By Dave Sedgwick, VP, Organizational Development, The Ensign Group
The Centers for Medicare & Medicaid Services’ shift to a prospective payment system in 1998 sent shock waves through the industry and claimed the financial lives of many prominent long-term care companies.
The current combination of recession, Medicare cuts, RUGs-IV, MDS 3.0, state budget crises, QIS, RAC, and the unknowable final shape of healthcare reform have today’s leaders feeling déjà vu.
What do long-term care companies need in order to avoid last decade’s casualties? Here are a few very important things:
Culture
An organization’s culture—its structure and values—is the single most important factor for overcoming acute challenges and for transforming the industry one facility at a time.
Decentralization
Speaking generally, there are two types of corporate structures: centralized and decentralized. The most prevalent structure in long-term care is the centralized model. To be blunt, the primary need for a controlling, top-down, large corporate bureaucracy is to make up for incompetence at the facility level.
If this is not so, then why pay for all of those corporate puppeteers?
If you hope to attract a different breed of administrator and director of nursing, you have to cut the puppet strings—empowering the facility leaders to lead.
A decentralized model attracts the type of leader who is entrepreneurial and innovative, and has an ownership mentality. When the puppet strings are cut, facility leaders no longer say, “I have to check with corporate.” They own their problems and solutions.
A decentralized model also attracts the type of support people who believe in the creativity and responsibility of local leaders and love to help them grow.
One of the main arguments against decentralization is that it is too risky—clinically and financially. To avoid risk, decisions are made at the corporate level: vendor contracts, hiring, firing, compensation, policies, forms, etc.
The trade-off for operating that way, of course, is that you get a culture that attracts “employees” instead of “owners” and you promote the “all-stars” out of the facilities where our staff and residents need them most.
In order to mitigate the inherent risk of decentralization, a company must have deep-rooted shared values among its facility leaders.
Values
Without a fanatical commitment to core values, a decentralized structure is too risky. But if a decentralized company hires, trains, and measures based on shared values, it has the potential to outperform its centralized competitors because it has infused top talent throughout the company and where it’s needed most.
Almost every company has a written culture statement (mission, values, motto, etc.) But the difference between those that will be able to overcome major tests and those that won’t will be how real those values are to the facility leaders themselves. Too often, mission-type statements collect dust as decorations.
The structure will shape the true values and feel of a company more than anything.
A major test
Johnson & Johnson, for example, refers to itself as “not one company but many.”1
In 1982, it was hit by the Tylenol pill-poisoning crisis, which forced its market value to plummet before bold, widespread action by leadership sparked a stunning comeback.
“I do not think we could have done what we did with Tylenol if we hadn’t all gone through the process of challenging ourselves and committing ourselves to the [culture],” said company CEO James Burke.
“We had dozens of people making hundreds of decisions and all on the fly. And the reason they made them as well as they did is they knew what the set of beliefs that the institution they worked for were. So they made them based on that set of beliefs and we made very, very few mistakes…. ”2
Creating new cultures
What lessons can we learn from recent long-term care history and companies like J&J? In order to be prepared for the significant tests ahead, we need to have efficient, nimble, talented organizations fanatically committed to their core values.
Companies with centralized, top-down, bloated bureaucracies needing to justify their position and authority are slower to react to the shockwaves that will come.
Not only will a decentralized organization of many owners and partners come up with better ideas than a centralized few, but it also will be able to act quickly, like J&J did.
Empowering the field and eliminating bloated bureaucracy is for many an impossible pill to swallow. Yet, whether you were to ask the dozens of beaten companies from the late 1990s if they would try that medicine if given the chance, I bet they would.
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1Harvard Business School, Case Study: Johnson & Johnson (A): Philosophy & Culture, p. 3.2Video, Philosophy & Culture, A Question & Answer Session With Advanced Management Program Participants at Harvard University, December 1983.
The author’s healthcare leadership blog can be found at http://worldclasscare.wordpress.com.
From the June 01, 2010 Issue of McKnight's Long-Term Care News
