to act on.
Tie Business Unit Metrics To Individual Performance
Business unit KPIs should be cascaded down to individual employees and be reflected in their individual goals. Transparency and follow-through are the keys to success here (see Aligning Staff Compensation To Value). Transparency is key to getting staff buy-in—so make sure each employee knows how metrics are established, how individual goals are derived from organizational goals, and exactly how their performance will be measured. While alignment of individual goals to KPIs is imperative if the organization has performance-based compensation plans in place, it is a best practice to motivate and engage employees even if such plans are not yet in play.
Leaders must continuously work with their teams to assess performance and provide direction and support in improving that performance. “Connecting the dots” between each team member’s role and organizational strategic objectives is a leadership imperative.
Clarify The Process For Review & Remedial Action
So you’ve got the data, the dashboards are set up and the numbers and reports are flowing in. But what if performance targets are not being met? It would be helpful to define a process up front for what actions need to be taken—and by whom and over what period of time—to understand the reasons for under-performance or non-performance and put remedial measures in place.
There could be any number of reasons why KPIs are not being achieved—and any number of solutions. It may be that individual employees need help to improve productivity and quality, or that workflows and processes need to be streamlined, or that costs need to be managed more tightly, or that marketing needs to be more targeted…And if the identified solutions are applied and the results still don’t improve, the executive team and managers should have a candid, data-informed discussion about whether KPIs need to be adjusted and scaled up in a phased manner. While stretch goals are important, goal-setting and achievement can be an iterative process.
Ultimately, organizations that have the best data—and the best insights based on that data—are those that are able to achieve strategic objectives while leveraging the needed degree of flexibility in getting from here to there. As we enter the next normal, demonstrating success with strategy implementation, and having the data to back it up, will be key for long-term sustainability and for future updates to the strategic plan.