WHAT TO DO WHEN CONVERTING A HOSPITAL FROM NONPROFIT TO INVESTOR-OWNED

https://www.healthleadersmedia.com/strategy/what-do-when-converting-hospital-nonprofit-investor-owned

While perhaps not as controversial as it once was, the ‘conversion’ of a nonprofit hospital to a for-profit venture can raise questions and spark unhelpful rumors.


KEY TAKEAWAYS

There may be an opportunity to highlight increased revenues for the benefit of local government, since investor-owned hospitals pay taxes.

Remember: Every hospital, regardless of its tax status, must bring in more dollars than it spends in order to be financially healthy and reinvest.

In most communities, the conversion of a hospital from a not-for-profit to an investor-owned enterprise no longer stirs the heated debate that it did decades ago. Instead, you’re much more likely today to see not-for-profit and investor-owned hospital organizations working in partnership.

Renowned not-for-profit health systems such as Duke Health and the Cleveland Clinic have formed strong affiliations with investor-owned hospital companies. In these and other partnerships, not-for-profits and investor-owned organizations are working together to strengthen hospitals, invest in communities, and serve patients.

In fact, the issues facing investor-owned hospital systems during a partnership are the same as those faced by not-for-profit health systems during a partnership discussion: Local control and governance, cultural compatibility, charity care support, and commitment to local investment are leading hot buttons for both.

Still, the “conversion” of a not-for-profit to an investor-owned organization can represent a change that can raise questions and ignite unhelpful rumors.

To help you be prepared, start by answering these basic questions: What’s the difference? How are not-for-profit and for-profit (investor-owned) hospitals different from one another?

  • Taxes: First, a (very) broad definition: “Not-for-profit” and “for profit” are tax-related designations. A not-for-profit hospital does not pay certain taxes, including those on property used for care, income, and sales. How- ever, it usually does pay payroll and other federal employee taxes. A for- profit hospital pays property, sales, and income taxes as well as payroll taxes. Not-for-profits sometimes make payments in lieu of taxes to help offset the costs of providing important community services, such as police and fire coverage.
  • Capital: Not-for-profit and investor-owned hospitals are also differentiated by where they get capital to invest in their facilities for infrastructure improvements, new equipment, staff, and the like. Not-for-profit hospitals usually go to the bond market for capital. Investor-owned hospitals go to the public stock market, the bond market, or investment groups for capital.
  • Analysts: Now for a word about financial ratings. Both types of organizations have outsiders judging the hospital’s financial performance. To help investors monitor their portfolios and make buying and selling decisions, not-for-profits are graded by credit rating agencies, such as Moody’s Investors Services and Standard & Poor’s. Publicly traded, investor-owned hospital stocks are watched by analysts and valued daily in stock exchanges.
  • Ownership: Who “owns” the hospital after such a sale is an important question and can reflect a community’s concerns about having a future voice in the care provided at its hospital. The answer can be complicated and inconsistent from hospital to hospital and community to community.

Here’s an overview: Independent, not-for-profit hospitals are, in a sense, owned by the communities they serve. The boards are usually comprised of local leaders and physicians. Excess revenues—profits—are fully reinvested into the community’s care after debt payments, payroll, and other expenses. Hospitals that join a regional or national not-for-profit health system, however, may or may not have a local board with a say in the direction of the facility and may or may not share their profits with the system. (In fact, if your local hospital is in financial trouble, the money flows into your hospital, not out of it!)

Investor-owned hospitals are, as you might guess by the name, owned by investors, who can be private individuals or stockholders. Investors traditionally benefit as the value of the company’s hospitals increases over time, through effective operations and local investments, and as the company overall grows by adding more hospitals.

Adding to this complexity is the trend for hospitals to pursue joint venture partnerships where ownership is shared by two or more organizations, including the “seller.” These partnerships call for strong and trusting relationships by every party. Communications is key to success.

Familiarize yourselves with these terms and issues as you move through a partnership. Be prepared for some myth busting.

