“I was listening to their marketing plan,” Van Gorder says. “Their marketing plan was to take as many patients away from Scripps La Jolla as they possibly could.”
Five different health care campuses in the San Diego area share the Scripps name. They’re all under the same corporate umbrella. But each location was wrapped in its own silo and, in some cases, competing directly for business with another Scripps location.
“We’re all one company, so that makes no sense whatsoever,” Van Gorder says. “But people were thinking and operating in their own silos. Hospitals can become very big silos, and it then becomes very easy for an employee to say, ‘I work for Scripps, but I really work for Scripps Mercy Hospital. It’s a mindset that pays no attention to the fact that you might be in direct competition with other areas of the organization.”
The silos had developed over time throughout the 12,700-employee organization, ironically because the power at Scripps had become too centralized. The system’s corporate leadership had dictated policies from headquarters, and in many cases, the administrators, doctors and staff on the hospital level didn’t agree with the policies or they felt that the hospitals weren’t given enough say in creating the rules.
As a result, the hospitals had become strategically and philosophically detached from corporate leadership and from each other.
“It was the biggest challenge I had when I first got here: how to overcome a vote of ‘no confidence’ from our managers and employees on the organization and its strategic direction,” Van Gorder says. “They simply did not agree with our direction or strategic plan.”
To re-engage the team members working at the hospital level, Van Gorder had to put decision-making power back in their hands. He had to give the hospitals an ability to impact the strategy and direction of the organization. He had to decentralize the entire system by starting from the center and working his way out.
Build the right plan
With no backing from the organization as a whole, the strategic plan at the time simply wasn’t working. Scripps was losing money, there was little to nothing in the way of an overarching company culture, and the entire system suffered from the effects of weak relationships among its various levels and locations.
The strategic plan would never be realized in that kind of climate. So Van Gorder scrapped it altogether. Instead, he and his leadership team rolled out a tactical plan that acted as a form of triage, aimed at addressing the most severe problems first.
“We literally threw the strategic plan away, and that received immediate applause,” Van Gorder says. “Then we decentralized the organization as one of the first steps of the tactical plan, pushing accountability down to the hospital executives and medical staff. We weren’t hitting our targets, financially or otherwise, because there was no ownership.”
Van Gorder began to engage the system’s physicians by forming a physician leadership cabinet — bringing all of Scripps’ elected physician leaders onto a single council with the goal of assisting top management with critical decisions about the organization’s future.
The object was to begin stimulating ideas at the hospital level, and then giving the staff members an avenue for feeding their ideas to the corporate level.
The connection between the field and corporate levels is a key part of this stage. Without the connection to corporate, you run the risk of further entrenching the silo mentality, as employees at one location develop a best practice and might not be eager to share it with other locations if trust and familiarity aren’t present.
“In decentralizing, the object is to try to drive accountability back to the hospitals, but in doing so, recognizing that it creates the opportunity for even more silo orientation,” Van Gorder says. “Over time, what we’ve done is rebalanced that. There are things we need to do in a standardized way for more cost-efficiency and effectiveness. But at the same time you don’t want to lose the accountability key. So you develop a system where decisions are made at the local level but communication is very robust from the corporate level so that things are standardized across the organization.”
Lead with your middle
Many of the changes at Scripps were operational in nature. But the system also needed a cultural overhaul, and cultures aren’t changed from the top down. They’re not changed from the bottom up, either.
Van Gorder says cultures are changed in the middle. Your middle managers are high enough on the ladder to be visible to their entire company segment, but low enough that they can still have frequent personal contact with employees on the lower rungs.
Middle managers can reach every corner of your organization. With that in mind, Van Gorder places a top priority on getting his hospital-level management on board with his new decentralization plan.
“I’ve been in a lot of organizations and I’ve seen no way that a CEO can write a memo to change culture,” Van Gorder says. “At the other end, there is no way a ground level employee can change a culture. So my hypothesis was that, over time, the middle managers would become the agents for culture change.”
Van Gorder constructed a panel of 25 of Scripps’ middle managers and placed them in a yearlong program of periodic full-day sessions. Each session contained several hours of open discussion with Van Gorder, during which he encouraged frank discourse and tough questions about the health system’s future.
“Every time we’d do this, they’d all come in a little timid, a little unsure about what they could ask me,” he says. “I’d usually chide them, tell them that they’re not a very good class because they’re not asking tough questions.
