Creating readiness and involvement.

Your CEO just announced that future competitive conditions demand reducing organizational costs by another 10 percent. He has delegated the task of creating this new, lean budget to you and other members of the senior management team.

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These new budget demands follow years of prior cost reduction efforts that most people believe have the organization operating at costs well below your competitors. You are unclear as to how it will be possible to remove an additional 10 percent from the budget. However, based on a long history of success, the CEO's position is strong with the health system board. You have no doubt that your group must find a way to meet his new objective.

What actions will you recommend to the management team at the upcoming budget meeting?

Innovation is critical to long-term success in today's health care environment. Change is accelerating, competition increasing and access to information expanding. Many health care providers try to ignore these changing demands while continuing to practice past behaviors. Others react by leaving the profession in order to avoid having to make the required adjustments. Neither strategy contributes much to generating the innovation required to effectively deliver care in today's environment.

Creating readiness for change

Leaders need the best ideas their people can provide. However, centralized planning and control of resources discourage innovative involvement from those front-line people who typically care about the well-being of patients, possess local knowledge, and are stimulated to contribute when awakened to the need.

But what other alternatives are more likely to lead to success?

As noted in our earlier columns, committing the organization to a vision that your people find meaningful is essential to engaging their enthusiastic contributions. Beyond that, however, it is also important to spread dissatisfaction with current conditions so that your people fully recognize the need for change. How can this be done most effectively?

While it is tempting for many of us to try to get people to change their behaviors by pressuring them to do so--threatening them, criticizing them, etc.--this approach is typically unsuccessful in the long run.

If you are powerful and monitor others closely, it may generate grudging compliance, but it is unlikely to lead to the commitment required to bring forth innovative ideas. In many cases, such direct pressure will not even result in compliance. Instead, it often leads to defensiveness and increased levels of resistance. After all, how do you respond to criticism and pressure from others to change your behaviors?

It is often more effective in organizations to change the systems that influence people's behaviors, rather than attempting to change behaviors directly. This allows people to experience having a choice about continuing their old behaviors, even though it may not be advantageous for them to do so.

For example, by altering the reward system in an organization, leaders can communicate what new behaviors are being encouraged. While people can continue their old patterns, doing so leads to lower rewards. Alternatively, they can choose to make the changes needed to receive the higher payoffs available.

Changing feedback systems can also encourage shifts in behavior. For example, publicly publishing outcomes and contrasting results across people or units can be used to increase people's discomfort with their current performance, thus highlighting changes that need to be made.

After all, how many of you like finding out that you are in the lower one-quarter or even one-half of your profession in terms of demonstrated competence? Such data can often create sufficient discomfort to motivate people to study the innovative actions of those who perform more effectively and to adopt new patterns of more desirable behavior.

Sometimes leaders have to demonstrate that they are serious about their demands for new innovative behaviors by providing an example of what can happen to those who fail to comply. Other individuals/groups then have the opportunity to make a clear choice about whether to shift their behavior or suffer similar consequences.

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For example, after General Electric sold its small home appliance operation to Black and Decker in the 1980s because it did not meet previously articulated performance standards, leaders of other divisions knew that being sold could also happen to them if they did not meet their goals.

Similarly, when people practicing unacceptable behaviors such as sexual harassment or misuse of resources are removed from an organization, other offenders know similar fates could also befall them and are encouraged to change their ways. In fact, it is not simply the people who are removed who feel the discomfort. Those who are left behind have the opportunity to either alter their behavior patterns and outcomes or anticipate the consequences that are likely if changes do not occur.

Providing such examples discourages old patterns of behavior and, as a result, opens the door to the innovative outcomes required for long-term success.

Until people begin to experience some threat or discomfort, they are typically not willing to step forward to provide the innovative ideas needed to support a change initiative. While it may be tempting to directly threaten them in order to generate movement, this alone seldom produces long-term success.

Therefore, rather than impose pain directly, it is typically more effective to create clear organizational conditions that allow people to make intelligent decisions for themselves about letting go of old patterns that inhibit innovation.

Meeting the budget challenge

As a senior leader in the budget reduction case described at the beginning of this column, would you:

1. Attempt to squeeze more out of everyone's budgets by making them work harder?

2. Try to get other people to make the majority of cuts, arguing that you have taken heavy cuts in the past, and/or that your area is more important than theirs?

3. Attempt to identify new, more efficient methods of producing current organizational outcomes, knowing that it is not possible to remove an additional 10 percent by simply working harder?

4. Rethink what outcomes your customers really want, and then rethink the processes required to produce these newly-identified outcomes, using creative methods to satisfy customers while reaching your quality and budget goals?

The first two options are clearly attempts to maintain past behaviors and are loosely equivalent to patterns we have sometimes seen in health care. Neither will do much to enhance the long-term success of your organization.

By contrast, alternatives 3 and 4 both encourage innovative thinking and have the potential for pulling forth the best ideas from you and your people. It could well be that the CEO, in demanding the 10 percent budget cuts, is simply creating discomfort in the present to encourage the innovative thinking that will move his people beyond being bogged down in old assumptions and behaviors.

Have you implemented strategies like these to generate discomfort with the present and create the readiness and involvement for change required for long-term innovative success?

In future columns, we will describe additional tools that will aid you in both reducing barriers and encouraging innovative support for needed changes in your organization.

Edward J. O'Connor, PhD, is principal with the Implementation Institute, a professor of management and health administration at the University of Colorado at Denver and Health Sciences Center and a member of the faculty of the American College of Physician Executives. He can be reached by calling [phone] or by e-mail at [e-mail].

C. Marlene Fiol, PhD, is a professor of strategy and health administration at the University of Colorado at Denver and Health Sciences Center. She can be reached by phone at [phone] or by e-mail at [e-mail].

By Edward J. O'Connor, PhD and C. Marlena Fiol, PhD