Unconventional Leadership

by Nancy M Schlichting

  Sometimes just showing your own humanity is the thing that is critical during the darkest moments. At the time, I didn’t keep it secret that the layoffs were the most difficult thing I had ever done. To make life even more difficult, the month that we had to lay off six hundred people at Henry Ford Hospital, my partner of twelve years walked out on me. The two things together were emotionally devastating, and I made the unconventional decision to be honest about that. In the midst of the chaos I told my team what was going on in my life. I sat down with each of them and said, “I just want you to know that I’m going to need your help during this period in my life because it is a tough time for me.” It was incredible how people stepped up. Simply opening up made it easier for me to build trust and enlist support.

  The final commonality in the turnarounds I have worked on is speed. And this is pivotal. Every time I’ve been involved in turning an organization around, or seen it done well, there has been an intense focus on getting what needs to be done completed as soon as possible. Getting results quickly and showcasing them makes change easier. Both times at Akron, at Riverside Methodist, and later at Henry Ford we made the necessary changes and returned to profitability very quickly. We completed the entire financial turnarounds within a year or a little more. That is exactly what we were driving for. When that kind of work drags on, the uncertainty is debilitating. Leaders need to make decisions, communicate them to the organization, and implement the turnaround with little or no delay. People need to be able to see the light at the end of the tunnel and see progress. It’s as simple as that.

  Steps to Turnaround Success

  In addition to the common threads mentioned above, there is also a methodology associated with turnarounds that culminates in prescriptive advice. These prescriptions can be used as guidelines for driving change across an organization or simply as a path for making smaller adjustments as needs arise. Regardless, these steps are based on my experience and are intended to be general advice to build on as opposed to a rigorous model.

  1. Create a Partnership Model

  When I was promoted to chief operating officer in 1999, after about a year at Henry Ford, I found myself in an unexpected situation—drifting all alone. My job was to manage the operations of the health system and improve the faltering results in the process. Without a turnaround, the organization’s influence within Detroit would be diminished and its long-term future in health care would be in jeopardy. It was no small task without partners. I needed like-minded senior-level leaders, especially in finance and human resources—but they were nowhere to be found. Not only did key individuals fail to step up, at times they even stonewalled me when I requested assistance. The first step in a turnaround is putting together a team of people with diverse expertise but shared objectives and vision.

  When I realized the obstacles I faced with the executive team, I went to Gail Warden and said, “I don’t think I can do this job on my own. I can’t even get the basic information about how we’re doing.” I would ask the system’s finance team to give me performance data and I wouldn’t get it. I would ask a straightforward question and be met with a circuitous answer. So Gail agreed to talk to the CFO. When he came back, he essentially told me to “hang in there” because the finance officer would be leaving the organization in about two years. I couldn’t believe it. I said, “Gail, I don’t think we’re going to make it. We’re draining cash really fast, and we don’t have a game plan.”

  It was a tense few weeks, but Gail and I ultimately agreed that we needed to put together a new team of leaders. The group we assembled was pivotal in terms of generating confidence within the organization, creating transparency, and enabling me to have trusted partners during the turnaround. We brought in a new CFO, Jim Connelly, who was extraordinary from the onset and has been a remarkable leader ever since. He runs HFHS’s health plan now but was the system CFO for fourteen years. We also promoted a highly regarded leader, Bob Riney, to run human resources. Bob was key because he brought a credible, positive approach to solving problems and a proactive mind-set for addressing weaknesses.

  Soon after, when I went to Henry Ford Hospital as CEO, we handpicked new leaders there as well. Changing the entire leadership team at the hospital was a dramatic move for HFHS and largely without precedent. It was visibly painful for everyone. The leaders we exited were good people who had been loyal to Henry Ford Hospital for a long time. Typically, coming into a new leadership role, I commit to working with the existing team even if changes occur over time. But in this case, we didn’t have the luxury of working with the existing team, because the urgent situation dictated that we work in a new and different way quickly. From my vantage point, it would have been much riskier to not make the change.

  After that, as the turnaround plans were being put into place, the real work began. We assembled an outstanding interdisciplinary team internally, which became the new leadership team at the hospital. We invited leaders from our health plan, including the chief financial officer and leader of system care management, and the head of our management engineering group, as well as a number of other talented leaders. But the real game changer was asking all of the key hospital-based leaders in the Henry Ford Medical Group, including the chairs of medicine, surgery, radiology, and emergency medicine, to join us.

  Bringing together people from across the organization enabled a much faster flow of information. Even better, it provided an integrated perspective and uncovered opportunities that otherwise would have remained hidden. At HFH, for example, working with the CFO from the health plan allowed us to see that we were losing significant business because half of our health plan wasn’t directing patients back to our Henry Ford facilities. We were losing them to other hospitals and clinics around the market! That was a double hit for us because we owned the premium and yet we were paying somebody else for the care instead of referring the business into our own system.