“There were only two parameters we had for the question-and-answer sessions: We didn’t allow personnel-related questions and we didn’t allow questions about anything related to a confidentiality agreement. Everything else was fair game. What that does is, eventually, it starts getting people more comfortable with me and each other, and it gets people to be more transparent with information.”
If you’re going to get your middle managers on board and allow them to become agents for the organizational changes you are planning, first you have to give them a reason to get on board. You do that by giving them a chance to understand why a decision was made, how it impacts them and how they can help carry it forward.
“What I’ve always said is that people need to understand why decisions are made in an organization,” Van Gorder says. “I started out as a clerk in the emergency room and I spent many years thinking, ‘That is a crazy decision; why would they do that?’ It builds kind of a distrust of the intelligence behind decisions that were made, a distrust of the overall direction of the organization. But if people understand the parameters of a decision, they might understand the decision and be able to own it better.”
After a year of meetings with middle management, Van Gorder began to see a change in attitude throughout the Scripps system. Managers began to take a wide-angle view of decisions, looking at cu
lture and strategy from the perspective of corporate management instead of just from the perspective of their own organizational units.
“I now had a group of 25 people who understood that the center of the universe didn’t exist in each of their business units,” Van Gorder says. “They began to understand that the greater Scripps was a pretty robust organization and that there are experts throughout the organization that they can tap into. Rather than doing something all by yourself, maybe somebody has already done it at one of our sister campuses.”
From there, Van Gorder put a message in his middle managers’ minds and sent them out to their respective campuses to spread the word.
“I told all of my middle managers that they are my agents for culture change, and what I expected from them is to go into their hospitals and talk about how we have a whole system here to help you,” he says. “No. 2, I told them to demand more from the people they work with. Senior management should be delivering more to you and you need to deliver more to the people who work for you.
“Truthfully, even though it was a cool thing to say, I wasn’t sure if even I believed it. But they proved me right, and they brought the whole organization together.”
Develop new leaders
When building and implementing a cultural and strategic change, Van Gorder says the two most important things you can do are find enthusiastic leaders and listen to them.
“When you give somebody an opportunity to step up, there is a loyalty and a drive that comes with that,” he says. “I surrounded myself with hard chargers who were excited to be leaders, then I listened to them. Listening is a key piece. I listened to my corporate leadership, my middle managers and my employees, and that connection jumped our culture ahead by literally years.”
It can be a lengthy process to find the right people who can become effective decision-makers and promoters of the culture in a decentralized organization. But the time and effort is worth it if you can make the right hire.
What makes for a “right hire”? One critical element you should always look for is an interest in your business and industry.
“You always want to be looking for people who are interested in the business you’re in,” Van Gorder says. “When I was interviewing for our CFO, I interviewed candidates for over a year. Our search firm brought in some of the most talented people I had ever seen. They had outstanding backgrounds, but you could tell that they often thought they needed to run a bank for me. They had to manage our money. But what I wanted them to understand was how the money was to be used in patient care. We don’t run a bank. We earn our money for one thing, and that’s patient care.”
It comes back to one of Van Gorder’s guiding principles, which is to build his organization around people who are able to view decisions and policies from the perspective of how it benefits the whole organization. In Scripps’ case, the organization doesn’t benefit unless patients receive a high level of care, so all decisions need to impact patient care in a positive fashion.
That mindset has helped make Van Gorder’s turnaround of Scripps a success. In fiscal 2009, the system had an operating margin of a little more than $100 million.
Van Gorder ended up hiring a chief financial officer who is not a certified public accountant. Instead, he hired a management engineer who understood organizational operations and how money needed to be used to achieve Scripps’ end goal of outstanding patient care.
“Every CFO, CEO, every leader is looking for what they believe to be a good attitude,” Van Gorder says. “We do take some of the objectivity out of it by requiring everybody we hire to take an exam that helps identify some attitudes and traits. But when push comes to shove, it’s really about the persona connection between manager and subordinate.
“We do make mistakes. I’ve made mistakes in the past with people who I thought would be a great fit, but they didn’t fit. But over the years, I’ve made that mistake less and less because I’ve developed a level of experience and I trust my instincts more.”
How to reach: Scripps Health, (800) 727-4777 or www.scripps.org