leadership

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!

Does Office of Patient Experience Matter in Improving the Delivery of Care?


Source: @IBCMED

Improving the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) scores has always been a challenge for US hospitals. Hospitals with poor HCAHPS scores can lose up to 2% of their Medicare reimbursements, which equates to a several million dollars for an average sized hospital. Using data from over 3615 hospitals between the years 2007-2014, we studied how hospitals improve their HCAHPS scores. We found that it is common from hospitals to use resources from their existing administrative offices such as office of quality and patient safety to improve HCAHPS but are less successful. This is because, elements of HCAHPS such as communication with the nurses and physicians are often considered less tangible and hence difficult to improve when compared to evidenced-based measures such as length of stay reduction. Performing well on HCAHPS therefore requires hospitals to change their operating routines and organizational culture.  To accomplish these tasks, we found that a certain proportion of hospitals are undertaking a number of initiatives that are unique to this industry. One such initiative includes setting up the Office of Patient Experience (OPX). An OPX is generally tasked with developing and implementing best patient experience practices to ensure that the hospital delivers consistent patient-centered care. It is different from other entities such as “Patient Council” and “Patient Relations Office,” which historically have been responsible for interfacing with the patients, surveying patients and resolving patient issues.  One example of this office and how it operates can be found at the Cleveland Clinic

Our Findings

We collected extensive data on the setting up and operations of these offices in the US. Between 2007 and 2014, we found that there were 132 hospitals that had an OPX within their organizational structure. We also find that this number continues to grow in recent years. Our results suggest that hospitals with an OPX are associated with 1.95% higher HCAHPS for each year of operation. We also found that hospitals that have higher residents and treating high acute patients (measured using case mix index) benefit from these offices to manage patient and provider variations.  Specifically, for hospitals with high CMI, we observe a 6.5% improvement in HCAHPS for each year increase in operation of the OPX, with no significant impact observed for hospitals with low CMI. Similarly, for hospitals with high resident intensity, we observe a 1.8% improvement in HCAHPS for each year increase in operation of the OPX, and only 0.9% improvement observed for hospitals with low resident intensity. Hence greater benefits of an OPX are realized by hospitals with high CMI or high resident intensity. This estimate offers the first empirical evidence to the efficacy of these administrative innovations. The significance of these improvements in HCAHPS are better highlighted when compared to only a 0.85% annual improvement in HCAHPS for hospitals that did not have an OPX.

Given the effectiveness of OPXs in improving HCAHPS, we conducted additional analyses  to investigate the cost of implementing these offices. We find that the operating costs, which include expenses incurred in every aspect of a hospital’s operations, reduce by 1.4% for each year of its existence.  These are also sizable improvements in operating efficiencies, especially given the low margins of operation for a vast majority of hospitals – the median operating margin for hospitals in 2018 was 1.7% .

Finally, taking cues from our interviews with the OPX and hospital staff at a prominent teaching hospital, we also investigated the impact of the background of the CXO (medical vs. non-medical) on the effectiveness of an OPX. In our dataset, we find that only a small proportion of the CXOs (14.5%) had a medical background, i.e., a nursing (RN, BSN) or MD/DO degree. Preliminary evidence suggests that a CXO with a medical background is more effective at improving EQ than a non-medical CXO. Specifically, a hospital with a medical CXO observes a 1.6% improvement in HCAHPS, compared to a 0.1% improvement in HCAHPS for a non-medical CXO, with each year of OPX operation. This suggests an interesting managerial insight on how to lead these offices in a hierarchical industry such as healthcare. Taken together, these results offer preliminary insights on the role and efficacy of these new administrative innovations in the healthcare industry. It also offers important policy implications to CMS on how to prioritize and manage HCAHPS.

 

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

In Hospitals, a trade-off between patient safety and patient experience

Balance

Hospitals that adopt strategies to reduce errors and meet government requirements face an initial tradeoff between improved patient safety and a decline in the quality of individual patients’ experiences, according to new research.  Quality process management, a practice associated with the private sector, is becoming more common in hospitals as they set up operating systems in response to federal and state mandates to reduce medical errors and improve patient safety, the researchers say. It is not surprising to find that the implementation of these techniques led to improved safety outcomes. But finding that these improvements sometimes came at the expense of the quality of the patient experience was unexpected. Also referred to as experiential quality, the quality of the patient experience is gauged by how patients perceive their personal interactions with health-care providers.  “Patient Safety is about doing things correctly – strict guidelines, standardization and checklists, for example – so when you consider experiential quality is about customizing health-care delivery to an individual patient’s needs, there is a tension there,” said Aravind Chandrasekaran, associate professor of management sciences at Ohio State and lead author of the study.

