Balancing act: Scorecards help businesses stay healthy

COMPANIES OFTEN RELY on a single telltale measurement to determine success: profits. That may appeal to investors and Wall Street mavens, but it does not always indicate that a company is using its resources to reach its full potential.

In fact, even extremely successful companies could most likely turn more profit -- and do so with the same resources they already have in place. To reach that goal, several Fortune 500 and other companies are using balanced scorecard technology.

A balanced scorecard is a software application for measuring the success of enterprise departments, such as human resources and IT, to make sure they are performing optimally and working toward the company's ultimate goal of profitability rather than just looking at the bottom line. Scorecards enable organizations to measure the performance of processes such as business planning and simulation, performance management, and stakeholder communication.

The use of scorecards, since their inception in 1992, has been spreading, albeit slowly. Statistics confirmed by Stamford, Conn.-based Meta Group suggest that in 2001 the percentage of companies using balanced scorecards will rise to 38 percent, up from 27 percent in 2000. Closely in line with Meta Group's numbers, a study from Gartner, in Stamford, Conn., estimated that about 40 percent of the Fortune 1000 would implement a balanced scorecard by the end of 2000.

"The idea is a wake-up call to enterprises to look at the things they can directly control that will lead to profitability," says Doug Laney, vice president of application delivery strategies at Meta Group. "You can't directly control profits, but there are things you can control that add to profitability."

More than money

Duke Children's Hospital in Durham, N.C., had more on the line than mere profits; in 1996, the hospital was $11 million in the red. Critical programs were being shut down, the number of patient beds was being reduced, and the quality of patient care was declining.

Dr. Jon Meliones, chief medical director at Duke Children's Hospital, was faced with the problem of either cutting programs and laying off 30 nurses or figuring out a way to save 3 percent of the budget.

Rather than make the unpopular decision to cut programs and staff, he implemented a balanced scorecard with the help of Cary, N.C.-based SAS Institute. As a result, the hospital was able to streamline its practice, increasing efficiency and cutting the average cost per case from $15,000 in 1996 to $10,500 in 2000.

"We were able to turn things around enough to show that we could run the business without making the cuts," Meliones explains.

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