Change before you have to

Leaders, even when sailing in smooth waters, must anticipate the dangers that lie ahead and change before they have to, Prof. Bob Kaplan told the HSE Masterclass. Maureen Browne reports.

Prof. Bob Kaplan
Prof. Bob Kaplan

 

Leaders, even when sailing in smooth waters, must anticipate the dangers that lie ahead and change before they have to, Prof. Bob Kaplan, Marvin Bower Professor of Leadership Development, Emeritus at the Harvard Business School, told the HSE Masterclass.

Quoting John Kotter on “What prevents CEOs from Leading Change,” he said the answer was complacency. Complacency existed when people thought what they were doing was right and they didn’t need to change. The most common cause of complacency was past success. In a world that was changing faster and faster all the time, complacency was cancer. Not bad. Not a problem. Cancer.

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Well-known and often still highly respected companies had the disease, and their futures weren’t pretty. Many people, including capable CEOs, didn’t recognize this in their organizations—and even more didn’t see it in themselves. Success and scale usually resulted in an inward focus, where people didn’t see the threats or opportunities that lay just outside.

Prof. Kaplan said that leadership alone was not sufficient. Businesses needed management tools to implement the leader’s change agenda.

“Leadership creates the vision and sense of urgency. Leaders communicate, inspire and motivate. Management provides the rigor, alignment, and discipline required to implement the strategy and achieve the vision.”

He said less than 10% of strategies effectively formulated were effectively executed. In the majority of cases—an estimated 70%—the real problem wasn’t bad strategy. It was bad execution.

A Strategy Map and Balanced Scorecard bridge linked leadership objectives to management of initiatives, processes and employees’ everyday actions. Leaders must communicate the vision and strategy using multiple media. “Align employees to strategy and communicate “seven times seven different ways.”

Communication could be by intranet, newsletters, posters, Town Hall meetings, emails, screensavers, large group meetings, reports, board game, videos, formal speeches, hallway/coffeepot conversations and advanced copies of agendas.

Turning to costs, Prof. Kaplan said that there was could be confusion of costs with prices (charges) where provider expenses were allocated to patient care based on r charges or “relative value units”, neither of which was a good surrogate for the actual costs incurred and costs were not assigned to unbilled or unreimbursed processes and procedures.

Less than 10% of strategies effectively formulated were effectively executed.

A system where costs were measured for organizational units or individual procedures and events, not for the full cycle of care to treat a patient’s medical condition was a wrong unit of analysis for measuring costs.

A bottom-up approach to costing patient care based on the actual clinical and administrative processes, and resources, used to treat patients should be used.

He said the percentage of patients waiting at least 90 days for treatment in Sweden declined from 33% to 13% following the introduction of bundled payment reimbursement.

At the same time, the average pre-operative sick leave decreased from 50 days in 2008 to 39days in 2009 and the surgery queue disappeared by 2011. Pre-procedure cost for joint replacements declined by 17% between 2008 and 2011 and payments for post-operative services declined from SEK 12.5 million in 2008 to 3.5 million in 2011.

Prof. Kaplan said bundled reimbursement aligned providers to value creation and delivery. Value-based bundled reimbursement was a single payment that provided a positive margin above the costs incurred by efficient and effective providers for treating a patient with a specific medical condition across a full cycle of care. The payment was contingent upon achieving good patient outcomes, with both the payment and outcome targets risk‐ stratified by the complexity of a provider group’s patient population.

There could be time-based reimbursement for complete care of a chronic condition (e.g. diabetes, end stage renal disease) and time-based reimbursement for primary/preventive care for defined patient populations (healthy infants and children, healthy adults, frail elderly).