Healthcare organization
The case of a healthcare organization shows how these four conditions can coalesce to change mindsets and behavior to improve performance.
A few years ago, this CEO took the helm of a healthcare organization that employed more than 15,000 people. He set several targets:
Doubling the economic profit of the organization.
Reducing its cost-to-income ratio to 38 percent (from 51).
Increasing the annual revenue growth from the current 1 percent to 4 to 6 percent—all within five years. But healthcare is a commodity business. No financial re-engineering or superficial changes in practice could win a competitive edge for the organization. The CEO realized that meeting these performance goals could only be accomplished by motivating its people to deliver far better client outcomes at a much lower cost. That meant changing the culture from a bureaucracy into a federation of entrepreneurs where managers would be rewarded for taking charge of problems and quickly deciding how to fix them.
At ThriveVance, we helped this CEO devise a plan to achieve his goal:
The Narrative of Change
First, the CEO developed these insights into a story that would make sense to all employees at all levels and persuade them to change their behavior per the new principles. The primary technique was collaborative dialogue-based planning, which created double-loop learning.
He drafted a top-level story based on what he perceived as the organization's position and refined the story in collaboration with his executive team. Each executive then developed a story chapter relevant to their direct reports. Every executive was responsible for each "deliverable" in the story to one member of their direct reports. Each team member had to create a performance scorecard outlining what they would do differently to meet the new goals.
The CEO and his executives met again to review their chapters and to get feedback from one another. The amended version was shared with the rest of the employees. The reason for retelling the story was to emphasize making it meaningful to the employees listening to it and to the groups to which they belonged.
The flow of information was upstream as well as down. Employees at each level of the organization heard the fitting version of the proposed changes from their immediate boss.
How could he know that people bought into his story? The secret was ensuring that the story described how life would be better for each employee, not just investors.
Reinforcing systems
The most dramatic structural change in the organization was eliminating 18 percent of its managerial jobs. The theory proved correct that doing so would remove useless activity without negatively impacting performance. The goal of the reduction in managerial roles was not primarily to improve the cost-to-income ratio; on the contrary, the layoffs were relatively high. Instead, since fewer managers now had to make the same number of decisions, this change was intended to speed up the decision-making.
Simultaneously, the performance-management process was revisited and changed from a numerical rating (1-5) to a ranking system that eliminated 85% of employees rating 3 or higher, which did not reflect the organizational performance. The new performance management process injected reality into the process by introducing rankings within teams. To reveal the relative performance of the employees, and only those that ranked people based on performance with the guidelines that no more than three can be top performers and at least one person in the lowest rank. The bonus for the first rank was increased by 25% from 15%, and those with the lowest ranking did not receive a bonus. Those consistently in the lowest rank were terminated.
Skills for change
After three months of developing the new strategy with the executives, the CEO realized that only six were committed to change and prepared to implement it. To ensure that his organization had the suitable skill set to change its practices and culture, he replaced the other four, three from outside the organization.
Meanwhile, the top 65 managers spent two days in a leadership development workshop where their leadership abilities—in coaching and decision-making, were assessed, and each created a personal development plan to improve those talents. Additionally, they began to evaluate managers' performance in terms of whether they produced and the leadership dimension. Managers who had consistently won high bonuses and were known to be hell to work for, a fact acknowledged by the new measurement plans: they were paid the lowest sum appropriate to their position, emphasizing that leadership really matters.
Consistent role models
Collaborative dialogue-based planning ensured that leaders at each level of the organization were on the same page and that the message was consistent. Their planning sessions were prominent events where they started modeling the new type of behavior that they wanted the staff to adopt. The CEO's enthusiasm also inspired employees to adopt the new behavior. He persuaded them that although change would take time and be hard to achieve, his passion for improving the lives of everyone involved with the organization was sincere.
The outcome
The organization is now two and half years into its five-year improvement cycle and is about halfway toward meeting its targets for increasing revenue and profit and reducing its cost-to-income ratio. This achievement indicates that behavior matches the intended direction throughout the organization. We don't have any empirical data that mindsets are changing; however, we can see that the culture has evolved from close observation.