Paul Levy Essay
How would you describe the situation Levy inherited at the BIDMC? What challenges did he face? Why did previous turnaround efforts fail? (4 points)
Two unique corporate cultures, Beth Israel Hospital and Deaconess Hospital merged in 1996 to become Beth Israel Deaconess (BID). To compete with Partners, BID and a few other hospitals combined forces and formed Care Group Systems (CGS). Lacking leadership commitment, BID was in chaos and consistently posted operating losses in millions of dollars per year. Additionally, although advised on numerous occasions, BID was inept in implementing restructuring plans and consequently had excessive employee turnover, which resulted in poor patient care.
Succinct and expert advice to reorganize BID was never implemented. Although BID would agree to change, execution was postponed or disregarded due to the myriad level of management and bureaucratic processes within each department, which appeared to function independently of one another. Unable to move forward, management was locked in mental prisons. Groupthink was common practice for making essential business decisions, which resulted in escalation of commitment in continuing past practices and refusal to accept recommended changes. BID could be referred to as egocentric as the organization maintained the status quo.
As President and CEO, Levy was expected to create a rapid turnaround of the deteriorating financial condition of the hospital. He was also expected to stop the several year trend of flawed implementation of restructuring recommendations. Furthermore, he was working under intense scrutiny and pressure from many officials, including the Attorney General’s Office of the Commonwealth of Massachusetts, the BID Board of Directors (BOD) and the Board of Directors of the BID parent company, CGS.
How did Levy get started in his new job? What were his objectives and what did he accomplish 1) prior to his first day of work? 2) on his first day? 3) during his first week? (4 points)
Before Levy accepted the position, he made conditions for his employment.
These conditions included that he be hired before the Hunter Group Report was released, that the BOD be considerably reduced in size and that the BOD stay out of the day-to-day operations of the hospital. Even as he talked to the search team, he knew the responsibilities and his own abilities.
Levy wanted to be hired prior to the Hunter report so that he could use the report in ways that he thought would be best. The second condition was to shrink the BOD from a 44-member group to a more-manageable group of 18 members, which was accomplished just a few months after Levy’s appointment as CEO. The third condition of employment, that the BOD remain out of the day-to-day operations, showed that he believed in a chain of command. Levy clearly communicated any meeting between board members and staff required prior approval.
On his first day, he sent every employee of the hospital a memo that included:
• A promise of an open administration
• A warning that the hospital had been given this one last chance for a turnaround
• A promise to post the findings and recommendations of the Hunter Consulting Group
• Encouragement to employees to read and make comments regarding the report
• A promise that changes would be implemented and measured
• Warning of an unavoidable elimination of several hundred staff positions in the hospital
• A promise that the staff reductions would be carried out as humanely possible and people would be treated with dignity and respect
• His expectation of successful turnaround of BID because of the employees, their commitment, their strong sense of teamwork, and their ability to succeed
In his message, Levy also conveyed that:
• He considered all staff (not just key players) to be team members • All team members must share a common goal of carrying out the mission • There is a sense of urgency
• The Attorney General of the Commonwealth of Massachusetts had legitimate authority and control over the future of BID • Staff would be held accountable for their actions
• Levy would be open, honest and inclusive with information, even in the case of bad news • High quality care was essential to BID’s future
• Together, the BID team could show the world success
Levy created a sense of reality for employees whom previously had been told half-truths, lies or nothing about the serious nature of BID’s problems. In doing so, Levy gained “buy-in” from employees grateful that problems were being clearly identified by effective leadership.
Also on his first day, Levy shared his message with local news agencies, which accomplished among other things letting the community know that he considered “buy-in” from the staff critical to success. According to his daily calendar, Levy spent much of his first week meeting with BID staff.
