6 signs that your growth engine is idling

In the coming years of continued industry change, hospitals and health systems will require more discipline than ever before in their business planning processes. Just as the multi-year ACA rollercoaster ride began to slow down, the 2016 presidential election introduced a new challenge for hospital executives.

"Wait and see" is not an option, and neither is a strategy built solely on the cornerstone of incremental cost improvement. Health systems have to grow, and quickly. However, while many have actively been pushing to expand, they are not realizing the growth they hoped. This is indicative of a disconnect between their growth strategy and operational execution. And, while most executives would agree on the value of having alignment between these areas of their organization, achieving alignment in practice is much easier said than done, and most organizations have room for improvement.

In our experience, there are six areas where breakdowns in alignment occur between strategy and execution. Fortunately, organizations can begin building the interstitial tissue between strategy and operations by focusing on addressing underlying root cause issues in an organization's operating model.

Below we lay out six common areas of disconnect, along with suggestions on where to start in addressing them.

1. Your operations team can't articulate your organization's growth strategy. When an organization's growth strategy isn't clearly articulated, or widely understood throughout the organization, it is unlikely that operational priorities or project planning will align to support it. A clear sign that misalignment exists is when your organization's operational teams are unable to express the growth strategy. This often results in one or more of the following:

⦁ projects being defined by service lines or technology teams that support only their own priorities (e.g., when every service line acts like it is a destination/center of excellence);
⦁ ad hoc or informal processes forming to define projects required for department-level growth;
⦁ "gamesmanship" by service lines to ensure their pet projects are prioritized through other channels — either through disaggregating projects, or requesting them outside of the formal business planning process.

Where to begin: First, ensure your organization has a clearly defined, current growth strategy. A good growth strategy should tell you clearly where your organization will go (in terms of geography, service, volume, price), by how much, and how. This strategy should be granular enough that departments can use it for business planning purposes, yet accessible enough that each department can repeat it back to ensure there is no miscommunication. Finally, the strategy must be widely communicated by these service lines so that, in practice, it becomes adopted as the baseline for planning.

2. Business planning is done in silos. When business planning activities are performed in silos — with minimal connectivity and dialogue between support operations and service lines — there is a high likelihood that disconnect can occur between the needs required to support an organization's growth strategy and projects being proposed. Additionally, this results in each service line proposing its highest priority projects to leadership – supporting the respective aims of that unit, but not necessarily those of the organization overall from a growth perspective. As reimbursement continues to shift towards outcomes- or population-based measures, organizations can ill afford to have different parts of the health system, such as acute, emergent and post-acute units, working independently or at cross-purposes. Furthermore, when business planning occurs without connectivity to the strategy team and without common expectations for rigor in planning, forecasting often defaults to projecting historical numbers with an arbitrary growth target on top.

Where to begin: Treat growth planning like an innovation project — view all components of a business case holistically across the organization. Active dialogue and planning should occur across service lines and across the continuum of care, breaking down functional silos and creating a comprehensive understanding of the costs and benefits of growing the organization. Much stronger analytical capabilities are now available to hospital management, and should be used for forecasting annual, quarterly, monthly, daily and hourly numbers — and staffing/target-setting accordingly. Finally, setting shared metrics and performance indicators that cut across functional silos will encourage a matrixed approach to planning, which is required to ensure agility in business planning and internal investment.

3. Strategy is a bystander or passive steward for business planning. When the strategy function serves merely as a steward for the business planning process, rather than as an active participant and facilitator of the process, the organization lacks a valuable voice to represent the organization's overall strategy and growth plans, and unite plans across functional areas and service lines. Organizations that lack a strong strategy function that actively drives planning and prioritization enable the perpetuation of siloed and disjointed business planning. They are less likely to be able to rapidly navigate market changes and efficiently deploy capital in response to these changes.

Where to begin: Empower your existing strategic planning team to actively drive business planning in partnership with service lines and functional experts. Let strategy get in front of business planning, working with the CFO, the COO, the heads of business development and marketing, and the senior physician leaders to catalyze the planning. To do this, leadership must ensure that strategy has the resources, tools and executive support to efficiently and effectively drive this process, without compromising other responsibilities.

4. Ad hoc projects continually surface throughout the year to support "one off" growth activities. When ad hoc projects are proposed continuously throughout the year to support service line-specific growth activities, in lieu of going through traditional business planning, it is a clear indication that growth needs are not being met through established processes. If a robust business planning process does not support the needs of all constituents, ad hoc side projects will arise over time in lieu. This further deteriorates an organization's ability to understand priorities and needs in a holistic manner.

Where to begin: Start with evaluating your growth strategy with the lens of how realistic and achievable the targets are. Battling the pressures (external and internal) to deliver substantial growth can be difficult. Organizations must start by understanding their organization's readiness to support growth, and how effectively their business planning function allocates investment dollars toward the growth pipeline. Relevant metrics that measure effectiveness must be established and actively tracked and managed. Finally, establishing a more frequent (e.g., semi-annually versus annual) planning process, a strategic reserve for unforeseen projects, and clear criteria about funding this cycle vs. next cycle can ensure the same rigor and discipline gets applied against all projects.

5. A culture of blame is pervasive. One of the most visible and harmful symptoms of a strategic planning process that doesn't enable the organization to achieve its growth goals is a culture where various functions and departments blame each other for enterprise-level failures. Most commonly, this manifests itself as service lines and support operations and technology teams assigning blame for cross-functional projects on each other. This culture of blame results in a vicious cycle that increases the divide between functional groups, further detracting from the ability of each group to support overarching organizational goals and growth targets.

Where to begin: Start at the top. An organization will never escape damaging behaviors that are demonstrated at the highest level of hospital leadership — both clinical and administrative. Ensure that the right leadership and behaviors are in place, before looking to layers below. Focus on fixing culture by pulling multiple levers, such as shared incentives and increased transparency across functional and service line structures. Only through proactive management from the top down, can cultural divides be mended, and an organization can start truly collaborating toward enterprise goals.

6. Disconnected financial and operational goals. Having disconnected financial goals and operational metrics prevents the organization from understanding how well departments execute against financial targets. Growth and cost reduction initiatives are defined purely in financial terms, and allocated equally to everyone in the interest of "fairness." As business performance fluctuates, it is impossible to tell whether targets are being achieved or missed as a result of specific actions — regardless of them, or in spite of them. This obfuscates the effectiveness of teams and initiatives, and makes growth planning more difficult. Furthermore, it results in an environment where no one is accountable.

Where to begin: Linking financial goals to operational goals creates much greater accountability (and fairness), and enables the organization to have full transparency into performance. Furthermore, service lines and initiatives can be evaluated and supported based on operational and financial performance; they can also be supported where needed as indicated by relevant performance metrics. This also helps in driving toward a culture absent the "blame game."

Increasingly, how capital is deployed is just important as how much and where it is deployed. The torrid state of the healthcare industry — and rapid pace of change for hospitals — leaves little room for inefficiency in capital deployment. This is especially true for smaller hospitals that can ill afford to invest time and resources in projects and activities that don't support growth goals and enterprise strategic plans. If any of these symptoms ring true in your organization, taking a hard look at the underlying behaviors and processes is a good starting point for enabling a more effective planning function, and in turn, a more nimble healthcare organization.

Igor Belokrinitsky is a principal with Strategy&, PwC's global consulting team, and John Petito is a manager with the firm.

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