by Adam Hartung | May 22, 2014 | Current Affairs, Leadership
It is ironic that on this Memorial Day weekend (a remembrance of our fallen soldiers) America is learning that its military veterans have been ineffectively served by the Veterans Administration (VA) hospital system. Hundreds, if not thousands, have gone months without care – and some have even died while waiting.
No veteran should die while waiting for care. But we now know at least 40 have died. This is especially heinous because we now know those who provide care weren’t admitting to the fact that veterans were being denied care. And instead of tracking the waiting time these veterans underwent, the actual information was being tracked on hidden lists while factually inaccurate information was being disseminated.
At the top of all this is simply really bad leadership. That veterans were undergoing long waits is not a new story. In March, 2013 (14 months ago) Frontline ran a story that waits were inexcusably long (averaging 318 days,) and that the VA was doing little to solve the problem. Then, the day after Christmas, 2013, Military News ran a story quoting Secretary Shinseki providing several statistics indicating the backlog was down, wait times were down and this whole problem would disappear by 2015. Unfortunately, the American Legion – which has championed this issue – made it clear they thought the Secretary’s datapoints were inaccurate.
Now we are learning via CNN that the wait lists were being fudged in several hospitals, and that both hospital and VA leaders were well aware of this fudging. There were the reported facts, and then there were secret lists of people waiting for care.
How could this happen?
Chalk it up to lazy leadership, and an over-reliance on numbers and record-keeping. Instead of managing patients, Secretary Shinseki’s administration was managing numbers. And in this case, it caused people to die.
When long wait times were reported the President publicly admitted to being appalled, and he told Secretary Shinseki to do something. What the Secretary did was declare a standard of no more than 125 days from incident to care had to be met. And he told people to meet that goal, or they would risk losing their jobs.
As a leader, he didn’t offer a solution. He didn’t challenge his staff to find out the root cause of the problem and understand why these waits were so long. He didn’t hire outside consultants to evaluate the problem and propose solutions. He didn’t ask for “best practices” from industry. Instead, he pushed out a metric and a tracking system and threatened his team with pay cuts (or at least no bonuses,) demotions, career ending reviews and potentially termination. “Solve the problem, or else.” Then he was back to his office, and waiting for the “right” statistics to show up so he could say “all is well.”
This simply becomes a breeding ground for collusion, corruption and malfeasance as people try to save their income, careers and their jobs. If the order is to “make that number” then a way will be found to “make that number.” The command wasn’t to save lives, or improve care. The order was to reach a certain metric. So out comes all the creativity imaginable to give the boss what he wants. And in this case, it involved deception in record keeping, dual bookkeeping, hiding information, falsifying reports and even letting people die in order to give the Secretary the numbers he ordered them to report.
Meanwhile, the Secretary is so involved in managing his own career – and that of his boss – that he simply turned a blind eye to all other data. The American Legion was offering compelling statistics that things weren’t as the Secretary said. And there were multiple stories coming up in the press, and through the veteran networks, of patient experiences which did not match what the Secretary reported. But instead of listening to external information the Secretary ignored all of it and kept pushing his own organization to give him the numbers he wanted.
Leaders like to “manage by the numbers.” The study of business management was born around 1900 by Frederick Taylor and his theory of Scientific Management. Taylor believed all work could be broken down into inputs and outputs, everything could be measured, and if you set metrics for everyone then you could simply manage better. It was an engineering problem, and humans were just machines that needed to know the right metrics and produce to those metrics. Ah, the simplicity of Taylorism.
That management approach was greatly loved by business schools, and business leaders. Famously some Harvard Business School graduates and former Army officers (termed the “Whiz Kids”) in the 1940s went to a nearly failed Ford Motor company and turned it around. One of them, Robert McNamara, became the youngest President of Ford. They claimed their success was “statistical control.”
