Garrett Ogden

Leadership skills can help hospitals survive-and thrive-in a difficult economy.

At a Glance

Investing in leadership development will help hospitals:

  • Do more with fewer resources
  • Reduce turnover of talented staff
  • Preserve quality and control costs

Healthcare organizations today are making tough decisions about how to allocate their time and money. There is no shortage of pressing needs-capital construction, technology upgrades, and facility expansion, to name a few-but fewer resources are available to address those needs.

One area at risk of getting put on the back burner is leadership development. Evaluated alongside such sharply defined, easily understood initiatives as expanding the emergency department or making IT upgrades, directing limited resources toward developing the so-called "soft skills" of business leadership, talent development, and employee management can appear less strategic. Nothing could be further from the truth.

The need for strong healthcare leaders and an engaged workforce is greater than ever. Talent management is in crisis at many hospitals. They are experiencing shortages in clinical and nursing leadership, high staff turnover rates, a wave of retirements among executive teams, and growing difficulty in attracting cross-industry management talent.

Healthcare organizations without the right processes in place to identify and develop talent will struggle to perform and compete at a high level in the new healthcare economy. They might find it difficult to instill employee accountability, engagement, and resiliency at a time when traditional motivational "carrots," such as raises, are off the table. They will need to align employee efforts with changing strategic initiatives, but could find that they lack effective ways to make that essential link. And they could fall behind in retaining and recruiting top staff in a marketplace where turnover is high and qualified talent is scarce.


Directing Resources Toward Your Greatest Asset

We are witnessing fundamental shifts in health care that demand new operational models, processes, and practices. And when your business is all about people, that is where the "shifting" has to occur. Likeany service business, talent is the greatest asset that a healthcare organization has.

Health care can meet today's economic and patient care challenges by systematically developing excellent leaders at all levels, from front-line staff to top executives. That accomplishment requires investing in programs and processes that will equip employees to succeed.

The healthcare industry can take a lesson from other industries that have shown they believe in the power of leadership development, especially in an economic crisis. A February 2009 article in The Wall Street Journal stated that "despite layoffs and recession-starved budgets, many employers are investing in leadership-development programs" and then described the efforts of companies such as Philips Electronics and Canon USA to make sure employee training still gets a piece of the shrinking budget pie. ("Despite Cutbacks, Firms Invest in Developing Leaders," Dana Mattioli, The Wall StreetJournal, Feb. 9, 2009.)

Why should healthcare organizations invest in developing talent when budgets are in free fall? Three reasons come to mind, all of them directly related to the organization's bottom line.

Enabling the do-more-with-less equation. Hospitals are resource-constrained. Many have had to reduce or freeze workforce levels despite increasing demand for services. To make this "do-more-with-less" workplace function, hospital leaders need employees to be fully engaged and delivering a high degree of discretionary effort. Getting employee buy-in for such extra effort may be difficult without a visible commitment to redesigning workflow processes and developing staff skills to support a leaner organization.

Putting a stopper in the talent drain. Failing to invest now in the continuing development of top-performing staff sets the stage for a talent drain when economic conditions improve. In organizations that cut back employee development programs, star performers may simply bide their time until the economy recovers and employment prospects improve. At that time, the most effective executives, managers, and clinical staff are likely to bolt to organizations that demonstrate greater appreciation for their skills and apply more resources toward their professional development.

Preserving quality and controlling costs. Investing in leadership is the best way to avoid the high costs of staff turnover and associated disruption in continuity of care. The No. 1 reason that employees give for leaving an organization is dissatisfaction with their immediate superior. This is bad news for healthcare organizations, which often promote clinical staff to management positions without giving them adequate training to fulfill the duties of their new position. From a financial perspective, the cost of a single nurse turnover is estimated to be $31,000 in hiring, productivity, ramp up, and other soft costs, according to a December 2009 study by Healthcare Management Review. Any loss in continuity of patient care may be unquantifiable but has the potential to be more costly than recruiting and training staff.


Helping Leaders be More Effective

Some leaders feel ill-prepared to deal with these and other talent management issues. Those who are succeeding have learned how to tightly connect leadership development with business management, create cultures that encourage employee development, and redesign workflow in logical new ways that increase access to care and improve patient and staff satisfaction.

But that understanding doesn't develop overnight or in a vacuum. Healthcare organizations should investigate and ultimately put into effect leadership models that can help them develop physician, nursing, and administrative leaders at critical stages in their careers so they can advance to greater levels of responsibility and accountability.

The objective is to instill management practices that are proven to build a performance culture and develop leaders prepared to meet today's and tomorrow's challenges in health care.

One organization that has taken such talent development practices to heart is Ochsner Healthcare System.


Case Study: Ochsner Healthcare System

In 2001, executives at Ochsner Healthcare System in New Orleans realized the system was not functioning optimally to survive in a highly competitive market. Rapid growth had led to greater competition for resources and a pressing need for more rigorous and better aligned processes.

