Why are we choosing the wrong metrics?

For several years, I have had the fortune of studying healthcare organizations up close – some of them high performing in terms of patient care, cost and experience while others are not. One of the common element that unites the management teams in these organizations regardless of their actual performance is the fact that they prioritize safety over any other outcomes. That is, patient (and sometimes provider) safety climate is the first and foremost metric over cost of care and patient experience. Of course, these outcomes are not completely independent since safe care can lead to better experience and low cost over time.

Numerous times I have heard people suggest that this industry can learn from other industries such as manufacturing and services on how to create processes and good operations. I agree – but let me also tell you that other industries can certainly learn one thing from healthcare. The industry’s undivided focus on safety over anything else. I am writing this blog after observing the shocking line of events that occurred at Boeing. Just a simple google search using the words “Boeing” and “safety” would fill your browser with series of articles on how this organization prioritized shareholder value over customer safety. On numerous occasions they had ample evidence on the design and the safety issues of the 737-Max product line but this was ignored repeatedly by the leadership citing that delays and additional testing would result in bad market performance and lowering of shareholder value. I refer to shareholder value, market performance and profitability as an outcome metric (also sometimes referred to as lagged metric). The fundamental issue is that focusing on outcome metrics by themselves alone would result in short term gains but long term losses. Rather a focus on process metric such as safety may in the short term create some pain but over the long term is undoubtedly the best strategy for the organization. History has taught us this lesson repeatedly. A great example that shows this work is the leadership of Paul O’Neill at Alcoa. He transformed the company from being the worst productive organization to the best productive and profitable organization by focusing on one process measure – i.e. – worker safety. The culture at Alcoa was transformed into one that prioritizes worker safety over anything else. The results in terms of the outcomes followed through this transformation. That is, processesàculture & behaviorsàprocess measures à Outcome measures. So why are other organizations missing this link?

I am writing this blog not just reflecting on the Boeing’s troubled management focus but also hearing that the new CEO Dave Calhoun getting appointed today. What is troubling is the wrong way to incentive the leader, his hefty compensation package ($26.5 million) is focused on getting the 737 max out of the crisis – an outcome based measure in my opinion. Are we making the same mistake again? Wouldn’t this tradeoff with other product line priorities at Boeing? Why are we not thinking on process baffles me as an academic researcher!