But McNamara left Ford to become Secretary of Defense for Lyndon Johnson and run the Vietnam War. He applied his same “statistical control” approach to the war that he used at Ford. Famous amongst these tracked, reported and closely watched statistics was the “body count.” Simply put, how many did you kill today? McNamara was sure if he could reach a “kill ratio” of 10 enemy dead to every 1 American dead the Vietnamese would give up.
How did that work out? Well, McNamara resigned in disgrace. Johnson was forced to step down after one term, realizing his failure in Vietnam made him unelectable. It turned out body counts included dogs, cats and cows as officers from Lieutenants to Generals were fudging the numbers. It encouraged burning down entire villages, and then simply deciding everyone – including Vietnamese civilians – would be included in the “body count.”
Needless to say, not America’s finest hour. And a mess that took another several years from which to extricate. There is a lot more to understanding international relations, and fighting a war, than simply tracking statistics. But unfortunately then Lieutenant Shinseki apparently learned the wrong message while he was in Vietnam. His penchant for using statistics to lead appears to have remained unwavered.
Unfortunately, far too many leaders like the lazy approach of using statistics. In the 1980s and 1990s a quality improvement program called Six Sigma caught on in America. But in many companies, Six Sigma became a management dogma rather than simply quality control. “You have to measure everything, or else it is simply not important” was a common part of Six Sigma. People suddenly had metrics given to them, even for jobs (like “Creative Director” or “Investor Relations”) where this made no sense. And they had charts on their doors tracking the data. If that chart didn’t point in an obviously northeasterly direction then it was clear the occupant was going to have pay, and longevity, problems.
Motorola was a leader in Six Sigma. The same Motorola that today is a shell of its former self. Although in the 1990s Motorola was heralded as a leader in modern management, today it has lost all relevance as its old businesses in radios and mobile phones have been made obsolete by new technologies, or taken over by companies like Google.
Far too often leaders think they can turn leadership into an engineering exercise. “Run business by the numbers” is a common refrain. Especially amongst leaders who come up via finance. “Everything can be turned into numbers, and spreadsheets, and if we manage the numbers the business will take care of itself.” We’ve all heard this.
But it simply isn’t true. We now know that even the famous Taylor falsified data in order to keep his guru status and promote Taylorism to client companies. Leadership involves going far, far beyond the numbers. It means understanding situations that defy simple measurement. It means knowing how to identify and solve problems – changing processes, procedures, directions, instructions, strategy and tactics. It means listening to external inputs to understand the greater marketplace, not just your own internal views. And it means understanding how to lead and manage people toward superior performance – not merely tracking performance statistics and slapping those who don’t return “the right numbers.”
Secretary Shinseki has a long and storied career. But as head of the VA, he truly blew it. And people died. This kind of lazy leadership cannot be tolerated in a field like health care, and hospital management.
Can your business tolerate it?
by Adam Hartung | Jan 12, 2010 | Defend & Extend, In the Swamp, Innovation, Leadership, Lock-in
Do all good ideas originate outside the organization? Of course not. Motorola understood all the critical technologies for smart phones, and taught Apple how to use them in a joint development project that created the ROKR. That's just one example of a company that had the idea for growth, but didn't move forward effectively. In this case Apple captured the value of new technology and a market shift.
On the Harvard Business Review blog site one of consulting firm Innosight's leaders, Mark Johnson, covers two stories of companies that had all the technology and capability to lead their markets, but got Locked-in to old practices. In "Have You Already Killed Your Next Big Thing" Mr. Johnson talks about Xerox and Kodak – two stories profiled in my 2008 book "Create Marketplace Disruption." Both companies developed the technology that replaced their early products (Xerox developed desktop publishing and Kodak developed the amateur digital camera.) But Lock-in kept them doing what they did rather than exploiting their own innovation.
One of the causes is a fascination with metrics. Again on the Harvard Business Review blog site Roger Martin, Dean of the Rotman School of Management at the University of Toronto, tells us in "Why Good Spreadsheets Make Bad Strategies" that you can't measure everything. And often the most important information about markets and what you must do to succeed is beyond measuring – at least in the short term.
