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Operational Excellence Systems – How to Create a Perpetual Learning Organization?

Have you ever worked for an organization that is always successful in its mission whose employees are highly committed to its purpose? Anyone reading this article would question the existence of such an organization. Through our research, teaching and outreach, we found that managers from various industries such as healthcare, information technology, manufacturing and hospitality services are constantly searching for the answer to the question on how to create a perpetual learning organization where everyone continuously learns, improve and remain committed to its purpose every day (similar to the perpetual moving machine shown below).

 

 

Think about the following example of a healthcare system that personifies such a learning organization where a small problem faced by one unit becomes a great learning opportunity for the entire system.

“In a Tier 6 daily huddle using visual management, the senior leaders (including the CEO, Chief Medical Officer, Chief Nursing Officer, Chief Financial Officer and Chief Quality & Safety Officer) of Apollo Hospital systems were informed on a “near-miss” caregiver fall injury that had happened in one of their regional surgical units previous day, 60 miles from their main hospital. The attending nurse almost tripped on a wire from a new computer terminal recently installed due a system wide rollout of electronic medical records. After a quick discussion, it was decided to prioritize this issue and offer support to the care team at the surgical unit to solve this problem. The next week, the CEO attended their tier 1 huddle at the regional hospital listening to how the team was planning on solving this issue. Thirty days later, the countermeasure developed and vetted by the team in the surgical unit was spreading all across the 24 hospital systems involving more than 30,000 caregivers to avoid similar near miss injuries. What is fascinating is that every unit in Apollo is adapting the solution to their appropriate unit needs, tracking them and improving them on a daily basis. Six months later, Apollo continues to maintains a zero-fall injury rate for both their caregivers and patients”

  • Information about a close-encounter from a regional unit within the hospital system percolates all the way up to the C-suite within 24 hours. It is important to note that action follows immediately after the reporting process.
  • The hospital system tracks caregiver outcomes (e.g. near-miss accident) and prioritizes them along with patient (customer) outcomes.
  • The CEO of the hospital system makes time to travel 60-miles to offer her support to the team in the unit the next week.
  • There are no specialists solving the problem at Apollo. Rather, the team who encountered this problem is tasked to come up with a countermeasure and report on the efficacy of this measure after experimentation.
  • The countermeasure developed in this unit (i.e. process of problem solving and not the solution) is rolled out across all 24 hospitals within 30-days. This process of problem solving results in customized solutions across other units adapted to their needs (i.e. there is no single silver bullet for problems).
  • The entire organization is learning every day and improving from smaller experiments that are happening throughout the system. These lessons are made available to those facing similar problems in a way that same problems do not get solved over and over.

Our research with several organizations, including Toyota, Mayo Clinic, Nationwide, Cleveland Clinic, Thedacare Systems, IBM, General Electric and 3M etc. reveals that creating a perpetual learning organization such as the one described in Apollo requires creating four distinct learning systems. They include Alignment & Adaptability Systems, People Development Systems, Problem Solving Systems, and Daily Management Systems. We refer to them collectively as Operational Excellence Systems.  See Figure 1 that describes these systems.

Figure 1: Operational Excellence Systems

Dimensions of the Operational Excellence Systems

  • Alignment & Adaptability Systems – Systems that allow everyone in the organization to understand the value and purpose of the work they do and how it relates to the higher level strategy. This allows them to guide their actions as well develop adaptive skills to change for the future.
  • People Development Systems – Extent to which the firm invest in practices that add skills and capabilities to employees at all levels that allows them to continuously experiment, reflect, learn and innovate and become change agents.
  • Problem Framing & Solving Systems – The approaches taken by everyone when a problem arises in way the problem framing and solving processes are standardized across all levels of the organization and the learning permeate through the entire organization.
  • Daily Management Systems – The practices leaders at all levels use every day to identify potential issues and ensure all activities are on track and create accountability and cadence to the functioning of their units.

It is important to note that these systems are leader independent and sustains even after the departure of the architect responsible for creating them. They are also independent of the processes and business functions and has to exist at every level within the organization.

Our findings are not only informed through our research but also through our experience developing 300+ change leaders through the Master of Business of Operational Excellence (MBOE) program at the Fisher College of Business. In this program, executives from various industries develop their own operational excellence systems over a year. Through this journey, they document some of their challenges and opportunities when creating these systems back in their organizations.

