How Leaders Evaluate Leaders

This article appears in the November 2012 issue of HealthLeaders magazine.

Healthcare leaders are inundated with pleas and demands from payers, the government, their boards, and even their patients to be more accountable to them in cost, quality, and patient safety. Frontline staffers are the focus of the day-to-day evaluation, but senior leaders are charged with developing strategies that will help the organization adapt to new roles. Senior leaders have no playbook from which to evaluate how well they and their most senior deputies are doing, but some innovative senior leaders are keeping it simple.

Nancy Schlichting, CEO at Henry Ford Health System, a Detroit-based organization with $4.22 billion in revenue, says much of her leadership style is rooted in seeking out common values and providing constant feedback on how well her team is meeting its self-imposed targets. She boils it all down to transparency of information, culture development, and engagement of people.

"It's critical to attract talented leaders with common values," she says, adding that senior leaders must work together as a team, which is not as simple as it sounds. "I can set a tone at the top, but if you don't have the team who is able to execute on that—managing change and taking risk in an effective way—you won't make it work."

Schlichting's style, she says, tends less toward the autocratic and more toward allowing her senior deputies to take risks under their areas of expertise.

As examples of that risk, she notes that Henry Ford, in an attempt to
diversify its revenue streams and its scope of care, has acquired ownership of a Medicaid HMO and majority ownership in a third-party administrator in recent years, as well as more targeted acquisitions, such as this summer's purchase of the Detroit Institute of Ophthalmology, which will become a research education arm of Henry Ford's ophthalmology department, which treats about 55,000 patients annually. She's also busy developing a new physician network that will integrate group practices, employed physicians, and private practices, as well as a complex and expensive installation of Epic, an integrated suite of healthcare software, across the system—in other words, much of the same work that many CEOs across the country are navigating.

Henry Ford has a nice track record of success, with 10 straight years of revenue and net income growth in an economically challenged area, and was one of only four organizations nationwide to receive the prestigious Malcolm Baldrige National Quality Award for 2011.

"Leadership is a great privilege, and it's really about having thousands of eyes looking at you," she says. "We're all under the spotlight every day and everything we do is judged. It's the behavior we exhibit that creates that culture, and everything counts; there's nothing off the table."

A strong leader must constantly be evaluating senior leaders, she says, based on their ability to think comprehensively about the impact of their decisions, "because people can get pretty myopic. I like to see leaders who have a particular focus, but I want them to be operationally sensitive and thinking about the impact of their work on many stakeholders."

In evaluating how senior leaders are doing, she focuses on their ability to build a cooperative team and to execute and drive change effectively.

"There's a whole list of those competencies, and then there's others related to the strategic elements of the organization. The metrics we're using measure outcomes across a variety of categories," she says, including quality, financial performance, and community mindedness, among others. Those are the common ones, but she evaluates leaders regularly—that is, many times a year—on seven strategic categories that are specific to their business units. She's careful to constantly evaluate and be available personally for course corrections because she wants leaders to be confident and aware of where they stand at any particular time.

"A lot of collegiality and teamwork is necessary," she says. "That means telling stories and confronting issues at the moment you see them."

She says if CEOs are consistent in their standards, there will be some natural attrition, but she doesn't put much stock in any rote suggestion that, for example, 10% of the bottom performers in an organization should be culled every year. Some people can perform well for years and then get burned out and need to do something else. Sometimes it's time for people to move on to new roles, and that's healthy.

"The main thing is we have discipline on maintaining high standards of performance and behavior," she says, adding that she's careful to keep the evaluations professional—equating people's worth with how effective they are at their jobs happens more than CEOs like to admit.

"Over the years I have seen enough change that I've seen people who are completely ineffective move to other organizations and be very effective."

So sometimes it's not the people, but perhaps the fact that they are in the wrong place with the wrong people surrounding them.

"I still get Christmas cards from people I've fired because I never diminish them as people even if their performance wasn't as effective as we needed," she says.

Mastering communications

C.J. Bolster says healthcare organizations and their leaders sometimes don't give themselves enough credit for managing the huge volume of changes they've already been through in recent years, as healthcare has changed so dramatically.

Bolster is the national director of U.S. industries with Hay Group, a global management consulting firm that specializes in helping organizations translate strategy into results. He has extensive experience in healthcare.

"If you ask a nurse how they're doing their job compared to four years ago, it's an enormous amount of change," he says. "They have different relationships with physicians, with the electronic medical record."

He says CEOs need to manage the intricacies of developing a systemic way to help deputies understand how much they've already gone through and how they've coped.

