As the recession began to bite into hospitals early last year, CEO Mark Newton of Swedish Covenant Hospital in Chicago made a familiar request. Rather than order layoffs, he asked employees to forgo their annual pay increases. But he added a promise: If employees introduced operational efficiencies to help the hospital reach its financial goals, they would get the withheld money back, in full.
Employees successfully met this challenge during 12 months of innovation, from March 2009 to Feb. 2010, producing a long list of efficiencies. And in their April 16 paychecks, Mr. Newton fulfilled his promise, paying them a total of $1.5 million in withheld raises for the 12-month period. Employees got back merit increases that made up as much as 3 percent of their pay.
"The whole staff showed an incredible spirit and established a very good culture, a culture of much deeper understanding of the performance of the hospital," Mr. Newton says.
Getting everyone involved
Kicking off the operation back in March 2009, staff met with their managers and came up with a variety of ideas that were quickly implemented, without going through a lot of red tape. Ideas ranged from simple efficiencies, such as turning off lights when rooms were not in use and reducing printing costs, to more complex ideas, such as using supplies more efficiently and streamlining internal processes.
Swedish Covenant's financial managers did not try to tote up the new efficiencies and estimate the cost savings. Instead, they waited for the actual savings to appear in monthly financial reports. "We picked up the savings through the normal accounting process," Mr. Newton explains. The incremental savings slowly filled a blue "beaker" showing progress toward the $3 million goal. Employees received a monthly e-mail showing the current beaker level and a message from Mr. Newton on progress of the campaign.
Mr. Newton says the campaign helped the hospital's 2,200 workforce understand the choices executives must make every day. The initial choice, asked of departmental directors, was whether to forgo merit raises or eliminate about 15 jobs. When the directors chose to forgo merit raises for everyone, there were further choices to make.
For example, it turned out the roof needed repair at a cost of $80,000. Mr. Newton held a forum with employees and presented some representative employees with another choice – forgo either the roof repair or an employee appreciation cruise for some 400-500 staff. Even though they looked forward to the cruise, these employees agreed to cancel it so the roof could be fixed.
Creating 'a spirit of entrepreneurship'
As employees came up with more ideas to improve the bottom line, "we saw a spirit of entrepreneurship throughout the hospital," Mr. Newton says. For example, staff members were asked to persuade more friends and neighbors to use Swedish Covenant. "We got everyone to understand that you need to grow the business," he says. "Everyone was an advocate, a salesperson. They were encouraged to bring their family here, talk to their neighbors." The hospital increased inpatient activities by 2 percent in the some period, probably in part due to this initiative.
Now that Swedish Covenant has reached its final goal, Mr. Newton says it would be difficult to ask employees to continue making the same sort of sacrifices for the hospital. "As an organization you really have to be faced with a major crisis for this to work," he says. But the hospital is continuing to ask employees to think outside the box and come up with more efficiency improvement suggestions.
"We reward people for improvement that they design," Mr. Newton says. Swedish Covenant is introducing incentives targeting specific outcomes in many departments. For example, the collections staff has already brought accounts receivable down to under 30 days.
Asking staff to make a sacrifice during hard times has ignited a lasting spirit of improvisation that will help the hospital move forward through uncertain times for hospitals nationwide.
Learn more about Swedish Covenant.
Employees successfully met this challenge during 12 months of innovation, from March 2009 to Feb. 2010, producing a long list of efficiencies. And in their April 16 paychecks, Mr. Newton fulfilled his promise, paying them a total of $1.5 million in withheld raises for the 12-month period. Employees got back merit increases that made up as much as 3 percent of their pay.
"The whole staff showed an incredible spirit and established a very good culture, a culture of much deeper understanding of the performance of the hospital," Mr. Newton says.
Getting everyone involved
Kicking off the operation back in March 2009, staff met with their managers and came up with a variety of ideas that were quickly implemented, without going through a lot of red tape. Ideas ranged from simple efficiencies, such as turning off lights when rooms were not in use and reducing printing costs, to more complex ideas, such as using supplies more efficiently and streamlining internal processes.
Swedish Covenant's financial managers did not try to tote up the new efficiencies and estimate the cost savings. Instead, they waited for the actual savings to appear in monthly financial reports. "We picked up the savings through the normal accounting process," Mr. Newton explains. The incremental savings slowly filled a blue "beaker" showing progress toward the $3 million goal. Employees received a monthly e-mail showing the current beaker level and a message from Mr. Newton on progress of the campaign.
Mr. Newton says the campaign helped the hospital's 2,200 workforce understand the choices executives must make every day. The initial choice, asked of departmental directors, was whether to forgo merit raises or eliminate about 15 jobs. When the directors chose to forgo merit raises for everyone, there were further choices to make.
For example, it turned out the roof needed repair at a cost of $80,000. Mr. Newton held a forum with employees and presented some representative employees with another choice – forgo either the roof repair or an employee appreciation cruise for some 400-500 staff. Even though they looked forward to the cruise, these employees agreed to cancel it so the roof could be fixed.
Creating 'a spirit of entrepreneurship'
As employees came up with more ideas to improve the bottom line, "we saw a spirit of entrepreneurship throughout the hospital," Mr. Newton says. For example, staff members were asked to persuade more friends and neighbors to use Swedish Covenant. "We got everyone to understand that you need to grow the business," he says. "Everyone was an advocate, a salesperson. They were encouraged to bring their family here, talk to their neighbors." The hospital increased inpatient activities by 2 percent in the some period, probably in part due to this initiative.
Now that Swedish Covenant has reached its final goal, Mr. Newton says it would be difficult to ask employees to continue making the same sort of sacrifices for the hospital. "As an organization you really have to be faced with a major crisis for this to work," he says. But the hospital is continuing to ask employees to think outside the box and come up with more efficiency improvement suggestions.
"We reward people for improvement that they design," Mr. Newton says. Swedish Covenant is introducing incentives targeting specific outcomes in many departments. For example, the collections staff has already brought accounts receivable down to under 30 days.
Asking staff to make a sacrifice during hard times has ignited a lasting spirit of improvisation that will help the hospital move forward through uncertain times for hospitals nationwide.
Learn more about Swedish Covenant.