What became evident to us through this learning journey is that even exemplar organizations don’t have all four systems at all levels within their organizations. The answer to creating a perpetual learning system may involve creating “isomorphic” structures of these systems at all areas in your organization.

Interested in knowing how to develop these systems in your organizations? See how our students and organizations partnering in MBOE program do by visiting https://fisher.osu.edu/graduate/mboe

Skeptics – We have Proof that Operational Excellence Works in Healthcare!

I’ve written a number of times on the skepticism and lack of understanding surrounding operational excellence (Op-ex) deployments in healthcare. Under the op-ex umbrella, there are several change management initiatives such as lean, Six Sigma, Total Quality Management, etc. All of these emphasize the importance of a systemic approach toward the sustainable improvement of key performance metrics.

Although there are several books and research on the benefits from these initiatives in healthcare context, skeptics dismiss them as mostly anecdotal and devoid of the rigor necessary for causal inferences (i.e., the presence of op-ex leads to healthcare improvements). In this regard, the skeptics are right. Many existing inferences in this area come from surveys (i.e., asking healthcare leaders about op-ex and correlating results to performance) or are based on secondary data that may not adequately capture op-ex elements.

Recent research Peter Ward & I conducted with Dr. Susan Moffatt-Bruce and other collaborators at The Ohio State University Wexner Medical Center leaves little room for skepticism about the impact of op-ex deployment in healthcare. Our quasi-experimental investigation permitted us to compare care delivery performance before and after deployment, using a control group from the same setting to account for any variations in the system beyond our experiment. Results show that op-ex deployment reduced 30-day readmissions, decreased monthly operating costs, improved patient satisfaction and also improved the quality of work among caregivers. In short, it works.

The Quasi-Experiment

Our experimental intervention was conducted over a period of three years and used op-ex principles to change the way patients were discharged after a kidney transplant. We specifically looked at a fundamental op-ex element: Standard work during patient discharge. This represents the set of activities standardized in terms of content, sequence, timing and outcome but still able to “flex” based on patient characteristics. An important feature of standard work is that it should be designed and developed by people doing the work and continuously monitored for improvement. In our study, more than 40 nurses, physicians, social workers, IT specialists and nurse managers responsible for discharging the patients designed and developed the new standard work over a nine-month period.

We focused on the kidney transplant discharge process because these recipients require prolonged periods of care after discharge. In fact, one in three U.S. kidney transplant patients  is readmitted within 30 days, resulting in higher hospitalization costs, resource utilization (i.e. longer wait times for other wait-listed recipients), and – more importantly – poor quality of life for the patient post-procedure. When looking closely at the discharge process, we found patients were taking in an overwhelming amount of information in the four days prior to discharge. In this short period, caregivers covered more than 45 topics, including medication, infection prevention, lab compliance, fluid intake, exercise, and dental hygiene, among many others. Some of these instructions – dental hygiene, for one – were not critical to patients’ immediate well-being and could have been given post-discharge. Nurses, we found, also varied their delivery of instructions, adding to confusion and anxiety. Figure 1 represents the current state of discharge process prior to our intervention. As seen from this figure, variability during the discharge process confused the patients and heightened anxiety levels after discharge, triggering readmissions.

Figure 1

 

The new standardized discharge work sought to resolve these inconsistencies. The caregiving team developed specific instructions on the content, sequence, timing, and delivery outcome for each element of discharge, drawing from data on 15 former transplant patients. The team also decided to adopt a two-part instructional approach, with inpatient nurses giving the most essential discharge instructions during the hospital stay (Part I Instructions), while outpatient nurses gave other instructions (Part II Instructions) 48 hours after discharge. This resulted in a formal handoff process between the inpatient and outpatient caregiving teams. After implementing this new process, the team also adopted 10-minute “huddles,” or standing meetings, to continuously monitor and improve communication at inpatient (bi-weekly) and outpatient (weekly) units by focusing on problem solving and best practice-sharing. These huddles have been going on for more than a year, with full participation from the caregiving teams. The entire op-ex implementation, launched in May 2015, took about a year. Figure 2 represents the process after the op-ex implementation.

