Talent Management - January 2009 - (Page 39)

The Case of Paul Levy and Beth Israel Deaconess Medical Center Michael A. Roberto In January 2002, Paul Levy took over as CEO of Beth Israel Deaconess Medical Center in Boston. At the time, the hospital faced severe challenges. It was losing $50 million per year. Relations between management and the clinical staff were strained. Morale had fallen as the highly respected academic medical center stumbled repeatedly while it tried to turn things around. Perhaps most importantly, the Massachusetts attorney general, responsible for overseeing charitable trusts, had begun to pressure the Board of Directors to sell the hospital because he saw little evidence the institution could stop the substantial losses it was incurring year after year. Levy stepped in and engineered a remarkable turnaround. He enacted some tough remedies, including substantial layoffs. His results paid off, though. The hospital returned to a healthy ﬁnancial condition within one year. Levy’s efforts yielded a number of insights about successful turnarounds, particularly regarding how to communicate effectively. Successful restructuring efforts must begin with transparency. Too often senior executives keep employees in the dark about the scope of the challenges confronting the organization. Employees need to understand how bad things are; otherwise, they will not comprehend the need for large-scale restructuring and downsizing efforts. Levy opened up the books and let his staff know precisely how dire the hospital’s ﬁnancial condition was. He told everyone about the attorney general’s inclination to force a sale to a for-proﬁt hospital chain. He also informed them the hospital would likely lose its status as a Harvard teaching hospital if a sale took place. Many leaders communicate with employees about the scope of a crisis, but they do not exhibit transparency as they craft turnaround plans. They work up restructuring programs under a veil of secrecy, afraid to let anyone know the steps being considered or the details regarding what might occur. They only reveal proposed solutions when a ﬁnal decision has been made and implementation has begun. Levy went a different path. In his ﬁrst week, he posted a consultant’s report on how to ﬁx the hospital on the institution’s intranet. He let everyone know precisely what the consultant was advocating, including substantial layoffs. He then asked everyone to read the report and send him e-mails on what they agreed and disagreed with. He responded to hundreds of e-mails about the consultant’s recommendations during his ﬁrst few weeks on the job. This transparent approach makes more sense than the typical highly secretive approach because it builds trust in the institution’s leadership. Further, it helps stop the rumor mill that inevitably emerges if leadership doesn’t disclose any information. Employees will step in and ﬁll the gap with speculation that can be harmful to morale and productivity. Transparency involves and empowers staff and shows the leader is genuinely considering its views. Employees value being consulted, and each person begins to take ownership of the turnaround efforts. It becomes their plan, not just the chief executive’s plan. And research shows people will be more committed to a course of action if they believe the decision-making process was fair, even if they don’t agree with all the ﬁnal choices made. Fair process means people perceive that their voices were heard and considered, and that they were clearly told how the ﬁnal decisions were made. This includes how and why their input was or was not incorporated into the chosen course of action. When Levy ﬁnally announced his restructuring plan, he was speciﬁc about how he deviated from the consultant’s recommendations based on input from hundreds of employees. A restructuring plan should not be executed piecemeal. Instead, leaders need to confront the problem head on and, to the extent possible, enact a decisive and fullscale restructuring plan expeditiously. Major changes will be painful when they take place suddenly and simultaneously, but this approach is far superior to a plan that unfolds over time because people can begin to heal and move on with work if they are conﬁdent no other shoe will drop. Levy came forward with a comprehensive turnaround plan after one month on the job. It was painful, and the cuts were deep. However, he got the tough remedies out of the way and moved on to begin what he described as an institutional healing process. He understood trying to avoid pain in the short run would have only prolonged the misery. Michael A. Roberto is the trustee professor of management at Bryant University and author of Know What You Don’t Know: How Great Leaders Prevent Problems Before They Happen. He can be reached at editor@talentmgt.com. talent management magazine www.talentmgt.com 39 http://www.talentmgt.com

Table of Contents Feed for the Digital Edition of Talent Management - January 2009

Talent Management - January 2009 Editor’s Letter Contents Human Performance Leading Edge Learning Connections Integrate Web 2.0 Into the On-Boarding Experience Show ’Em the Money: Compensation Trends 2009 Transition at the Top How Hollywood Manages Talent and What You Can Learn Get the Most Bang With Limited Training Bucks Life After Layoffs Attract Specific Talent Groups Performance Management: Its Time Is Now Helping the Helpers Advertisers’ Index Editorial Resources Full Potential

Talent Management - January 2009

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