“When leaders were more patient-centric, our analysis showed that they were able to overcome that tension between patient safety and the quality of the patient experience,” Chandrasekaran said. “Leaders have to be thinking about patients when they design their operations. That way they can cater many of their design principles to individual patients.”

How might this tension play out? Consider a patient  safety guideline of giving a beta blocker prescription for patients who have had a heart attack, but offer no suggestions for how to effectively relay that information to a patient. So the hospital gets a good mark for prescribing the drug, but a patient may not understand the instructions and possibly won’t even fill the prescription.

Chandrasekaran and colleagues assert that setting up standardized quality management systems is the most effective way for hospitals to meet state and federal mandates geared toward patient safety. Quality process management entails a systematic approach to map, improve and adhere to given sets of guidelines with a goal to minimize an organization’s variation in its processes.  Federal and state regulations in health care have become more stringent since 1999, when the Institute of Medicine released a milestone report stating that almost 100,000 people died every year as a result of preventable medical errors in U.S. hospitals.

In a move toward standardization, the U.S. Centers for Medicare and Medicaid Services (CMS) in 2003 issued hospital care guidelines related to four health conditions: heart attack, heart failure, pneumonia and surgical care. CMS requires hospitals to report their care practices with these types of cases, and has provided financial incentives to hospitals that are best at adhering to the standards of care outlined in these guidelines. In addition, many states have passed patient-safety legislation calling for reductions in hospital-acquired infections, also beginning in 2003. In the study, the researchers used this legislation as an example of state leadership focused on improving patient safety.

These regulations have led many hospitals to adopt quality process management practices to improve their safety outcomes as quickly as possible. But the researchers also wanted to examine what happened to the patient experience as hospitals focused on new techniques to improve their clinical quality. To determine these relationships, they analyzed four sources of data: a survey of 284 acute care hospitals in 44 states; CMS patient safety scores publicly reported between April 2009 and March 2010; state legislative mandates for reduced hospital-acquired infections passed between 2003 and 2008 in a portion of those 44 surveyed states; and April 2009-March 2010 reports from the Hospital Consumer Assessment of Healthcare Providers and Systems survey as a measure of patient experience quality. Directors of quality or chief nursing officers at 284 hospitals in 44 states were surveyed to determine how extensively respondents were using a data-driven, quality management system to design operations and train staff with the goal of adhering to CMS guidelines. Additional questions examined the leadership style and culture of each hospital.

The analysis showed that a focus on quality process management was simultaneously associated with an increase in patient safety as reported by hospitals and a decrease in the quality of the patient experience as reported by patients. State legislative mandates to improve patient safety initially reinforced this tradeoff. However, the earlier these laws were passed, the sooner hospital environments adjusted to operational changes so they could improve the patient experience as well.  When analyzing the  survey data about hospital leaders’ traits, we found that patient-focused leadership could soften the negative association between quality process management and experiential quality, allowing hospitals to excel in both areas.

Hospitals also commonly survey patients after their stays to gauge their satisfaction with their care. These surveys collect information about patients’ overall impression of their care and whether they would return to the hospital or recommend its services to friends and family. This suggests that patients are able to understand and appreciate the standardization in hospitals if they experience better levels of communication during their care. In other words, treating patients well enables them to better perceive when they are getting the ‘correct’ clinical care.

The Common Mistakes that you make in your R&D

Optimize-and-Align-Your-Project-Portfolio-smaller-TEST

 

A new study from a Fisher College of Business professor suggests research and development teams could use some more outside-the-box thinking in how they structure and manage their own innovation projects.

The research appeared in Production and Operations Management journal titled:  “The Role of Project and Organization Context in Managing High-Tech R& D Projects.” This study employs both qualitative case data and survey data from more than 100 R&D projects at nearly 34 high-tech organizations is authored by Aravind Chandrasekaran, an associate professor of management sciences at Fisher.

In his research, Chandrasekaran found that companies are making a very common mistake in managing their R&D projects, and the consequences can range from an internal preference towards cut-and-dry, quick-turnaround innovation projects to loss of market share and competitive edge.

