Managing Risk: Where Are You on the Curve?

The morning after the signing of the new healthcare legislation, senior healthcare leaders knew their jobs had changed forever. Historically the emphasis for most had been on achieving those metrics that enhanced profitability, increased patient satisfaction and modest growth — without undertaking significant risk.

The discontinuous change created by the new legislation compels healthcare organizations to move to a new pay-for-performance platform of care while maintaining short-term financial expectations in the historical fee-for-service models. Unfortunately, the transformation has an ill-defined destination, few if any relevant historical role models and requires a faster response time than most feel is reasonable. Healthcare organizations now play in a far more dangerous neighborhood characterized by high levels of ambiguity and uncertainty. The challenge is not only improvement within the boundaries of the organization itself, but also the performance and collaboration within the larger community. Healthcare leaders are fully aware that when this chapter ends, many healthcare organizations will have lost their seat at the table, and most others will have morphed to a completely different form. Long-term success means planning and executing this round effectively.

Taking this healthcare journey is not for the faint of heart. There are numerous choices: Leaders must balance their organization's tolerance for safety and risk; volume vs. value; centralized and decentralized control; openness for change and the consistency of best practice; high tech and high touch; cooperation and competition; primary care and specialized medicine; transparency and confidentiality; and meeting the needs of diverse stakeholder groups whose objectives often conflict.

The management of risk is now forefront of the senior leader's most critical agenda items. Knowing how to assess the risks and properly manage them has become an organization competency that must be fostered for long-term sustainability. To do so requires new language and tools to facilitate effective strategic thinking, decision-making and decisive action. The days of the flavor-of-the-year are over.

Here are some thoughts to help senior leaders transition to a world characterized by significant risk.

The S curve: Managing risk

The S-curve is an effective tool for evaluating risk and determining the various kinds of action that should be taken at specific points in time. The curve suggests that growth and change happen along an almost predictable trajectory of three distinct phases.

Understanding where an issues falls on the curve determines the most effective actions.

S Curve

The table below defines the kinds of challenges faced at each stage and the kinds of issues that must be addressed to effectively move from one stage to the next.

Table 1: The challenges and transitions issues along the S Curve

Phase Challenges Transition issues
Phase 1: Exploring Explore opportunities with a new set of eyes
Manage the range of emotions from exuberance to fear
Create a balance between the dream and the resources required to achieve it
Keep people interested enough to make commitments   
Stay with the business or change concept long enough to bring to fruition
Achieve balance between what is achievable and what is an unachievable dream
Know when to move from concept to implementation
Phase 2: Norming Establish an achievable agenda
Install management practices
Communicate regularly
Ensure commitments are achieved
Allocate resources effectively
Improve productivity
Standardize product/service and the processes used to create them
Maintain the balance between continued innovation and efficiency
Maintain an open culture
Respond to changes in customer expectations
Use financial measurements as the only/prime method of assessing organization health
Phase 3: Fulfilling Be personally open to the need for major change
Help others overcome resistance to change
Provide organization structure and resources to explore and realize new products and services
Manage a stressful political organization climate
Re-skill and re-tool the assets of the corporation
Establish a new vision and sell it     
Know what and when to unlearn
Create space where employees feel empowered to innovate
Find a critical mass of leaders who will support the change effort
Find the courage to overcome personal doubts and setbacks
Know when and how to ask for support
Create strategic partnerships
Successfully manage the core business and invent the new business

One of the powerful attributes of the model is that it can provide a timely way to determine when a new discontinuous change occurs and its relationship to the current state. The S curve should be put in place to determine the types of organization and leadership issues that will be encountered on the journey.

Impact of 2 S Curves

Collision of two worlds

The generic S curve suggests that when a few pioneers start a new S curve (the green line) they are initially ignored by those who remain intent on achieving the historical performance metrics and objectives. As the new S Curve requires more resources from the existing stakeholders (pink line), they meet with resistance from them. The pink line folks see the green line as an unnecessary drain on resources at a time when financial and people assets will be at lower levels because the organization is experiencing stage 3 decline. They will argue against the distraction of the green line and a return to the historical focus on the basics that led to historical success. The green stakeholders demand that the old is finished and that if a new course is not successfully embarked, it could spell the demise of the organization.

Caught between the forces who resist change and those who under-appreciate the accomplishments of the past are senior leaders who must help each side understand the need to do both: maintain the past approaches long enough to reap short-term benefits and focus on establishing the successful implementation of the new-to-achieve long-term benefits.

The concept of the S curve helps the leader frame the situation so that the players can depersonalize the negative energy and help each side find value in the other. It is in this manner that the senior leader can help balance such risks the long and short-term; current financial model and the new model.

Without the use of new language and tools, the issues are experienced as a contest of wills. Through the use of tools, the issue moves from a politically imposed solution to one that is more comprehensive and embraces a larger set of possibilities.

