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Gail Perry Susan Warren Why Cliff Diving Wasn't Such a Good Idea
- 1. ©1997-2014Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 1 Why Cliff Diving Wasn’t Such a Good Idea and 8 Other Lessons Learned While Cascading at Blue Cross and Blue Shield of Alabama Gail Stout Perry Vice President Strategic Solutions Balanced Scorecard Institute Susan Warren Department Manager Corporate Strategy Office Blue Cross and Blue Shield of Alabama
- 2. • Provides internal management consulting services with a focus on strategic management including strategic planning, Balanced Scorecard, change management, facilitation, and business strategy development and execution. • Susan has been with Blue Cross and Blue Shield of Alabama for 24 years. Current and prior areas of responsibility include: • Strategic Planning and Balanced Scorecard • Healthcare Reform • Health Information Technology • E-Business and Website Governance • HIPAA • Y2K Insert Photo Department Manager, Corporate Strategy Office Blue Cross and Blue Shield of Alabama ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 2 Susan Warren
- 3. An Independent Licensee of the Blue Cross and Blue Shield of Association • Founded in 1936 as the “Hospital Service Corporation of Alabama” • Currently employs more than 3,700 associates • In terms of total membership, we rank 6th among the 38 Blue Cross and Blue Shield Plans nationwide. Cover over 3 million members, including 2.1 million Alabamians. Administers health and dental plans for nearly 24,000 employer groups. Processed about 70 million claims in 2012, with an accuracy rate averaging 99.76% Returned over 92 cents in healthcare benefits for every revenue dollar received. Our 6.6% administrative expense ratio is one of the lowest in the industry. Recognized for highest member satisfaction in our region for 6 consecutive years by J.D. Power and Associates. ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 3
- 4. • 20 years experience in management consulting at Accenture and other firms, focused on strategic performance improvement • Client experience includes: Fluor Corporation , ADP, BrightPoint, City of Edmonton, ANSAC, Mary Kay, Inc., U.S. Office of Secretary of Defense, DFAS, Northwest Fire District, Government of Botswana, U.S. Army Medical Command, U.S. Air Force, US Marine Corps, Susan G. Komen for the Cure, TATA Chemicals NA • BS Industrial Engineering and MBA • Native Texan – Resides in Dallas • Co-Author: Washington, DC Office (202) 465-4253 San Jose, CA Office (408) 549-1267 Headquarters Cary, North Carolina (919) 460-8180 Vice President Strategic Solutions Balanced Scorecard Institute ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 4 Gail Stout Perry
- 5. Cascading ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 5
- 6. Leap of Faith ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 6
- 7. ©1997-2012 Balanced Scorecard Institute, a Strategy Management Group company. All Rights Reserved. Do not copy 7 7
- 8. “The Wheel” ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 8 Nine Steps to Success TM
- 9. Solid Foundation at Tier 1 ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 9 Strategic Results Customer/ Stakeholder Financial/ Stewardship Internal Processes Capacity Building Perspectives Mission Vision Customer Needs – Enablers & Challenges Engaged Leadership – Interactive Communications – Core Values Theme:Operational Excellence Theme:Strategic Partnering Theme:Service Excellence Theme:Culture Change
- 10. Lesson #1: Set Your Anchor Firmly ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 10
- 11. Manage Costs Superior Customer Experience Strategic Growth IT(Co-Chair) Quality(Co-Chair) Insurance Sales(Co-Chair) Health Mgmt(Co-Chair) Claims Ops (Co-Chair) Network Svcs(Co-Chair) Finance Pharmacy Ops Actuarial Sales Marketing Application Development Internal Audit Human Resources UTIC Facilities Communications Treasury Business Services Network Operations Government Services Customer Service Legal SVP Business Operations SVP Enterprise Resources SVP and CMO SVP and CIO SVP and CFO SVP and Chief Legal Officer SVP Healthcare Networks Lesson #1: Set Your Anchor Firmly ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 11
- 12. Lesson #2: Perfection Takes Time ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 12
- 13. Corporate Card Divisional Cards Individual Performance 2011 2012 - 2013 2014 - 2015 Lesson #2: Perfection Takes Time ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 13
- 14. Lesson #3: Cliff Diving Wasn’t a Good Idea ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 14
- 15. Lesson #3: Cliff Diving Isn’t a Good Idea ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 15 The RIGHT people The RIGHT place The RIGHT time
- 16. “Line of Sight” is Through the Objectives ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 16 Alignment Vision 2016: Prosperity for All ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission.
