The nature of business operations has changed significantly in recent decades. Consequently, organizations across different sectors are forced to thrive in increasingly dynamic and competitive environments. These environments are characterized by continually changing internal as well as external variables. Moreover, over time, these changes have become harder to predict. Rajaee et al. (2016) argue that since a tremendous amount of time and resources are used in formulating and implementing strategies aimed at facilitating attainment of long-term goals and perspectives, organizations need to emphasize three issues. First, they have to acknowledge the need for organizational performance. Secondly, they have to track to what extent they have met their objectives. Lastly, it is crucial that they pay attention to their position taking into consideration the complex and dynamic nature of today's business. Evaluation of an organization’s performance is a feedback mechanism that is useful in preventing deviation, optimizing resource allocation, detecting weaknesses and strengths, ensuring orderliness, setting standards and reducing waste ( Rajaee et al., 2016). The balanced scorecard (BSC) is a tool that has been used widely in the measurement of organizational performance.
The Balanced Scorecard: Background
First introduced by Kaplan & Norton (1992), the BSC has revolutionized the traditional approach to the measurement of organizational performance. Zelman et al. (2003) argue that the BSC is a vital management innovation in the 21 st Century. Its introduction took place at the onset of the information age when organizations were positioning themselves to compete effectively. However, more decisiveness was channeled towards exploitation of intangible assets as opposed to the management of the physical assets. In response to this, the BSC aided the companies in tracking financial results and at the same time helped monitor the progress of building the ability required to create growth. The BSC was not aimed at replacing the traditional financial measures. Rather, it was aimed at complementing it. For instance, the tool eventually became a pillar of the strategic management of organizations. In this case, it filled such a gap as the challenge of linking an organization’s short-term financial goals to its long-term strategy.
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The BSC helps companies in linking short-term financial goal to the long-term strategy using four approaches (Kaplan & Norton, 1992). Firstly, the BSC helps in translating an organization’s vision. In this stage, the tool assists managers in creating harmony in its strategy and expressing it in ways that can drive local-level action. Secondly, the tool facilitates linking and communicating. Here, the BSC aids in communicating the strategy across all the organizational levels and linking this with the individual and unit goals. Business planning is the third approach via which companies integrate their business and financial plans. Lastly, the BSC facilitates learning and feedback. Specifically, it builds a company’s ability to mainstream strategic learning. This entails collecting feedback, testing a strategy’s principal hypothesis, and lastly executing the required adjustments.
The business environment today is not only competitive but is also characterized by numerous revolutions and variations. Given this background, there is a need for organizations to evaluate organizational performance in a manner that is consistent with these dynamics. Organizations must not only ensure that evaluation of performance is done correctly but also use a system that is desirable and one that ensures that the results influence the decision-making process. For instance, the BSC can aid managers in investigating trends and activities of either decline or growth from different perspectives. It can also give them a comprehensive framework for interpreting a company's strategies and perspectives using performance measures. Although changes have taken place, the initial BSC perspectives included customer, financial, growth and learning and lastly internal processes. Since its launch, the BSC has been adopted by a wide of industries. The healthcare sector is amongst the industries that have adopted the BSC ( Kollberg & Elg , 2011; Gurd & Gao, 2007; Zelman et al., 2003).
Adoption of the balanced scorecard in the healthcare sector
The use of BSC in the healthcare sector is driven by numerous factors, which call for innovation. Firstly, the aging populations are causing increased demand for healthcare services. Secondly, more and more people are seeking improved treatments for various emerging ailments. Further, a significant number of governments are faced with a shortage of skilled healthcare employees. Lastly, innovation is inevitable as governments work towards reducing their financial involvement. These factors are common in numerous countries and have played a vital role in influencing the adoption of BSC in measuring organizational performance in the healthcare sector.
Gurd & Gao (2007) argue that the first generation of BSC in healthcare combined non-financial as well as financial indicators with the four conventional perspectives of BSC notably customer, learning and growth, financial and internal business process. On the other hand, the second generation BSC underlined the cause-and-effect relationships between strategic objectives and measures. The BSC became a strategic management tool in which case a strategy map was used to illustrate the linkage between strategies and measure ( Kollberg & Elg , 2011) . Thus, it has been argued that the principal contribution of the second-generation BSC in healthcare was the formal linkage of performance management with strategic management. Further, the third generation BSC entailed the development of strategic control systems and accomplished this through the incorporation of destination statements and, if need be, two-perspective strategic linkage models. As opposed to the conventional four perspectives, perspectives related to ‘activity’ and ‘outcome’ were used. Therefore, the third generation BSC was an extension of the second generation in which targets and action plans were added followed by their linkage to incentives (Gurd & Gao, 2007).
