Eve, one of my former Under-12 soccer players writes:
Hi Coach, It’s been a while, but I hope you and your family are doing well! I am in my freshman year at Miami University where I am majoring in marketing. I was just flipping through my Business 101 textbook, and I stumbled across an excerpt that discusses the strategies you used at Beth Israel to avoid large job layoffs back in 2009. i thought it was a funny coincidence, and that you’d be pleased to hear that your innovation is being recognized somewhere!!!
This is a key chapter in Goal Play!, too, called “We’ll design the warm-up, coach.”
In the spring of 2009, halfway through the fiscal year, we found that the nationwide recession and other factors had thrown our hospital finances into a tizzy. Instead of heading toward a year-end surplus of $20 million, which we had projected when we wrote our budget at the start of the fiscal year, we were looking at a loss of that amount—a swing of $40 million in just six months. It was clear that a loss of that magnitude would have an impact for years to come. The income from operations is virtually the only source of funding for a hospital’s capital investment. Even during good years, a hospital is fortunate if it can earn a three percent margin, barely enough to cover the depreciation of plant and equipment. Major losses mean having to put off important upgrades or replacing medical equipment. Infrastructure maintenance and replacement are likewise deferred, affecting the functioning and appearance of buildings and services. Even strategic investments in the hospital and with affiliated physician groups and community hospitals are delayed, putting the hospital at a competitive disadvantage.
The clock was ticking. Our run rate was negative $400,000 per week on an annualized basis. But since we had only six months to turn around the finances to break even, we needed to garner savings of twice that amount per week to break even by the end of the fiscal year. My senior advisers told me that we would have to lay off several hundred staff members to meet the target. They advised that we should immediately begin to contact vice presidents to construct a layoff list, make the decisions, and send out pink slips. I disagreed.
I felt that we had a tightly knit community in the hospital that would stand together and agree to make sacrifices in order to save the jobs of their fellow workers. I believed that if I asked the question the right way, framing the issue in terms of mutually held values, the staff would “design their own warm-up,” solving the financial problem more quickly and effectively and humanely than a centralized approach based on layoffs. I felt that way because of the time I had spent with hundreds of our managers, who now knew each other as well. I had seen their sense of mutual purpose and collaboration grow.
You can read more about what happened here, from my other blog.