Measure, Monitor...and Be Flexible!

Part 3 of 3

We've talked about creating a model that lets us know where our organization is, with respect to the critical functions, so we know where we're starting from. Only then can we prioritize and aggressively seek solutions to our most critical issues. Once the model is in place, we don’t want it to sit on a shelf! Periodic (no less than monthly) status reviews must take place. Where timetables are not being met, serious dialogue must be entered into, to get things back on track. A periodic progress report to Senior Management should also be incorporated in the process.

A side, and not so incidental, benefit of the process will be the development of performance metrics to facilitate measuring progress toward the goals inherent in certain of the tasks. Again quoting from “Hospital Strategies for Effective Performance Management”, “ …performance management rests on a relatively straightforward process of monitoring core metrics to gauge how well the organization is reaching its goals and adjusting strategies accordingly. …Effective management of healthcare organizations, therefore, requires looking at more metrics and comprehending a wider scope of information than most businesses. Only by developing a deeper understanding of performance drivers can leadership address such an incredibly complex environment involving everything from clinical care and patient satisfaction to cash flow and supply chain costs.”
Finally, flexibility is crucial. As the organization's’s situation and the impact of external factors (regulatory, reimbursement, competition, etc.) evolve, priorities and timetables will shift, and must be reflected in the model.

The development of such a model is admittedly a time-consuming task, involving much collaboration. In some circumstances, it may even require external assistance – “CFO Extenders”, if you will. But the benefit of this exercise should be readily apparent. You will identify and address those areas of opportunity to strengthen your organization, focusing on the basics and positioning yourself to meaningfully attack the imperatives for future success.

Good luck, and let me know whether this discussion has proved helpful.

Putting The Concepts Into Practice

This is a continuation of  the previous blog

So...we want to develop a comprehensive set of requirements. Drawing on the expertise of the office of the CFO, along with  other C-suite executives and input from subject experts within or external to the organization, this list should delineate the preferred state (“best practice”, if you will) of every policy, process and analysis that provides the underpinning of the organization’s fiscal health and supports strategic direction.

I can't overemphasize the importance of collaboration, both vertically and horizontally, in this process. A January 6, 2010 Healthcare Financial Management Association report – “Hospital Strategies for Effective Performance Management”, in discussing the structure that best supports improvement efforts, points out “…performance typically is strongest when authority is decentralized and those developing strategy as well as those responsible for implementing strategy work together to formulate plans for growth and solutions to performance issues.”


Delineate the items, and evaluate both their acceptability within your organization and status of their completion. Priorities can than be identified, responsibilities assigned and timetables for completion projected. The finished product will be shared with all appropriate parties. With buy-in from all internal constituencies, you will have a living, dynamic document that can guide the collective effort.

A Proposed Model
If all of this sounds a bit vague or too all-encompassing, perhaps a visualization of the model will serve to clarify. While other models may work equally well, I'll describe a multi-tab spreadsheet that I'm familiar with.

• Each spreadsheet tab relates to a particular function, for example Controllership, Capital Structure, Quality, Strategic Transactions, IT, Risk Management and so forth. While such categories are universal, your organization’s particular situation may dictate additional components. If your organization is financially distressed  for instance, there may be a Turnaround tab.

• List on each tab the one-line sub-function tasks. Let’s look at the IT function. If, as it should be, your objectives are to link IT strategy to organizational strategies and to leverage your IT budget, sample one-liners might include:

o Analyze current state of financial processes and potential to rationalize, scale and automate them
o Verify the fit between improved financial systems and the company’s infrastructure, to ensure that improvements
o Ensure that adequate training is provided and financial systems are integrated with business processes, and so on...

• Having obtained input for these tasks from a wide cross-section of the organization, the draft document can be reviewed, edited, pared down and rearranged as deemed appropriate by the document owner (I suggest that be the CFO). Following this process, each contributor should be given an opportunity to review their section(s) of the draft, and be requested to sign-off.

Facilitate Accountability

• Priorities, responsibilities and timetables must be assigned. The manager with oversight of each function should take the first shot at this. The CFO should then meet with those managers to review, debate and negotiate the final draft. Then, review with the CEO and the rest of the senior management team, for buy-in.
Tune in next time, for a view on how to effectively deploy the model, to strenghten your organization by, in part, linking it to performance drivers.

And, again, what I've described is just one model.  I would be interested in other models you may have seen or be working with in your organization.

What's a CFO to do?

Although the content of this post is related to the healthcare industry, it's really applicable across all industries (All you need to do is substitute, for the italicized healthcare-specific issues throughout this post, those issues of major impact your industry is facing now and in the future).

Bob Dylan was, in fact, prophetic: "The times, they are a’changin’". And, yes, the issue of wrestling with rampant change is popping up in every professional journal and newsletter. What with healthcare reform, integrated electronic health records, depressed investment dollars, pressures on cost containment, pressures on physician income, quality metrics…well, you get the idea.

I maintain the question is less “How do we address the multitude of critical issues concurrently?” than “How do we know where we’re starting from? How can we can identify our most critical issues, prioritize and aggressively seek solutions, in the midst of so much pressure and confusion?”

The future viability of your organization will likely hinge upon the following seven imperatives (among others):

• Focusing on quality initiatives, measures and outcome reporting 
• Strengthening and internalizing a compliance culture
• Identifying opportunities to maximize revenue, streamline costs and manage cash
• Developing and reporting key metrics tied to organizational goals
• Developing and implementing an electronic health record system
• Finding ways to partner with and bond physicians to your organization
• Enhancing product line accounting, to facilitate decision making and identify strategic opportunities

But here’s the rub: You’ve got to walk before you can run. You need to ensure every basic control and process in support of your higher goals is in place.

How Do I Start?

I’m sure you're functioning as an effective strategic partner with the rest of the C-suite team. Taking that as a given, you will find it productive, as a starting point, to lead the effort of developing a comprehensive set of the basic requirements or "best practices", categorized by area of risk or opportunity and by function, that are the underpinning of a strong organization.
My next post will walk through the manner in which you might work within your organization to get such a project off the ground in an effective, collaborative way. A subsequent post will describe one model that can be used to put the concepts into practice.

Meanwhile, let me know what you think of this as an approach to developing an effective starting point, before digging in to conflicting priorities?