Measurements are good control tools. Measurements can help force a focus on short term improvements. But measurements, and the concomitant focus, reduces an organization's ability to look laterally. They lose sight of information from lost customers, from small customers, from fringe customers and fringe competitors. Measurement often leads to obsession, and a deepening of Defend & Extend behavior. It's not accidental that doctors often find anorexia patients measure everything in (liquids and solids) and everything out (liquids and solids).
Measurements are created when a business is doing well. In the Rapids. Like Kodak during the 1960s and Xerox in the 1970s. Measurements are structural Lock-ins that help "institutionalize" the behavior which makes the Success Formula operate most effectively. And they help growth. But they do nothing for recognizing a market shift, and when new technology comes along, they stand in the way. That's why a powerful Six Sigma or Total Quality Management (TQM) or Lean Manufacturing project can help reduce costs short term, but become an enormous barrier to innovation over time when markets shift. These institutionalized efforts keep people doing what they measure, even if it doesn't really add much incremental value any longer.
To overcome measurement Lock-ins we all have to use scenario planning. Scenarios can help us see that in a future marketplace, a changed marketplace, measuring what we've been doing won't aid success. And because we don't yet know what the future market will really look like, we can't just swap out existing metrics for something different. As we proceed to do new things, in White Space, it's about learning what the right metrics are – about getting into the growth Rapids – before we tie ourselves up in metrics.
Note: To all readers of my Forbes article last week – there has been an update. The very professional and polite leadership at Tribune Corporation took the time to educate me about the LBO transition. As a result I learned that what I previously read, and reported in my column as well as on this blog, as being an investment of employee retirement funds into the LBO was inaccurate. Although Tribune is in hard times right now, the very good news is that the employee retirement funds were NOT wiped out by the bankruptcy. The Forbes article has been corrected, and I am thankful to the Tribune Corporation for helping me report accurately on that issue.
by Adam Hartung | Jun 15, 2009 | Defend & Extend, General, Leadership, Lifecycle
Harvard Publishing recently posted an article from a professor at the London Business School, Freek Vermeulen "Can we please stop saying the market is efficient?" The good professor's point of view was that he observed a lot of companies that were efficient which didn't survive, and several not all that efficient that did survive. He even took time to point out where some Harvard professors had identified that companies who implement ISO 9000 often see their innovation decline!
Unfortunately, the good professor is all too correct. If markets were efficient, we'd see performance move in a straight line. But any follower of equities, for example, can show you where the stock of a company may have gone up, then declined 20%, then gone back to a new high, maybe to even fall back more than the original 20%, only to then climb to even greater highs. If the market for that equity were efficient, it would never have these sorts of wild price gyrations.
Likewise, the market for products, things like copiers, aren't all that efficient. A case I describe pretty deeply in Create Marketplace Disruption. When Xerox brought out the 914 copier it changed the world of office copies. But it didn't take off. Instead, for years companies maintained their duplicating shop in the basement, using small lithographic offset presses. This went on for years, and usually the basement shop was closed when (a) the operator retired, (b) the printing press simply gave up the ghost and was ready for the scrap heap, or (c) when the company realized it had so many copiers the basement would be better served to house copiers instead of the printing press. The fact is that marginal economics – the very low cost of continuing to operate an alread-paid-for-press meant that it was easy to simply keep using presses long after they had any economic advantage. Not to mention all kinds of kinks in the decision apparatus that funded things like a print shop just because the budget "always had." But eventually, as the retirees and metal scrappers started accumulating, the market shifted. What had been a "mixed market" of presses and Xerox copiers suddenly shifted to almost all copiers. Xerox exploded, and the small offset press makers disappeared.
That wasn't efficient. There was a huge lag between when the benefits of copiers were well known and the demise of print shops. In the end, those who had debts or equity in printing press companies suffered huge losses as the business "fell off a cliff." There was no "orderly migration" out of the marketplace. In a very short time, the market shifted from one solution to another.
