By Joe Naughton-Travers, Ed.M.
If you have great staff and great infrastructure, your organization still needs a strong management team—and management practices—to make sure that organizational plans to deliver great performance becomes reality. To do this, management teams need well-designed, real-time performance metrics. In successful organizations, metrics-based management happens in two contexts: managing strategy implementation and optimizing business operations. The key is to ensure you have the right data and the right analytical tools to report these performance metrics.
Managing Strategy Implementation
The use of metrics in implementing a strategic plan is considered a core element of strategic management built around key performance indicators (KPIs). Simply put, KPI’s are the ‘metrics’ that measures progress towards your strategic objectives, as well as whether your organization has achieved them. Some metrics are a direct measures of success. For example, if a strategic objective is to operate at a 10% positive financial margin, then the KPI for this objective is the margin, which is reported at least monthly. In other instances, you may choose process or proxy metrics that measure progress made in various initiatives to accomplish a particular strategic objective.
There are four important steps to selecting these KPIs and managing strategy implementation:
Step #1: Start with your strategic plan. It should have a short list of quantifiable strategic objectives, initiatives for accomplishing them, timelines, assignments, and budgets.
Step #2: Select metrics for success. These are your key performance indicators (KPIs) calculated from obtainable data that indicate organizational performance in progressing toward and accomplishing strategic objectives. An effective KPI is specific, measurable, and actionable. Use a ‘balanced scorecard’ framework that includes metrics that report financial performance, customer performance, organizational innovation, and effective internal operations.
Step #3: Create a KPI reporting system. Ideally, this is from a business intelligence (BI) or data analytics software application that includes management dashboards to report the metrics, showing a comparison to the performance trend from past to present. Minimally, the KPIs are reported monthly with the trend data as well as against performance targets. This reporting system and its use communicates the importance of the organization’s strategic objectives and the executive team’s focus on them. As Peter Drucker said, “You can’t improve what you don’t measure.”
Step #4: Coach your staff to use the KPIs. Engage in ongoing monitoring and proactive management using the KPIs with your executive team and staff. Modify the KPI metrics if needed to ensure progress in implementing your organizational strategy.
Much has been written about the development of KPIs and models for selecting both leading and lagging financial and non-financial indicators of performance. The challenge, beyond selecting the measures, is two-fold: developing the ability to routinely report the measures using data from existing software systems or databases (or expanding current information systems to collect the data) and analyzing the KPIs monthly to develop or update organizational strategies to improve performance.
Optimizing Business Operations
Metrics-based management also plays a key role in optimizing business operations for specialty provider organizations. What exactly is business process optimization? It is the management discipline that promotes efficiency and effectiveness of organizational process—employing methods, policies, management practices, software tools, and metrics to optimize an organization’s activities across the business process life cycle.
Optimizing business operations is critical for provider organizations. All aspects of service delivery (referral, admission, routine services, and discharge or transfer) and administrative operations need to run smoothly. Processes should be standardized to be effective and consumer and staff friendly. Data and analytics are critical tools for doing this.
Organizations that have superior process management performance share a few key competencies—corporate strategy that is connected to performance indicators as described above, process and project management expertise, deliberately designed process models that promote service quality, access to information, support of management for process improvement initiatives, and incentive-focused employee compensation.
It sounds simple. But if business process management is so simple, why do so many organizations have bad performance from bad processes? Author Janne Ohtonen, in an article titled, “Enabling strategic growth and improved performance through Business Process Management,” offered some interesting insights. His list of the ten key capabilities needed to be successful with business process management and optimization include:
- Co-workers have confidence and trust in each other
- There is open communication between employees and managers
- Managers share vision and information with employees
- The organization is able to respond to changes in markets quickly
- Senior management has confidence and trust in managers
- There are efficient communication channels for transferring information
- The organization has appointed people responsible for processes
- The organization extensively uses information systems
- No one has to worry about losing his or her job because of process changes
- Managers support changes in processes
How does your organization stack up in terms of using data and analytics to drive strategy and to optimize operations? Your team can’t perform or manage without the metrics to support both of these. In fact, I would argue that, beyond strategy, metrics and metrics-based management competency are the most fundamental ingredients for organizational success for providers in today’s market. Why?
I’ve seen executive teams of organizations with all sorts of other competencies—but with no access to timely performance metrics or the ability to use them—fail to optimize performance. Without real-time performance metrics for your management team:
- Identification of performance issues is often delayed
- Organizational performance relative to competitors is more a matter of opinion than a measured achievement
- The identification of performance problems requires constant observation—and is often anecdotal
- The “causes” of poor performance are harder to identify (and often the subject of disputes between team members)
- It is difficult to sort out persistent performance problems and separate “trends” from short-term issues
- It is challenging to prioritize operational improvement initiatives and investments
I could go on…
If current performance data is not the focus of your management team meetings, it will be more difficult for your team to respond to evolving consumer and payer demands, a rapidly changing health care market, or emerging competitive threats. I liken it to flying blind; the airline pilot without the dashboard.
Key elements of an organization with metric-based, performance-driven culture:
- Visible metrics—both customer-centric and organizational—and the data and analytical tools for reporting them routinely
- Actionable insights based on rich data and identification of the actions needed to improve performance
- Clear team member accountability for specific performance metrics
- Real-time performance feedback at all levels of the organization
- Targeted coaching based on performance data with individualized goals to improve team member performance
- Recognition of great performance
- An interactive strategy and budgeting process
- Nimble and data-driven service line reengineering and development
So, collect the data and teach staff how to use metrics and analytics to improve your business operations and achieve your strategic objectives. Metrics-based management is one of those “must develop” competencies for health and human service organizations. Organizational performance—including financial, service, quality, compliance, etc.—matters more to the sustainability and success of organizations every passing year.