That’s where the fundamental structural differences end. The driving forces of both organizations, however, are precisely the same:

  • No matter your tax status, every hospital must take in more dollars than it spends to be financially healthy and to reinvest in the care it provides.
  • Every hospital must offer quality care, provide current medical equipment and facilities, and support a trained staff to attract (and keep) patients  and serve the needs of physicians, payers, and others.

Now, consider some specific questions you may hear related to the structure of a not-for-profit to investor-owned conversion.

WHAT HAPPENS TO THE PROCEEDS OF THE SALE?

When there are funds left over from a sale, they are often referred to as the proceeds. These proceeds exist once the hospital’s debt and any other obligations (e.g., a pension fund) have been paid.

The answer as to what happens to those dollars depends on the ownership structure of the selling organization and the terms of the transaction. Here are a few scenarios:

  • The sale of a stand-alone, not-for-profit community hospital to an investor-owned company may lead to the creation of a community foundation. The creation of the foundation—including its board and mission—may be directed by your state attorney general’s office, and the proceeds from the sale will fund it.
  • When two not-for-profits merge, it is rare that there are proceeds. Instead, the common practice is for all assets from both organizations to combine for the good of the new system.
  • From the sale of a hospital owned by a religious organization, the remaining proceeds will likely return to that order or denomination.
  • When a government-owned hospital is sold, money left over may return to the city’s or county’s coffers, which may deposit it into the government’s general operating fund or create a new organization for meeting the charitable healthcare needs of the community.

WILL CHARITY CARE CONTINUE AT ITS CURRENT LEVEL?

This is really a question of community commitment and may be an indicator of how much the community-based culture is or is not going to change under the new ownership. In most cases, a commitment to either a specific level of charity care or a guarantee to continue the hospital’s existing charitable mission and policy is written into the deal documents. Expect the question and know the answer.

HOW MUCH MONEY IN LOCAL TAXES WILL THE NEW HOSPITAL OWNER PAY?

An investor-owned hospital pays taxes that benefit local government. This question is an opportunity to highlight the added contribution as a distinct benefit of investor-owned partnerships.

In many cases, the fire department, police force, schools, parks, and other community assets will benefit on an annual basis from an investor-owned partner paying state and local property and sales taxes.

One cautionary note: In some cases, new hospital owners may seek appropriate tax incentives when entering a new community and investing in a hospital. Be sure you understand the local government strategic thinking before you answer the tax question.

 

 

 

 

Top 5 Differences Between NFPs and For-Profit Hospitals

https://www.healthleadersmedia.com/finance/top-5-differences-between-nfps-and-profit-hospitals

Image result for Non-Profit and For-Profit Hospitals

Although nonprofit and for-profit hospitals are fundamentally similar, there are significant cultural and operational differences, such as strategic approaches to scale and operational discipline.

All hospitals serve patients, employ physicians and nurses, and operate in tightly regulated frameworks for clinical services. For-profit hospitals add a unique element to the mix: generating return for investors.

This additional ingredient gives the organizational culture at for-profits a subtly but significantly different flavor than the atmosphere at their nonprofit counterparts, says Yvette Doran, chief operating officer at Saint Thomas Medical Partners in Nashville, TN.

“When I think of the differences, culture is at the top of my list. The culture at for-profits is business-driven. The culture at nonprofits is service-driven,” she says.

Doran says the differences between for-profits and nonprofits reflect cultural nuances rather than cultural divides. “Good hospitals need both. Without the business aspects on one hand, and the service aspects on the other, you can’t function well.”

There are five primary differences between for-profit and nonprofit hospitals.

1. Tax Status

The most obvious difference between nonprofit and for-profit hospitals is tax status, and it has a major impact financially on hospitals and the communities they serve.

Hospital payment of local and state taxes is a significant benefit for municipal and state governments, says Gary D. Willis, CPA, a former for-profit health system CFO who currently serves as CFO at Amedisys Inc., a home health, hospice, and personal care company in Baton Rouge, LA. The taxes that for-profit hospitals pay support “local schools, development of roads, recruitment of business and industry, and other needed services,” he says.

The financial burden of paying taxes influences corporate culture—emphasizing cost consciousness and operational discipline, says Andrew Slusser, senior vice president at Brentwood, TN-based RCCH Healthcare Partners.

