Sunday, September 23, 2007

Managemet program: Delta Dental is satisfied with scorecard results

Five years ago, executives of Delta Dental of Kansas Inc. set out to implement a new management program. The purpose of the program, called the balanced scorecard, was to help the company carry out its growth strategy. The difference was that it wasn't a program that affected just the senior and middle management of the Wichita-based dental insurance company. It required the participation of all of the company's nearly 100 employees. "It truly does increase accountability and transparency," said Linda Brantner, Delta Dental president and chief executive. Getting employees to buy in to the balanced scorecard system probably was the biggest hurdle Delta Dental officials had to overcome in its implementation. But Brantner, like executives at other companies that have implemented the balanced scorecard, said the payoff has been significant. Measurable results: In its 2006 annual report, Delta Dental said its business and operations improved in several ways, all because of the balanced scorecard. Company revenue increased 176 percent to $174 million in 2006. Delta Dental's market share more than doubled. And its expense ratio dropped nearly 3 percent in five years. "It made it possible for us to clearly define our strategy and communicate it," Brantner said. "It helps you align your initiatives and resources to your strategy." The balanced scorecard was created by Harvard Business School professor Robert Kaplan and business consultant David Norton as a way to communicate and implement strategy throughout an organization -- all the while measuring a company's progress toward meeting its strategic goals. It's a system that was also implemented at UMB Bank in 2005, said Craig Anderson, chairman and chief executive of UMB's Kansas region. "It's been a great tool for us and is one of the primary drivers of our earnings growth, our loan growth over the last three years," Anderson said. "We had different measurement systems, but we did not have that type of strategic focus month by month." Key to its implementation is the participation of all of an organization's employees. All Delta Dental employees' compensation is tied to their scorecard performance, which they review quarterly with managers. "It's truly not something you do once a year and put away," Brantner said. "What we try to do is align everybody's goals... with the corporate strategy." Delta Dental rolled out the balanced scorecard to rank-and-file employees a year after it was launched at the corporate and departmental levels. Brantner said it took a while for all of the company's employees to understand it and accept it. The company held training sessions and all-employee meetings on the scorecard, and stories on it were published in the company newsletter. UMB's Anderson compared the scorecard to the report cards "like we all had in high school and college." At UMB, an example of a balanced scorecard goal would be increasing total loan or deposit growth by a certain percentage annually. "It gives you a specific set of goals to manage to," Anderson said. "We look at those metrics month by month to see how we're faring against that target goal." Brantner says one scorecard area where the company saw great improvement was the time for its customer service representatives to answer phone calls. Previously, it took 12 seconds for a call to be answered by a representative. That's since been halved to six seconds. For that group of employees, that was a target set for both a departmental and individual scorecard measure. 'Valid concept': A local management expert compared the balanced scorecard system to other earlier management improvement systems, such as Total Quality Management and Six Sigma. "Putting a metric on whatever you're trying to achieve, I think that's a valid concept," said Gerald Graham, R.P. Clinton distinguished professor of management at Wichita State University. "But good companies were doing that before they heard of balanced scorecard." One particular strength of the balanced scorecard is that every person within an organization is measured on something that is tied to the company's larger strategy. In that scenario, the company's strategic goals are made clearer to everyone within the organization. "To me, the value of it is if an organization is sort of adapting this template to planning... it kind of gets everybody on the same page," he said. Graham predicted that the balanced scorecard, like other management systems, "will be around for a while until some other professor" comes up with a different management concept. But at Delta Dental, management and employees "kind of live" the balanced scorecard system, Brantner said. And Delta Dental has done a good enough job executing it that the company last year was inducted into the Balanced Scorecard Hall of Fame, which put it in the company of corporate giants such as Best Buy, Motorola, UPS and Sprint. Brantner said Delta Dental's leadership team also attends an annual balanced scorecard seminar and takes the information back to apply it at the company. Brantner said she doesn't see the company abandoning the balanced scorecard system. "Now it's part of our culture," Brantner said. "I don't think we'd ever go back." - (TWE, 2 Sep 07)

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