Urgency Emergency: 5 Ways CEOs Can Cure Complacent Hospitals

Quint Studer, founder and Chairman of the Board of Studer Group, tends to disagree about something with his wife — when to arrive at the airport.

"I want to get there a day and a half early. She wants to get there with just enough time to run on the plane," he says. The difference doesn't stir up too many problems, but it does paint a picture of two people with different senses of urgency. To Mr. Studer, getting on the plane is of utmost importance. To Mrs. Studer, however, Mr. Studer is overreacting.

The same dynamic plays out in many hospitals. Often, there are dramatic differences in urgency at different levels of leadership. However, C-suite leaders don’t always realize this — they may believe there is more urgency in the workforce than there really is. While mid-level leaders may think senior leaders are overreacting, the senior leaders may be underestimating the degree of complacency that exists elsewhere in the organization.

"Complacency is much more common than people may think," says Mr. Studer. "And until recently, that complacency has been very difficult to objectively measure."

Sometimes, the problem can even manifest itself in subtle ways, such as leaders showing up late to meetings. Mr. Studer recently diagnosed a hospital as complacent when he was lost among its halls. "It was obvious I was lost, but nobody was anxious to show me where I should go," he recalls.

While missing the occasional flight may not be the end of the world in a marriage, the same isn't true for failing to quickly respond to the demands reshaping the healthcare industry. In hospitals, an urgency disconnect can be devastating. Even a subtle sign of complacency is a glaring red flag — especially if it starts in the C-suite and moves its way down.

Studer Group has assessed more than 26,000 hospital leaders from small to large systems about their sense of urgency. When C-suite leaders were asked to rate the difficulty of the next five years on a scale of one to 100, they responded with an average rating of 92, meaning "they almost all think the next five years will be very difficult," says Mr. Studer. C-suite leaders were also asked to look back and rate the difficulty of the previous five years. That rating sat closer to 70.

But here is where the gap widens. When leaders outside the C-suite — from supervisors through directors — rated the difficulty of the next five years, their responses averaged at about 70. When they looked back on previous five years, they rated the difficulty closer to a 60.

"Yes, senior leaders think the next five years will be more difficult, but not near the level of the CEOs' urgency," explains Mr. Studer. "CEOs get frustrated because they're sitting there thinking, 'Where's their urgency?' And the supervisors, managers and directors are thinking, 'Why are they overreacting? Once again, the sky is falling.'"

"It's like anything in life," he adds. "If people think something is going to be difficult, they'll be better prepared. Then, even if it turns out not as difficult as they thought it would be, they'll be ok. But people who don't think it will be difficult won't be prepared…and that's when damage occurs.”

As part of another assessment, Studer Group asked senior leaders the following question: If your organization continues as it is today — with the same processes, cost structure, efficiencies, patient care volume, productivity, and techniques — will the results over the next five years will be much worse, worse, same, better, or much better?  

"Members of the C-suite see that question and think it's obvious," says Mr. Studer. "They say, 'Of course if you stay the same, results are going to get much worse.'"  

The scenario is comparable to an adult maintaining the same spending habits stay while experiencing a decline in income, he adds. Obviously, that individual's financial conditions will worsen.    

But this finding takes CEOs by surprise, sometimes to the point of expressing genuine disbelief, says Mr. Studer: On average, 37 percent of respondents below the C-suite level feel that if they continue to work in the same way, their hospitals' results will stay the same, get better or get much better. And that 37 percent is only an average — Mr. Studer worked with one hospital where 45 percent of people said that if their performance remained the same, their organization’s results would stay the same.

The implication is clear: many organizations are suffering from a complacency epidemic at a time when urgency needs to be at an all-time high.

5 cures for complacency

The good news is organizations can prevent, reduce or cure complacency and get everyone's urgency levels more aligned. Mr. Studer offers the following strategies for doing just that.

1. Start by sharing information. Members of the C-suite are surrounded by different discussions, resources and professional events from those of managers, supervisors and other leaders. CEOs frequent roundtable events and conferences, where they discuss the healthcare environment with peers and other like-minded experts. They read extensive literature on healthcare reform, are attuned to statewide hospital advocacy efforts and are highly involved in strategic planning. On the other hand, managers and other leaders outside of the C-suite may be pressed enough by keeping up with their day-to-day work.

"Due to their environment, C-suite executives often fall into the trap of believing people see healthcare the same way they do," says Mr. Studer.

Instead of introducing a medley of improvement initiatives to bridge the gap in urgency, Mr. Studer recommends CEOs and members of the C-suite start from a simple place. First, convince other leaders outside of the C-suite that they actually need to change. For instance, provide them with a resource toolkit or information packet that illustrates the root causes for the C-suite's urgency.

"When CEOs attend panels or conferences, they sometimes don't bring detailed information back to other leaders because they assume those leaders already see it as they do," says Mr. Studer. "If I see clouds coming overhead, I don't necessarily feel the need to tell people it's going to rain. But maybe they've been trapped inside for a long time and don’t see those clouds. We just can't assume that others see the environment the way we see it."  

This packet should be a collection of financial data, healthcare studies, whitepapers and other resources that drive C-suite discussions. Mr. Studer recommends CFOs also put together Power Point slides, "just like they would show to the board of directors." The CEO should hold town hall meetings with managers to discuss the CFO's slides, healthcare policy topics and other documents in the information packet. A combination of resources presented in different formats will accommodate visual and audio learners.