Figure 2

To validate the benefits of the Op-Ex implementation, we tracked the discharge process outcomes for more than 700 kidney transplant patients for four years (two years prior to, and one year after, implementation). To ensure our data weren’t skewed by factors such as discharge procedure changes or electronic medical record implementation, we collected patient discharge process data from 180 heart and liver transplants, using them as a control group. Patients undergoing heart and liver transplants experience similar outpatient issues as kidney transplant recipients and have very similar discharge instructions (as seen in Figure 1). We also controlled for patient factors such as age, preexisting conditions, length of stay, functioning of transplanted organ at the time of discharge, ethnicity, 30-day mortality rates, etc. In addition, we adjusted for any other changes to the process that were not a part of our experiment (e.g. adding new technologies)

After accounting for all these effects, we used a difference-in-difference (DID) approach to estimate the causal effects of our implementation on readmission outcomes. Our analyses suggest that the likelihood of getting readmitted to the hospital was about 35% lower for the treatment group (kidney transplant process after Op-Ex implementation) compared to the control group and pre-implementation group (See Figure 3).  On average, this accounted to a 25% reduction in the overall readmission rates after the intervention for the treatment group, resulting in a conservative savings estimate of $85,000 due to hospitalization expenses for the unit. This doesn’t capture savings from the overall patient well- being after the surgery.

We also found a 10% increase in the overall patient experience quality score, measured using the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey. Interestingly, the control group unit experienced an 11% decline in these scores during the same time period (see Figure 4). Improving the scores from this survey has been a key objective for hospital administrators as Medicare/Medicaid reimbursements are now tied to them.

 

Figure 3

Figure 4

Our study shows that Op-Ex transformation indeed can result in improvement across multiple outcomes. The real challenge is how to initiate and sustain this journey. All these results were possible due to the hard work of all the front-line nurses in this unit. They truly are the miracle workers who continue to sustain this journey and innovate as they move along.

 

Scope Creep: How the best companies navigate seismic shifts in R&D

 

 

 

Shifting

 

For all the far-reaching complexity inherent in high-tech companies, decades of research and practice have helped simplify the crucial research and development process into two principal roads taken. Some projects set their sights on version 2.0, tweaking and improving an existing product or technology, while others start from scratch, riding the tide of technological advances and market demand to create something radical and new.

The management approaches guiding these two types of innovation have guided countless products to successful updates or launches. The problem? These same projects can unexpectedly change scope, and companies that don’t pivot accordingly can wind up at very costly dead ends.

Research from a forthcoming article1 in Production and Operations Management sheds light on how traditional approaches to managing R&D projects are failing companies when they face a sudden shift that brings new complexity to a seemingly simple problem.  Looking at two multi-billion dollar companies – one a cautionary tale, the other a benchmark of success – we’ve uncovered key measures that other high-tech organizations can learn from to avoid product launch delays, excessive costs and market share loss.

These insights are rooted in a study where we tracked a dozen R&D projects in three high-tech business units across two companies over three years. One company, which we will call MicroTech, is a $1 billion-a-year disk-drive maker. The other is a Fortune 500 communications tech giant we’ll call CommNet. Each company followed existing R&D best practices on budgeting time and resources, sorting projects into two major “buckets.” One consists of less complex, so-called incremental innovation projects (think of a new iPhone release with slight modifications) while the other requires more complex, so-called radical innovation, launching a new product following exhaustive experimentation, testing and market research (think of Apple’s leap from the iPod to iPhone). As such, these two kinds of projects necessitate different management techniques: Top management, for example, typically keeps a closer eye on radical projects, which are high-risk and high-reward.

For MicroTech and CommNet, eight of their 12 projects we studied began with one level of complexity and never shifted; the remaining four, however, saw scope shift from incremental to radical after a change in customer requirements or emerging technology. MicroTech set out to update a disk drive and leveraged its seamless and flexible project management system, ultimately basking in commercial success.  CommNet’s journey to upgrade a durable tablet designed for police and firefighters, meanwhile, ended in failure.

At first glance, both companies’ approaches to product development don’t appear radically different. Its three key mechanisms MicroTech had in place that helped it pivot and stick the landing.