As recently as 2007 almost every home in America had a newspaper delivered. By 2009 the market had begun to disappear with subscriptions down over 60% in some markets. For advertisers, the purchasing of print ads dropped by over 50% in just 24 months. Yet, the growth of web usage and internet ads had been growing for almost a decade. In an efficient market there would have been a smooth transition between the two, with say 5% of ads shifting every year. Again, the economists' "orderly transition" would have applied. There doesn't seem anything orderly if you're in a market where the newspaper has disappeared, filed for bankruptcy, or cut its pages 40% – and you're wondering how to get the local news or even the TV listings you once found in the newspaper.
Market shifts are sudden, and big. In the later half of the 1980s the PC market shifted from 60% Macintosh to 80% Wintel in just 5 years – while growth for PCs exploded. It didn't feel very efficient to people at Apple, the suppliers of apps for Macs or the user base. Thousands of people in corporations were told "surrender your Mac and get a new PC next week" with no discussion, explanation or concern.
Companies that fall victim to market shifts aren't without strategists, planners or quality programs. Many have robust TQM or Six Sigma projects. But these are all about optimizing performance against past performance – not necessarily what the market wants. When you optimize agains the past you depend on minimal change. When markets shift, these "efficiency" programs can cause you to be the last to know – and the last to react.
People like to think of evolution as sort of like Continuous Improvement. Get 5% better every year. Like a variety of mammal might lose 1/4" of tail each generation until it no longer has one. We now know that's not how it works. There are winners. They keep reproducing, get stronger and more of them every year. Like mammals with long tails. Meanwhile, an alternative develops – like a mammal with no tail. Then suddenly, without expectation, the environment changes. Tails become a big hindrance, and those with tails die off in a massive exodus. Those without tails suddenly find they are advantaged by the lack of tails, so they begin breeding fast and getting stronger. In short order, perhaps a single generation, the tailed mammals are gone and the no-tails become dominant. Not very efficient, or orderly. More like reactive to an environmental shift.
If you want to do good tomorrow, I mean one day from today, the odds are that you can accomplish that by being just slightly better at what you did yesterday. But if you want to be good in 5 years, you may well have to do something very different. If you wait for the market to tell you – well – you've waited too long. By the time you know you're out of date, the competitor has taken your position. You have no hope of survival.
We live with a lot of myths in business. The value of efficiency, and the belief in efficient markets, are just a couple of big ones. Kind of like the old myths about blood-letting. Before the USA, never before in history has anyone ever tried to establish a government of self-rule. And self-rule led America to a country dominated by businesspeople. No longer did the king determine winners, losers, prices and behavior. Now markets would do so. The people who would make these markets were the emerging business folks. But nobody knew anything about markets – except some theories about how they "should" work written by an Englishman who had grand thoughts about open-market behaviors. So most people accepted the earliest theory – with its ideas about "invisible hands" that would guide behavior.
Markets are dramatically inefficient. Just look at the prices of equities. Look at the bankruptcies all around us. GM, your local newspaper, Six Flags and your neighborhood furniture store. People who were often efficient, but didn't understand that markets shift quickly, and very inefficiently. They don't move in small increments – they change all at once. And if you want to survive, you have to
prepare for market shifts. Simply working harder, faster and cheaper won't save you when the market shifts. If you aren't ready to be part of the shift, you get left behind and won't survive.
Markets are shifting today faster than they ever have. Telecommunications, internet connections, massive amounts of computing power, television, jet airplanes – these things have made the clock speed on changes much faster. Market shifts that used to be seperated by decades are compressed into a few years. If you don't plan on market inefficiencies – on market changes – you simply can't survive.
Lots of people misunderstand Darwin. The prevailing view is that his study on the origination of species says that the strongest survive. In fact, his conclusion was quite the opposities. What he said was that it is not the strongest that survive, but the most adaptable.
