An HFMA Healthcare Financial Pulse Resource
Layoffs are never easy. Yet one hospital shows managing communications and establishing financial transparency are vital to successfully guiding the organization through significant labor adjustment.
You can’t say Linda Deering and her colleagues don’t learn from the past.
As recently as 2006, Sherman Hospital in Elgin, Ill., had undergone a painful round of layoffs. But by 2008, volumes weren’t meeting projections, and Deering and other administrators knew they had to find a way to cut $4 million – cuts that likely would mean another reduction in the labor force.
And this time, something had to change.
“In 2006, we let people know a couple weeks in advance that financial difficulties were going to require an adjustment of the labor force,” said Deering, the hospital’s executive vice president and chief operating officer and a frequent speaker for Studer Group. “But when the actual event happened, even though you were kind of expecting it, it still felt like a surprise. It created such a strong emotional reaction, anxieties and feelings of fear.
“We reflected back on what we did in 2006 and thought ‘We’ve got to do better than that,’ ” she said. “The old surprise method of coming to work one day and having people have their last day, and folks not expecting that, it didn’t seem right.”
So what was right? What was a better way to prepare for and execute layoffs that wouldn’t cripple service or morale at the same time? According to Deering, it was a combination of organizational transparency, communication, and staff involvement--the seeds for which had been planted years before.
An Inclusive Culture
Shortly after the 2006 layoffs, Sherman administrators started implementing a cultural transformation that set the stage for complete transparency.
Officials began sharing hospital financials with all employees monthly, as well as clear goals and progress toward those goals. To help facilitate communication, the hospital began publishing the Sherman Employee Hotline--a publication that’s routinely produced when rumors need to be addressed. (See examples of employee hotline communications here and here.)
It was an inclusive culture president and CEO Rick Floyd began promoting when he joined the hospital eight years ago. Administrators knew this culture had to remain in place even when it came time to make 2008’s difficult decisions.
“If you’re going to be a transparent organization, you have to live transparency in the good times and the bad times,” Deering said. “None of us had done a layoff with that level of transparency before, and of course your anxiety is that it’s going to cause chaos and hysteria. It took a little bit of guts.”
Administrators started by first soliciting ideas from a team of 120 leaders and then--at the suggestion of an ad-hoc council that helps the hospital deliver sensitive messages--from staff members themselves.
“They said ‘Go out and do the same things with staff that you’re doing with leaders. Go hold focus groups; let the staff know in advance what the challenge is and start soliciting ideas,’ ” Deering said.
The result? Cost-cutting ideas that would have been difficult to implement from the top down were instead embraced by the rank and file who knew that the changes came from fellow employees. (See a sample communication on cost-cutting plans.)
The ‘Scariest Message’
During a series of town hall meetings in August, officials shared those changes--slated for September and October--with staff. But administrators also told employees that while the changes would lead to $3 million in savings, another $1 million would have to be cut from the labor force.
“That was the scariest message I’ve ever had to stand in front of a workforce and give, and I was petrified,” Deering said. “How do you go in front of your workforce and say ‘We’ve got to find a million dollars in salaries’?”
To Deering’s surprise, employees took the message in stride.
“Initially I thought they weren’t hearing it, that they weren’t getting it because we were being too subtle in our message,” she said. “But it turns out because of the focus groups we were holding, because of the communication that we were putting out on e-mail and in our newsletter, folks did have a realistic understanding that there would be some positions eliminated.”
Administrators told employees the date layoffs would occur, but even that proved to be less of a distraction than Deering and others feared.
“Folks had to go through that uncomfortable period of knowing two weeks in advance that whatever the date was, that it might be your last day at work,” she said. “So you can imagine the anxiety during a time like that.
“Surprisingly, we kept looking at ourselves and thinking ‘Could this be true? The anxiety isn’t as out of control.’ It indeed was a calm – an anxious calm, but a calm nonetheless. Everyone understood that we needed the financial improvement, and luckily we found $3 million in non-salary improvements, but that a million dollars would still have to come from salaries.”
It was a reaction Deering credits to Sherman’s culture.
Employees “were happy we found $3 million (in non-salary savings), and they were grateful we were trusting them to know the truth without secrets,” she said. “They had come to trust and believe that we were really open and transparent with communication-- the good news and the bad, we weren’t hiding anything from them.”
A Success, But Room to Improve
Operational changes the hospital made--including increased attention to daily staffing needs and overtime--remain in place, and by late summer 2009, Sherman had been in the black for 9 months straight. Turnover has continued to decline, and despite the layoffs, employee satisfaction improved from 62nd percentile ranking in January 2008 to the 65th percentile ranking in January ’09.
Still, in talking with a colleague at a Wisconsin hospital that went through a similar process, Deering says she learned that Sherman could have done even more to involve employees.
“Not only did the (other) hospital hold focus groups with staff, but also they created several different teams of people--including staff--who were responsible for facilitating the improvements. It’s a shared decision-making, flattened organization approach to getting the work done,” she said. “It’s no longer about the executive team making all the tough decisions and communicating them downward to the workforce. But rather, when we have things to achieve, let’s go right to the workforce who can make it happen and let them, with us, lead the way to facilitating the improvements.”
The key, Deering said, is to never underestimate the value your employees can bring.
“The more we trust our workforce to understand our challenges and the more we include our workforce to help us solve whatever is wrong, then the more successful we’ll be,” she said. “It’s just amazing that when we include staff in the solution, it’s a better solution. The implementation will be more successful, and the variation will be less.”
Linda Deering speaks on organizational change and building a culture of service excellence for the Studer Group, www.studergroup.com.