“For-profit hospitals generally have to be more cost-efficient because of the financial hurdles they have to clear: sales taxes, property taxes, all the taxes nonprofits don’t have to worry about,” he says.

“One of the initiatives we’ve had success with—in both new and existing hospitals—is to conduct an Operations Assessment Team survey. It’s in essence a deep dive into all operational costs to see where efficiencies may have been missed before. We often discover we’re able to eliminate duplicative costs, stop doing work that’s no longer adding value, or in some cases actually do more with less,” Slusser says.

2. Operational Discipline

With positive financial performance among the primary goals of shareholders and the top executive leadership, operational discipline is one of the distinguishing characteristics of for-profit hospitals, says Neville Zar, senior vice president of revenue operations at Boston-based Steward Health Care System, a for-profit that includes 3,500 physicians and 18 hospital campuses in four states.

At Steward, we believe we’ve done a good job establishing operational discipline. It means accountability. It means predictability. It means responsibility. It’s like hygiene. You wake up, brush your teeth, and this is part of what you do every day.”

A revenue-cycle dashboard report is circulated at Steward every Monday morning at 7 a.m., including point-of-service cash collections, patient coverage eligibility for government programs such as Medicaid, and productivity metrics, he says. “There’s predictability with that.”

A high level of accountability fuels operational discipline at Steward and other for-profits, Zar says.

There is no ignoring the financial numbers at Steward, which installed wide-screen TVs in most business offices four years ago to post financial performance information in real-time. “There are updates every 15 minutes. You can’t hide in your cube,” he says. “There was a 15% to 20% improvement in efficiency after those TVs went up.”

3. Financial Pressure

Accountability for financial performance flows from the top of for-profit health systems and hospitals, says Dick Escue, senior vice president and chief information officer at the Hawaii Medical Service Association in Honolulu.

Escue worked for many years at a rehabilitation services organization that for-profit Kindred Healthcare of Louisville, Kentucky, acquired in 2011. “We were a publicly traded company. At a high level, quarterly, our CEO and CFO were going to New York to report to analysts. You never want to go there and disappoint. … You’re not going to keep your job as the CEO or CFO of a publicly traded company if you produce results that disappoint.”

Finance team members at for-profits must be willing to push themselves to meet performance goals, Zar says.

“Steward is a very driven organization. It’s not 9-to-5 hours. Everybody in healthcare works hard, but we work really hard. We’re driven by each quarter, by each month. People will work the weekend at the end of the month or the end of the quarter to put in the extra hours to make sure we meet our targets. There’s a lot of focus on the financial results, from the senior executives to the worker bees. We’re not ashamed of it.”

“Cash blitzes” are one method Steward’s revenue cycle team uses to boost revenue when financial performance slips, he says. Based on information gathered during team meetings at the hospital level, the revenue cycle staff focuses a cash blitz on efforts that have a high likelihood of generating cash collections, including tackling high-balance accounts and addressing payment delays linked to claims processing such as clinical documentation queries from payers.

For-profit hospitals routinely utilize monetary incentives in the compensation packages of the C-Suite leadership, says Brian B. Sanderson, managing principal of healthcare services at Oak Brook, IL–based Crowe Horwath LLP.

“The compensation structures in the for-profits tend to be much more incentive-based than compensation at not-for-profits,” he says. “Senior executive compensation is tied to similar elements as found in other for-profit environments, including stock price and margin on operations.”

In contrast to offering generous incentives that reward robust financial performance, for-profits do not hesitate to cut costs in lean times, Escue says.

“The rigor around spending, whether it’s capital spending, operating spending, or payroll, is more intense at for-profits. The things that got cut when I worked in the back office of a for-profit were overhead. There was constant pressure to reduce overhead,” he says. “Contractors and consultants are let go, at least temporarily. Hiring is frozen, with budgeted openings going unfilled. Any other budgeted, but not committed, spending is frozen.”

4. Scale

The for-profit hospital sector is highly concentrated.

