Performance Management Links Strategy And Operations

NETWORK EFFECT
One of the dangers of bottom-up, operational performance management (or, for that matter, top-down PM that doesn't get to a low-enough level) is that people will continue to operate in silos. Performance management really pays off when it aligns activities.

Most missed deadlines, quality problems, and costs happen in the handoffs from one activity to the next, says Frank Buytendijk, a VP and fellow for enterprise performance management at Oracle and author of Performance Leadership (McGraw-Hill, 2008). A huge marketing campaign launched without adequate notice or coordination with call centers can overwhelm call center reps. An isolated manufacturing- or logistics-optimization project can cut costs in these areas, but increase warehousing costs, canceling out the savings.

Interdepartmental collaboration was key in a project at the Maine Medical Center. An interdisciplinary group, including nurses, physicians, and administrators, was formed two years ago to coordinate and improve treatment of specific groups of patients, including stroke, heart failure, and pneumonia. The resulting scorecard, built on the hospital's SAS BI platform and launched about a year ago, includes clinical, educational, patient satisfaction, and financial measures. The scorecards, which are accessible through an intranet-based portal, show cardiac unit managers how quickly patients are recovering on average, what percentage of staff have been through training, changes in patient satisfaction ratings, and trends in costs per discharge.

"The theory is that if we educate our staff, we're going to improve our performance, improve customer satisfaction, and lower the cost of delivering that care," says Peter Chingos, manager of data analysis at the medical center.

It's too soon to say whether all those measures are headed in the right direction, Chingos says, but a second initiative is clearly paying off. Using a framework suggested by the Joint Commission on Accreditation of Healthcare Organizations, a respected regulatory body, the hospital has set up performance objectives and scorecards for what's called "medication reconciliation." The system monitors compliance with practices for keeping track of the medications patients are on when they arrive at the hospital and all the medications prescribed throughout their stay.

Prescriptions are tracked through every phase of care, Chingos says. The medical center has increased compliance from about 50% to the 90% range, he says, and "there's frequent feedback through the scorecards that tells people how they're doing."

TOP DOWN VS. BOTTOM UP
It's that feedback loop that makes PM really work. Even if it's initially an extension of financial performance management, as was the case at UAP, PM is most effective when it aligns strategy and operational execution, as happened at Southwest Airlines. "If you don't link strategy and operations, then you're stuck in either a bottom-up world, where you're focusing on operations and you don't really have control of whether it's impacting the strategy, or you come top down and focus only on strategy, but you can't make things happen," Palladium's Norton says.

Performance management tools are key to providing the all-important link between strategy and operations. With them, businesses can take all the data, reports, and analysis of BI and aim them at driving better decisions at all levels. Done right, PM translates business strategy into concrete goals and measures.

Photo illustration by Sek Leung

Continue to the sidebars:
Three Ways To Elicit Strategic Decisions
and
Promote Positive Performance Behavior