Part 2: How a CEO Empowered Staff to Save $3M and Their Jobs

During the recession, Chicago's Swedish Covenant Hospital chief Mark Newton was unwilling to take draconian measures such as layoffs. Instead, he deployed a tactic from his entrepreneurial background: he challenged his staff to find ways to cut costs themselves. Read Part 1 of the story here.

The first step of Newton's strategy was to communicate frankly with staff. "We decided that if we were candid [with] our 2,200 employees, if they were told the situation, and they realized we were all in the same boat together, they would respond," he explained.

The goal was saving $3 million in a year, which was important in itself, but an additional benefit was in helping staffers internalize a sense of ownership in the institution. As the health of the institution improved, so would the health of their jobs, so to speak. The communications department got involved by setting up a visual aid—a beaker—that would indicate progress toward the goal as the year progressed.

"We reported it out every month and identified stories where people made an impact," Newton explained. "I did not have a consultant, nor did we say people had to ask for permission to use a cost-saving or revenue-generating idea. There was no wasted time in approvals and meetings. If you're doing something that needs the boss's input ask him, then do it. We wanted them to take the risk. It's the ultimate in delegation."

• One person in Dietary had a whole different way of buying milk and other food products. That saved $15,600 a year.
• The cafeteria began selling reusable coffee mugs to save on paper and plastic cup costs.
• The surgical recovery area reorganized their storeroom and created new par levels, saving $5,700.

Other employees worked on renegotiating contracts with vendors. People got involved in job-sharing ideas, meaning many departments took on tasks that were traditionally outside their boundaries. One department instituted a $20 no-show charge. Another changed how the hospital scheduled surgeries to be more efficient.

"These were things within their work environment that they could control," Newton explained.

He provided details of cost-saving measures enacted by Swedish Covenant Hospital staff:

• The emergency department used evidence-based research to determine that a more cost-effective type of irrigation solution would be just as safe and effective, saving an estimated $10,800 a year.
• The inpatient pharmacy implemented stewardship efforts for distribution of antibiotics, which saved an estimated $60,000.
• Operational changes were implemented to reduce infection rates and improve many other quality measures.
• Nursing units stopped printing lab results and other items that could be viewed electronically ;
• Radiology continued conversion from film to digital images;
• Medication formularies built into the EMR system mean physicians automatically order the most cost-effective, appropriate medications available
• Some nursing units placed "turn off the lights" reminders by every light switch to save electricity costs; patient monitors and equipment in rooms were turned off when not in use
• The surgical recovery area created a schedule to streamline staffing which saved $24,577 in overtime;
• Increase in market share by 1.39% from 2008 to 2009; Volumes were higher – partially thanks to employee efforts:
• Employees became active ambassadors for hospital services among family, friends, neighbors as well as physicians;
• Testing and rehabilitation services departments made special efforts to encourage patients to attend their appointments, such as reminder phone calls. This ultimately improved patient outcomes and recovery.

It's rare to see this type of effort expended to avoid a few dozen layoffs, but Newton says it shouldn't be.

"I don't know why it's so rare," he says. "It's not that brilliant of an idea. It's a little unconventional. But the bigger picture is that it gets the egos and the formalities out of the way in the workplace. You deal with people respectfully, tell them how they're accountable, and they'll respond."

Although Swedish met its goal, and was able to avoid layoffs, Newton is careful to say that this type of employee engagement becomes ingrained, which is the key benefit of the exercise beyond the $3 million saved. He cautions, however, that the big, easy savings are not easily repeatable.

"You have to be very careful about this," he says. "We had to have a crisis moment, if you will, that everybody felt, and you don't want to keep going back to this well all the time. When we made the beaker goal, it established immense trust with the workforce. Leadership made a promise, and fulfilled it."

Now Newton is trying to build on the success of the beaker by getting employee buy-in on achieving eight organizational goals.

"When I introduced them, I walked through why each one was important, and I also said this is not about holding back merit raises, or layoffs, this is what we need to do for organizational success. We're building on that culture and the importance of being an advocate for the organization. Your livelihood depends on the success of this organization. If you get a paycheck, your job is to advocate and support and help us grow."