C OV E R S TO R Y
Author’s note: Content for this article has been adapted in part from my recently published book, Innovative Corporate Performance
Man-agement, which is the sequel to my 2007 book, Five Key Principles of Corporate Performance Management, from Wiley Publishing. This first
of three articles is focused on Principle 1: Establish and Deploy a CPM Office and Officer. The second article focuses on Principles 2 and 3,
and the final article focuses on Principles 4 and 5.
How do Malcolm Baldrige,
Balanced Scorecard Hall of Fame,
Sterling, Fortune 100, APQC,
and Forbes award winners
innovate and drive value?
By Bob Paladino, CPA
Achieving Innovative
Corporate Performance
Management
Achieving Innovative
Corporate Performance
Management
W
hat do award-winning companies know that eludes most of today’s executives? How do they organize and innovate to achieve outstanding results in their fields of endeavor? What core and innova-tive corporate performance management (CPM) pro-cesses and best practices do they leverage to succeed in challenging times? How have they overcome what a recent CEO study calls the “change gap,” or the ability to innovate and change in a challenging market?In good times, strengths and weaknesses of a business model are often overlooked. In bad times, as with the recent global recession, weaknesses often come to the forefront. Market forces and the prolonged recession have caused organizations to rethink their business models and innovate through best practices. I became intrigued with how several companies have thrived and innovated using CPM methods during one of the worst recessions since the Great Depression, and their leaders were kind enough to share their stories with me. My research focused on core best practices from my first book and on how award-winning organizations have developed dozens
of new, innovative best practices—not only to survive but to lead their sectors. The Five Key Principles of CPM model (shown in Figure 1) has been used by dozens of organizations to emulate the winners and with striking results.
The five key principles of CPM are:
Principle 1: Establish and Deploy a CPM Office and Officer
Principle 2:Refresh and Communicate Strategy
Principle 3:Cascade and Manage Strategy
Principle 4:Improve Performance
Principle 5:Manage and Leverage Knowledge
Innovation and Performance
Management
Innovation has been at the heart of our existence and advancement for centuries. The U.S. Congress invented the U.S. Patent System in 1790. To put a sharper point on our need to embrace and adapt to an increasingly innov-ative society, consider the following trends.
In 1883, the U.S. Patent and Trademark Office
C OV E R S TO R Y
Figure 1:
Five Key Principles of CPM
processed only a few hundred patents. Between 1977 and 2008, however, a deluge of 2,096,055 patents was filed, it says. This isn’t a uniquely American experience—every society has its way of expressing innovation or creativity. Globally, the World Intellectual Property Organization (WIPO) reports the explosion of patents and ideas in its annual report. For example, it took Japan more than 100 years to reach a level of 150,000 patent filings per year but only 20 more years to reach 450,000 patent filings per year. And the rate of innovation keeps accelerating. The United States, China, and Europe have all attained 150,000 filings in multiple years, according to WIPO’s 2008 report. The companies I selected for cases in my new book have earned a collective 175 awards and have been consistent with the core 34 CPM best practices in book one but have also provided more than 132 new, innovative CPM best practices. Most of these arise in Principles 2-5. See Table 1 for some of these numbers.
Change Gap
In one of the most comprehensive CEO global studies by IBM, CEO Enterprise of the Future, in late 2009 more than 1,000 leaders of the largest global enterprise in Europe (403), North and South America (358), and Asia (359) offered the following insights:
◆ Organizations are bombarded by change, and many are struggling to keep up.
◆ Eight out of 10 CEOs see significant change ahead, yet the gap between expected change and the ability to man-age it has almost tripled since the prior-year CEO study. ◆ CEOs view more-demanding customers as an oppor-tunity to differentiate, not as a threat. CEOs are spending
more to attract and retain increasingly prosperous, informed, and socially aware customers.
◆ Nearly all CEOs are adapting their business models, and two-thirds are implementing extensive innovations. ◆ More than 40% are changing their enterprise models to be more collaborative.
In IBM’s 2006 CEO survey, 57% of CEOs felt their companies had changed successfully, yet 65% felt change would continue, a change gap of 8%. In the 2009 CEO survey, 61% of CEOs felt their companies had changed successfully, yet 83% felt change would continue, a change gap of 22%. The change gap expanded from 8% to 22%, an increase of 275% in just three years. In short, companies are finding it more challenging to innovate and stay current with accelerating change.