Perspectives
Most healthcare organizations have modified the BSC’s four perspectives in response to their immediate conditions and according to their understanding (Gurd & Gao, 2007; Zelman et al., 2003). For instance, some have used such perspectives as cost, client, care and service, research, innovation and growth, and systems integration among others. As a result, with regard to the possible range of perspectives, healthcare organizations differ from organizations in other industries. This implies that the BSC scorecard in healthcare is more diverse compared to other sectors. Two notable additional perspectives in healthcare include people and community ( McDonald , 2012; Kollberg & Elg , 2011) . The need for the former is driven by the fact that the achievement of balanced accountability for quality, cost and care is highly dependent on the beliefs, attitudes and behaviors of the physician. Secondly, it is pegged on the attitudes of the nurses and other healthcare professionals. Therefore, since it is impossible to decouple the role of hospitals from that of the professionals that run them, such perspectives as staff and people have been adopted as independent perspectives. Moreover, the adoption of human resources as independent perspectives is justified if the human resources are vital in the implementation of the organizational strategy (Gurd & Gao, 2007; Zelman et al., 2003).
Regarding community, healthcare organizations are focused on patients who are the customers, and serving their needs is a step towards the achievement of the organization's mission. However, there is a need to balance between the patient and the community. For instance, it is not easy for public health programs to define the specific clients who eventually benefit from their services since the entire community is targeted. Further, some services have to be provided irrespective of the opinions of particular members of the public. While the entire population may not be at risk, public health services have to be provided nevertheless. Moreover, the health care system has to ensure that services are equitably distributed on the basis of health needs. Due to the public’s differing opinions, consumers may poorly rate services that are of high quality from the experts’ perspectives. Therefore, the focus of public health ought to be changed from patient/client satisfaction to community engagement. This justifies emergence of the community perspective.
Performance measures and generation of scorecards
To ensure that performance indicators are closely tracked, it has been suggested that for each perspective, the indicators should not exceed four or five. This is because the more the indicators, the higher the cost of measurement, data collection and analysis, reporting as well as interpretation. The diverse nature of the BSC in healthcare allows for a measure to occur in different perspectives, in the process relating to several goals (Gurd & Gao, 2007; Kollberg & Elg , 2011 ). For instance, as an indicator, patient satisfaction can be used in the internal process perspective as well as the customer perspective. It can also be determined by such factors as the waiting time, response time and the periodic patient complaints. Also, while employing BSC as a strategic management tool, a majority of the healthcare organizations focus on cause-and-effect relationships or the linkage between strategy and its elements (Gurd & Gao, 2007). Thus, the first and second generation BSC are the most widely used.
Personal opinion
I agree with the approach of balancing performance across the BSC in a bid to achieve the mission and strategic goals of healthcare organizations. This is because as an innovative approach, the BSC is very beneficial in addressing the challenges facing the healthcare sector today. Likewise, it can be used in evaluating health programs, the quality of care, clinical pathways, accreditation as well as measuring performance across hospital consortiums. Other possible strengths include alignment of healthcare organizations around customer-focused or market-oriented strategy and facilitation, assessment or monitoring of strategy implementation. Besides providing a mechanism for collaboration and communication, the approach spreads accountability for performance across an organization’s different levels. Moreover, it gives an opportunity for continual feedback on the strategy as well as promoting adjustments to both regulatory and marketplace changes.
References
Gurd, B., & Gao, T. (2007). Lives in the balance: an analysis of the balanced scorecard (BSC) in healthcare organizations. International Journal of Productivity and Performance Management , 57 (1), 6-21.
Kaplan, R., & Norton, D. (1992). The Balanced Scorecard—Measures that Drive Performance. Retrieved from https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2
Kollberg, B., & Elg, M. (2011). The practice of the Balanced Scorecard in health care services. International Journal of Productivity and Performance Management , 60 (5), 427-445
McDonald, B. (2012). A review of the use of the Balanced Scorecard in healthcare. Newcastle: BMCD Consulting .
Zelman, W. N., Pink, G. H., & Matthias, C. B. (2003). Use of the balanced scorecard in health care. Journal of health care finance , 29 (4), 1-16.