- 17. Creating T2 Objectives Involves These Options 1. Keep the T1 language as it is written to create identical Objectives 3. Remove Objectives that do not apply at T2 2. Edit the Objective language to create T2 specific contributing Objectives 4. Add more T2-specific Strategic Objectives as needed T2 Human Resources Dept. Scorecard T1 Scorecard T2 Human Resources Dept. Scorecard Cascading Objectives From T1 to T2 ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 17 Improve Knowledge & Skills Improve Knowledge & Skills T1 Scorecard T2 Human Resources Dept. Scorecard Increase Acquisitions Improve Acquisition Integration Increase Product Sales Increase Product Sales Improve Recruiting Improve Employee Development X T1 Scorecard T2 Human Resources Dept. Scorecard X T1 Scorecard Improve Knowledge & Skills
- 18. Lesson #4: Diving too Deep ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 18
- 19. Lesson #4: Diving too Deep ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 19 1. VP had to choose the ones the unit most strongly contributed to 2. Narrowed focus to intended results 3. Removed initiative gathering until later date 1. Too many objectives 2. Too many measures 3. Too many initiatives
- 20. Lesson #5: Use a Consistent Process ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 20
- 21. Lesson #5 Use a Consistent Process ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 21 One Corporate Strategy consisting of Three Pillars cascading to Twenty Six Divisions Facilitated by Seven Internal Strategy Consultants JENGA!!!
- 22. Key: Performance Measures & Strategic Initiatives Align to Strategic Objectives ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 22 Simplified Strategy Map Objectives Measures Targets Initiatives Financial • Increase Profits • Lower Costs • Increase Revenue • Market Value • Plane Lease Cost • Seat Revenue • 25% per year • 20% per year • 5% per year • Optimize routes • Standardize planes Customer • More Customers • Increase On-time Flights • Lower Prices • # of Customers • FAA On time Arrival Rating • Customer Ranking • 5% change • First in the industry • 98% Satisfaction • Quality Management • Customer Loyalty Program Internal Process • Improve Turnaround Time • On Ground Time • On-Time Departure • <25 Minutes • 93% • Cycle time Optimization Program Learning & Growth • Align Ground Crew • % Ground Crew Stockholders • % Ground Crew Trained • 70% (100% by year 6) • 70% • Stock Ownership Plan • Ground Crew Training Lower Prices Mission: Dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit. Align Ground Crew Improve Turnaround Time Increase On- Time Flights More Customers Lower Costs Increase Profits Increase Revenue Vision: Continue building on our unique position -- the only short haul, low-fare, high-frequency, point-to-point carrier in America. Adapted from work by Harvard University / Balanced Scorecard Collaborative Measures & Targets align to Strategic Objectives Strategic Initiatives are also aligned to Strategic Objectives and are measured separately (i.e. project measures & targets related to budget, milestone, risk, etc.).