 

 

Responsive Search

 

 

 

 

 

 

Weekly Risk tracking: Research on R&D project management largely recommends keeping close tabs on risk for radical product development and taking a more hands-off approach for incremental changes. MicroTech flatly ignored this conventional wisdom – and for the better. Senior managers here used the same risk-tracking framework for all R&D, completing simple risk scorecards on a weekly basis that gauged risk factors and flagged problem areas. These scorecards were deployed as visual dashboards accessible that provided up-to-date information to multiple management levels (even up to the Chief Technology Officer). CommNet, by comparison, eschewed this routine risk-tracking and found itself mired in meetings, kicking off a chain reaction of ultimately fatal delays.

Continuous planning: MicroTech’s risk-tracking tools fit seamlessly into a broader effort to tighten its strategic planning horizon. Long-range planning was maintained at a lean one year, contrary to the recommended three to five, while monthly strategy touchpoints allowed leaders to use fresh risk-tracking data to revisit and revise decisions. CommNet, meanwhile, updated risk Intel on an annual basis from their strategic plans, which ultimately proved no match for the changing fortunes of its tablet.

Seamless Communication: MicroTech successfully created a continuous and frequent top-down and bottom-up flow of communication that connected project teams and senior – even C-suite – leadersThese communication channels were very “lean” and “visual” and did not require excessive time commitments from everyone. At CommNet, meanwhile, product leaders only received updates at major project milestones (or gate reviews), which ultimately contributed to product-killing delays.

Decision time

In one of its routine monthly planning forums, leaders at MicroTech pointed out that advances in a new material technology would heighten the risk of the disk-drive project over the next couple years. By leveraging its regular risk-tracking, flexible strategic planning and free-flowing communication, MicroTech ignited a chain reaction of decisions to increase manpower, budget and project scope. CommNet, meanwhile, discovered six months into its project that the upgraded tablet design wouldn’t survive the rough conditions it’s designed for. Instead of pivoting, senior leaders dug in, requesting additional tests that contributed to months of delays before acquiescing.

The fortunes of each product come as no surprise. MicroTech announced its upgraded disk drive to investors in 2008 and saw shipments triple over the next three years. CommNet’s tablet, meanwhile, hit the market in 2008 after months of delays, only to receive poor business-press reviews and sales – leaders yanked it from the market the next year.

These might be two products in a sea of high-tech devices companies roll out each year, but their journeys – and the decisions made along the way – are hardly unique. Our research compared the experiences of MicroTech and CommNet to 10,000 other projects through simulations to find that success or failure is inextricably linked to how risk, strategy and communication are managed in times of crisis. It’s not dashboards or scorecards alone, however, that equip companies to change course when the time comes. They must be part of a broader R&D culture that encourages feedback, inspires experimentation and develops agility and lean practices. Without it, scope creep can kill and can be extremely costly to handle in today’s economic climate.

 

  1. Chandrasekaran, A., Linderman, K., Sting, F., Benner, M., “Managing R&D Project Shifts in High-Tech Organizations: A Multi-Method Study“. Forthcoming at Production and Operations Management

Five Star Treatment – Moving the Needle on Patient Safety and Experience

Moving the needle

Whether they like it or not, hospitals today can’t solely measure success by properly treating patients according to established standards of care. Moving a patient through surgery to recovery with no complications or hospital-borne bugs, for example, is only part of the equation in the eyes of the government agencies holding the purse strings for critical Medicare and Medicaid reimbursement dollars. Now, patience experience also matters – and hospitals must wrangle with age-old cultural tensions to avoid getting hit where it hurts.

To avoid penalties and bring in maximum federal reimbursement funds, hospitals since 2013 have had to show high marks in evidence-based standards of clinical care and the Hospital Consumer of Healthcare Providers and Systems, or HCAHPS, survey. This survey measures patients’ experience, driven largely by how they grade their interaction with physicians and nurses. Pressure is mounting, as reimbursement penalties are set to potentially double next year if hospitals don’t show improvement on clinical care and patient experience under terms of Obamacare, the Patient Protection and Affordable Care Act passed in 2010. In addition to these penalties, we also find that improving both these dimensions can actually reduce the occurrence of 30-day readmission rates1.

Physicians greet this newfound emphasis on patient experience with skepticism at best and outright resentment at worse, largely due to the subjective nature of the HCAHPS survey. This, however, perfectly illustrates the challenge therein: It’s difficult to simultaneously improve these two measures in a notoriously hierarchical culture where doctors focus relentlessly on disease and nurses fear challenging them, even while carrying the torch as the patient advocate. Luckily, it’s possible, and our forthcoming research2 points to key measures that can drive the culture change needed to make it happen.