Product Portfolios

 

 

Context is key

At the root of this increasingly troubling trend among R&D teams is a common villain: The tried-and-true approach, backed by decades of research and results. Projects typically are categorized and managed by the extent of change in the product, process, technology and market dimensions. A routine iPhone upgrade from a 3G to a 3GS, for example, falls at one end of a continuum as a so-called incremental innovation project.

“If you’re going from a CD player to an iPhone, though, that’s radical innovation,” Prof. Chandrasekaran said.

This research posits that R&D project management shouldn’t be determined on a sliding scale of eventual change, big or small. Rather, it should be driven by project goals, whether they’re to explore a new technology or to exploit opportunities for efficiencies, cost savings or faster time to market, Prof. Chandrasekaran said.

The research found that incremental and radical innovation projects thrive under two entirely different sets of so-called project and organizational contexts. Incremental projects need diligent, transactional leaders at the helm, low levels of team-member autonomy and well-defined goals that are tied to outcome-driven incentives. Radical innovation projects, meanwhile, need a leader who’s willing to promote risk-taking and experimentation, give team members more latitude and reward them at milestones, not just the finish line.

Crossing these wires, the research found, can be deadly for project success. Put a rigid, transactional leader in front of a radical project team and the creative juices stop flowing. Give incremental project teams more autonomy and a hands-off approach and deadlines are missed.

A one-size-fits-all approach to project tracking, all too common in the companies surveyed, spells trouble, too. Teams juggling a mixed bag of projects, all with the same metrics and reporting structure will develop a Pavlovian affinity for the fast and predictable incremental ones and leave the long-term radical ones on the to-do list.

Double-dipping

Here’s the nuance that even the savviest high-tech companies miss in their ongoing R&D project management efforts: Some projects in these environments are driven by goals typically associated with radical innovation and incremental innovation, but existing research doesn’t offer much help on how to deal with them, Prof. Chandrasekaran’s research found.

These so-called “hybrid projects” aren’t new to post-recession R&D departments, but they’re making more appearances as companies are asked to do more with less or – at best – the same.

“In this day and age, budget cuts are more and more visible in R&D environments, and companies are being asked to make big leaps in projects, pushing up deadlines without giving additional resources,” he said.

The growing stakes of maintaining competitive edge are outpacing overall R&D spending, too. An annual Battelle report on R&D expenditures found U.S. spending is set to grow about 2.5 percent this year, on par with the growth in the national Gross Domestic Product but slower than the global growth rate of 3.4 percent.

The key to nurturing these hybrid projects, Prof. Chandrasekaran found, is first not to let them get incorrectly classified as radical innovation projects, the most frequent mistake. Key red flags to look out for include the addition of deadline or cost pressure to an otherwise radical innovation project.

“In practice, organizations are pretty good at making changes between radical and incremental projects,” he said. “They often fail to make that change for hybrid projects.”

What these projects need, according to the study, is a so-called “ambidextrous leader” who knows when to shift between hands-off management during bursts of team creativity to taking the reins and steering the project on time and on budget.  For instance, an ambidextrous project leader from one of hybrid project remarked the following:

“And the expectations are certainly higher to meet our project timelines, since these timelines rarely gets expanded by the senior management. So my role is to drive my team members to meet these deadlines [transactional]….. However, there were occasions when we encountered a lot of unknowns wherein I need to step back and allow my team to tackle these unknowns. Definitely, I am more tolerant and flexible during these times [transformational].”

Not just for tech

Tapping into high-tech companies for this study, Prof. Chandrasekaran said, wasn’t an act of random selection. The tech sector remains the R&D industry’s most fertile ground for growth, but that doesn’t mean this research is valuable only to them.

Any company investing in R&D should take notice of the opportunities they’re missing as they organize and deploy project teams, he said.

“This research shows management has to make key changes,” Prof. Chandrasekaran said, with the following questions: “How do you reward these people? How do you lead these teams? When do you give them decision – making autonomy? When do you take back the same decision-making autonomy?”

In short, effective senior management support in R&D doesn’t stop after signing off on a budget. That’s just the beginning.

 

  • Chandrasekaran, A., Linderman, K., Schroeder, R.G.2015. The Role of Project and Organizational Context in Managing High-Tech R&D Projects. Production and Operations Management 24(4) 560-586.