There are 4,862 community hospitals in the country, according to the American Hospital Association. Nongovernmental not-for-profit hospitals account for the largest number of facilities at 2,845. There are 1,034 for-profit hospitals, and 983 state and local government hospitals.

In 2016, the country’s for-profit hospital trade association, the Washington, DC–based Federation of American Hospitals, represented a dozen health systems that owned about 635 hospitals. Four of the FAH health systems accounted for about 520 hospitals: Franklin, TN-based Community Hospital Systems (CHS); Nashville-based Hospital Corporation of America; Brentwood, TN–based LifePoint Health; and Dallas-based Tenet Healthcare Corporation.

Scale generates several operational benefits at for-profit hospitals.

“Scale is critically important,” says Julie Soekoro, CFO at Grandview Medical Center, a CHS-owned, 372-bed hospital in Birmingham, Alabama. “What we benefit from at Grandview is access to resources and expertise. I really don’t use consultants at Grandview because we have corporate expertise for challenges like ICD-10 coding. That is a tremendous benefit.”

Grandview also benefits from the best practices that have been shared and standardized across the 146 CHS hospitals. “Best practices can have a direct impact on value,” Soekoro says. “The infrastructure is there. For-profits are well-positioned for the consolidated healthcare market of the future… You can add a lot of individual hospitals without having to add expertise at the corporate office.”

The High Reliability and Safety program at CHS is an example of how standardizing best practices across the health system’s hospitals has generated significant performance gains, she says.

“A few years ago, CHS embarked on a journey to institute a culture of high reliability at the hospitals. The hospitals and affiliated organizations have worked to establish safety as a ‘core value.’ At Grandview, we have hard-wired a number of initiatives, including daily safety huddles and multiple evidence-based, best-practice error prevention methods.”

Scale also plays a crucial role in one of the most significant advantages of for-profit hospitals relative to their nonprofit counterparts: access to capital.

Ready access to capital gives for-profits the ability to move faster than their nonprofit counterparts, Sanderson says. “They’re finding that their access to capital is a linchpin for them. … When a for-profit has better access to capital, it can make decisions rapidly and make investments rapidly. Many not-for-profits don’t have that luxury.”

5. Competitive Edge

There are valuable lessons for nonprofits to draw from the for-profit business model as the healthcare industry shifts from volume to value.

When healthcare providers negotiate managed care contracts, for-profits have a bargaining advantage over nonprofits, Doran says. “In managed care contracts, for profits look for leverage and nonprofits look for partnership opportunities. The appetite for aggressive negotiations is much more palatable among for-profits.”

 

 

 

 

 

 

 

Ego Is the Enemy of Good Leadership

https://hbr.org/2018/11/ego-is-the-enemy-of-good-leadership?utm_campaign=hbr&utm_medium=social&utm_source=facebook&fbclid=IwAR0wt2VgC-vpMSa4qlHnn2bVGKdlrbSlxb-_4ekjqxN5REthTwOKN626qro

On his first day as CEO of the Carlsberg Group, a global brewery and beverage company, Cees ‘t Hart was given a key card by his assistant. The card locked out all the other floors for the elevator so that he could go directly to his corner office on the 20th floor. And with its picture windows, his office offered a stunning view of Copenhagen. These were the perks of his new position, ones that spoke to his power and importance within the company.

Cees spent the next two months acclimating to his new responsibilities. But during those two months, he noticed that he saw very few people throughout the day. Since the elevator didn’t stop at other floors and only a select group of executives worked on the 20th floor, he rarely interacted with other Carlsberg employees. Cees decided to switch from his corner office on the 20th floor to an empty desk in an open-floor plan on a lower floor.

When asked about the changes, Cees explained, “If I don’t meet people, I won’t get to know what they think. And if I don’t have a finger on the pulse of the organization, I can’t lead effectively.”

This story is a good example of how one leader actively worked to avoid the risk of insularity that comes with holding senior positions. And this risk is a real problem for senior leaders. In short, the higher leaders rise in the ranks, the more they are at risk of getting an inflated ego. And the bigger their ego grows, the more they are at risk of ending up in an insulated bubble, losing touch with their colleagues, the culture, and ultimately their clients. Let’s analyze this dynamic step by step.

