Making a re-organization work for your health system
IBM was in trouble. Between 1990 and 1993 it had gone from one of the most profitable companies in the world to a company with mounting losses and legitimate questions about its continued viability. With pressure on the company mounting, the board generally accepted CEO John Aker's strategy for right sizing IBM's performance, but they chose a new man to execute it: Louis Gerstner. Many assumed Gerstner, an IBM outsider, would follow his predecessor's strategy of splitting the company into separate smaller entities, but after extensive customer sessions, Gerstner determined that in the rapidly changing technology environment of the early 1990's the future for IBM hinged on his ability to create, not a series of independent businesses, but a more unified company focused on providing coordinated customer solutions.
In order to move the company toward this goal, Gerstner began reorganizing IBM's management structure so the company was better positioned to drive customer solutions. Gerstner breathed life into the revised structure by creating a series of systems and structures designed to change the way the business operated and ensure the company did not go through the re-organization only to revert to business as usual. Gerstner knew that for IBM's transformation to succeed it had to extend beyond reporting lines and truly change the way people thought about their jobs.
The problem IBM faced in the 1990s is not all that dissimilar to the situation facing many healthcare executives today: in the face of a rapidly changing industry, health systems across the country are focused on moving from a siloed fee-for-service care model to a new world where all the assets of a system (Preventative, Acute, and Post-Acute) need to be focused on providing a patient with coordinated health solutions. In response to this challenge, many health systems are reorganizing their leadership team and reporting structures, as IBM did, to better align with this new model of care.
This is the right approach as traditional health system organization structures often create barriers to managing a population's health. The re-organization alone does not solve the problem, however, and unfortunately, too many systems fail to take the next step of changing their operating systems and structures to support the new organization. Organization charts are important, but if you move the boxes without addressing how people actually work together and how goals are aligned across the organization you will continue producing the same results.
To activate its new strategy, IBM instituted new operating rhythms that brought together collaborative teams from across the organization to focus on progress toward its strategic imperatives. IBM also adjusted its goal-setting and incentive compensation systems to ensure leadership was aligned around the common goals of the organization. This approach is similar to what GE uses internally, and it is the basic methodology Performance Solutions has used to drive transformations at health systems around the country.
Our experience has shown that health systems seeking a true transformation must move beyond simply re-organizing their reporting lines and focus on establishing organization-wide processes that align goals, focus work efforts around a few key initiatives, and ensure accountability for execution. While re-organizations often accompany the transformation efforts we are involved in, the clients who are truly successful are those, like IBM, who adopt strong processes for aligning goals, activating strategy, and driving accountability.