Yet several companies have leveraged CPM and flour-ished in the face of this dramatic change and change gap. Let’s now turn to a case study about award-winning Sharp HealthCare to delve deeper into its approach to CPM. Nancy G. Pratt, RN, senior vice president of the Clinical Effectiveness department, made substantial contributions to this case. Without them it wouldn’t have been possible.
Sharp HealthCare Demonstrates
Innovative CPM
The following sections describe Sharp’s operations and work, awards and honors for innovation and perfor-mance, actual results from innovations and performance management, and how Sharp accomplished these results through Principle 1: Establish and Deploy a CPM Office and Officer. I’ve adapted the materials from company documents.
Table 1:
Best Practices
FIVE KEY PRINCIPLES OF CORE COMMON NEW, INNOVATIVE,
CORPORATE PERFORMANCE BEST CPM COMPANY-SPECIFIC TOTAL
MANAGEMENT PRACTICES BEST PRACTICES BEST PRACTICES
Principle 1: Establish and Deploy a CPM Office and Officer 8 8 16
Principle 2: Refresh and Communicate Strategy 6 39 45
Principle 3: Cascade and Manage Strategy 9 31 40
Principle 4: Improve Performance 5 30 35
Principle 5: Manage and Leverage Knowledge 6 24 30
Principle 1: Establish and Deploy a CPM Office and Officer
Sharp HealthCare is the largest integrated regional healthcare delivery system (IDS) in San Diego County and the parent company of all Sharp entities. The Sharp system consists of four acute-care hospitals, three spe-cialty hospitals, two affiliated medical groups, a health plan, three long-term care facilities, a liability insurance company, and two philanthropic foundations.
With more than 23 subspecialties of medicine and surgery, Sharp also offers state-of-the-art treatment for multi-organ transplantation, hyperbaric medicine, and a level-two trauma center. Licensed to operate 1,870 beds, Sharp provides care to approximately 785,000 individuals annually, including more than 350,000 health mainte-nance organization enrollees. At the end of the 2009 fiscal year, Sharp reported $2.1 billion in net revenues. Approx-imately 35.7% of Sharp’s revenue is derived from senior and commercial capitated managed care contracts (pre-mium revenues). Fee-for-service and managed-care government-sponsored reimbursement (Medicare and Medi-Cal) account for approximately 41.8% of Sharp’s gross patient charges.
Demonstrating innovation and leadership, in Septem-ber 2001 Sharp launched “The Sharp Experience,” a performance-improvement initiative designed to trans-form the healthcare experience and make Sharp the best place to work, the best place to practice medicine, and the best place to receive care. Today, everything at Sharp, from strategic planning to performance evaluations to meeting agendas, is aligned with the Experience’s Six Pillars of Excellence: Quality, Service, People, Finance, Growth, and Community.
Malcolm Baldrige Quality Award Criteria
During Sharp HealthCare’s journey to transform the healthcare experience, another innovation was selecting the Malcolm Baldrige National Quality Award criteria as the quality standard for all Sharp entities. Since only one healthcare organization earns this acclaimed award annu-ally, Sharp’s leaders wanted to continue to stretch the organization via The Sharp Experience transformation structure. The Baldrige program offered the means to set high goals with lofty targets that would raise performance a notch every year.
The Baldrige standard provided Sharp HealthCare with accountability and aspirations to improve processes and results. It established process improvements through wel-come feedback and specific measurements, and it asked
leaders to think differently and front-line staff to take ownership of the importance of what they do every day to make the organization better. Baldrige principles offered rigor and structure that allowed a good organiza-tion to become an excellent one.
Sharp’s executives think highly of their organization’s performance so far. Mike Murphy, president and CEO of Sharp HealthCare, says, “Sharp has been on a six-year jour-ney to transform the healthcare experience for employees, physicians, and patients. The Baldrige criteria and our unwavering commitment to quality satisfaction and con-tinuous improvement have helped us toward our vision to be the best place to work, practice medicine, and receive care and ultimately to be the best healthcare system in the
universe.” (Sharp won state quality awards during its jour-ney toward winning the Baldrige Award in September 2007 and has received numerous awards since.)
Nancy Pratt added, “We will continue to set higher annual goals, higher targets. It is the right thing to do for our patients, staff, physicians and volunteers. We will raise our performance a notch every year.”