As we rise in the ranks, we acquire more power. And with that, people are more likely to want to please us by listening more attentively, agreeing more, and laughing at our jokes. All of these tickle the ego. And when the ego is tickled, it grows. David Owen, the former British Foreign Secretary and a neurologist, and Jonathan Davidson, a professor of psychiatry and behavioral sciences at Duke University, call this the “hubris syndrome,” which they define as a “disorder of the possession of power, particularly power which has been associated with overwhelming success, held for a period of years.”

An unchecked ego can warp our perspective or twist our values. In the words of Jennifer Woo, CEO and chair of The Lane Crawford Joyce Group, Asia’s largest luxury retailer, “Managing our ego’s craving for fortune, fame, and influence is the prime responsibility of any leader.” When we’re caught in the grip of the ego’s craving for more power, we lose control. Ego makes us susceptible to manipulation; it narrows our field of vision; and it corrupts our behavior, often causing us to act against our values.

Our ego is like a target we carry with us. And like any target, the bigger it is, the more vulnerable it is to being hit. In this way, an inflated ego makes it easier for others to take advantage of us. Because our ego craves positive attention, it can make us susceptible to manipulation. It makes us predictable. When people know this, they can play to our ego. When we’re a victim of our own need to be seen as great, we end up being led into making decisions that may be detrimental to ourselves, our people, and our organization.

An inflated ego also corrupts our behavior. When we believe we’re the sole architects of our success, we tend to be ruder, more selfish, and more likely to interrupt others. This is especially true in the face of setbacks and criticism. In this way, an inflated ego prevents us from learning from our mistakes and creates a defensive wall that makes it difficult to appreciate the rich lessons we glean from failure.

Finally, an inflated ego narrows our vision. The ego always looks for information that confirms what it wants to believe. Basically, a big ego makes us have a strong confirmation bias. Because of this, we lose perspective and end up in a leadership bubble where we only see and hear what we want to. As a result, we lose touch with the people we lead, the culture we are a part of, and ultimately our clients and stakeholders.

Breaking free of an overly protective or inflated ego and avoiding the leadership bubble is an important and challenging job. It requires selflessness, reflection, and courage. Here are a few tips that will help you:

  • Consider the perks and privileges you are being offered in your role. Some of them enable you to do your job effectively. That’s great. But some of them are simply perks to promote your status and power and ultimately ego. Consider which of your privileges you can let go of. It could be the reserved parking spot or, like in Cees ‘t Hart’s case, a special pass for the elevator.
  • Support, develop, and work with people who won’t feed your ego. Hire smart people with the confidence to speak up. Humility and gratitude are cornerstones of selflessness. Make a habit of taking a moment at the end of each day to reflect on all the people that were part of making you successful on that day. This helps you develop a natural sense of humility, by seeing how you are not the only cause of your success. And end the reflection by actively sending a message of gratitude to those people.
  • The inflated ego that comes with success — the bigger salary, the nicer office, the easy laughs — often makes us feel as if we’ve found the eternal answer to being a leader. But the reality is, we haven’t. Leadership is about people, and people change every day. If we believe we’ve found the universal key to leading people, we’ve just lost it. If we let our ego determine what we see, what we hear, and what we believe, we’ve let our past success damage our future success.

 

 

 

Healthcare workforce development: New strategies for new demands

https://www.healthcareitnews.com/news/healthcare-workforce-development-new-strategies-new-demands

As hospitals and ambulatory sites grapple with the challenges of quality improvement, value-based care, cybersecurity and more, the size and shape of the workforce is changing as technology and imperatives evolve.

The healthcare workforce is evolving, often by necessity, thanks to the same gravitational forces that are affecting the rest of the industry and the economy at large: technological advances, competitive market forces, shifting imperatives that demand new skill sets, challenges with job satisfaction and burnout.

Whether they’re C-suite leaders, physicians, nurses, IT staff, data scientists, case managers, security pros or revenue cycle, billing and accounting experts, hospitals and health systems large and small are facing an array of challenges when it comes to finding the right people to fit the right roles.