  Creating a new partnership composed of interdisciplinary members unleashed enormous wins, as support from diverse members of the team brought access to fresh insights and better thinking around integration. It also improved morale and gave people a stake in the success of the turnaround.

  2. Communicate Early and Often

  During the turnaround at Akron City Hospital, in 1983, it became clear that we had to reduce labor expenses. More than anything, I wanted us to pull off the turnaround without layoffs. The city of Akron was in a severe recession at the time, with 12 percent unemployment, and additional job loss was more than most people could reasonably be expected to handle. Working with my team, we came up with a plan to reduce 250 full-time-equivalent employees through attrition, reassignment, and early retirement. People would still be making sacrifices, but everyone would continue to get paid. It was an excellent plan but it would have gone south fast without a well-orchestrated communication strategy.

  People were walking on eggshells and rumors were everywhere. In order to put the plan into action, we needed to convince the board of directors and then sell the plan to employees and their union. The board was relatively simple to persuade because board members wanted to avoid layoffs as much as I did. The employees and union were a little trickier. It was important to get everyone aligned quickly in order to avoid pitting one group or coalition against another. The last thing we needed was more internal strife.

  Historically, the lines of communication with employees had been limited. Management made decisions in conference rooms and information eventually trickled down, losing bits and pieces in the translation. This time communication needed to be different—because the stakes were so high. With that in mind, I decided to tell all the employees about the plan myself. So we set up town hall meetings around the clock, during all three shifts and also on weekends. It was an open forum—people could ask as many questions as they wanted, and I would stay as late as needed to answer them. It was such a dramatic departure from the way things had been done in the past that employees almost didn’t know how to rea
ct. Luckily, they reacted positively and the plan was accepted by employees and approved quickly by union leaders. The approach was so unconventional at the time that a local radio station wanted to come in and record the proceedings (I didn’t agree to that).

  That big early win helped me understand the importance of communication, and I have used the same model again with similar success. Communication has forever been a big part of the success of turnarounds. This is particularly true in a field such as health care, where you don’t want nurses and physicians, or even frontline service staff, feeling jittery and passing that vibe on to patients and their families. It would be like boarding an airplane to find the pilots and air traffic controllers standing around talking about their problems with the company—you don’t want that. You want them to pay attention to flying the plane. The same is true in health care.

  I remember that my father faced a possible layoff when my sister and I were in college. He was working at Babcock & Wilcox when the company ran into financial difficulties. Before the company’s plans were solidified, it made public the fact that it intended to release 10 percent of its workforce. With two kids in college and two more in line, both my parents were extremely scared, and their anxiety had an effect on the entire family. I remember thinking how terribly the organization handled the whole thing, and it stayed in my mind as a cautionary tale.

  At HFHS, and throughout my career, I have found that people want leaders who can take charge and make tough decisions—but they also want to know what’s going on and how changes will affect them. The basic blocking and tackling that I’ve done over the years has been to set up systems that open the lines for clear communication. In a turnaround situation, that means communicating what’s going on, why it’s happening, what forces are causing the financial losses, and what has to change. The faster you can tell every individual what their status is and how they are affected, the better everyone comes out in the end.

  What’s more, having a strong communication plan during turnarounds means that I, as a leader, don’t do anything alone. Instead, I work in concert with thousands of people. When employees understand why problems occur and what they can do to make a difference, then everyone in the organization starts to align in the same direction. That is when you see progress starting to happen quickly.

  3. Attend to the Culture

  One of the most unconventional things we did during the turnaround effort at Henry Ford was to focus on fixing the culture from the beginning—even before attending to the finances. Most organizations look at culture after the fact, once the “hard work” of cost cutting and resizing the organization is complete. But the cultural aspect of a turnaround is the hard part. Without that, the rest of the effort is utterly wasted.

  At Henry Ford, we started with senior leadership, which is where the ultimate responsibility begins and ends. So we got in a room with professional facilitators and forced ourselves to admit the truth about the problems that were causing our poor performance. In our case, the missing link was trust. That one deficiency fostered a lack of transparency, failure to communicate and collaborate, and all-around dismal morale. It was a bitter pill for us to swallow because the organization takes deep pride in its heritage as an institution built by Henry Ford to serve the community and make it a better place. Luckily, that mission also fired us up to address the dilemma.

  At the time, the lack of trust was systemic and only made worse by our size and complexity. We had so many professional groups working under one banner, from physicians, professional managers, and pharmacists to insurance specialists, finance executives, and educators. They all advocated for themselves but had a difficult time connecting with one another. And the most acute mistrust was between the physicians and executives. When financial performance started to slide, the problem went from bad to worse.

  What we found was that we needed to rebalance our efforts to achieve a better integration model between business units, with less micromanagement by corporate executives. I’ve always had the attitude that business unit leaders need to take ownership and run their respective businesses. The corporate team needs to create a corporate structure that fosters collaboration. They also must have a servant-leader model in order to support operations. This puts accountability for performance in the right place, with the business unit, and allows for better all-around teamwork.

