Monday, March 30, 2009

The Retirement of a Generic Manager

A frequent theme on Health Care Renewal has been the adverse effects of health care leadership by generic managers with no background or experience in health care, and no intuitive understanding of its values. This type of leadership arose after some health care economists called for abolishing the supposed physicians' "guild," and transferring power over health care to managers as a way to control health care costs. This has not lead to control of health care costs.

The recent coverage by the New York Times of the sudden retirement of the CEO of General Motors suggests that the notion that organizations should be run by generic managers is one whose time ought to be past. Wagoner presided over a dramatic decline in the fortunes of GM.

Mr. Wagoner presided over some of the biggest losses in G.M. history. In 2002, the company had predicted that it would earn $10 a share by the middle of the decade.

Instead, G.M. lost $30.9 billion in 2008, when its per-share loss translated to more than $50 a share. G.M. stock, an economic bellwether that sold above $35 only three years ago, closed Friday at $3.62; it has fallen as low as $1.27 in the last year.

In 1994, when he took charge of G.M.’s North American operations, the company made up 33.2 percent of auto sales in the United States.

Last month, G.M. represented only 18.8 percent of American car and truck sales....

The problem may have been, in part, that Mr Wagoner was never a "car guy."

'It’s a pretty unceremonious ending,' said John Casesa, an industry analyst and managing partner of the Casesa Shapiro Group. 'G.M. lost its way in the ’70s, but the company didn’t know it until 20 years late. The hole was much deeper than he realized when he became C.E.O.'

And, Mr. Casesa said, Mr. Wagoner’s finance background might have been a poor fit: 'The most successful auto companies are run by people who came out of the revenue-generating functions — manufacturing, design, marketing — making cars and selling cars.' Mr. Wagoner, the analyst said, 'skipped the whole apprenticeship that most auto C.E.O.’s experience.'

The notion that a finance guy should run a car company makes not much more sense than the notion that a finance guy (or marketer, accountant, or lawyer) should run a hospital or a drug company. Yet now most health care organizations are run by such generic managers. Is it any wonder that while such generic managers have made a lot of money, they have been unsuccessful in controlling health care costs, much less solving any other aspect of the the health are crisis?

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