There’s a lot that needs doing in healthcare these days, after all – managing the clinical and operational demands of value-based reimbursement, caring for a growing aging population with a shrinking number of doctors and nurses, fighting the good fight against relentless cybersecurity threats – and finding the right employees to do it all is more important than ever.

During July, Healthcare IT News and our sister publication, Healthcare Finance, will explore how hospitals and health systems are managing these challenges – optimizing their workforces and positioning skilled leaders to help drive long-term strategic success in those areas and others.

From the C-suite to the trenches, unique challenges persist

The recent 2019 HIMSS U.S. Leadership and Workforce Survey polled 232 health information and technology leaders from acute and ambulatory providers nationwide to gain some insights about the challenges they’re prioritizing and the organizational structures they’re putting in place to deal with them.

Surprisingly or not, “hospitals and non-acute providers appear to have very different strategies regarding information and technology leadership and workers,” according to the report.

For instance, inpatient sites are much more able to prioritize the hiring of skilled C-suite execs to guide strategic initiatives. But “the absence of information and technology leaders in non-acute organizations is unsettling as it becomes more challenging to advance capabilities in settings without strong executive champions.”

Likewise, hospitals and practices also differ substantially when it comes to more rank-and-file employees. The larger inpatient sites “tend to operate environments with fairly extensive opportunities, whereas non-acute providers tend to deal with static workforce demands,” according to HIMSS. “The culture that can result from these different settings is something healthcare leaders should take into consideration when developing a staffing strategy.”

And health system hiring strategies are indeed shifting as providers face an array of challenges that need skilled and forward-thinking workers to help solve them. The HIMSS report listed the top 10 of these as:

  • Cybersecurity, Privacy, and Security
  • Improving Quality Outcomes Through Health Information and Tech
  • Clinical Informatics and Clinician Engagement
  • Culture of Care and Care Coordination
  • Process Improvement, Workflow, Change Management
  • User Experience, Usability and User-Centered Design
  • Data Science/Analytics/Clinical and Business Intelligence
  • Leadership, Governance, Strategic Planning
  • Safe Info and Tech Practices for Patient Care
  • HIE, Interoperability, Data Integration and Standards

The big hurdle, however, is that many “hospitals are continuing to be negatively impacted by staffing challenges,” according to the study. “The negative impacts on providers resulting from paused/scaled back projects are significant enough to at least warrant an exploratory consideration,” said HIMSS researchers.

A look at the numbers tells one story: When it comes to workforce vacancy barely one-third 36% of providers polled by HIMSS say they’re fully staffed – while more than half (52%) said they have open positions (12% didn’t answer or weren’t sure).

Indeed, there’s plenty of hiring to be done for health systems trying to tackle some of the biggest ongoing strategic challenges.

Even though the size in provider workforces since 2018 increased for 38% of the providers in this year’s survey – it stayed the same for 37% and decreased for just 14% – the projection for 2020 is a further expected hiring boost at 34% of providers (compared with a status quo for 42% and a contraction at just 9%).

Still, there’s nuance when one considers the differences between inpatient versus ambulatory organizations. While both are more likely to increase their workforces than to decrease them in 2020 (37% and 12% percent of hospitals, respectively, and 26% and 1% of outpatient sites), far more non-acute organizations expect their staff sizes to stand pat than hospitals (51 percent, compared with 38%).

“The variances in staffing growth trajectories evidenced in the two provider groups … has the potential to produce exceedingly different workplace cultures; a fast-paced environment in hospitals and a fairly stable setting in non-acute organizations,” according to the HIMSS report. “If true, then it is very possible these settings attract health IT workers with remarkably different needs/wants. Provider organizations looking to stabilize their workforce should take these factors into consideration when developing staff recruitment, retention and development strategies.”

What to expect in our Focus on Workforce Development

Over the course of this month, Healthcare IT News and Healthcare Finance will be exploring the many challenges related to staffing and workforce, across many facets of healthcare in the U.S.

