August 2003 Bulletin

Performance measures ensure success

Meeting the needs of various constituencies depends on SMART results
By Edward A. Toriello, MD

Over the past ten years, the number of programs operated by the AAOS on behalf of Fellows has increased by nearly 30 percent–from 300 in 1993 to approximately 390 in 2002. These programs range from educational courses and publications to advocacy and media relations.

The Board of Directors realizes that, to keep the organization solvent, it is imperative to keep a watchful eye on these programs. To ensure that programs continue to meet member needs, support the organization's mission and focus resources where they are most meaningful, the AAOS has developed an ongoing financial review process. As we enter the 2004 budget cycle, I thought it would be beneficial for you to understand just how this system of checks-and-balances works.

First, the plan

Each activity begins with an idea. Perhaps it is for a course, a new or updated textbook or a video training tool. Whatever the idea, it must be supported by a plan. Short-term initiatives require an action plan; longer-term projects that require substantial time and financial commitments (more than $75,000) must be supported by a business plan. Table 1 outlines the elements common to both plans.

The business plan is submitted to the Board of Directors for review. The Board can reject the proposal, return it to the originator with a request for more information or approve the idea "in concept" and forward the plan to the Finance Committee. The Finance Committee examines the plan in depth, with a particular focus on the funds requested. Is the request reasonable? Is it sufficient to carry out the plan? How would funding the plan affect current finances? Future finances?

Finally, the plan is again presented to the Board, accompanied by recommendations from the Finance Committee. The Board weighs these fiscal recommendations when making its final decision to approve the plan, modify it or admit that it is an idea we cannot afford at the present time. Table 2 shows how the project approval process works.

The Program Assessment System

Even if the program is eventually approved, it continues to undergo regular annual scrutiny under the program assessment system. This is a formal, objective method of measuring how well every program that costs more than $75,000 meets the strategic goals of the organization, responds to the needs of the members and remains viable. There are approximately 104 activities, representing 92 percent of the AAOS budget, that fall within this category. Other projects with budgets of less than $75,000, also are reviewed, but under a separate process. Although the AAOS staff is heavily involved in preparing the necessary information, it is Board members, through the Leadership Review Group (LRG), who do the final assessment (Table 3).

Each November, staff prepare a report on every approved ongoing project for the coming year. These are assembled into a document called the Annual Plan of Work (APW). This APW places the project under one of the AAOS strategic plan goals and categorizes it as revenue-producing (book sales), non-revenue-producing (patient education Web site), or infrastructure (human resources). The APW also provides a snapshot of the project and outlines up to four criteria for measuring its success. These criteria must meet the SMART test; they must be Specific, Measurable, Achieveable, Realistic, and Time-bound. This material is meticulously examined by the LRG, which is made up of the treasurer and members of the past and present presidential line. All APW reports accompany the budget to be approved at the Board's December meeting.

At about mid-year, the Board receives an updated APW, noting the progress that has been made on each activity during the first half of the year. Projects are rated by several criteria, including:

Points are assigned to each component, building an objective score that the Board can use when making decisions on strategic goals and allocation of resources.

In the spring, final APW reports are prepared for the prior year's activities. This "look-back" by the LRG also includes an objective assessment of each activity. Programs that fail to meet objectives are placed on either a "watch list" or a "sunset list." An example of a program that was sunset is the Summer Institute.

Responsive and responsible

In some ways, it is difficult for an association to be both responsive to the needs of the members and responsible in managing fiscal resources. Resources can stretch only so far, and every constituency wants to claim its share of the available assets. The AAOS system of initial review, objective assessments and final recommendations seems to me a fair and reasoned methodology that is designed to keep the AAOS both responsive and fiscally responsible.

Edward A. Toriello, MD, is treasurer of the AAOS. This is the second in a series of three articles on the AAOS financial situation. The first article covered the value of AAOS membership, and the final article will examine income sources other than member dues.

Table 1: Business Plans and Action Plans

Project Title
Goal Statement/Strategic Direction
Program Description and Objectives

  • Must include target dates
  • Must define audience/beneficiaries of the program
  • Must define "value-added" component of activity
  • Must outline resources and organization structure required for implementation
Outcomes Measurements
  • Must include measures of success that are SMART: Specific, Measurable, Achievable, Realistic, and Time-bound
Financial Sections
  • Must include both direct and indirect expenses
  • Must include projected revenues (if any)
Supporting Data
  • Member needs assessment and/or research data/activities to support the initiative as relevant and necessary

Table 3: Review Groups

Finance Committee

  • Chaired by the AAOS Treasurer
  • Consists of First and Second Past Presidents (voting); Treasurer-Elect (if any); the Executive Vice President and Deputy Executive Vice President/Chief Operating Officer (ex-officio); director of the finance department (staff liaison).
  • Charge: "Manage, supervise and control the financial affairs of the Association and the Academy."
Leadership Review Group
  • Chaired by the First Vice President
  • Consists of Second Vice President, Immediate Past President, Treasurer, Treasurer-Elect (in years when there is one) and Chief Operating Officer (ex officio).
  • Charge: Make an independent assessment of all APW projects and submit a report to the Board of Directors with findings and recommendations.


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