When Cost and Culture Collide

Michael Young was brought in as chief executive officer of Grady Memorial Hospital in Atlanta to work a similar turnaround that he accomplished with Erie County Medical Center in Buffalo, NY—a story I wrote back in 2006.

Cutting the outrageous deficits the troubled public hospital has been running for years was probably number one on his list of things to do. Wringing greater support from the communities that send their indigent and charity care patients to Grady was probably item number two. But changing the culture that allowed Grady to slip so far has to be third on his list.

If you talked to him, he would probably give a political answer, saying that all those facets of an effective turnaround are equally important. Each is one of the legs of a three-legged stool, and all that mumbo jumbo. But in this case, the political answer may be more right than you know, because without culture change, the cost-cutting initiatives and revenue-raising initiatives don't last.

Young recently cut about 140 employees from Grady. He's certainly not alone. I've counted about 40 layoff announcements from hospitals across the country of more than 100 positions since January—and that's just from the news on our Web site. Plenty more have occurred without fanfare. Patient volumes are dropping, reimbursement continues to be a major challenge, and investment portfolios have been hard-hit. Still, all of the staffing reductions have been accompanied by typical public relations blather about none of the layoffs affecting patient care, and that most of the positions eliminated were from "administration."

But what was interesting about the 140 layoffs from Grady was that Young made a special effort to mention that the cuts—which ranged from groundskeepers to top managers—weren't solely because of the poor economy, government cuts, or an increase in the uninsured, all of which are problems at Grady.

They were about culture.

Not only do layoffs that weed out poor performers in any organization get rid of many of the problems that hinderinnovation, but they put the rest of the staff on notice that someone's paying attention to who's on board with the turnaround and who's just collecting a paycheck—a move that's likely to inspire the achievers in the organization and frighten the rest of the low-performers into action.

In a story earlier this month in the Atlanta Journal-Constitution, Young mentioned that keeping such employees on board represents "an old and unsuccessful way to run a hospital." Critics of the hospital, according to the story, say the so-called "Grady culture" tolerates inefficiency and hampers patient care.

And it's not as though the problem workers weren't warned. In a memo last October, shortly after Young took the reins at the troubled public hospital, he sent a memo to staff complaining about the entrenched culture of getting by that many employees seemed to tolerate.

"This is an example of the dysfunctional operations of the Purchasing Department, lack of leadership, and the failure to meet Grady's goals and targets," Young wrote. "This lack of response is the old Grady way, making Grady a laughing stock."

He's making progress. I'm assuming that those on the newly created nonprofit Grady board knew he would make such tough decisions when they hired him. There was predictable opposition to the decision, but if they were smart, the board gave plenty of leeway to Young, who is the hospital's sixth CEO in three years. When you see a record of hiring and firing CEOs like that, I smell last chance for this hospital unless Young is allowed to do what he was hired to do. His record demonstrates that the turnaround everyone says they want for Grady stands a good chance under his watch.

He's providing leadership—something Grady sorely needs.