Mastering the Management System

Robert S. Kaplan; David P. Norton

Article | Harvard Business Review | January 2008

Mastering the Management System

Abstract

Companies have always found it hard to balance pressing operational concerns with long-term strategic priorities. The tension is critical: World-class processes won't lead to success without the right strategic direction, and the best strategy in the world will get nowhere without strong operations to execute it. In this article, Kaplan, of Harvard Business School, and Norton, founder and di-rector of the Palladium Group, explain how to effectively manage both strategy and operations by linking them tightly in a closed-loop management system. The system comprises five stages, beginning with strategy development, which springs from a company's mission, vision, and value statements, and from an analysis of its strengths, weaknesses, and competitive environment. In the next stage, managers translate the strategy into objectives and initiatives with strategy maps, which organize objectives by themes, and balanced scorecards, which link objectives to performance metrics. Stage three involves creating an operational plan to accomplish the objectives and initiatives; it includes targeting process improvements and preparing sales, resource, and capacity plans and dynamic budgets. Managers then put plans into action, monitoring their effectiveness in stage four. They review operational, environmental, and competitive data; assess progress; and identify barriers to execution. In the final stage, they test the strategy, analyzing cost, profitability, and correlations between strategy and performance. If their underlying assumptions appear faulty, they update the strategy, beginning another loop. The authors present not only a comprehensive blueprint for successful strategy execution but also a managerial tool kit, illustrated with examples from HSBC Rail, Cigna Property and Casualty, and Store 24. The kit incorporates leading management experts' frameworks, outlining where they fit into the management cycle.

Keywords: Framework; Management Analysis, Tools, and Techniques; Management Systems; Operations; Performance Improvement; Strategy;

Format: Print

16 pages

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Citation:

Kaplan, Robert S., and David P. Norton. "Mastering the Management System." Special Issue on HBS Centennial. Harvard Business Review 86, no. 1 (January 2008): 62–77.

In 2016 the newly appointed surgeon general of the Navy launched a value-based health care pilot project at Naval Hospital Jacksonville to explore whether multidisciplinary care teams (known as integrated practice units, or IPUs) and measurement of outcomes could improve the readiness of active duty personnel and lower the cost of delivering care to them, their dependents, and local retirees. This article describes the formation of the project’s leadership structure; the selection of four conditions to be treated (low back pain, osteoarthritis, diabetes, and high-risk pregnancy); the creation of the care team for each condition; outcomes and costs measured; and the near-term changes in outcomes during the twelve-month pilot period. Patient outcomes improved for three of the four conditions. We describe factors that contributed to the project’s success. After the pilot concluded, the Navy combined the back pain and osteoarthritis IPUs into a single musculoskeletal clinical unit and established a similar IPU at another naval hospital and its clinics. The diabetes IPU was continued, but the high-risk pregnancy IPU was not. We offer several observations on the elements that were key to the success of the project, explore challenges and opportunities, and suggest that the pilot described here could be taken to greater scale in the Military Health System and elsewhere.

In 2016, the Centers for Medicare & Medicaid Services (CMS) launched its first mandatory bundled payment program, the Comprehensive Care for Joint Replacement (CJR) model, by randomizing metropolitan statistical areas (MSAs) into the payment model. The paper analyzed Medicare costs for beneficiaries undergoing lower extremity joint replacement between April 1, 2016, through December 31, 2017. The introduction of the CJR was associated with reduced Medicare Part A spending ($582 per episode, a 2.5% savings) largely through lower post-acute spending in skilled nursing facilities. The CJR hospitals had no significant differences in hospital length of stay, readmissions, complications, 30- or 90-day mortality, volume of episodes, or patient characteristics relative to the non-CJR hospitals. We conclude that mandatory bundled payments may help to change clinicians’ and facilities’ behavior without harming quality.

Article | Journal of Medical Economics | 2019

Time-Driven Activity-Based Cost Analysis for Outpatient Anticoagulation Therapy: Direct Costs in a Primary Care Setting with Optimal Performance

Robert S. Kaplan, Rohit A. Bobade, Richard A. Helmers, Thomas M. Jaeger, Laura J. Odell and Derek A. Haas

Objectives: To determine how overall cost of anticoagulation therapy for warfarin compares with that of Novel Oral Anticoagulants (NOACs). Also, to demonstrate a scientific, comprehensive, and an analytical approach to estimate direct costs involved in monitoring and management of anticoagulation therapy for outpatients in an academic primary care clinic setting, post-initiation of therapy.

Methods: Time-Driven Activity-Based Costing (TDABC) was applied in a population-based cross-sectional study at Mayo Clinic’s warfarin anticoagulation clinic. The study measured the personnel and supplies costs to monitor and manage anticoagulation therapy for 5,526 patients.

Results: The cost of warfarin management for patients who display unstable International Normalized Ratio (INR) is more than three times those who display stable INR over time. For complex anticoagulation patients, the total cost of medication and monitoring for warfarin anticoagulation therapy is similar to that for NOACs.

Conclusion: Despite warfarin being significantly less expensive to purchase than NOACs, overall warfarin management incurs higher costs due to laboratory monitoring and provider time than NOACs. NOAC treatment, therefore, may not be more expensive than warfarin therapy management for complex anticoagulation patients.

Keywords: Time-Driven Activity-Based Costing; Activity Based Costing and Management; Health Care and Treatment; Analysis;

Citation:

Kaplan, Robert S., Rohit A. Bobade, Richard A. Helmers, Thomas M. Jaeger, Laura J. Odell, and Derek A. Haas. "Time-Driven Activity-Based Cost Analysis for Outpatient Anticoagulation Therapy: Direct Costs in a Primary Care Setting with Optimal Performance." Journal of Medical Economics 22, no. 5 (2019): 471–477. View Details

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