Clinical Effectiveness Organization
Innovation and performance management have been embraced at the highest levels in Sharp. As a cohesive and collaborative force, its executive leaders have been com-mitted to excellence from the onset of The Sharp Experi-ence. This teamwork is evident in the Executive Steering Committee, which consists of 17 senior leaders, including the system CEO/president, the executive vice president, the CEOs of all entities, all senior vice presidents, and the system medical director. These leaders share a unified dedication to challenging the conventional and stretching the organization to be the best. It was no surprise when the Executive Steering Committee embraced the Baldrige program and unanimously agreed to pursue the Baldrige standard of excellence.
Formalizing innovation and performance improve-ment, Sharp established a noteworthy role on Executive Steering—the “champion for performance improvement.”
efforts and facilitates transparency, quality, patient safety, and organizational performance improvement. Pratt reports to the executive vice president, Hospital Opera-tions, Sharp HealthCare, and her colleagues include members of the executive team. Other vital areas under her direction are clinical service lines and clinical deci-sion support. She was a member of the 2005-2007 board of examiners for the National Malcolm Baldrige Quality Award, which endorses her role in directing performance improvement.
Clinical Effectiveness coordinates or facilitates a corpo-rate performance management (CPM) portfolio that con-sists of quality and safety strategic planning; dashboard report card measurement; Six Sigma tools, including CAP (change acceleration program), DMAIC (define, measure, analyze, improve, and control), Lean Six Sigma, and Work-Out™ (an improvement method that uses a con-centrated decision-making session in which the people who do the work solve problems); and knowledge man-agement best practices.
The Clinical Effectiveness team also coordinates with a range of other key contributors in Sharp to drive innova-tion and performance improvement. Pratt and her team’s participation and inputs have contributed (and still con-tribute) to the:
◆ CEO Council, a weekly meeting of Sharp’s hospital CEOs and executive vice president to facilitate integration and to solve problems.
◆ Executive Steering Committee.
◆ Leadership Development Session, an educational ses-sion held four times a year (the fourth is in conjunction with an all-staff assembly) for Sharp leaders that provides career development opportunities for them to gain depth of experience and insight from peers, outside experts, improvement projects, and action teams across multiple assignments and entities.
◆ Change Agents, those leaders who facilitate CAP and Work-Out™ by instilling innovative new tools and tech-niques across the system and coaching other leaders on change facilitation.
◆ Pillar of Excellence Awards to recognize innovation and performance improvement. These annual system awards go to outstanding individuals, action teams, and departments that demonstrate superior performance under one of Sharp’s Six Pillars of Excellence. Pillar Award winners are selected from each entity’s Center of Recognized Excellence (CORE).
◆ Employee Forums, quarterly employee meetings held at Sharp entities to provide report card updates, commu-nicate Sharp’s business results, and educate staff about specific Sharp Experience lessons. Communication Expos are an example.
◆ Trailblazers of Excellence, which are best-practice units, departments, or functional areas within Sharp HealthCare.
Best Practices to Enable Innovation and Performance Improvement
Sharp HealthCare has established a host of best practices that have enabled innovation and performance improve-ment. Best practices 1 through 8 are consistent at Sharp and other award-winning companies I researched, but best practices 9 through 12 are unique to Sharp.
1. Executive sponsorship: The CEO actively sponsors
a CPM Office called Clinical Effectiveness and CPM proj-ects for a sustained period and with the right visibility to enable maturity.
2. Organizational level and reporting relationship:
CPM Office executive reports to the EVP.
3. CPM office staff: Small senior team experienced in
change programs.
4. Leadership, influence factors: Able to organize cross
organizational, virtual teams to drive results in all CPM methods.
5. Ownership of CPM processes and methods: The
office owns or substantially influences the portfolio and methods of CPM processes throughout the enterprise.
6. CPM, industry, and company knowledge: The
CPM team possesses deep expertise in strategic planning, initiative management, scorecards, Six Sigma tools, and knowledge management. One or more team members have deep industry and company-specific knowledge to help guide resolution of project issues.
7. Collaborative maturity: Experienced in working
horizontally and vertically through the organization.
8. Ability to learn: Open to new ideas, methods, and
approaches; able to streamline, integrate, and adapt methods; able to think concurrently.