2. Vividly illustrate what will happen to the organization if performance stays the same. This dynamic occurs every day in hospitals and physician offices across the country. Medical providers clearly outline the risks patients face if they do not improve their diet, increase their daily exercise or stop smoking, among other habits. It's up to CEOs and other leaders to routinely do the same thing for their organizations in terms of economic health.

"Physicians are really good at this," says Mr. Studer. "They might say to a patient, 'You don't have to change, but if you don't, there will be serious consequences."

Like physicians, members of the C-suite need to provide leaders with specific and data-driven forecasts. The fact is, people resist organizational change. To counter this tendency, leaders need to clearly show the repercussions their hospitals face if changes aren't made. For example, one hospital CFO took financial data for his organization and deconstructed the outlook into simple terms for managers. His forecast turned out to be quite eye-opening.

"He said, 'If we continue to work the same way, tomorrow we'll have a 5.2 percent operating margin. In three years, we'll break even. In four years, we'll lose money. Five years? Our bond ratings will lower. And in six years, we'll be in a death spiral,'" recounts Mr. Studer.

After presentations such as this one, leaders will return to their work with a clear understanding of where they are headed if their performance, habits and productivity do not change.

3. Demonstrate changes managers must make and acknowledge how uncomfortable the transition will be. Leaders cannot just tell people the future is gloomy and expect that fear to drive change. Senior-level leaders and members of the C-suite must take caution and not overwhelm the workforce. There is a difference between creating a sense of urgency and creating a sense of anxiety.

"If senior leaders are overwhelmed, the rest of the organization feels it," says Mr. Studer. Instead of expecting dire forecasts to drive performance improvements, you also need to give people actions they can take after they get afraid. For example, if you're working on patient safety, say 'Here are the steps we can take to ensure patient safety.' Giving them something to do, something that's proven to get results, makes all the difference."

4. Reevaluate and redesign leader evaluation tools. Over time, Mr. Studer has learned that most hospitals' evaluation tools do not include weights or prioritizations. This is a mistake: Treating goals evenly creates confusion. Weights can help reduce anxiety and clarify what leaders should focus on. A manager might have anywhere from 20 to 30 goals. Mr. Studer says, ideally, managers should have no more than seven, and each of those should be weighted.

For example, one organization might be experiencing too many cases of hospital-acquired pneumonia. If 30 percent of the CNO's performance evaluation is based on reducing hospital-acquired pneumonia by a certain percentage point, the CNO will understand the urgency of the problem. This is something that requires more of his or her time and effort.

Leaders should create an understanding among managers that if their performance remains the same as in years past, they will not have the same evaluation results. Continuing to give positive results when clinical quality has not improved or costs haven’t been reduced reinforces the idea that there's no need to change.

"In the past, a leader might have been able to manage labor at a certain cost and received a good evaluation for managing labor at that cost," he says. "But now, knowing costs need to be reduced, the hospital might take 3 percent out of that manager's expenses. So if that manager performs the same as last year, his or her evaluation will reflect the lack of improvement."

5. Look at the "door-openers" in incentive pay. Incentive compensation usually includes two or three door-openers. These goals, if achieved, ensure eligibility for incentive pay. The amount of incentive pay each leader receives will differ depending on his or her contribution, but mere eligibility is reliant upon these door-openers. If hospital leaders are frustrated with what they consider to be a lack of urgency throughout their organization, it's time to reexamine what goals will trigger eligibility for incentive pay.

In fact, Mr. Studer has adopted a new door-opener for his own organization this year. For the first time, Studer Group will document whether it saves organizations at least $3 for every $1 spent on the company's services. To determine whether the company meets this three-to-one ratio, client CFOs must sign off on documentation. "Unless we get three-to-one, 160 people won't be eligible for incentive compensation," says Mr. Studer. "Every employee is in the same boat."  

Hospital leaders may want to build HCAHPs results into their incentive compensation by turning specific metrics into door-openers. For instance, unless HCAHPs results hit a certain level for "patients who rate hospital nine or 10," incentive compensation will not open. "That's my recommendation," says Mr. Studer. "When you do that, it really shows you're serious about it."

Mr. Studer cites John P. Kotter, former professor at Harvard Business School in Boston and author of "A Sense of Urgency," when he said that the biggest mistake people, and inherently organizations, make when trying to change is this: They didn't create a high enough sense of urgency among enough people to set the stage to make a challenging leap in a new direction.

Hospital and health system executives must strike the perfect cord by igniting a sense of productive urgency within their organizations while preventing anxiety, panic or defeat. To achieve this, executives should bridge gaps in information regarding the external environment, concisely communicate a data-driven forecast for the organization if improvements aren't made, acknowledge the discomfort that lies within change, restructure evaluation metrics and redesign door-openers in incentive compensation to mirror the organization's biggest obstacles.

"These five strategies will help hospitals avoid complacency and forge ahead as engaged organizations prepared for a demanding healthcare environment," says Mr. Studer.

More Articles on Hospital Management:

5 Things the Most Extraordinary Hospital CEOs Do
Hospital-Physician Relationships Shouldn't Be One-Size-Fits All
6 Characteristics of High-Performing Healthcare Organizations

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