2006-2010 Statewide Comprehensive Plan for Mental Health Services
Chapter 3
Overview of the Balanced Scorecard - A Best Practice in Strategic Planning and Performance Measurement

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The purpose of this chapter is to provide a conceptual overview of the balanced scorecard method for improving planning processes and to highlight the strengths it brings to OMH's commitment to transform the public mental health system. The value of the balanced scorecard approach is in part its utility to facilitate the translation of multiple perspectives into goals aimed at achieving an agency's mission, vision and measurable objectives.

A Focus on Best Practices in Management - The Balanced Scorecard

The focus during the 2005-2009 planning cycle has been on strengthening the continuous quality improvement efforts within OMH and further developing a set of processes to "weld" the OMH performance management and measurement approach to the strategic planning process. The rationale underlying this effort has been to continue movement toward producing quantifiable improvements in the mental health system and accountability for the achievement of the goals and objectives aimed at fostering culturally and linguistically competent, recovery-oriented, person-centered services that promote wellness and resiliency. In a sense, OMH has been applying the concept of best practices to identify the optimum approach to align its Strategic Plan Framework with the essential elements of transformation.

The process of identifying the best strategic planning approach has involved a re-examination of existing components of the OMH infrastructure for monitoring performance, gathering data, and making it accessible to stakeholders; review of the literature on performance management and transformation of the public mental health system; thoughtful reflection upon the agency's mission, vision and values, its strengths and improvement opportunities, and the environment in which it operates; and careful consideration of strategic planning methods that would allow the planning framework in place to be enhanced through the successful union of strategic planning and performance management.

The results of this process led to the identification of a set of essential elements OMH desires in its strategically focused performance management system. A number of these elements already existed in the performance measurement and management strategies utilized by OMH^{1, 2} and some represent enhancements to the planning process already under way. These elements include:

• Keeping central to all efforts a focus on the agency's mission, vision and values
• Aligning performance measures, standards and targets with the agency's goals and objectives, thereby fostering daily activities consistent with the overall strategic direction
• Promoting ownership of and accountability for results at all levels of the organization
• Enhancing organizational efficiency by allowing focused attention to the issues of greatest importance
• Moving the organizational structure and culture from one defined by specialized functions to one concerned with service outcomes
• Ensuring ready access to data for management decision making
• Systematically identifying issues that would likely become problematic without proactive change
• Providing an organizational structure that values effective communications and enables full participation in meeting short- and long-term goals

The balanced scorecard method has been identified as the approach that captures these key elements. It is consonant with OMH's commitment to bring into line its strategic planning process with its resolve to work toward transforming the public mental health system. Moreover, it addresses Governor Pataki's initiative to bolster strategic planning activities at the State level, thereby facilitating wise use of limited resources to meet critical public need.

Formally introduced in 1992 by Kaplan and Norton³ of the Harvard Business School, the balanced scorecard approach to performance management represents a systematic way to integrate stakeholder, internal business processes, employee and organizational knowledge and growth, and financial data into measuring and influencing better performance and outcomes. Kaplan and Norton's original research, which precipitated the development of the balanced scorecard approach, identified five core principles among successful companies. These companies consistently made clear their strategy in operational terms, aligned organizational activities to strategy, made strategy a part of every person's daily work, ensured continual attention to strategy, and inspired change with strong and committed leadership at the executive level. While the balanced scorecard approach was initially developed for use in business, with an emphasis on the management of fiscal performance, it has been adapted over time for the public sector, and expanded to reflect attention to balance between financial and other major operational perspectives of organizational performance.

Since its introduction, the balanced scorecard methodology is being used more widely for managing performance at the national and international levels as well as at the state and local levels. The balanced scorecard approach has been instrumental in transforming such companies as Mobil and Cigna⁴ in the private sector and numerous agencies at the Federal level (e.g., Department of Energy, Office of Personnel Management). Considered a management best practice, the approach is presented in the President's Management Agenda: A Balanced Scorecard Approach.⁵This comprehensive guide was created to permit federal agencies to apply the best of balanced scorecard practices to improve performance, as required by the President's Management Agenda.

In addition, it is being employed with regularity and with positive results within the fields of public health and mental health and healthcare in general. The literature is replete with case studies and reports of improved outcomes and performance resulting from the use of the balanced scorecard approach.

The Conceptual Structure of the Balanced Scorecard

The balanced scorecard is not just a tool nor is it a quality management project. Rather, it is a dynamic, continual and comprehensive strategic performance management system that encompasses mission, strategy and perspectives.⁶ Figure 3.1, which depicts the basic design of the balanced scorecard, has been adapted to the OMH public mental health system. The mission is at the top of the model, signifying its importance as the main driver and catalyst of activities in a public-sector organization. At the core of the approach is the business strategy, which is the means to accomplish the mission and nurture advancement of the organization's vision through a focus on goals and objectives. Connected to these two components are the major organizational perspectives that are taken into account in the balanced scorecard approach: customer, financial, internal processes and learning and growth. While perspectives may vary from organization to organization, most often these four are included in balanced scorecard systems.

This adapted model shows one perspective being balanced by the others and all being driven by the organization's mission, vision and strategy.

