Can I Have a Do Over?

I still wish my husband and I could take back the decision to purchase that 1986 Oldsmobile. Its transmission died a month after we bought it, so it ended up sitting in our driveway with grass growing up around the tires. Fourteen years later, it's still a sensitive subject to discuss (or write about).

While that decision dinged our pocket book and was a major inconvenience, it was still just a car. When a hospital CEO makes a poor decision, the repercussions can affect employees, patients, and the community at large. I certainly don't envy their position or some of the decisions they'll need to make this year. For example, no CEO wants to downsize 50 people. And the realization eight months down the road that you need 10 of those positions back because they really were vital to the operation of the organization only makes that decision tougher to bear.

Usually CEOs have exhausted all of the alternatives when deciding to cut a service or lay off employees or close a facility. But perhaps the even more challenging decisions are the strategic choices made throughout the year. According to a survey by McKinsey & Co. that evaluated which decision-making processes yield the best results, only 23% of decisions were made in response to an immediate threat. The report, which surveyed 2,327 executives from various industries and regions, also found that decisions made without a strategic planning process were twice as likely to generate extremely poor results—more than a fifth generated revenue 75% or more below expectations.

CEOs tend to have a large role in both the most and least successful decisions, the report says. Given the current financial climate, I'd say there's no denying that CEOs are facing extraordinary pressure to make sound strategic decisions.

Pete Knox, the executive vice president of Bellin Health in Green Bay, WI, recently told me that one of the key reasons some healthcare organizations struggle is because they fail to view their core strategic missions like service, quality, growth, people, and finances as a collective group of strategies that require the same resources. "They tend to fragment that," he says. Unfortunately, that means each group is focused on their own priorities and driving that agenda. For example, the financial people want resources for financial priorities, quality people want to focus on regulations, marketers want to expand services, and so on. CEOs are getting hit from different angles and sources, Knox explains. "You have to make high-level decisions on where to focus time."

Knox says Bellin Health has five strategies that align with its mission and vision, and all five compete for the same resource pool. Even though the organization focuses some energy in each of the five categories, how much it allocates relies on a very high-level discussion. "We make some strategic decision about where we are as an organization, how we want to position ourselves, and where we need to focus energy," he says. "It is a very deliberate prioritization and allocation process."

Based on its findings, the McKinsey report offered three best practices organizations can use to improve their decision making.

1. Define the risk. Organizations should examine decisions through a detailed financial model that compares those risks to the risks of other projects in the organization's portfolio. Looking back and learning from past situations that are comparable is also advised.
2. Discussion is key. The report found that decisions initiated and approved by the same person generated the worst financial results. There was also a strong correlation linking financial success with clarity about who is responsible for the project and the involvement of that individual in the decision-making process. Other participants in the discussion should be included based on skills and experience, and that decision criteria should be transparent. Lastly, the decision should be discussed in relation to other strategic initiatives.
3. The organization should come first. Organizational goals should be placed above the business goals of individual units. Leaders should spend time building consensus among the different units of the organization.

There are many external factors that healthcare CEOs can't control, like government reimbursement, the new administration's policies, and the speed of the economy's recovery. But CEOs can ensure that all decisions have the proper analysis, resource allocation, management oversight, and strategic alignment with the organization as a whole.

Having those tools in place can help CEOs avoid the fallout of a poor decision—and the sting of regret.