Sunday, January 07, 2007

Business Management Stories That Resonate for Health Care

Two recent stories about business management in the US have a certain resonance for health care.

The first, from the Associated Press (via CBS here) was about the downfall of Robert Nardelli, the CEO of Home Depot, once a renowned big-box retailer of hard-ware and home improvement supplies.
Nardelli believed in centralizing functions and running a tight ship. Profits and revenue soared under his six-year tenure, but customer service was often a sore spot. Some Home Depots looked tired and disorganized, and finding an employee to help locate items could be a chore at times.

Industry observers say Home Depot would benefit from allowing store managers more of a say in serving their local markets and by improving the morale and training of its employees. Analysts suggest the company return to some of the strategies that made it so successful in the 1990s.

'Instead of having people that really knew electric, knew carpentry and were around to help you, they disappeared,' Sonnenfeld said, noting that Home Depot's salespeople 'ended up to be overworked store clerks you could get anywhere.'

Finkelstein said successful retailing is about picking the right products, marketing them and selling them.'There's not a lot of science that goes there,' he said, adding that Nardelli, who had spent a good part of his career rising through the ranks at General Electric Co., might not have been the best fit for Home Depot.

The second from the Wall Street Journal was about how some American Airlines airplane wounds up sitting on the ramp for something for hours (more than 10, in one case), with toilets overflowing and passengers near hysteria.

How does this happen? After years of cutting staff, carriers are less capable of handling crises -- from not having enough telephone reservationists to handle calls, or extra bodies to empty toilet tanks or spare pilots and flight attendants to help out when delays stack up.

In the case of Flight 1348, according to interviews with four passengers plus officials at American, the problems were compounded by a lack of staff, the result of cost-cutting and holiday vacations, and some bad decisions.
Sound familiar? We have frequently discussed how economists urged breaking the "physicians' guild" and handing control of health care over to managers in order to cut costs. Current day MBA schools seem to teach that the same skills and techniques are appropriate to manage all kinds of businesses, from hard-ware retailers to airlines to hospitals, and that business managers need not be too familiar with the particulars of the goods or services their business is supposed to be supplying.

And throughout the business world, the mantra seems to be cutting costs, often by cutting the number of or hiring less experienced and trained line personnel. Of course, no one ever seems to be thinking about cutting costs by cutting compensation to the top hired managers. Much has been made of the $200 million "golden parachute" Nardelli received for his less than stellar management work. But Hank McKinnell of Pfizer Inc., the world's largest drug company, got an even bigger compensation package when he was forced out after his company's stock lost even more value than did Home Depot's.

So we see hospitals with fewer nurses, primary care physicians over-worked, under-paid, demoralized, and threatened with replacement by nurses and physicians' assistants (see post here), and the hiring of drug representatives not with pharmacology doctorates, but with experience as cheer-leaders (here). (Meanwhile, we see hospital, managed care, and pharmaceutical executives, many with little previous experience in actually providing health care, clinical research, or making pharmaceuticals, hauling in ever higher compensation.)

Isn't it time to start hiring business managers who actually know something about the front-lines of the companies they lead? And isn't it time to start thinking about hiring enough and well-trained enough people to do front-line functions, and actually paying and treating them decently? Those who run health care should heed this commentary by Mitch Albom in the Detroit Free Press which concluded, "American business has created a subclass of elitists -- CEOs and the board members who OK their salaries. And these people seem to think that money is just something to be handed out. We're good with that. Just start handing it out at the bottom. You'd be amazed at how well your company works when you pay people for coming in, rather than for leaving."


InformaticsMD said...

I noted the Nardelli case for a different reason: a WSJ article questions the validity of Six Sigma:

The 'Six Sigma' Factor for Home Depot; Departure of CEO Nardelli Brings Into Focus a Management Technique He Championed.

Karen Richardson . Wall Street Journal . (Eastern edition). New York, N.Y.: Jan 4, 2007 . pg. C.3

The important point with respect to healthcare:

"During the past couple of years, management analysts and investors also have questioned whether Six Sigma is suited to help firms expand through technology, innovation and human interaction. The retail sector, in particular, "is a very human thing, with lots of people going through your store, wanting to talk to somebody about buying a chainsaw," says Jeff Matthews, general partner at Ram Partners, a hedge fund in Greenwich, Conn. "That's a lot different than running a light-bulb plant efficiently."

This raises the issue of whether Six Sigma can work in healthcare, another highly human-interactive enterprise as opposed to an assembly line.

Anonymous said...

Great analogy and well said. If television is a reflection of our society, we need only to look at the many shows where people are given impossible task, and then treated to verbal abuse, or fired, when they fail. Other programs show that winning, at any cost, is the goal and that corporate or group success is secondary to personal gain.

There is always a lead lag in any system. Many of today's young people are survivors of broken homes and corporate downsizing. They know first hand the pressure put on a family when a parent looses a job, or is divorced. Being good students, but not the top student, they are shut out of the very state supported universities their parents attended and are forced to fight for the eductions they receive.

While we have extended adolescence, young people today have been forced by a lack of job security, to put on hold the very activities we expect of them, such as buying a house and starting a family. My 50 something peers complain of their chalderns unwillingness to sacrifice personal relationships and family life for a job. In this day of HIV and STD's it is hard to imagine a parent complaining of a child's lack of sexual activity, but it happens.

Kid's today are more conservative, having lived through the ravages of their parents lives. They are looking for both personal and professional security. Unlike their parents they want to be a part of their chalderns lives and do not want the chaos of frequent job changes.

They are now bringing these attitudes into the work place. The only problem is it will be 25 years before they are in charge and can return the system to some sense of normalcy.

Steve Lucas

Anonymous said...

One nice thing about a spell check, it can be consistently wrong. Chaldern should be children.

Steve Lucas

Anonymous said...

One nice thing about a spell check, it can be consistently wrong. Chaldern should be children.

Steve Lucas