"A core competency of a future leadership team is how to master internal communications," he says. Bolster , like Schlichting, says a combination of regular reviews along with constant communication is what he recommends to leaders hoping to get the most from their senior deputies. That and constant reminders of why they are in these jobs in the first place.

"That's where some of the faith-based organizations do such a great job—anchoring people in why they do what they do. Doing so provides a rationale so that the changes you're asking them to make are all about providing better service to the patient."

The best senior leaders do a good job of articulating what's central and unchanging versus what's changing—the processes to get there.

The past seven or eight years in healthcare have been very operationally focused, he says. What senior leaders were evaluated on has had large dollops of efficiency, quality, and satisfaction themes. But he's starting to see that, while those are still important, strategic implementation is critical. That may mean getting a new EMR system installed on time and on budget or being able to work out new relationships with physicians. For the vice president level, for example, effective CEOs have recognized and implemented process measures around strategic execution. For many of the larger organizations, healthcare is becoming more like running a professional service firm than running a hospital.

"Every organization we work with has a clear set of strategic initiatives for that year and for multiyear execution," he says. "Translating those into outcomes or process measures is critical."

Staying on message

Dealing with the new in healthcare is a constant concern for senior leaders. New terms are often understood in theory by senior leaders, but how they translate them into plans of action makes the difference between success and failure. Consistency in communicating goals and expectations is more critical than ever, says Marlon Priest, MD, executive vice president and chief medical officer at Bon Secours Health System Inc., a Marriottsville, Md.–based multistate system with FY 2011 total net revenue of $3.3 billion.

"I lead a weekly clinical operations call with my CEO that involves chief nursing officers, CFOs, regional CEOs and CMOs every Wednesday at 7 a.m., focused on items that create value," he says. "We talk about the things that are important to do now and we stay on the subject for two to three weeks, so that the operators, and the finance and clinical leaders are having the same conversation. That way, we know the message and can hear the challenges they're facing."

He says constant evaluation of senior leaders can be a big challenge, even though there are many "hardcore metrics" that can easily be obtained from proprietary organizations such as the Gallup Organization.

Those are the objective metrics, but Priest spends a lot of time and focus on other success factors. For instance, are people contributing in the room? Are they smiling? He spends a lot of time making sure his direct reports are effectively communicating with each other, or in some cases, even communicating at all. He calls his subordinates and makes sure that, for instance, "one of my staff people is having a conversation with another staff person that they need to have a good working relationship with to solve challenges."

He also checks to see that email does not have a "gotcha" or otherwise nasty tone.

"I use that in addition to the traditional Gallup measures," he says.

It's a collegial atmosphere, and "they do occasionally say that I'm micromanaging. But if you aren't talking to each other between staff meetings, I need to know why. If you were, we could possibly achieve a goal much faster."

He keeps goals big in scope but few in number. For instance, he and his group agreed to meet one performance objective for the group around readmissions.

"All 11 agreed and all would be responsible for some piece, which forced them to have conversations among each other."

He argues that senior leaders need to create "stretch" metrics that subordinates don't hit every year. When they don't hit them, they also need to know you're not planning on firing them. He says while clinical people have some transformation of work practices, to deal with that can be quite challenging; it's the administrative staff that has the toughest bridge to cross as healthcare incorporates vast changes.

"The leaders under the most pressure are traditional C-suite people because they cannot achieve anymore without their clinical people being at the table," he says, adding that 70%–80% of what physician senior leaders have to deal with are not necessarily tied to the organization—that is, the independent medical staff. As CMO, Priest tries to bridge that gap and own a goal, but it's his responsibility to make sure his team members can help him achieve it.

"I'm going to be the owner of the goal. If they don't get it right, maybe you can laugh about it and find ways to improve. It's not perceived as an organizational failure, but you have to hold people accountable. I might have a conversation that goes like, ‘We've been at this 18 months. Tell me what you need to do different.' If they're blaming someone else and they don't bring solutions, that's a red flag."

For what it's worth, Priest also doesn't buy into prescriptive culling of the leadership ranks for the
bottom performers.

"You have to deal with the fact that at times people are ill-suited for their job." Leadership skills or their lack are quickly evident in an industry that is undergoing such constant change. But Priest is convinced that his hands-on style means that people are rarely surprised when he has to arrange for them to exit the company, as he puts it.

"If they're surprised," Priest says, "either I didn't do my job, or they have self-deception. I have to feel comfortable in both a verbal and written manner that I have been very clear about my expectations. They're often happy you've helped arrange for them to exit the company because it's miserable for them, too. People don't like to fail."

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This article appears in the November 2012 issue of HealthLeaders magazine.