What (if anything) was distinctive about the way Levy went about formulating, announcing and implementing the recovery plan? How did he overcome resistance? (3 points)
Levy’s practice of speaking with staff likely induced his ability to gather as much information as possible regarding the current mood and culture. This information was needed to develop and implement a plan. Initially, his recovery plan had to include huge cost-saving initiatives. He had already set the stage for a massive lay-off by posting the Hunter Report for all employees to read. Therefore, it was relatively easy for him to fire/permanently lay-off 150 people by the end of the month. After all, he was only doing what the experts recommended. Who could argue with that? At the same time, purchasing controls were implemented in an effort to reduce costs.
The next week, he rolled out additional strategic efforts. His plan was three-fold: regain a reputation for quality patient care and maintain an academic status; adopt some of the recommendations of the Hunter Group Report, implementing change; and, analyze why previous restructure plans failed and why this new one would work. Another of Levy’s implementation plans was to promise low and deliver high. In other words, he knew the importance of meeting deadlines and plans by being conservative and not over-estimating. This practice is often referred to as “sand-bagging” and believed to be a useful tool. Levy’s intent was not to be deceitful; rather, it is a way of keeping forward momentum by delivering good news.
How did Levy tackle the problem of the BIDMC’s “curious inability to decide?” (3 points)
It was not until Levy came in and talked with the doctors and staff, really listening to each other’s problems and concerns that change could happen. Levy realized that the culture of BID played a significant role in the organization. People reacted and performed their jobs considering how they had performed their jobs in the past. The current structure and hierarchy defined who the chiefs were and the importance of their roles. They were caught up in this psychic prison. Levy had to help them overcome it by making sure they realized that they were not wrong and that they just needed to be open to change. Levy tried to get to the underside of the human emotions for these chiefs and let them see the benefit of changes. He made sure to give credit but also expected results and acceptance of the new strategic plan. While there is no indication as to which personnel were fired/laid-off, it was clear to the remaining staff that Levy was in charge and that “slackers” would not be tolerated. This is a powerful motivator (albeit via fear) to eliminate resistance.
Also prior to Levy, it seemed that committee meetings often resulted in groupthink. Levy knew that the chiefs were usually involved in those meetings, and that there was now a tremendous need to see results from those meetings. In the past, no one spoke up at meetings. Many participants kept quiet instead of actually saying what they thought. Staff members were afraid to rock the boat. Once Levy came on board, many decisions and changes were implemented via steering committees instead of from the chiefs. This was a significant change in the hierarchical structure. No longer did all decisions and ideas come straight down from the boss in the tower. This change allowed staff members to get involved and present ideas. Ultimately, it would be staff members whom had a key role in the implementation of turnaround plans. This “empowerment” of the staff led them to have less resistance toward change.
In describing his leadership style, Levy speaks of the CEO as teacher. How has he defined that role? Why has he chosen to focus on it? What skills does it require? (3 points)
Levy’s leadership style is a strategic facilitator, through developing employee ownership by illuminating the nature of the problem and seeking their involvement in finding solutions. Levy believed it essential to build a core management team that is in accord with the plan, mission and values and who are willing to assume risk in embracing change. The CEO role is to support the management team and remove those who are obstructionists. The byproduct is improved decision-making and accountability. He uses peer pressure as an accountability tool so there is public acknowledgment of responsibility for specific tasks. By redirecting comments from naysayers, Levy places the onus on others to provide a solution for problems. Additionally, Levy understands the dynamics of each meeting and what can and cannot be accomplished in each.
Levy used a human resources view in assessing various situations. He leveraged this framework while making a majority of his decisions. He valued feedback from his employees and kept them abreast of pertinent information, which resulted in efficient and satisfied employees. Levy accomplished this literally by roaming the hospital with the intent on knowing the staff in person. He would engage in conversations seeking suggestions for change in their occupational area and reassured skeptics that his plan for change would be successful. Levy’s efforts to include everyone in the day-to-day progress as well as helping employees find answers to their problems, made the work more satisfying to his employees.
What did members of your team learn from completing this case?
How might members of your team use this information in their current or future jobs?