In 2005, Ochsner was literally in the eye of the storm when Hurricane Katrina struck. Ochsner lost between 60 and 70 percent of its workforce as residents fled the area. In the wake of Katrina, the health system purchased three hospitals in the region to extend access to healthcare resources to residents in dire need of help.

The acquisitions and staffing changes following Katrina gave Ochsner's reformation efforts a new level of urgency. Leaders knew they had to evaluate, reorganize, and integrate a system that had ballooned in size and staff, with multiple cultures and constituents.

Ochsner launched a top-to-bottom organizational transformation in 2001. Leaders began using a strategic playbook to guide key initiatives, provided Lean training to employees to develop management skills, instituted a structured review process with associated incentives to improve talent development and retention, and introduced an integrated electronic system to gain the efficiencies of a paperless environment.

To accelerate this work, Ochsner invested in having its entire executive team take part in a leadership, innovation, and growth immersion, despite the economic downturn. The program gave the executives guidance in re-examining the organization's mission and vision, analyzing data on market challenges and opportunities, and prioritizing strategic focus areas with corresponding initiatives. Intact executives teams work, socialize, and live together for a week in a retreat environment, which allows them to work on many levels: break-through barriers to working as a team, react to leading experts' testimonial on industry topics and respond with action plans in immediate facilitated session, harness the collective thinking of the team and calibrate efforts so they are all headed toward the same goal, and set strategy and work through the initial steps to making strategy actionable. Success is measured by the organization's ability to activate the strategic direction in its strategic playbook process and day-to-day management of the organization.

Today, Ochsner is the largest healthcare system in the New Orleans region, with seven hospitals and 33 clinics serving 1.2 million patients a year. Ochsner's regional market share grew from 14 percent of its service area in 2001 to 36 percent in 2007. Its current annual revenue is about $1.3 billion.

With nearly 11,000 employees, a crucial measure of Ochsner Health System's success is its talent retention and satisfaction metrics. Ochsner's employee turnover rate dropped from 20 percent in 2006 to 13 percent in 2009.

With the help of its team-focused leadership training, structured review processes, and other strategic measures, Ochsner Health System has improved its Joint Commission core measures in all areas and decreased its risk adjustment, mortality, and complication rates. After completing the leadership development program, Ochsner's leadership team was re-energized around a new mission and vision for the organization. Building from that experience, Ochsner has invested in creating the Ochsner Leadership Institute, an on-site program with a curriculum designed to develop leadership talent and integrate leader characteristics among its employees.


Manage Talent to Manage Quality and Cost

Talent management has a significant impact on the most critical operational issues that healthcare organizations face today: patient safety, timely access to care, and cost control. Far from being a "soft" initiative, leadership development is the engine that drives success in today's healthcare environment, empowering an organization to achieve its quality and cost objectives despite limited resources and increasing demands.

Commitment to leadership and systemwide teamwork provides the base for building new strategies and successful initiatives. By applying streamlined processes and labor management, healthcare leaders can improve workflow, increase patient flow, access and build patient satisfaction, and attract and retain top talent-all of which contribute to an improved bottom line.

Organizations like Ochsner prove the point. As its president, Warner Thomas, points out: "Our story is about people. When you invest in training and supporting your employees, improvements happen. It was the right thing to do for our patients and our community."

Garrett Ogden is managing principal, Leadership and Organizational Excellence, GE Healthcare Performance Solutions Team, Waukesha, Wis. (


Tools and Strategies for Culture-Driven Performance

Historically, healthcare systems focused on creating a performance-driven culture-performance first, people second. Today, organizations that thrive pay primary attention to developing the right culture, knowing that innovative strategy and top-level performance will inevitably follow. The following tools and strategies can help healthcare organizations develop a workplace culture that drives relentlessly toward high performance.

Organizational alignment, strategic operating plan, and calendar. Hospitals need to focus at the organizational level on strategic imperatives, and align the actions of all employees to the overall strategy. To improve planning and probability, executives should develop a three-year plan. This plan lets the organization identify initiatives, and set goals and objectives for the leadership team that will cascade down the organization, driving focus and alignment.

Employee engagement and accountability. Evaluating the organization's human capital is critical. To identify key talent, create succession plans, and provide consistent, objective feedback on employee performance, hospitals need to update their performance management systems with structured talent-review processes. By growing future leaders' skills and aligning processes and initiatives with strategic objectives, healthcare executives build effective teams and drive accountability.

Integrated leadership development curriculum. Hospitals should seek out comprehensive, progressive learning programs for their medical, nursing, and administrative leaders at critical stages of their careers.

Performance improvement. A change-management process can help accelerate adoption of improvements, including integrated electronic systems and developing promising leaders through quality-continuous improvement methods such as Lean and Six Sigma®.

Publication Date: Monday, March 01, 2010

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