Magnet

The Magnet matters

These findings come five distinct case studies that involve more than 50 interviews we conducted at five large acute-care hospitals. This was paired with data drawn from more than 3,000 hospitals from 2006-12, before and after Obamacare kicked in. Strikingly obvious is the sheer difficulty of improving clinical care and patient experience without trade-offs (also evidenced in a different study3 conducted in 2012). Clinical care is comparably easier to operationalize and roll out through top-down directives: keep quality consistent, keep patients safe, and keep variation during care delivery minimal. The problem? These directives can make little room for the customized patient care in nurses’ hands. At the same time, providing a patient with a Ritz Carlton-quality experience means nothing if it interferes with doctors working to keep them alive and well.

A winning strategy a number of hospitals are beginning to adopt, we found, starts with clinching “Magnet” hospital status through the American Nurses Credentialing Center (ANCC). Its Magnet Recognition Program® is the stamp of a high-quality program, denoting they are involved in decision making from the highest strategic levels to the patient’s bedside. The presence of this “bottom-up” decision making, we found, is a crucial factor in hospitals’ ability to improve on “hard,” evidence-based patient care and the “soft” patient experience side. In fact, we found hospitals with ANCC Magnet status were 24 percent more likely than their peers to show improvement in both of these measures, according to federal data from the Centers for Medicare and Medicaid (CMS).

Flattening this hierarchy doesn’t mean the end of administrative oversight, but it does require a newly measured approach to it. What emerged in our research was a “sweet spot” of administrative duties for nurses. Hospitals whose nurses average more than 25 percent of their shifts completing checklists and managing electronical medical records instead of patient are more likely to show weaker trends in improving on both dimensions. But so are hospitals whose nurses spend scarcely more than 10 percent of their time on the same tasks. Administrative oversight and an empowering culture for nurses can peacefully exist, but only if both are carefully balanced.

Playing matchmaker

To maintain the culture needed to treat patients and treat them well, providers can learn much from the physician-nurse interaction in the five hospitals we closely studied. Collaboration between doctors and nurses at the same rung on the ladder – Chief Nursing Officers and Chief Medical Officers or Medical Director – Nursing Director – is a longstanding best practice, but it’s not enough. In another forthcoming research4 on collaboration, we found that the best hospitals took this a step further, routinely pairing experienced, high-level nursing staff with low-level doctors, aiming to instill the importance of patient experience early in their careers. The reverse happens, too: One hospital, for example, paired a chief medical officer with an entry-level nurse and noted success in breaking down the hierarchy that can prevent nurses from speaking up. Taken together, these cross-level collaborations can drive major gains in the improving both the clinical and patient experience measures that matter most.

These crucial collaborations can take many forms. Hospitals we studied reported placing nursing leaders on physician-hiring committees or sending medical directors to work with nurses on day-to-day tasks. One even borrowed from iconic General Electric CEO Jack Welch, issuing a “get on board or get out” policy for its new collaborative culture. These surely move the needle, but they’re also formal measures that “force” physician-nurse interactions. The most successful hospitals see these collaborations form and grow organically, whether it’s nurses inviting physicians to their meetings or informal touch-base discussions in hallways. These connections might not be in the service of scratching another item off a checklist, but their impact can be just as powerful.

 

Articles

  1. C. Senot, A. Chandrasekaran, P. Ward, A. Tucker, and S. Moffat-Bruce, “The Impact of Combining Conformance Quality and Experiential Quality on Readmissions and Cost Performance,” Management Science (2016).
  2. Senot, C., Chandrasekaran, A., Ward, P. 2016. “Role of Bottom-Up Decision Process in Improving the Quality of Health Care Delivery: A Contingency Perspective“. Forthcoming at Production and Operations Management
  3. A. Chandrasekaran, C. Senot, K. Boyer, “Process Management Impact on Clinical and Experiential Quality: Managing Tensions Between Safe and Patient-Centered Healthcare,” Manufacturing and Service Operations Management 14, no. 4 (2012): 548-566.
  4. C. Senot, A. Chandrasekaran, P. Ward. 2016. Collaboration between Service Professionals during the Delivery of Health Care: Evidence from a Multiple- Case Study in U.S. Hospitals. Forthcoming in Journal of Operations Management.