The first line of Robert Kaplan’s 1996 seminal book reads, “Imagine entering the cockpit of a modern jet airplane and seeing only a single instrument.” The analogy suggested it should be equally uncomfortable to know a contemporary corporation uses just one metric for guiding its future strategy – namely, financial return. What you measure is what you get, according to Kaplan.
Kaplan, the foremost authority on performance management and strategy execution, created the Balanced Scorecard (BSC) concept with David Norton. At the time, it was visionary. Nearly 25 years later, it still is – and more valuable than ever. The global economy is off to a shaky start in 2016 and the pressure to deliver short-term results is high; yet, 60 percent of large American companies across all sectors are invested in managing their performance across all of the BSC’s four distinct measures: financial, customer, internal processes and learning/growth.
The Balanced Scorecard methodology centers on value. And if there’s one industry in dire need of such strategy, it’s health care. The shift is underway and progress is promising. The quest: to increase the value of care delivery, or in other words, achieve better outcomes at the lowest possible cost. It’s a mission Kaplan believes in deeply – and one he, along with several colleagues, including fellow Harvard Business School professor and competitive strategy guru Michael E. Porter, is championing.
Kaplan, who also co-developed the concept of time-driven activity-based costing (TDABC), is actively collaborating with Porter and others to help health care organizations apply the management innovation to measure costs accurately, over complete episodes of care, for treating a patient’s medical condition. Accurate costing, combined with condition-specific outcomes metrics, form the foundation of value-based health care, an approach transforming health care delivery.
To accelerate the dissemination and adoption of value-based health care, Kaplan recommends health care leaders consider establishing a new central office to oversee it. In a recent Harvard Business Review article, he and his co-authors detail what they call a “value management office” to enhance an institution’s ability to improve outcomes and costs across the enterprise.
“At a minimum, it can serve as a center of excellence to assist decentralized clinical units in outcomes and cost measurement and management, set priorities for continuous improvement projects, facilitate the creation of value-based payment models with insurers and employers, and ensure that new information technology platforms are aligned with the value agenda,” as they explain in Health Care Providers Need a Value Management Office.
Performance and cost improvement initiatives such as these help organizations turn strategy into action – and move far more rapidly from a world that rewards short-term financial gain toward one that rewards value for all stakeholders. Measurement matters. After all, what gets measured gets done.