We’ll examine the industry’s labor force spend (the percentage of total budgets may surprise you), and look at how how AI, telehealth and consumerism can help change that equation. We’ll learn how to attract top C-suite talent and combat clinician burnout. We’ll explore the benefits of apprenticeship programs, and see the strategies some hospitals are using to deal with labor shortages. And much more.

So, as your healthcare organization looks to the fiscal year or remaining calendar year ahead, be sure to check back at HITN and HF during July to learn from thought leaders and industry peers – about the best way to put the best people in the best position to help meet your strategic goals.

 

6 DEFINING VALUES OF A LEADERSHIP CULTURE

http://www.leadershipdigital.com/edition/daily-innovation-leadership-2019-06-16?open-article-id=10712652&article-title=6-defining-values-of-a-leadership-culture&blog-domain=n2growth.com&blog-title=n2growth-blog

Twelve years after launching culture change consulting services, I am finally sitting down to write about six defining values of a leadership culture. These are factors I’ve learned that define whether an organization can improve their Culture or not. No surprise that all six values rise and fall on leadership.

Before I unpack the six values, let me paint the backdrop of how it all began. In 2006, one of my CEO clients in Sarasota, FL shared with me his annual employee engagement survey. Most Type A leaders are charming, demanding, and unlovable, but not Steve. He had a caring heart just below the surface of his Type A layer. Even in his frustration, he oozed care and concern for people. We sat in his office while he shared his most recent employee engagement survey, and because he cared so much, he was frustrated. He didn’t like the pre-formulated questions, and he didn’t know what to do with the report results. He was delivered a canned report with no clear direction. “David,” he asked, “can you build me an employee engagement survey that we can customize around the kind of culture I want to create?” Like all good consultants, I said, “probably, let me do a little research and get back to you.” After I flew home from my monthly trip to sunny Sarasota, I did as I said and began to research and evaluate his request. As I dug around the internet, three data points came to light.

The first data point revealed that most employee engagement surveys were un-customizable. Surveys were built for mass production, not carefully and strategically customized for unique cultures. Why should the 8-year old, first generation, 88-person software development company in San Diego expect to have the same desired culture as the 48-year old, 3rd generation, 268-person manufacturing company in Rochester, NY? To me, that made no sense for the client, but all the sense to the vendors who mass-produced their expertise to increase profit over quality. Their research determined that one of the most important questions that define a good corporate culture is “Do you have a best friend at work.” Really? How does that define one’s culture? I am quite blessed to have had many best friends over the years, but none of them worked with me. Whether my best friend worked in Chicago or with me in Allentown never impacted my like or dislike of corporate culture.

The second data point was that most employee engagement surveys and the firms that employed them were extremely heavy on reporting data overload, but weak on meaningful implementation. Before starting Walton Consulting, Inc. in 2001, I worked for a boutique strategy consulting firm out of Princeton, NJ that developed and delivered high-cost elaborate strategic plans. The client would outwardly applaud the mountain-sized strategic planning document full of analysis, logic, and recommendations. However, inside I am sure they were asking themselves, “what the hell do I do now, and why did I pay so much for something I don’t know what to do with…maybe I should hide it on the bookshelf and refer to it in ‘name’ whenever I want to drive a random point home to my employees.” It is the same way with employee engagement surveys. The client gets a pretty report, but without the creator of the report, the expert on the topic to help with implementation, the report becomes an article of affection or dissatisfaction (depending on the results of course). As with many consultants, the implementation phase becomes an afterthought, a monumental chore that gets swept under the carpet and ignored.

The third data point was an epiphany that corporate culture was the missing cog. At this juncture of Walton, I had been focused on delivering consulting services to CEOs and business owners to help them grow healthy organizations. I was already delivering strategic planning, sales and marketing strategy and leadership recruiting services, all of which helped grow organizations, but the culture cog was missing. As I pondered on the importance of corporate culture, I intuitively understood that the culture cog acted as a fuel valve that could either spur on growth or squelch it. I reflected on how much corporate culture was really the vineyard soil that determined the environment’s capability and capacity for growing good fruit and producing a rich yield.