Three kinds of work and impact on risk

In managing risks, there are at least three kinds of work:

  • Routine work: The organization does this well and has no need to improve. Example: routine medical care.
  • Management work: Fix issues that can be characterized as problems to be solved. Only focus on those problems that are critical to impacting major areas so that there is time to focus on more crucial work. Example: improve outcomes of the catheter lab where each physician engages in unique practices and best practices are available to help them guide the change.
  • Leadership work: Issues for which there are no easy answers, that most of us prefer to avoid, yet are critical to implementing the new S curve for future success and sustainability. Examples: Implementation of new models for patient access and payment.

Routine work
Those involved with routine work experience little risk since it involves minimal change and, as a result, are often drawn to focus more of their time here. It is typically necessary to accomplish the day-to-day work for which the organization has historically received payment. Most people prefer to focus on this work because it is habitual and creates relatively little conflict. It is the work that most people feel they are paid for, yet has no impact to helping the organization move to the new S curve.

Management work
Management work poses somewhat more risk than routine work. It is suited for the work on the pink S curve. Often solutions are known or can be determined. Once implemented, these issues are likely resolved and can lead to greater efficiencies. Management work typically shows up as problems to solve. Focusing on management work typically has little impact on building a new S curve.

Leadership work
Leadership work seldom pops up on its own…until it is almost too late to address it. Leadership work poses great risk. Typically the journey and destination are unclear at the start. The projection of kinds and levels of resources and the estimation of time to complete are underestimated. As a result, most people prefer to put off the risk of implementation of new S curves as long as possible. However, as the curve itself demonstrates, waiting too long means the organization may not in the future have the resources it needs to fund the new curve or simply may be too late to market. Building as new S curve requires people to focus intently on leadership work.

Managing the risks

The movement from fee-for-service to value-based payments requires healthcare organizations to embark on building new S curves quickly and more effectively managing risks than they have in the past.

The role of senior leaders is to facilitate this transition. Leaders should:

  • Demand that each of the critical members of your team spend significant and quality time doing leadership work. Don't add to the level of work; people are already stressed. Instead, reduce routine work even if there are some short-term negative implications. Focus also only on those management issues that are of greatest importance. Ask each person to work with their manager and determine those items that need to be removed, re-delegated, etc. Demand that each person spend a percentage of their time on leadership work. Make the accomplishment of leadership work top on your action agenda. It is the only way the new S curve will be built.
  • Determine the issues that are on the existing S curve, and those that need to be new S curves and manage time and risk accordingly.
  • Ask your organization to address the most critical issues by framing questions that demand deep thought and collaborative cross-silo action.
  • Determine the kinds of skills that are necessary to help those charged with leadership do this work. Most physicians are great problem solvers, but typically there is little within their career trajectories that helps them understand or execute this type of work. Give people the language, tools, processes and forums to do leadership work.
  • Develop the set of metrics that will help you move your department or organization forward. Reduce unnecessary measures that focus on routine work and add those which demonstrate movement and momentum to the new S curve. Allow the organization to miss some short-term financial and non-financial objectives so that others can accomplish the more important long-term work.
  • Reward those who adroitly take on the more challenging work.

Managing risk: An example

The University of Minnesota Department of Family Medicine and Community Health, which is affiliated with the Minneapolis/St. Paul-based University of Minnesota Medical School, faced incredible challenges unlike any in its history. State funding to serve its indigent patient population was slashed. Demands for service increased dramatically. Many of its physicians felt highly stressed and burnt out from the demanding workload. Consequently, finding new physicians to take on the load of more patients and teaching placed additional stress on the organization's leadership. The organization had successfully undertaken challenges in the past, but none of this magnitude. Despite its reputation as one of the best programs in the country for preparation for family physicians, its future was severely challenged.

Rather than avoid the issues, the senior leader decided to face the challenges head on. He trained his people to address the complex challenges of adapting to the change. He reconfigured the purpose of the staff to support the operations. Both clinic and department leadership were given specific challenges to address.

The result: Several physician leaders who were offered higher salaries elsewhere decided to stay with the department. Clinic leadership, not the department head, negotiated new working relationships with critical stakeholders. Clinic leadership is taking on the role of managing their business rather than asking the department to take on the roles. Clinic leader and the chair of the department are far more focused on strategic issues. They are actively managing their future to adopt the practices of a patient-centered medical home rather than waiting for the future to unfold. They are demonstrating a far greater ability to manage the risks before them.

Ralph Jacobson is founder of The Leader’s Toolbox, Inc. which is focused on building the capacity of organizations to embrace change. He is adjunct faculty at the Physician’s Leadership College, and author of Leading for a Change: How to Master the Five Challenges Faced by Every Leader, and Getting Unstuck: Unleashing the Power of Paradox (to be published 2013). He can be reached at

More Articles by Ralph Jacobson:

5 Questions for Building Physician Engagement

Copyright © 2023 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Whitepapers

Featured Webinars