  In our efforts to address the culture, we realized that the key to high performance by every individual was to create a structure that would make success easier. Operationally, then, we worked on making integration organic and eliminating overlap, and we created a path for ownership and accountability across the business units. These changes addressed a number of the financial issues. On integration, for example, there was low-hanging fruit to harvest: we had two separate corporate offices. There had been an acquisition a few years earlier, and both offices remained intact. Integrating those offices, together with a number of other changes, eliminated significant excess cost. The business units, for their part, took greater ownership of their spending. We made it our mission to help each one figure out where their money was going, analyze their expenses, and line up better support and transparency.

  The other major issue we worked on in terms of culture was reducing blame and encouraging camaraderie. That effort started during the turnaround and is something we continue to work on even today. For my part, I try to set the right tone. Not every decision I make is the right one, and I want people to feel safe speaking up to disagree. For example, we took a pharmacy out of the emergency department at Henry Ford Hospital in order to save money during the turnaround. Ultimately, that was a terrible decision. It’s a 100,000-visit emergency department, after all, and we needed that pharmacy on site. People spoke up—loudly—and we put it back.

  I told people, “We’re going to make some mistakes. We are doing a lot of things quickly. I need each of you to come forward and tell us where we’re wrong.” They did that and more—they started to step forward with their own ideas for change. Since then, a culture of innovation has flourished and become one of the most important parts of HFHS’s growth and identity.

  Everything we focused on in our cultural transformation cascaded across the entire organization, with the process ultimately involving about fifteen thousand people. It made every bit of difference in the turnaround and set the stage for a lot of the things I’ve been able to do, with so many others, at Henry Ford.

  4. Invest to Grow

  It’s easy to pinpoint problems in the worst of times, but it is seldom as simple to articulate a vivid path for growth. I’ve found that fully investing in growth—from the onset of a turnaround—is as important as taking out costs. For instance, in the same period we closed hospitals at HFHS, our primary hospital grew by 30 percent, we acquired two other institutions, we doubled the size of our community care division, and we grew our ambulatory network by a third. We also increased our nursing staff at Henry Ford Hospital, even as we were taking a close look at costs. This focus on growth created opportunities for people who were displaced and allowed twenty thousand-plus employees to see and believe that the organization had a compelling vision for the future.

  During a turnaround, part of having a vision means knowing what to keep even as you are making the toughest choices in your life. We left our obstetrics unit intact, for example, even after management consultants said that we needed to shutter it—it would never be cost efficient. At the time, I remember speaking up in a flash to say, “We are not going to take OB out of Henry Ford Hospital.” I had never seen any hospital in this country survive after taking the OB unit out. Not only would that sever a strong connection with female patients, it would also eliminate a core capability. Women come into ERs all the time with obstetrics issues. If we didn’t have the service, we couldn’t provide quality care to the community. It was a hot-button issue and I had to take on the board. We had some people serving at the time who thought, “If it’s a money loser, of course we get rid of
it.” I made the case that that’s not how hospitals operate and it’s not how health care decisions are made. It was tense, but we got through it and we still have OB. It’s a high-quality service center for high-risk moms, with a neonatal unit that cares for fifty babies at a time.

  Another part of our vision for growth was attracting more people to Henry Ford Hospital and reversing patient attrition. One reason bringing patient numbers back up was so difficult was the economic health of the city itself. The Detroit automotive industry in the late ’90s, although bracing for disruption in the global economy, was basically holding its own. But the City of Detroit was a different matter. There was very little municipal investment and the population was declining. Unfortunately, few business leaders in Detroit at that time were enthusiastic champions, and it was difficult to find anyone credible who was bullish on the future of the city. This was interesting to me because I had come in from outside and I was the only visible cheerleader for Detroit in my circle. It was pretty discouraging, but there was one notable bright spot. The individual who made a real difference was Dr. Irvin Reid, president of Wayne State University. Irv decided that Wayne State was going to significantly increase its numbers of residential students, and he built new student housing on the Wayne State campus in Midtown Detroit. That brought upwardly mobile young people back into the city. It took many years for us to see the positive effects, but the strategic decision was very important.

  For our part, we needed to reengage patients and take steps to prevent them from leaking out of the system. A major part of this entailed working with our own health plan to dramatically improve coordination—we needed the Health Alliance Plan to direct patients back to our facilities instead of sending them elsewhere, as I mentioned earlier. It was a huge initiative for us, driven by Joe Schmitt, former CFO of our health plan, and Tom Groth, who previously ran system care management for our health plan. It was their idea and we ran hard with it. It wasn’t simple, however, because we hadn’t yet made the necessary investments in the facility itself. The hospital was in pretty bad shape in terms of infrastructure, investment, appearance, and amenities. It didn’t look great and our service scores had slipped in recent years as a result.