- 23. Measures Focus on the Intended Result ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 23
- 24. Measurement Development: First “De-Weasel” the Intended Results ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 24 • Strategy is hard to measure because it is often written using “weasely” language, or vague ideals that are hard to interpret, for example: • We employ “best practices” • Performance is “Optimized” or “Maximized” • Employees are more “Efficient,” “Effective” or “Productive” • “Intended Result” in the Objective Commentary should avoid this practice – Use plain English: Not “Improve Thought Leadership,” but “We create engaging content,” or “More people read (or rave about) our stuff” – Use sensory language to visualize the desired end result • If you can see, feel or hear it, you can count it! Adapted from materials by Stacey Barr, the “performance measurement specialist” (www.staceybarr.com)
- 25. Lesson #6: Watch Out for Whirlpools ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 25
- 26. Lesson #5: Watch Out for Whirlpools ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 26 Unrealistic Targets Bad Intended Results Complex New Measures Over Execution Mixed Messages
- 27. Lesson #6: Whitewater Rapids Will Happen ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 27 Go with the Flow and hang on tight Embrace Change after all, it’s job security
- 28. Lesson #7: You Need the Right Equipment ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 28
- 29. Lesson #7: You Need the Right Equipment ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 29
- 30. Lesson #8: Hand-Holding ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 30
- 31. Communications Study ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 31 In collaboration with the Balanced Scorecard Institute, Eastern Kentucky University’s College of Business and Technology is identifying best practices for organizations to communicate their BSC to employees. Organizations spend time, money, and lots of creativity on developing the right communication method for their strategic plan/balanced scorecard. We are seeking to learn from the best and to share that knowledge. The study consists of 9 questions plus 5 informational questions. To participate, please go to this survey link: https://ekubusinesstech.co1.qualtrics.com/SE/?SID=SV_0DtCGHCZHyaUzbf If you have any questions or difficulties with the survey please call or email Laura Barthel of Eastern Kentucky University (Phone – 859-893-7884 or laura.barthel@eku.edu).
- 32. Lesson #9: Know the Rules So You Can Break Them Properly ©1997-2014 Balanced Scorecard Institute (BSI), a Strategy Management Group company. All Rights Reserved. Do not copy without permission. 32
- 33. Questions?
Editor's Notes
- Whenever people talk about cascading, the graphic that often accompanies it is a peaceful cascading waterfall. Since our topic today is about cascading and we are here at the beach, Susan and I decided to have some fun with water today.
- Sometimes, cascading isn’t as peaceful and orderly as a waterfall.When I first met Susan, it was through people from her org who were continuing to show up in our public training courses and were clearly struggling with cascading. I learned that BSCBSA had taken a huge leap of faith and launched 26 simultaneous cascades, relying on people scattered throughout BCBSA, who had been trained, to lead their various units through the process. In hindsight, they learned a lot of lessons from this “all in, leap of faith” approach. And I appreciate Susan being here today to openly share those lessons.
- I first met Susan a few years ago when BCBSA was in the midst of cascading. First, I should tell you that BCBSA is what we here at the Institute refer to as a DIY client. If you shop at Home Depot or Lowe’s, you know that term. It means “Do It Yourself”. BCBSA had sent many people through our public training and were using our Nine Steps to Success in a DIY mode...they were Doing it Themselves, without our consulting assistance. Just to be clear, BCBSA had built a solid Tier 1 strategy called Focus on 14. This strategy was their roadmap to transition the organization to maintain its strong competitive position after Obamacare came online. Susan and I have presented together before, but those presentations have focused more on how BCBSA developed its transitional competitive strategy...a strong and insightful strategy. And I can assure you that their Tier 1 scorecard was solid and ready to cascade when the organization embarked on its cascading process. Today, we are going to focus on their cascading experience. So Susan, you had a solid strategy in place to achieve the organization’s transition needed by 2014. And you had followed the Institute’s Nine Steps to Success to do this.
- As I mentioned, BCBSA had a solid Foundation in their Tier 1 scorecard.Those of you who have used the Institute Way: Nine Steps to Success, are familiar with this graphic. This represents the strategic elements that are the underpinnings of a Tier 1 balanced scorecard. We always emphasize the components in the foundation, especially Engaged Leadership. In fact, the leadership portion is so critical that when consulting, we won’t begin an engagement until we have spoken with and are sure of the leadership buy-in. It’s that critical for success.So while building their Tier 1 Scorecard, BCBSA paid attention to this and did a good job to ensure leadership was engaged and vested in their Tier 1 strategic scorecard.
