HELPING PHYSICIANS MOVE TO A BALANCED APPROACH TO SOLVING BUSINESS PROBLEMS.
Search, identify, and deal with error is what medical training is all about. An example: a medical test comes back “negative.” That means it is “positive” news for the layman!
This negative-seeking approach to problems becomes itself a problem when physicians become leaders or take a position on the Board of a Hospital or Physician Practice Group.
KEY WORDS: talent management, leadership, organization development, compensation, accounting, governance, recruitment.
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In the early 1970’s, Arthur F. F. Snyder, former Vice Chairman of Boston’s US Trust, became a legend because he was willing to lend money to a new technology company called Prime Computer Company. Other bankers saw risk at Prime Computer. Snyder saw opportunity. When asked his philosophy behind a risky venture that scared other bankers away, Snyder took out a sheet of paper and wrote:
Assets and Liabilities
Snyder said these two words were more than the fundamental building blocks of the Basic Accounting Equation. It also was a statement about human nature. What he meant was that some people gravitate towards asset enhancement as a way of providing value to organizations. Such people often see the world as full of opportunities. Their weakness is that they are prone to fall in love with their overly optimistic assessments. In terms of the Big Five Personality Dimensions, such people would be high on Openness and Extroversion.
But liabilities reduction is also a critical value. People who gravitate towards this side tend to see the world as full of threats. Their weakness is that they are tone deaf to value, lack vision, and place too much weight on threat. Using the Big Five, such people are low on Openness, high on Stability, and high on Introversion.
Snyder’s philosophy about making credit decisions was to use the two concepts of Asset Enhancement and Liabilities Reduction as a framework to look at financial structure and power. At Prime Computer, he saw a strong CFO and a strong Chief Legal Counsel monitoring the liability side. He saw strong VPs of Sales and Marketing as champions of asset enhancement side. And he saw CEO Ken Fisher as structuring his role as being the final arbitrator between two powerful and conflicting forces. Snyder liked what he saw.
SIMPLE AND PRECISE.
Perhaps leadership in a complex world ought to start from simple first principles. As a leadership principle, Asset Enhancement versus Liability Reduction is a principle that values the dynamic tension between these two competing values. It suggests staffing teams with strong advocates on BOTH sides. This formula sounds simple to the point of being simplistic. And yet, below are four common U.S. business failures that are linked to a lack of simplicity: the fallacy of alignment, the fallacy of thinking like a business partner, the fallacy of asking people to “think strategically.” Finally we discuss the fallacy behind skewing CEO pay to be aligned with the needs of stockholders.
We Are All Aligned.
Our simple model of leadership says conflict is natural. But using the concept of managerial “alignment” sees conflict as an aberration. “Alignment” implies a common understanding of corporate strategy and everything is linked/supported down to individual job descriptions and compensation plans. Those who fight alignment must have a psychological problem or they are so narrow minded they don’t “get it.”
Perhaps it is the very concept of alignment that needs to be changed.
Lehman Brothers was a classic alignment-driven company. The strategy was clear: increase assets and beat arch rival Goldman Sachs:
Richard Fuld did not view himself as the impartial arbitrator between two powerful forces. He was the Chief Asset Enhancement Officer aided by an aggressive sales/marketing function. Was the Liabilities Reduction Team given equal stature?
On May 16, 2008 SVP Matthew Lee wrote a letter to the CFO and the Chief Risk Officer complaining of “unlawful and unethical” conduct in violation of the Firm’s Code of Ethics relative to its stated mandate of “full, fair, timely, accurate, and understandable” disclosure of financial information. This 14 year veteran of Lehman complained that “certain senior level internal audit personnel do not have the professional expertise to exercise the audit functions they are entrusted to manage.” (New York Times, 2010).
A less dramatic but common example of the fallacy of alignment is when a physician practice group Board selects Directors who are all friendly with a strong CEO. One can predict that meetings will be harmonious and pleasant. Everyone will be aligned.
The price of We Are Aligned is a reduction of the organization’s ability to focus on the right problems that need to be defined.
Your Line Manager is Your Customer and the Customer is Always Right
Human Resources is one of those functional areas that in theory contribute both to Asset Enhancement and to Liabilities Reduction. Compensation, recruitment systems, and employee training touch all organizational boundaries. A common phrase within the United State HR business community is that HR professionals ought to think of their line managers like clients.”
It is a baby step from calling your customer a “client” to “the client is always right” to measuring HR outcome as a function of “client satisfaction surveys.” Your line manager is your client places an implicit value on the primacy of harmony over conflict. Instead of being forceful advocates for a unique perspective that spans Asset Enhancement and Liabilities Reduction, think of your line manager like a client may result in diminished effectiveness. In my experience, most line managers want HR to focus on short term cost containment. They are not particularly interested in discussions about how talent management can improve customer attraction and customer retention. Should HR comply? Is the customer always right?
At Southwest Airlines, HR reports to the VP Sales/Marketing because Southwest sees HR as a tool for asset enhancement. At many American companies, however, many heads of HR find themselves functional peers of Controllers, both reporting to the Chief Financial Officer. Is it any wonder that they are professionally frustrated and the HR function is not treated with respect?
Is your HR head a forceful advocate of change or a meek compliance-driven person?
Think More Strategically.
This developmental advice is sometimes given to high potential executives as a “positive” suggestion for improvement. Telling an executive that the executive fails to think “strategically” can be perceived as insulting. As one of our executive clients said, “I am paid to think tactically. I am rewarded for acting tactically. And then I am told that I don’t think strategically! I am doing what I am asked to do and now get penalized for it!“
A more precise way of getting at the same developmental issue is to tell executives that they have mastered being advocates for Asset Enhancement or Liabilities Reduction. Congratulations! For example, one Chief Medical Officer is the Master of Asset Enhancement in that he always comes up with breathtaking new ideas to move the practice forward. But he is not balancing his vision with a demonstration that he has mastered the liabilities associated with his ideas.
Leaders must take multiple perspectives at the same time.
Such a framework leads to concrete prescriptions such as “first define the problem from one side and then define the same problem from the other side. If you can’t easily define the problem from the side you normally favor, then say nothing and ask more questions. Perhaps you do not fully understand the issue.”
For example, we are coaching an outstanding Internal Auditor who would like to be a Chief Financial Officer. But she acts like a policeman in a game of Cops and Robbers. To move beyond “gotcha!” to serious contention for promotion requires an ability to articulate and appreciate Asset Enhancement even though her job today is biased on Liabilities Reduction.
CLARIFY WHAT HAT YOU ARE WEARING
In working with physicians on hospital Boards we urge them to focus on analyzing problems from both asset enhancement and liabilities reduction perspectives. This is sometimes the equivalent of asking physicians to sign checks with their non-dominant hands: easy to understand but hard to do.
We also recommend physicians be clear what “hat” they are wearing when they speak up at Board meetings. Physicians are required to represent multiple stakeholders at the same time. First and most important is to represent the needs of the hospital as an institution. Second is to represent the needs of your medical colleagues in your practice. And third is to represent yourself.
There is no conflict if the physician clearly states which hat she is wearing when she is speaking. There is no problem if the physician shifts metaphorical hats but is clear which hat she is wearing.
This technique only advances physician credibility on Boards.
REFERENCES
New York Times. “The Letter by Lehman Whistle Blower Matthew Lee. http://dealbook.blogs.nytimes.com/2010/03/19/the-letter-by-lehman-whistle-blower-matthew-lee/