9. Sharp’s CPM Office works effectively across a com-plex, multiple-entity enterprise, each with either a CEO or president, as part of a larger healthcare system.
10. Sharp has formalized an expanded performance improvement infrastructure or network consisting of champions, change agents, Executive Steering Committee,
and CEO council.
11. Sharp has formalized Pillar of Excellence Awards and CORE Award to recognize performance improve-ments and innovations.
12. Sharp has deployed a more-expanded innovation toolbox of methods than most companies in our research group, including CAP, Work-Out™, Six Sigma, Lean Six Sigma, SIPOC (suppliers, inputs, process, outputs, cus-tomers), and others.
Results from Innovation and Performance Management
Here are some of the results that Sharp has achieved through its innovation:
◆ San Diego consumers rated Sharp the highest on qual-ity measures and preference for healthcare services across all of the major service lines.
◆ Consumer satisfaction rates place Sharp Health Plan (SHP) in the top quartile across the nation for six years in a row.
◆ Inpatient Diabetes Mean Blood Glucose Level was reduced four years in a row.
◆ Glycemic Control Percentage in Joint Replacement Patients improved five quarters in a row.
◆ Acute Myocardial Infarction (AMI)—heart attack Beta Blockers at Discharge (DC)—most Sharp entities are in the top decile nationally.
◆ AMI Mortality has been lower than the national benchmark at all locations for three years.
◆ Harris Hip Functional Status Improvement (pre-op to one year post-op) has outperformed the national bench-mark three years in a row.
◆ Sharp Home Care Improvement of Patient Transfer Ability outperformed the national benchmark three years in a row.
◆ Sharp Bariatric program results beat national bench-marks in all four complication types five years in a row. ◆ System Ventilator Associated Pneumonia Rates out-performed the national quartile four years in a row. ◆ Agency for Healthcare Research and Quality (AHRQ) Patient Safety Indicators outperformed the national benchmark in 11 safety indicators.
Awards and Honors for Innovation and Performance
Sharp HealthCare has also earned several notable awards: ◆ Malcolm Baldrige National Quality Award
◆ California Performance Excellence (CAPE) Eureka Gold, Silver, and Bronze awards
◆ American Nurses Credentialing Center (ANCC) MAGNET Designation for Nursing Excellence to Sharp Grossmont Hospital (SGH) and Sharp Memorial Hospital (SMH)
◆ Excellence in Patient Safety and Health Care Quality based on Leapfrog Survey (SMH, SGH)
◆ 50 Exceptional U.S. Hospitals based on Leapfrog Survey (SMH)
◆ Press Ganey Summit Award to Sharp Coronado Hospital and Healthcare Center (SCHHC) for Top 5 Percentile in Patient Satisfaction (three years)
◆ San Diego Better Business Bureau Torch Award for Marketplace Ethics (SHC)
◆ Verispan/Modern Healthcare Top 100 Integrated Healthcare Networks (three years)
◆ San Diego Society for Human Resources Management, Workplace Excellence Grand Prize
◆ American Heart Association (AHA) Get with the Guidelines (GWTG) Sustained Performance Achievement (SMH) and Performance Achievement (SGH)
◆ 100 Best Places to Work in Information Technology (two years)
◆ 100 Most Wired awards for nine consecutive years As you can see in this article, Sharp has truly achieved and demonstrated innovative CPM. In the second article, I’ll focus on key core processes and best practices for Principle 2, Strategic Planning, and Principle 3, Perfor-mance Management. The third article focuses on Princi-ple 4, Business Improvement, and PrinciPrinci-ple 5, Enterprise Content Management. SF
Bob Paladino, CPA, is the founder of Bob Paladino & Asso-ciates, LLC. He advises boards of directors and executives and offers CPM/balanced scorecard services for rapidly implementing and integrating proven methodologies to drive breakthrough results. When he was senior vice presi-dent of Crown Castle International in the Office of the CEO, he directed the global CPM/Balanced Scorecard program to win the Hall of Fame award and APQC’s Best Practice Partner award. You can reach Bob at (978) 857-6766 or [email protected].
This content is excerpted from Innovative Corporate
Per-formance Management with permission from the
pub-lisher, John Wiley & Sons. You may not make any other use, or authorize others to make any other use, of this excerpt in any print or nonprint format, including electronic or multi-media. For copies of the article, contact Sheck Cho, execu-tive editor, at [email protected].