Wow, I must build this tool for my client I thought. It is not only critical as a foundation for successful organizational growth, but it also fits neatly into my core service offerings focused on “healthy” growth. In 2006 I launched the Culture offering. Now, 13 years later, with over 3,000 employees surveyed, and a marketplace foaming at the mouth about culture with quotes like Peter Drucker’s, “Culture Eats Strategy for Breakfast,” I am ready to share six values that leadership needs to employ if they plan on truly Changing Culture. Check back next issue where I will reveal what they are and why they are so important to growing a healthy organization.

Here are six leadership values that impact culture:

  1. Leadership Cares
  2. Leadership Alignment
  3. Leadership Listens
  4. Leadership Commitment
  5. Leadership Implementation
  6. Leadership Flexibility

For the purposes of this article, leadership is defined as the CEO and his or her executive team. Let’s deep dive into each factor…

LEADERSHIP CARES

There are different reasons why leaders care.  I had one client who cared because he was experiencing an employee revolt.  He was truly concerned that if he did not get his arms wrapped around his dysfunctional corporate culture that he would have a mass exodus on his hands.  Some leaders care because they understand that improved culture leads to improved profitability.  Other leaders care because they want to enrich the lives of their employees.  Bottom line, the leadership needs to care.  A friend and colleague of mine who was the President of a mid-market global firm told me flat out; he just didn’t care.  The employees to him were a means to an end.  Another human resource colleague of mine cares deeply about changing their culture, but she isn’t the CEO, and without the CEO caring, it will never get the attention it needs.

LEADERSHIP ALIGNMENT

When beginning a culture change endeavor, the likelihood that the CEO and all of the executive team really cares, views culture impact with the same gravity, and has the same cultural values is rare.  For successful culture change to occur, leadership needs to be aligned.  This is not an easy task, but my pill for the cure is training.  With each culture change engagement I deliver, I interview and train the leadership team together.  We review how it impacts their business, and we talk about what kind of culture they have and want.  We even design the employee engagement survey together for aligned executive level buy-in.  People own what they help to create, so in this manner, the leadership team owns their culture and shifts into alignment.

LEADERSHIP LISTENS

One of the most important messages you can send to people that follow you is that you listen.  That means you ask for opinions and give others an opportunity to influence.  When you incorporate a strong feedback mechanism in your employee engagement survey, you create a pathway for communication that fuels employees’ personal value.  The key though is to listen.  The biggest mistake to corporate culture change is to ask and not act.  Essentially communicating that you are not listening.  I encourage my clients to respond to culture change feedback even if the ideas cannot be adopted—this reinforces that you have listened.

LEADERSHIP COMMITMENT

As a leader of your organization, if you are not ready to commit to the adventure of change, then don’t get off the porch.  I mean that—do not start unless you are committed to finish!  I have seen firsthand companies that have turned culture change into an organizational minefield.  The CEO will tell me it didn’t work, and unfortunately, I have to remind them that they weren’t committed to change and that the entire initiative turned into a hollow promise.  Yes, it will backfire if there is a lack of commitment.

LEADERSHIP IMPLEMENTATION

As a 20-year consultant veteran, I differentiate myself by emphasizing implementation.  When an organization begins culture change, the transformation will only occur through implementation.  I do not stop with a report and recommendations. I help my clients build actionable implementation plans.  I work with the leadership team to identify and select employees who can play a role in helping the execution of those plans.  This spreads the implementation buy-in throughout the company and ensures greater success of implementation.  Leadership’s role is to coach and facilitate implementation.

LEADERSHIP FLEXIBILITY

When a company embarks on transforming their corporate culture, they are embarking on a journey into the unknown.  Culture is fluid, ever-changing, impacted by the daily weather, disruptive, moody and explosive.  During culture change implementation, leaders need to be flexible, understanding that the environment will shift actions and initiative throughout the process.  Leaders need to use their corporate values as the compass, to ensure they are going in the right direction, yet be flexible to allow deviations.

The bottom line is simple. Culture change rises and falls on leadership, but a strong culture can make the difference between winning and losing, so I encourage leaders to embrace the challenge and lead their organizations toward a healthy corporate culture.