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July 1998


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Finding Your Way Through Performance Measurement

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Finding Your Way Through Performance Measurement

Tom Slay had a problem. A million-dollar donor to his nonprofit company, Franciscan Healthcare Systems, Cincinnati, Ohio, went to receive care at an outpatient testing center and left without service. The donor felt the wait of 15 minutes was too long for health care assistance. Slay’s boss was on the phone with a very simple question: “How long do patients have to wait, on average, to get service at our clinics?” In a follow-up call, Slay was ready with an answer, albeit the wrong one: “We don’t know.”
“We don’t know?” the CEO repeated. Maybe he wasn’t hearing right. “We don’t know,” Slay confirmed. “Tom, I have a million-dollar donor on the other line. Isn’t there any way you can find out?” What Slay needed and what the CEO soon asked him to find, was a measurement system in which he could access that kind of performance data: detailed and from the front line employee, accessible and up to date and now. It was a tough bill to fill, but Franciscan was under ever increasing pressure to fill it; the donor’s demand was only indicative of the many external forces pushing for performance health care in the 1990s.
As regional director of TQM for Franciscan, Slay needed a system that could work with a multi-site company (Franciscan has 29 locations), and involve all of its 7,000 employees, from the highest level of management to front line employees. He found assistance from Tony Fink, vice president in charge of QMAPS at Advanced Production Systems, Inc. (APS), Louisville, Ky. Fink had been working on perfecting the type of system that could meet the demands of a large, multi-site enterprise like Franciscan’s with Don Korfhage, APS president.

Trial and Error with Performance Measurement
Collecting and analyzing data is essential for making the right decisions and taking action; finding the right way to get that data was the first challenge for Fink and Slay. “The problem with a lot of performance measurement systems,” says Fink, “is that they measure the wrong things at the wrong times. I think anyone who’s been involved with establishing proactive business systems based on current data collection programs will tell you this. You’ve got to have a finely tuned, up-to-the-minute system based on the right indicators to make performance measurement work.”
Slay likes this analogy: Imagine you are driving a car, navigating only through your rearview mirror. The challenge is that you are moving forward, not backward, and must determine the impending curves based on what you see behind you. Fink calls this rear-view mirror measurement, and like other existing performance measurement systems, it’s based on information that’s not useful. Other systems include ownership and isolationist measurement. Ownership measurement is embodied by the question, “What difference does my job make anyway?” Measuring only the processes you “own,” without considering how they fit into the larger picture, can ultimately inhibit high productivity.
The single-minded pursuit of one performance requirement (financial, customer satisfaction, human resource utilization, etc.) is indicative of isolationist measurement. Measuring only the part, and not the sum of the parts in respect to an overall company vision, results in a distorted view of how the company is performing. It’s easy to fall into such a pattern of isolationist measurement when team improvement goals do not clearly relate to the strategic goals and vision of a company.

Creating an Ideal Performance Measurement System
Let’s dream for a moment. Imagine that in your day-to-day operations you know the exact cause of a failure. When something goes well, there’s a reason, and you can prove it–you have data. As a matter of fact, the maze of factors that contribute to a desired result all fall into place and form a comprehensible order that everyone can understand. No more what ifs, no maybes, no guessing. You just know.
In order to achieve that kind of scenario a company needs lead indicators, data that serves as a dashboard rather than a rearview mirror for management. Fink and Korfhage developed such a system and were ready to try it out on Franciscan Healthcare. The proposed system had two steps. First, translate the company vision into success factors, focused strategies and performance indicators. Next, apply these factors, strategies and indicators, to a technology system that provides information on a multi-level accessible basis (think of Franciscan’s 7,000 employees at 29 locations).
Franciscan’s Performance Measurement System
Management’s objective with a performance measurement system should be twofold:
� To engage each employee and communicate the company’s vision.
� To access performance data in order to know whether the company is attaining that vision.
The first step in the performance measurement framework is to translate the company vision. The vision can be broken down into critical success factors used to measure achievement or success. For example, a success factor for Franciscan could be, are patients being assisted within 10 minutes of entering our clinics?
The next step is alignment, in which focused strategies are created and used to align the company vision with employee performance. Indicators are translated down from the executive level to the front-line employee so that all are focused on some form of the same goal. An example of an indicator is response time: How long does it actually take for a patient to be assisted in a Franciscan clinic? Does the response time correlate to the company vision? If not, what changes can be made for improvement and alignment? The objective is to identify a measurement system to see if the company’s vision is being attained.
Feedback and information is the third step of the performance measurement system. This means establishing the ability to capture data in a timely manner and communicate it. Who reports the amount of time it takes for a patient to be assisted in the clinic? How can office procedures integrate new technology to record this information, and can a network be created to communicate the resulting data to other areas in the company?
Finally, a follow-up step emphasizing improvement is necessary. Why did it take so long to assist this person? Was it staffing? Scheduling? A busy time of day? Can customers be better accommodated based on what we now know?

Deciding What to Measure
Slay faced the possibility of analyzing thousands of indicators, so it was difficult to decide which issues to address in his performance measurement system. Franciscan, like other health care providers, suffers from what pediatrician, Donald Berwick, calls “Health care’s excessive redundancy,” asking the same set of questions in several stages of patient assessment. Health care also suffers from problems of oversupply of beds and physicians, unnecessary complexity, fragmented processes, unwillingness to move forward and expensive habits, like implanting a $5,000 pacemaker when a $2,000 one would do the job just fine.
With all these problems to consider, how did Slay decide what to measure? Fink recommended a balanced approach between hard and soft numbers. Soft numbers come from measuring areas like training and employee satisfaction (such as unnecessary complexity), while hard numbers include low cost, efficiency and profit margin (such as an oversupply of beds). Other things to consider when measuring performance can include: innovation, community responsibility, corporate assets, growth and learning and quality. Slay and Fink based their framework on the Malcolm Baldrige Excellence Criteria for 1997, which included some of these other factors.
The Technology of a Performance Measurement System
The technology aspect of Fink’s measurement system truly allows it to overcome traditional problems like rearview mirror measurement. According to Fink, however, technology is not a solution, it is an enabler and must be facilitated. “The best thing you can do when you employ performance management technology is to seek a balance between the technology and the indicators you intend to measure. Are they appropriately defined? Are you measuring the right thing? Performance measurement only really works with a holistic approach.”
The Benefits of Performance Measurement
There is a myriad of benefits to Fink’s balanced system of technology and corporate vision. Compare it to other systems of measurement, including manual accounting of performance, which is time consuming; spreadsheets, which become disjointed when made to accommodate large, multi-level data and individual formatting reports, which offer good reports on data, but no alignment with company vision.
In Fink and Slay’s system, embarking on the process of performance measurement requires the company to effectively translate their vision and to define what strategies are being promoted at what levels. Integrated, balanced indicators are essential for effective measurement, as are success factors and focused strategies. Otherwise, each area has their own perspective and isolationist management can result.
A performance measurement system communicates success factors and performance indicators to all departments, workgroups and individuals. It also encourages all employees to consider how their jobs work with others for the good of the whole company; it allows employees to track their own data and be in charge of their own improvement. And it helps people like Tom Slay, when the CEO calls with a question, respond with something other than “I don’t know.”

July '98 News for a Change | Email Editor

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