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Where will the leaders come from?

Where Will the Leaders Come from? My article in the Harvard Business Review predicts a second health care revolution rising, like a Phoenix, from the ashes of the first. But, who will lead the charge? One group, professional managers, is staking its claim. They say: "We can manage anyting--an automobile manufacturer, a food company, a utility, an ad agency. You name it--we can manage it. We are professional managers. We bring our managerial skills and experiences to every business. The type of business is almost irrelevant, because they all require the same type of management."

"Unbelievably arrogant," you say. But the managers woh built up the 1970s conglomerates such as ITT believed this statement. So did the LBO financiers, who bought established companies and replaced their management. And so did the entrepreneurs who set out to reconstruct the American health care system in the 1980s.

Time has proven all of them wrong. ITT is now a slimmed-down, focused version of its former self. Many LBO deals have already soured. And the failure of the 1980s revolution in health care is evidenced by the many bankrupcies, fire sales, and other distressed company financings now taking place among entrepreneurial health care firms.

What went wrong? In health care, as elsewhere, the so-called professional managers were neither professionals nor managers. Many of the entrepreneurs were "deal-makers"--lawyers, financiers, movers and shakers--whose health care experiences were limited to their annual doctor's visit. They found managing health care companies a lot harder than they had imagined. Massive regulations, ambiguous standards for professional behavior, and no guidelines for productivity resulted in billions of dollars of losses in their fledgling biotechnology, insurance, and health services firms. Although the ace salesman in "The Music Man" averred that "you gotta know the territory" before you can sell effectively, the deal-makers knew very little about their health care territory.

Is salvation then to be found with health care professionals acting as the next generation of health care entrepreneurs? Again, I think not. Professionals know their territory very well indeed, but they don't know enough about business. Among money folks, hospitals and doctors are legendary marks for ill-conceived business deals. The debacle of hospital diversification efforts well illustrates the limited range of business knowledge of health care professionals. When hospitals strayed outside their own territory--for example, managing ambulatory care or real estate ventures--they lost their shirts.

Is there a leader? You bet! It is you, dear reader--the happy combination of physician and executive. The physician, who knows the territory, and the executive, who knows what his or her strengths and weaknesses are.

Some believe this combination of skills to be an act of nature--a happy accident. Business people believe that they will pick up medical and scientific knowledge "on the side" and health care professionals believe they will learn business skills "on the job." Nonsense. Medicine, science, and b usiness are professions with deep bodies of knowledge to be mastered. The four years of medical school and the two years of MBA education are not mere whims or acts of academic sadism. Their length indicates the voluminous amount of knowledge they embrace.

Casual approaches toward acquiring professional and business knowledge "on the job" or "on the side" are certain to be failures. But most medical and business schools do not recognize the need for even casual education. Few business schools offer health industry courses and fewer still medical schools have any management education.

The American College of Physician Executives has already played a pivotal role in gaining recognition for the physician executives I am describing. I applaud the efforts to date and hope that the College will extend them even further. The physician executive the College represents is key to the salvation of the American health care system.

Regina E. Herzlinger, PhD, is Nancy R. McPherson Professor of Business Administration, Graduate School of Business Administration, Harvard University, Boston, Mass.
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Title Annotation:Health Care Management
Author:Herzlinger, Regina E.
Publication:Physician Executive
Date:Mar 1, 1990
Words:648
Previous Article:The revolution revisited.
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