Four Resolutions for CFOs in 2010
I am a person who makes resolutions each year, and actually sticks to (most of) them. To be fair, I don't make "resolutions," I set goals each January. I write down about five to 10 items and jot a few notes about how I intend to attain my objective and then twice a year I look at my goal list and I try to keep myself on track.
In the 10 years since I started doing this, I've accomplished a lot of what I set out to do. Sure, the 10 pounds have come off and come back, but the long awaited trip to Italy was realized this summer and my personal finances are in order.
Whether you want to call it a "resolution" or a "goal" doesn't really matter, the point is to give yourself a compass to achieve new heights. So here are my reflections on the past year and some suggestions for resolutions CFOs may want to consider as we bid adieu to 2009 and welcome 2010.
Resolution #1: Find Non-labor Cost Reductions. 2009 gave CFOs a valuable reminder of what their greatest asset really is: their employees. While many facilities struggled to keep their operating margins in check, to your credit, most financial leaders looked to their employees for suggestions, and cut supplies and capital spending budgets before personnel.
That's not to say some facilities didn't cut labor, but it wasn't the first line item to take a hit. In fact, as we exit 2009, healthcare is one of only a few economic areas showing employment growth. The healthcare sector reported 21,000 payroll additions in November, creating 249,700 new jobs in the first 11 months of 2009, according to U.S. Bureau of Labor statistics. Moreover, 613,000 payroll additions have been made since the start of the recession in December 2007.
New equipment and buildings are certainly important, and market share and growth are vital to every facility, but the recession is a reminder to look at your mission statement and take stock in it (it's safer than taking stock in Wall Street anyway these days). Hospitals are there to help people get well, and you simply can't do that without skilled medical teams. Not only should you look to other areas for cost reductions, you must dig in and find the money to keep hiring more physicians—your docs are your ticket to growth.
In 2010, make it your goal to continue to care about the employees that work at your hospital. Without a doubt, more cost reductions lay ahead, so look for creative solutions. If it comes down to labor, seek input from the very employees whose jobs are on the line. You'd be surprised how willing people are to make other sacrifices so that they, and their coworkers, can continue to work (perhaps less paid vacation time or flex hours). So, when looking at your bottom line, vow to consider creative solutions—you may find you come out ahead in the long run.
Resolution #2: Out with the Old Forecast; In with the Rolling One. Here's what the economy looked like in 2009: it was up, then down, then down, then up, then down, and so on—you know the picture all to well. The last two years have been a rollercoaster and that's the only trend you can predict will continue in 2010. What does that tell CFOs? Well, you can grab onto a tree when the wind blows and hope the storm ends quickly, or you can send up a kite and see where the wind blows you.
It's time to get your kites ready. If you haven't done so already, throw out your old notions about when and how you should do financial forecasting for your hospital's business plan. The national economy and even your local market aren't stable enough to have a business plan that's set in stone—even reviewing your plan every six months isn't good enough—it's time to start a rolling, monthly forecast. You'll be amazed at the insights you gather.
Resolution #3: Keep Communication Open. You hear a lot about healthcare transparency in terms of consumer information, but very little about it in terms of employee communication. You're a CFO, but you don't have all the answers and the sooner you admit that the recession is mind-boggling to even to the most seasoned financial pros, the sooner you'll be ready to communicate with employees.
Paul Levy, president and CEO of Beth Israel Deaconess Medical Center in Boston, who writes a blog called Running the Hospital, has embraced open, transparent, communication. He recently wrote a blog entry called "Listening to Staff," but it could just as easily have been dubbed, "Solving Problems Together." Here's an excerpt:
"Many people around the country followed the dramatic story last March when our employees generously gave up salary increases and benefits to help save hundreds of jobs of their fellow workers. A key part of that process was that staff members had multiple paths to contact me with suggestions and reactions to various proposals. Thousands of people did that, and it was very helpful as I made decisions on these matters.
"Several months have passed, and our financial situation has improved. We hope to be close to the time when we might restore salary increases and/or benefits. I needed to know which of those items would be most important to our workers, to help set the priorities for restoring them. It was time to check in again.
"Two emails follow. I sent out the first just before Thanksgiving and the second one yesterday.
"As I have talked about all this with people around the country, many have expressed surprise that, as CEO, I would 'take the risk' of consulting our staff on these matters. For some, this is considered an odd ceding of executive authority. My view is just the contrary. If a CEO cannot rely on the judgment and opinions of those doing the work in an organization to help him/her make the final decisions on matters affecting those very people, what does it say about the level of mutual respect in that institution?"
What a refreshing approach to communication and a great goal for every hospital financial leader.
Resolution #4: Failing to Plan; Means Planning to Fail. There is this omnipresent negativity about healthcare reform, but you literally cannot afford to wait and see what the fall out is from the latest initiative. Years of government legislation should have taught every CFO that you must expect government intervention to cause a hiccup with your financials.