Do your people want to do what is needed?

  When I was a mechanic, I knew how much faster I could fix an airplane
when I wanted to fix it than when I didn't. I've tried to make it so the
other guys want to do it" (1)
--Gordon Bethune
Former CEO, Continental Airlines

In 2004, Fortune Magazine called Continental Airlines chief Gordon Bethune the "best remaining CEO of a major legacy airline." (1) Incentives were an important part of a strategy to encourage his people to "want to do it."

For example, at a time when Continental ranked last in on-time flights, Bethune promised each employee a $65 bonus each month that Continental was in the top half of airlines in on-time performance. The first month Continental shot up the list.

What are you doing as a leader to make it easy for your people to want to move toward your organization's vision? Are you providing incentives, removing barriers, or both?

As noted in our earlier columns, creating a vision, building a compelling case that clarifies the benefits of moving toward it, and altering systems, structures and culture to support that movement are important components of successfully leading change. For example, aligning incentives with leadership priorities is likely to foster implementation success.

Many of the nation's largest payers have historically rewarded providers for brief and frequent patient visits rather than for long-term care management. (2) This method of controlling health care costs, largely by limiting services, hasn't been very successful in either controlling costs or improving quality. As a result, incentives are changing.

Driven by external pressures, quality has become a rallying cry in health care. Powerful groups such as Leapfrog and Medicaid are pushing for progress by encouraging the publication of outcomes and the implementation of pay-for-performance systems. pay-for-performance has rolled across our country in the past couple of years leading to scores of new incentive plans designed to improve care while cutting costs. (3)

In response, many health care organizations are rapidly expanding their investments in both measuring and improving outcomes. As Don Berwick pointed out, openness provides incentives for improvement, if simply through embarrassment. (4)

Open sharing of patient survey results, for example, can confront your people with the realization that customers don't see your services as favorably as insiders do, providing a powerful incentive for change. Similarly, data demonstrating that your hospital's patient safety scores don't measure up to those of your competitors can also encourage people to want to open the door to needed change.

While some leaders may try to hide down a foxhole until the storm blows by, the growing furor in our environment for safety and quality service at a reasonable cost makes it unlikely that such a strategy will be successful. Rewarding "A" while hoping for "B" is unlikely to generate the behavior changes needed for enhanced quality and service at competitive costs. (5)

If your purpose and vision communicate that you exist to enhance the health of your community, it is important that your incentives encourage people to adopt behaviors that will produce this result. Tying 15 percent of senior executive bonuses to targeted immunization rates in the community is likely to get managers on the phone working collaboratively with the health department and school system. "What gets measured gets managed, and what gets rewarded gets attention." (6)

Consistent findings suggest the value of tying your incentives to those specific behaviors and outcomes you wish to encourage. For example, using financial incentives to reward quality leads to better patient care and fewer costly complications according to the recent results of a demonstration project conducted by Premier and CMS. (7)

In addition, recent data from Medical Group Management Association surveys indicate that a higher percentage of best-performing practices are more likely than their average counterparts to use productivity-based compensation plans, (8) and that the number of clinical hours worked per week is higher in a diversity of specialties when rewards are tied to production. (9)

Well-designed incentive systems have been reported to change physician behavior and group practice outcomes. For example, two years after implementing incentive physician pay systems in 33 MaternOhio Management Services, practices' patient satisfaction scores climbed 16 points to 98 percent, hysterectomy standards were met 90 percent of the time up from 54 percent, and drug spending increases slowed to an annual rate of 4.2 percent down from 13.2 percent. (10)

A similar pattern was evident in data reported by Greater Houston Emergency Physicians, whose general revenues grew from $24 million to $38 million under a new incentive plan, while simultaneously their applications for physician positions increased and lawsuits dropped significantly. (11)

Removing discouraging barriers

It is important to use the incentives to encourage desired behaviors and outcomes, but it may be equally valuable to remove barriers that hinder or discourage those results. Before complaining that outcome problems lie with providers who fail to deliver the quality we desire, it is important to ensure that systems support rather than discourage the desired outcomes.

Removing situational constraints has long been recognized as important to effective performance, positive attitudes and reduced turnover. (12) A recent study of nurses demonstrates this point. Evidence indicated that the vast majority of failures occurred as a result of systems problems such as missing/incorrect information, missing or broken equipment, waiting for a resource to arrive, or missing/incorrect supplies. (13)

The presence of such barriers leads people to question the commitment of their managers, discourages providers and counteracts the positive influence available through incentives.

Researchers and practitioners have documented the importance of incentives that encourage desired behaviors as well as the removal of barriers that inhibit performance. Figure 1 provides an opportunity to examine the degree to which these tools have been used effectively to encourage change 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 303-573-1273 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 303-556-5812 or by e-mail at [e-mail].

References

1. Helyar, J. "Why Is This Man Smiling?" Fortune, October 18, 2004.

2. Benco L B. "A rewarding relationship." Fortune, June 9, 2003.

3. Romano M. "Performance anxiety: Is it too late for physicians to set their own rules on pay-for-performance?" Modern Healthcare, May 30, 2005.

4. Gawande A. "The Bell Curve." The New Yorker, December 6, 2004.

5. Kerr S. "On the Folly of Rewarding A. While Hoping for B." Academy of Management Journal, 18(4), 1975.

6. Shortell S. Quoted in Grazier, K. L. Journal of Healthcare Management, 49(12), March/April, 2004.

7. Loos R. "While in the connections: financial rewards lead to better care, study says." Modern Healthcare, May 9, 2005.

8. Jesse WF. "Does management affect healthcare outcomes?" Presentation at the 2002 national meetings of the Academy of Management. Denver, Colorado.

9. "What Counts?" Production versus only. MGMA Connection, January, 14, 2005.

10. Benco L. "A rewarding relationship." Modern Healthcare, June 9, 2003.

11. Seay T., Yee G., Dumas N. "A spurt to succeed: Manage physician behavior with incentive-based compensation." MGMA Connexion, Jamuary, 2005.

12. Peters LH, and O'Connor EJ. "Situational constraints and work outcomes: The influences of a frequently overlooked construct." Academy of Management Review, 5, 1980; Peters, L.H., O'Connor, E.J., & Rudolf, C.J. "The behavioral and affective consequences of situational constraints." Organizational Behavior and Human Performance, 25, 1980.

13. Tucker AL and Edmondson AC. "Why Hospitals Don't Learn from Failures: Organizational and Psychological Dynamics That Inhibits System Change." California Management Review, 54, 2, Winter 2003.

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

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RELATED ARTICLE: How are you measuring outcomes?

Describe your organization's change initiatives using the following statements.

Answer each question on a scale ranging from Never 1 to Always 5.

1 2 3 4 5  Leaders have clearly defined and communicated which outcomes
           are most important to your organization's success.
1 2 3 4 5  Leaders have identified measures that track those outcomes
           that are most important to your organization's success.
1 2 3 4 5  Leaders have linked meaningful incentives to those measures
           that assess the outcomes that are most important to your
           organization's success.
1 2 3 4 5  Leaders have systematically removed barriers to achieving
           those outcomes that are most important to your organization's
           success.

How does your organization look when compared with this list of winning practices? If some, but not all, of these components are in place, results are likely to be inconsistent and the process of change highly frustrating to many of your people.

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