The Glue

Setting Effective Targets - the Two Best Ways

Setting good targets for strategic measures is a critical part of designing an effective strategy execution or performance excellence framework. These targets (along with your actual performance data, of course), trigger the red, yellow, and green stoplight indicators on Balanced Scorecards. These stoplights determine where you focus your improvement efforts, so bad targets can mean you're allocating critical resources to the wrong areas.

Too often, I find that organizations simply don't know how to set good targets. There are five ways that I have used and some are better than others.

If you consult the Malcolm Baldrige National Quality Award or any state quality award criteria, you will find the two best ways to set targets: benchmarking (or industry comparisons) and customer valid requirements.

We'll start with these two. I'll cover the other three in my next post.

Benchmarking is effective because you are attempting to find the best industry performer in whatever outcome you are measuring and meet or beat their performance. Dr. W. Edwards Deming, the noted quality and productivity guru, was not a big fan of benchmarking because he thought one might be limiting their improvement potential in some way by focusing on what others have achieved.

Three More Ways to Set Targets

Earlier this week I wrote about the two best ways to set targets for performance measures (Benchmarking and using Customer Valid Requirements). As promised, here are three more ways to do it.

The third way to set targets is to look back historically at your performance. If you used to perform better than you do now, strive for that historical target and try to determine what has changed to cause your deteriorated performance and turn it around.

A fourth way to set a target is to determine “what the data shows is possible.” Let me cite an example to help illustrate this method:

Executing Strategy When You're Stuck in the Middle

I recently had a meeting with the CIO of a major IT organization.  Her situation and challenges were very illuminating to me in that she wants to execute her own departmental strategy, yet she is completely dependent upon the strategies of others.  Adding to this challenge, she answers to two separate 'bosses' -- one on a dotted line and one on a hard line basis.

Here's a visual that depicts the basic organizational structure:

The following outlines her challenge and how we proposed to solve it to make headway:

Boss #1: The CIO reports to the head of the functional division that she supports -- on a dotted line basis.

This "Boss #1" is directly responsible for providing services to the organization's external customers. Naturally, the CIO views these as her customers as well and sees her main role, therefore, as serving the needs of this functional division (this division is her internal customer).

BUT (there's always a 'but'), none of the divisional units have clearly outlined objectives or measures.  They typically have long lists of initiatives or action item lists, which might be OK if it weren't for the fact that these lists constantly change and shift in priority levels.

In addition, the top-level division executive does not possess a clear strategic plan with objectives and measures. 

So, at the current juncture, our CIO is left:

    a) guessing at the real needs of her internal customers and

    b) constantly chasing the ever-changing priorities that are communicated from these internal customers. 

Measure Composites on Hospital Scorecards That Work

I took some time this week to reflect on something I see on every executive level hospital Balanced Scorecard -- the dreaded "composite" measure. 

Satisfaction Composite, Safety Composite, Core Measure Composite, Engagement Composite, and on and on.  You can add a system "average" into this discussion as well. 

Composites are a reality we all live with in large healthcare organizations, but are these really meaningful measures? 

They certainly can be. They can provide visibility for the executive staff into which parts of the organization are doing well, allowing them to share best practices with teams that aren't doing so well.  Composites can also be used to set top-level targets, which help us determine if we're on track to achieve our organizational vision.

To make them helpful, there are options you should consider when you're creating composites, based upon whether you're using them to report out or using them to manage your hospital.  Let's focus on the composites that help you manage your hospital.

Why Top-Down Scorecard Cascading Doesn't Work

Does this sound familiar?
Management thinks of top-down scorecard cascading as a carrot and a stick.
They know best what’s really driving performance and they want accountability for results.

The front line thinks of top-down cascading as just the stick.
It’s another chance for the big brother to watch over their shoulder and they don’t even know what’s really driving performance.

A Balanced Scorecard framework can only deliver results when there’s two-way communication.

During Scorecard cascading (see more on this here), you utilize the top-down process matrix approach as well as the bottom-up SWOT analysis from the individual departments.  I’m not just talking about picking scorecard-level objectives and measures for the front line; I’m also talking about building the leading measures beneath the lagging measures.  This means the leading measures are not prescribed up-front by top management, but created from the bottom up.

Here’s what this gives your organization:

1. The front line can lobby for resources to fix root cause problems using data to prove their story.  This removes the emotional and political influences on resource allocation.
2. The front line is engaged in the routine performance review process.  This is very different than most front line scorecard teams I see that view the Scorecard as a project owned by someone else (the quality department, top management).
3. Top management allows its strategy to become more complete by listening to the voice of the front line, who usually have a good idea of the true drivers of performance.
4. Everyone from the front line to top management can tell you readily what piece of the strategy they own and how that impacts achievement of the top level vision.

Why Software as a Service Will Change Performance Management

In case you haven't heard, Software as a Service (a.k.a. SaaS, rhymes with Jazz) is the hot new thing in Silicon Valley.  Simply put, this is where a vendor provides access to an application via a secure Internet link and charges on a monthly or quarterly basis (usually by user).  There are lots of technology improvements that differentiated this from the old Application Service Provider (or ASP) model, but the ideas are similar.

For the client this means quicker implementations with less up front investment and lower costs to maintain the application.  It also means quicker results.  With the success of companies like salesforce.com and Netsuite most of the old IT concerns about application and data security are melting away. 

We have used salesforce.com internally since our company's inception, so we're customers of this type of service.  And for our customers, we've always offered our Strategy Execution software application as a monthly or quarterly service.  Based on our experiences and those of our clients, I think there is going to be a huge move to SaaS offerings over the next few years.  Let me illustrate with a tale of two projects...

Overcoming the Question that Kills Balanced Scorecards

If you're leading the development or deployment of a Balanced Scorecard framework, you must be prepared to answer this question when it inevitably comes up: "Does this mean extra work?"

I consider this to be the toughest question that you'll face because, if not answered properly every time it's asked, this question can destroy your Balanced Scorecard framework.

Are you prepared to answer it?

There are five parts of the answer and all five are necessary: