The Human Side of Reengineering

The Human Side of Reengineering

by Elaine Griffin, PhD MBA MHA RN FACHE

Senior Ed ticat ion Specialist McFaul G. Lyons lnc. Trenton, NJ

CE Continuing Education

Journal for Healthcare Quality is pleased to offer the opportunity to earn continuing education (CE) credit to those who read

this article and complete the application form on page 42. This continuing education offering, JHQ46, will provide 1 contact hour to those who complete it appropriately. (See application form for further details.)

Objectives By participating in the indepen- dent study offering, the reader will be able to do the following:

1. Understand the importance of assessing the organiza- tional culture prior to under- taking a reengineering process.

2. Identify human resources issues such as compensation as well as education and training needs for all employees affected by the reengineering process.

CE questions for this article can be found on page 8.

Continuing Education

This article on the human side of reengineering describes the issues and concerns faced by healthcare executives who are considering or who already are involved in a reengineering project. It offers a practical approach to understanding issues such as the importance of assessing the culture and its readiness for change, the importance of human resource policy develop- ment prior to initiating a reengineering project, and how to ensure buy-in and support from the healthcare organization and its community.

Introduction Many issues face healthcare execu-

tives as they pursue improved productivity, quality, and expense reduction. Foremost among recent proposed ap- proaches to these issues has been reengineering, which often involves funda- mental and sweeping changes in existing business phdosophies and work processes. Such changes do not come without pain, especially when jobs must be sacrificed to the overall goal of in- stitutional survival. Yet relatively few healthcare executives have a clear idea of how to deal with the complex human side of the reengineering equation. Th~s article will provide executive managers with an understanding of issues they need to address throughout any reengineering project.

Paving the Way for Reengineering Assessing cultural issues: Before ini-

tiating any reengineering changes, it is important to understand and consider the culture not only of the organization as a whole, but also of the various work groups within it. Work and culture are intertwined, so changing the way work is performed necessarily changes the culture (Hansen & Sayers, 1995). Such changes almost never come without some resistance, and the consequences of attempting to create change without understanding culture can be severe (Sherer, 1995). In a healthcare organization, change is particularly difficult, because professional interests and de- partmental subcultures tend to conflict with reengineering goals. The loss or reassignment of various tasks can create turf battles that limit the success of reengineering initiatives.

Gaucher and Coffey (1990) stress the importance of evaluating the environ- ment to determine any beliefs and val- ues that employees share and then mov-

ing the organization away from its focus on how things have been done and toward a more ideal state. In many cases, executives should encourage cultural changes from the bottom up. Accord- ing to Hansen and Sayers (1995), “Homegrown redesigns created within nursing units are often much more successful than redesigns superimposed by administrators, because the homegrown changes incorporate the units’ important cultural tenets” (p. 142).

Whetsell contends that reengineering needs to be written into a healthcare organization’s strategic plan and com- municated to all employees, the medical staff members, the board of directors, and the community (Wachel, 1994). If all these stakeholders understand that reengineering will be used as a strate- gy to support the overall goals of improved productivity, quality, and expense reduction, the actual reengineering changes will be expected and understood.

Assessing readiness for change: Part of assessing the culture is determining readiness for change. Attitudes toward change often diverge widely. Some people welcome and initiate change, while others are extremely resistant to it. Re- sistance may stem from a variety of factors. People may resist a change because they are pleased with or believe in and are comfortable with the status quo, because they fear personal loss, or because they lack understanding about the change (Jamieson & O’Mara, 1991). Some may resist because they were not included in the change process, because the changes were not well communi- cated, or because they dislike the person implementing the change.

Several methods can be used to determine employee readiness, including formal assessment by an outside firm and informal meetings with employees.

4 rn JHQ September/October 1996 Vol. 18, No. 5

The latter may be especially appropriate for many healthcare institutions, as employees generally are accustomed to regular meetings and to information sharing from the administration. Ques- tions should be designed to determine employees’ beliefs about the need for change. If it has already been decided that reengineering should be done, the questions should convey the message that change is likely. The questions could include the following:

Are you dissatisfied with the way things are? Do you feel there is a need for some kind of change? Are you willing to become a part of the solution to make this organization successful? Are you aware of the potential consequences if we do nothing about our situation?

Regardless of the method used, the administration needs to obtain feedback in some way, so that major resistance will not be a surprise. In all cases (even with the most cooperative employees), top management needs to appreciate the validity of potential conflicts and to work toward their resolution, so that employees will buy into the reengineering project.

Developing preimplementation policy: Before initiating any reengineering effort, the organization must have in place all the human resource policies and procedures related to the change. American healthcare organizations have many different kinds of professionals, each with licensing laws, practice acts, and educational and legal qualifications that must be reviewed during the de- sign phase of the reengineering process. Strategies for dealing with layoffs, ear- ly retirement, grades and levels of compensation, transfer practices, educational support for newly created positions, and various other staffing issues must be largely in place before any major action is taken. To do otherwise risks serious labor relations problems.

Employees must be fully aware of the labor-management philosophy of the reengineering effort. For example, will the seniority system be honored? Will personnel changes be made according to job grade? If employees believe that

top management will be fair, then change efforts are likely to progress more smoothly.

Employees need specific educational programs to explain the concepts and benefits of reengineering, how it will af- fect them, and how they can help make it work. The executive reengineering team should develop a comprehensive educational program for the reengineering project. This program should be extremely well defined and detailed regarding time lines, how each portion of the project will be achieved, and the outcomes that are expected (Lumsdon, 1994). Team-building courses also should be included in the educational process (Hales & Savoie, 1994).

Addressing salary issues: One of the first questions employees ask at the be- ginning of a reengineering project is how salaries will be affected. Since reengineering typically creates multi- disciplinary roles for fewer employees, most staff want to know if they will be paid more for learning new tasks and assuming additional responsibilities. A healthcare institution that traditionally has based salaries on the educational qualifications of different professional and technical employees will need to develop a broader compensation philosophy, one that supports individual achievement in conjunction with team efforts.

Tying pay to performance: Accord- ing to Pierson and Williams (1994), healthcare organizations undergoing work transition are now tying pay more closely to performance through incentive programs such as broadbanding, team-based pay, gainsharing, competency-based pay, pay for skills, and a key contributor plan. ”Broadbanding” groups jobs and roles into fewer (but wider) pay ranges to encourage initiatives such as management develop- ment, career ladders, and skill- and competency-based pay. ”Team-based pay” recognizes group efforts. ” Gainsharing” focuses on improving operating results. ”Competency-based pay” encourages employees to become exceptional per- formers. “Pay for skills” rewards individuals for developing the various skills necessary for certain roles or jobs. A “key contributor plan” is an incentive

program designed to attract, motivate, and retain key individuals.

These practices may or may not re- place the traditional compensation practices of the organization. However, as more healthcare organizations face re- duced reimbursement, more employees will be expected to plan and imple- ment reengineering efforts designed to eliminate unnecessary expenses-and they will be rewarded accordingly.

Selecting the reengineering team: When selecting a reengineering team, top management should recruit the

Management needs to appreciate the validity of potential conflicts.

brightest and most appropriately skilled people the organization has to offer. This sends the message that the project is important (Hales & Savoie, 1994). Top appointments should include many of the organization’s formal and informal leaders, and if possible, someone who has reengineering expertise. Team members should be well-respected by the organization’s staff.

Some experts suggest placing at least one resistant person on the team, especially if the person is a leader in the organization. This person can shed light on the concerns of other change-averse groups within the healthcare institution and can help the team develop strategies so that everyone will “buy-in” to the process.

Ensuring Buy-in Sharing the vision: Bridges (1991) de-

clares that while purposes are critical to beginnings, they are, unfortunately, ab- stract. He suggests that employees ”need a picture of how the outcome will look, and they need to be able to imag- ine how it will feel to be a participant in it” (p. 55). Executive management will benefit as much as others in the organization if they are able to paint a picture of what the reengineering project will entail.

Management should describe in de-

JHQ 1 September/October 1996 Vol. 18, No. 5 1 5

Human Side of Reengineering

tail how the process will be carried out and who will be involved. These de- scriptions can be given in narrative form and include flowcharts, work assign- ments, and timetables, if they are available. Each description should include a specific goal. For example, if one pur- pose of the reengineering process is to reduce inventory, the goal of eliminat- ing unnecessary inventory carrying costs should also be stated. The object here is to shed light on the process and to give staff reasons to support it. The picture should also include examples of what might happen if the reengineering process is not successful, such as service eliminations or facility closure.

Communicating effectively: Ac- cording to Nordhaus-Bike (1995), fear decreases when people within the organization are informed and made part of the process. This can be achieved by involving representatives from all work levels in designing and implementing the change and by responding to employee concerns as they arise, rather than ignoring them until they become insurmountable problems.

Communication should go beyond the usual management/employee meet- ing channels. It can take the form of open forums, newsletters, and video programs (especially for personnel on the second and third shifts). The important point is to communicate regu- larly, in a manner that is planned and comprehensive.

All communication must be truthful. Honesty is always the best management practice, not only because it is honor- able and right, but also because dis- honesty is the quickest way to alienate employees (Tully, 1994).

Repeating the story: Top managers who have initiated and absorbed the concepts of a reengineering project tend to forget that when they announce their bold new plan, their employees will be hearing it for the first time. They must give the rest of the organization time to catch up. Threatening information tends to be absorbed with remarkable slow- ness (Bridges, 1991). Therefore, the reengineering story must be repeated on a regular basis through all communication channels.

Preparing the staff: Reenpeering ef-

forts may be seen as overwhelming. Staff will be able to respond more effectively if they are resilient. "Resilient" in this case simply means that they can adjust to changes without becoming dysfunctional or nonproductive. Exec- utives can help staff become more resilient by providing information and updates about the project. Top management should also provide educational programs regarding change and transition in general, tell stories about winners in the process, and encourage general sharing as often as possible during the project.

Motivating staff members: Burda (1994) notes that employee morale is the most pressing issue facing healthcare organizations as a result of cost-cutting efforts. Employee response may come in the form of resistance, even if employees agree that something must be done to ensure survival. One factor that

Executives should encourage cultural changes from the bottom up.

may cause this reaction is that many employees have been accustomed to carrying out orders, rather than having some responsibility and input into decisions. Reengineering concepts encourage decision making by all staff members. To motivate staff members, top management should train and em- power them to make work redesign decisions (Knight, 1995). Staff members' responsibility for all decisions may not be appropriate, but most decisions can be delegated to empowered employees. This action will serve to enhance buy- in.

Staff reassignment and redeployment methods must be planned, whether or not there will be reductions in force. Staff can be prepared to assume new roles by attending job fairs sponsored by the institution or educational re- training programs. Some conflicts will revolve around whether a task could be performed more cost-effectively by someone other than present staff mem-

bers. The executive team thus should be prepared for inter- and intradepart- mental conflicts.

Supporting the staff: Senior management must make the commitment to act upon the recommendations of the reengineering team. Their commitment will focus the project team on developing actionable recommendations and will reinforce the project's importance to the rest of the organization . It is extremely frustrating for staff to spend huge amounts of time on a project only for the results to be shelved.

It is critical that management provide the best facilities, methods, tools, and support they can afford during reengineering. The project will suffer if reengineering team members feel they do not have sufficient time or other resources necessary for successful implementa- tion. In some cases, management may need to relieve team members of their existing duties to allow them to focus their full effort on the reenpeering project. This will be especially necessary if the organization selects a "full speed ahead" process.

Supporting the survivors: For healthcare organizations, which traditionally have been known as caring institutions, reengineering may seem like a terrible betrayal. If reengineering results in workforce reduction, executives not only must consider the outplacement and other support needs of employees who are leaving, but they also must consider those employees who are being retained. Staff layoffs, work-hour cut- backs, and increased workloads may create emotional and financial hardships that can cause resentment and jeopar- dize the reengineering project.

Two factors are especially important when supporting those who are retained during a reengineering project. First, despite all efforts to redistribute the workload equitably, most employees may perceive only that they now are doing more work with fewer people. There should be ongoing educational support for these employees, and they should be given the opportunity to voice their concerns. Management should always address these concerns objective- ly with the intention of resolving the problem. The second factor is that em-

6 . JHQ . September/October 1996. Vol. 18, No. 5

tf!oyees feel the loss when their colleagues leave the organization. As for a n y loss, emotional support must be 1)rovided through ongoing communi- c‘ition efforts aimed at problem iden- tification and resolution (Nordhaus- Bike, 1995).

Rewarding and recognizing employees: Rewarding and recognizing employees for achieving operational and clinical improvements are as important during reengineering imple- mentation as they are at other times. Most employees have never been through this process, so they should be recognized for charting new waters. Great risk is involved, because reengineering may mean the loss of an employee’s job or that of the employee’s peers. Change theory is relevant here; Sherer (1995) notes that performance must be tracked and rewarded, and Bridges (1991) notes that one rule to reinforce new beginnings is to take the time to celebrate.

Dealing with Potential Problems Lack of top management buy-in: At

the administrative level, one or more crucial players may give only lip service to the project. If even one main player does not support the change, the entire project can be sabotaged. The hospital executive would do well to provide op- portunities for all members of top management to demonstrate their commitment in some public manner (e.g., by taking charge of one part of the imple- mentation process), so as to ensure their initial buy-in and continuing progress. Top management will set the tone for the staff to follow. In so doing, they will give staff the opportunity to rededicate themselves to the goals of the institution.

Organized labor: Reengineering op- portunities are often dismissed by executives as impossible because of the presence of organized labor in the institution. For example, reengineering to incorporate patient caregivers who are not registered nurses may violate existing labor agreements. Healthcare organizations that willfully ignore these agreements often meet with strong resistance that can snowball into a patient care and public relations nightmare.

Nurses in some parts of the country have resorted to strikes and appeals through the media to combat administration efforts (Ketter, 1995).

Healthcare executives need to fully understand and honor provisions of existing labor contracts that may conflict with reengineering objectives. Their show of good faith will serve the institution well if it becomes necessary to renegotiate labor contracts. At the same time, management needs to communicate strongly the necessity of the project, to labor leaders and rank-and-file employees alike. The objective of reengineering is to achieve the business goals of the institution. Management should justify in writing the reasons for re- ducing the workforce or changing operations in the face of increased com- petition (Jones, 1994). Executives should work to maintain a harmonious rela- tionship with organized labor, to ensure the success of the reengineering process and to avoid the creation of lingering resentments.

Professional practice issues: The reengineering team should be prepared to make difficult decisions regarding how professionals practice in the organization. Some professionals may need to make dramatic career changes if their positions are eliminated (Wachel, 1994). Management must be cautious of sabotage, as professionals who are con- cerned with job security may seek to de- rail the project.

Medical staff involvement: In order to ensure successful reengineering outcomes, the medical staff must be involved. Physician interest in the reengineering project may range from keen to virtually nonexistent. Top management will need to be creative in order to cap- ture physician attention. One way to do this is to get the chief of staff involved in the strategic planning process or on the reengineering steering team. Since peer pressure is often the most effective tool of persuasion, the chief of staff should be made responsible for selling the benefits of the project to the physi- cians and encouraging them to become involved as members of various de- partmental or functional teams. Physi- cians often see meetings as a waste of time, so any activities involving medi-

cal staff should be carefully scheduled, efficiently run, and goal-directed.

Burnout: For top executives and staff, burnout is not uncommon (Nordhaus- Bike, 1995). Among an individual’s symptoms of burnout may be loss of a sense of humor, loss of effectiveness, cynicism, clinical depression, sleep dis- turbance, chronic fatigue, stomach up- sets, backaches, headaches, and skin rashes. Burnout can have a devastating effect on the organization’s efforts. Reengineering team members must be

Management should recruit the brightest and most appropriately skilled people.

attuned to the symptoms in themselves and others and be prepared to intervene with appropriate work aids (e.g., short- term or part-time help, off-the-shelf computer programs), emotional support, or even an afternoon away from the workplace.

Involving the Community Reengineering affects the world out-

side the institution’s walls. Healthcare executives need to remember that their staff belong to the community the organization serves. Rumors among staff can quickly spread to the community at large and can create a sense of unease about the institution’s ability to deliv- ery quality healthcare, or any healthcare at all. It is very important that the hospital’s chief executive stand firmly and visibly behind reengineering efforts and control the dissemination of information through the media and other sources of public information. Includ- ed in the information provided should be the rationale behind the decision to reengineer, as well as the expected ben- eficial outcomes. It might even be appropriate to bring community representatives onto the reengineering team. Management should be prepared to face the public criticism that may come as a result of negative publicity.

JHQ 1 September/October 1996 1 Vol. 18, No. 5 1 7

Human Side of Reengineering

Summary ”Sustained improvements in pro-

ductivity and quality will develop best in healthcare organizations that are fo- cused, relatively stable, and have the ac- tive support and participation of their stakeholders” (Pierson & Williams, 1994, p. 30). Healthcare executives who plan to improve operations through reengineering efforts need to be aware of the human side of reengineering. Careful planning through environ- mental assessment, open communication inside and outside the organization, effective leadership, and staff support will ensure the greatest chance for the success of any reengineering project.

References Bridges, W. (1991). Managing transitions.

Reading, MA: Addison-Wesley. Burda, D. (1994, December 12). Layoffs rise

as pace of cost-cutting accelerates. Mod- ern Healthcare, 33-38.

Gaucher, E., & Coffey, R.J. (1990). Trans- forming healthcare organizations. San Fran- cisco: Jossey-Bass.

Hales, H.L,. & Savoie, B. J. (1994, Septem- ber). Building a foundation for successful business process reengineering. In- dustrial Engineering, 17-19.

Hanson, R., & Sayers, B. (1995). Work and role redesign: Tools and techniques for the health care setting. Chicago: American Hospital Publishing.

Jamieson, D., & O’Mara, J. (1991). Man- aging workforce 2000. San Francisco: Jossey-Bass.

Jones, L.D. (1994, December). Avoiding lit- igation after a reduction in workforce. Healthcare Financial Management, 50-53.

Elaine Griffin is a senior education specialist for McFaul G. Lyons lnc., a healthcare consulting firm based in Trenton, NJ. Grifin has directed quality improvement teams, developed and implemented critical paths, and effected cost-gective quality improvements by reengineering nursing departments. She conducts workshops for reenpeering projects, change management, and nonsalary expense reduction programs.

Ketter, J. (1995, April/May). Teamwork ensured march’s success. American Nurse, 19-21.

Knight, R.M. (1995, January). Reengineer- ing: The business buzzword. SKY Mag- azine (Delta Airlines), 22-28.

Lumsdon, K. (1994, November 5). Want to save millions? Hospitals and Health Net- works, 24-32.

Nordhaus-Bike, A. (1995, May 20). The bat- tle against burnout. Hospitals and Health Networks, 36-40.

Pierson, D.A. and Williams, J.B. (1994, September 5). Compensation via integration. Hospitals and Healtk Networks,

Sherer, J. L. (1995, February 20). Managing chaos. Hospitals and Health Networks, 22- 27.

Tully, S. (1994, November 14). Why to go for stretch targets. Fortune, 145-154.

Wachel, W. (1994, July/August). Reengi- neering ... beyond incremental change. Heal tkcare Executive, 18-21.

28-36.

CE Questions, JHQ46 (Mark your answers on

Continuing Page 42.) “1 Education

1. One method that may be used to assess employees’ readiness for change is a. formal assessment by an outside

b. informal survey by managers. c. “exit” interviews. d. preemployment questionnaires.

firm.

2. Key concepts involved in reengineering include a. payroll incentive programs. b. integration in the strategic plan. c. understanding of the work cul-

d. All of the above ture.

3. According to this article, a key person to include in the reengineering team is a. the most positive manager. b. the chief executive. c. a direct care staff member. d. someone who is resistant to

reengineering.

4. Fear of change decreases in the organization when a. only newly hired staff are in-

b. the only management is in-

c. people are informed and made

d. change is implemented quick-

volved.

volved.

a part of the process.

ly.

5. According to this article, one of the most difficult aspects of reengineering in a healthcare organization is that a. most organizations already are

short-staffed. b. in a caring institution, reengi-

neering is perceived as betrayal.

c. employees are underpaid. d. employees will seek jobs else-

where.

NAHQ in Nashville! Workshops, exhibits, posters, and special speakers, along with ”bootscootin’ barbecue,” and networking with colleagues and friends are in store for those attending the NAHQ 21st Annu- al Educational Conference in Nashville, TN, October 26-30, 1996. The conference, which will be held at the Opryland Hotel and Convention Center, promis- es to be fun and informative! Continuing education credit from HQCB and AHIMA will be available, as will nursing credits.

Keynote speakers Janet Lapp, PhD, President, Lapp

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Judith Briles, PhD, President, The Briles Group, Inc., Denver, CO.

Register today!

Call NAHQ at 800/966-9392

8 1 JHQ 1 September/October 1996 1 Vol. 18, No. 5

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The Human Side of Reengineering