- But when it came to cascading, they learned a valuable lesson.Does anyone here do any sort of climbing? Rock climbing, mountain climbing, etc? Any good climber knows that accidents are more likely to happen on descent, so it’s important to set your anchor firmly at the top to have a controlled and safe descent.The same principle applies to cascading. Leadership Engagement does not end after the Tier 1 scorecard is completed. It is JUST AS CRITICAL during the cascading process. Susan, would you like to tell us what you guys learned about this?
- Executive Buy-in, Participation and AccountabilityAnchored ExecutiveAccountabilityin the Tier One CardDivisional Officers and Directors each assigned to Pillars2 Co-Chairs2 Senior AdvisorsRecent reorg of Pillars to re-energize and get new ideasUse of sub-committees to bring information to the Pillars – spreads knowledge and understandingSenior VPs actively engagedOwn the ObjectivesCEO spontaneously reinforces accountability
- Is everyone here familiar with world-class competitive swimmer Michael Phelps? You may remember him from the London Summer Olympics. To date, he has won more Olympic medals than any athlete in any sport (22) and has shattered countless swim records. I love this quote by his coach. Michael did, indeed win his first Olympic medal in 2004. But it took him years of fiercely driven competitive training to achieve what he has achieved.At the Institute, we have a saying that “Best is the Enemy of Good” and the “80% is Good Enough for Now” One thing that can derail a scorecard effort, at any level, is striving for perfection immediately instead of starting with small victories and slowly learning and improving over time. In other words, there’s no shame in using water wings. Susan, would you like to explain how this lesson applies to cascading?
- I’ve been leading very large scale corporate projects since the early 90s.One truth has always stayed with me throughout all of them – and that is to take it one step at a time. A good plan will set the expectations right and you can change the company with you as you take your individual steps.We actually started changing our corporate strategy from the typical yearly strategic planning process to a more dynamic process in 2009. There were a lot of “fires” to put out in 2009. By the end of 2010, we had developed the three themes or pillars for our corporate strategy. 2011 focused on building the Balanced Scorecard Tier 1 card. I asked for three years to build the Divisional Cascade before we considered linking individual performance to the scorecards. So we started the cascade by mid 2011 – HA! The next two years will be spent refining the alignment of the Divisional Cards to the Corporate Card and also establishing linkage from the individual to their divisional cards. The ultimate goal would be to reinvent our incentive program around the balanced scorecard. I have two more years. So basically, we didn’t start off using the cards to drive behavior – we had time to work the process, get the company familiar and comfortable with the balanced scorecard and to ingrain it into our culture – before we start using it to set divisional or individual performance.
- Susan, we mentioned that you guys took a leap of faith and just launched yourselves into cascading. You often refer to that as the “Cliff Dive” and you learned 3 key lessons from that, didn’t you?
- Absolutely – we learned three of the most important lessons.First of all – you had to get the right people in the room – all at the same time. For the Divisional Cards, we needed to have the Vice President and all of his Direct Reports – or the Department Managers. Occasionally there is another “key” person who holds am important position in the Divisional hierarchy who also needs to be there. If anyone is missing, you take the risk of missing an important piece of the Divisional strategy – and you also miss out on the buy-in you get from having everyone there.Secondly – you need the right place – we have a Balanced Scorecard Room that is set up for this purpose. It has all of the materials we need to facilitate a good session – white boards, flip charts, a projector as well as large posters of the corporate strategy and all of the Divisional cards hanging on the wall. I can’t begin to tell you how many times the participants will get up to look at another Divisions card because they realized that they have functions that connect and they want to see how the other Division is handling it.Lastly – you need the right time. We never allow session to go past two hours. An hour and a half is actually best. People are at their freshest in the morning, but and early afternoon session would work as well. Never, ever on a Friday afternoon and never past three. It becomes a futile session of herding cats if you start too late.
