Scott MacStravic, PhD
I can remember the days when there were no CEOs in hospitals, only “administrators”. Now many have a wide variety of C_Os, with middle initials related to “Experience”, “Financial”, “Information”, “Marketing”, “Nursing”, “Operations”, and other domains important to success and survival. Perhaps it is time for some to consider adding a “CPO” (already suggested by some as meaning a Chief Privacy Officer”) where the “P” stands for “Performance.”
This does not mean the HCO’s overall performance, since CEOs and COOs are responsible for that. It relates specifically and exclusively to workforce performance across the entire organization, and aims at continuous analysis and improvement thereof. It would include at least four major approaches to promoting improved performance:
1. Improving work environment and culture could involve focusing on the HCO’s vision, mission and accomplishments to stimulate enthusiasm, commitment and motivation among employees. It could also include greater employee self-determination and autonomy, with respect to work processes, hours, even places of work (for those not involved in direct patient care). Best Buy, for example, achieved an immediate 36% improvement in productivity, while reducing turnover from 16.6% per year to zero by enabling its corporate office employees to choose their own places and times to work, as long as they produced up to standard.
2. Improving employee health has been shown to improve worker quality of performance, on both technical and service dimensions, in HCOs as well as other industries. Higher productivity thanks to reduced absenteeism, presenteeism, and turnover has been widely reported where these are measured, along with increased customer satisfaction and new business. Of all industries, health care should probably be leading the realization of the performance improvement potential in employee health.
3. Selective incentive/reward systems include all methods that pay employees differently depending on their measured performance, as individuals or teams. This has been shown to improve performance in two distinct, though related ways: a) stimulating employees to perform better for the greater rewards it can bring them; and b) stimulating high-performing employees to remain and low-performing employees to look elsewhere for employment. This shifts the mix of performers over time toward a higher proportion of high-performers, and thus improves overall performance.
One company, for example, switched from a standard hourly wage system to a productivity-based “P4P” system. If achieved a 44% increase in productivity in the first year the new system was in place, with an average increase in wages of only 10%. It also found that in the second year of the new system, turnover among low performers increased significantly, while turnover among high performers dropped by 21%. [E. Lazar “Performance Pay and Productivity” American Economic Review 190:5 Dec 2000 1346-1361]
4. Selective recruitment/retention systems aim at improving the mix of employees hired and kept through non-financial means. More systematic testing and interviewing of prospects as well as the use of current employee referrals, and looking for candidates as much like existing high performers as possible can help in this reward, and is helped, in turn, by pay-for-performance systems. The better the tools are used in assessing prospects, the more the “quality” and performance of new-hires, and thus of the entire workforce over time, are likely to improve. [C. Handler & S. Hunt “Estimating the Financial Value of Staffing-Assessment Tools” Workforce Management Mar 2003 (www.workforce.com)]
General retention can be improved by a wide range of means, including the integration of benefit programs and customization of benefit packages to individual employee preferences. Selective retention includes any mix of non-financial methods used to increase retention of high-performers and to get rid of low-performers. Recognition and development of higher performers can reinforce the effects of differential rewards, for example.
As for selective removal of low-performing employees, simply firing low-performing workers has been recommended by many leaders as an essential “weeding out” process that enables higher-potential replacements to be identified and recruited. Jack Welch, former CEO at GE recommended firing the lowest 10% of performers annually, for example. But this may cause internal unrest and interfere with the development of teams.
On the other hand, it has been shown to have measurable positive impact on overall workforce performance. So-called “forced distribution rating systems” that identify and fire a set percentage of low-performing workers can work. In general, the average annual improvement in performance was found to be roughly 16% in the first two years of application, though this fell to 2% in the sixth year and 1% in the tenth. Actual results in specific situations would depend on the rate or overall turnover, for example. [S. Scullen, et al. “Forced Distribution Rating System and the Improvement of Workforce Potential” Personnel Psychology 58:1 Spring 2005 1-32]
The only reason for suggesting a CPO as the basis for integrating or at least coordinating all four approaches to performance improvement is that this can overcome the kinds of “silos” that may otherwise prevent recognition and management of the interconnections across all four methods. Since HCOs are in a unique position, thanks to increasing P4P revenue they can gain as for their overall performance, the better that employee performance can be managed, the better is will be for HCOs, and they will have the financial data to prove it.
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