Among the four perspectives, the views of individuals, families and other stakeholders provide insight into an organization's ability to provide services that are of high quality, accessible, effective, and satisfactory to the individuals utilizing the services. Internal processes are viewed in light of the critical business processes that serve to meet the organization's performance expectations. An organization's abilities to manage and adapt to change through employees, information systems and organizational design are reflected in the employee and organizational perspective. The last perspective, the financial point of view, provides an indication of an organization's ability to meet the needs of the individuals it serves efficiently and in a cost-effective manner, providing the best value for each dollar spent.

The implementation of the balanced scorecard represented by these major steps "is most effective when it's part of a major change process in an organization."⁸ By adopting the balanced scorecard approach, organizational leadership embraces a "vision for change" and nurtures a sense of team, collaboration, and dedication to strategy as part of the organization's transition to a new way of conducting its day-to-day work. Importantly, according to performance management experts Rohm and Halbach, the process is one more "about changing hearts and minds and sustaining new directions, than it is about selecting performance measures...."⁹ It is about making vision and strategy the center of an organization's daily life and culture.

Under this framework, the goals and objectives operationalize and serve as the means to accomplish the mission within the context of the agency's vision and values, while the measures reflect progress toward attaining the goals. Further, the framework encourages the operating divisions within the organization to align their initiatives and programs with the organizational strategic plan and to work toward a shared vision in a systematic and uniform manner. As such, the balanced scorecard framework fosters a service environment that promotes change, integrates several key perspectives, aligning organizational mission with strategies to attain goals, and maintains the spotlight on attention to outcomes, performance and results.¹⁰ Implicit in the design are the values of accountability, commitment to change, and excellence.

Building a performance scorecard system takes into account these four perspectives and draws on a number of steps already taken by OMH in its ongoing strategic planning efforts. The sequence includes:

• Assessing the organizational strengths and improvement opportunities
• Defining aims and strategic goals
• Developing strategic objectives
• Examining organizational relationships and performance drivers
• Selecting initiatives to assure the success of strategies
• Identifying measures of performance and setting performance targets
• Automating data collection, analytic and reporting capabilities
• Translating the organization's scorecard approach throughout the organization
• Determining whether results match expectations and making adjustments as required

The benefits of employing the balanced scorecard cited by just one health care consortium¹¹ are that the scorecard places the consumer of services, families and stakeholders at the top of the model; is a dynamic, ongoing living process, rather than a static compilation of planning guidelines tucked away in a file cabinet; incorporates regular and systematic tracking of performance; focuses on achieving positive outcomes and results; facilitates proactive change by revealing issues before they become problematic; emphasizes strategic thinking and aids future planning; and stresses the attainment of shared goals through cross-functional collaborations and teamwork.

Overall, the balanced scorecard approach provides OMH with a stronger infrastructure for improved communications, ownership of results, and greater accountability. By selecting the balanced scorecard performance system, OMH is striving to enhance the process of organizational change that has been under way since performance measurement enhancements and the Winds of Change campaign were initiated. It is through this process of thoughtful change that OMH has laid the foundation for its ongoing efforts to continue the transformation of the New York State public mental health system and its commitment to improve the mental health, wellness and resiliency of all New Yorkers. Chapters 4 and 5 provide greater detail on the implementation of the balanced scorecard, highlighting how the addition of this approach has been designed to strengthen strategic planning and to sustain movement of the New York State public mental health system toward its vision of transformation.

Notes:

1. Carpinello SE, Felton C, Pease EA, DeMasi M & Donahue S. (1998). Designing a system for managing performance of mental health managed care: An example from NY State's prepaid mental health plan. Journal of Behavioral Health Services Research, 25(3), 269-278.
2. New York State Office of Mental Health. (2005, January). Statewide comprehensive plan for mental health services 2005-2009. Albany, NY: Author. Available online at http://www.omh.state.ny.us/omhweb/statewideplan/2005/.
3. Kaplan RS & Norton DP. (1992, January-February). The balanced scorecard: Measures that drive performance. Harvard Business Review, 71-79.
4. Kaplan RS & Norton DP. (2000).The strategy-focused organization: How balanced scorecard companies thrive in the new business environment. Boston: Harvard Business School Publishing.
5. Whittaker JB. (2003, August). The President's agenda: The balanced scorecard approach. Vienna, VA: Management Concepts.
6. Rohm H. Developing and using balanced scorecard performance systems. Perform Magazine, (2)2, 1-4. Available online at www.actuate.com/products/performancesoft/ .
7. Rohm H. (2002). Improve public sector results with a balanced scorecard: Nine steps to success. Raleigh, NC: U.S. Foundation for Performance Measurement.
8. Kaplan RS & Norton DP. (2001, September). Leading change with the balanced scorecard. Financial Executive, 64-66.
9. Rohm H & Halbach L. Creating a high performance organization. Perform Magazine, (3)2, 1-8. Available online at http://www.actuate.com/products/performancesoft/ .
10. See the primer offered by the University of Minnesota. (2004). Measurement model: The balanced scorecard. Author: Center for Human Resource Development Service Improvement Program. Available online at http://training.finop.umn.edu/sip/GRAPHICS/MeasModBalScrd.pdf.
11. Rural Wisconsin Health Cooperative. (2004, November). Balanced scorecard success: A rural perspective. Presentation on the Madison Area Quality Improvement Network. Available online at www.maqin.org .

Comments or questions about the information on this page can be directed to the Office of Planning.