- Now that I’ve explained how cascading is supposed to work, Susan do you want to talk about how some of your divisions went overboard in that they dove too deep, and nearly drowned themselves?
- The first time through, it seems that each Division wanted to “prove” their worth and cascaded as many of the corporate objectives to their card as they possibly could – even if the connection to that objective was very sketchy or loose. We also saw that the objectives that they were cascading to their cards looked more like their org chart than the strategic vision of the Vice President. Fix by narrowing down to the top three to five that the officer most closely contributed to. Starting on the third crank of the BSC wheel, we are finding that the more mature Divisions cards are showing the vision instead of the org structure. It just takes some time.Too many measures – whew – sometimes we saw 5 or 6 measures for one objective. We quickly realized that the intended result was the key here and many times we had to go back and narrow the focus of the intended result.One of the best parts of our culture at Blue Cross is our ability to execute. The first time through the cards, the team gathered at least three initiatives for each objective on every card. For a company that executes very well – this through us into execution overload! Our Top Leaders and the BSC Team decided to remove the initiatives until we had a better process in place to pinpoint the correct initiatives. We will start again this year with a structured business planning process.
- If I said to all of you “let’s go swimming”, I bet we’d not all be in agreement on exactly what “go swimming means”. For some of you, swimming is an athletic sport and you are quite serious about strokes, and breath timing, and you might even shave your body so you can glide more quickly through the water. For others of us....”swimming” is more about the outfits and the ambience. I guess both images have a couple of things in common. There IS water involved....and shaving is recommended. But it’s going to take a lot to get us all in synch in that swimming pool...where we are both athletic AND stylish.Susan, you’ve had some synchronization problems and in hindsight realized the importance of consistency in order to achieve the alignment necessary to execute strategy well. Please tell us more about that.
- The BSC team had to develop a process to make sure each of the Seven Internal Strategy Consultants were creating the cards the same way. We used the Balanced Scorecard 9 steps as a guide to developing the process adding our own gates for approval where necessary.Purpose StatementStrategy MapObjectivesMeasuresInitiativesBookletDraft Balanced ScorecardSenior VP ApprovalFinal Approval
- OK...now that I’ve explained this BSC component that may be new to some of you....I’ll turn it over to Susan. You guys ended up going round and round in circles for many reasons...caught in whirlpools that threatened to pull you under.
- Mixed Messages – language – like membership. Definitions.
- Organizational changes happen. Some examples:Departments move from one VP to another (Typically because the BSCs showed where we actually could have a better structure!)New VPs are put into place – after some time – they may want to put their vision into the card.Divisions are combined – this may cause problems with the data – what do you do with the history – like admin cost?Strategy ChangesEspecially in the beginning – refining of measuresLessons learned We didn’t know it all, and we don’t know it all now. Sometimes you have an aha moment and it changes everything. Cascading makes all of this change a little more difficult. It’s never just one change – sometimes it is now 26!
- In the Nine Steps to Success Framework, we recommend selecting and implementing a software system (or at least figuring out how you are going to manage an exponential growth in metrics) before Cascading. In your Leap of Faith, you guys didn’t worry about Automation right away. Tell me about that....
- Started out with Booklets and spreadsheets. Waited 2 years – collecting data quarterly.Purchased tool Corporate first Divisions Second Released good – not greatImportant to have a solid change process in place Made problems much more visible Changing measures and cards dynamically Needs to be simple!!!Personal touch for training and acceptanceProvides complete transparency
- Personal touch for training and acceptance
- Speaking of sharing....let’s move on to the final lesson you guys learned.
- Sometimes we couldn’t follow all of the rules – it just did not fit into our corporate culture. In those cases, we knew what rules we were breaking and what impact it might have on the strategy. This works well for us because typically have a plan to mitigate the risk of an adverse impact.Examples: Action verbs – manage, deliver Manage Costs Pillar Removing initiatives