Wednesday, June 3, 2009

Creating Value During this Economic Crisis

As July 1, 2009 arrives and marks the beginning of our new fiscal year, the Senior Leadership Team of CHRISTUS Health has been engaged in deliberate and thoughtful discussions on the services and related expenses we need to provide going forward. As a result, significant expense reductions are planned and are being communicated in several phases.

In addition, the team has been diligently reducing the CHRISTUS global corporate expenses throughout the FY09 fiscal year, resulting in actual expenses below budget of $8 million, plus an additional reduction of $6 million for Information Management services. This, of course, has provided a great starting point for the additional reductions in the coming months.

How have we decided which programs to reduce? Contrary to doing across-the-board cuts of the same percentage for all, the team reviewed the past budget, analyzed the value of projects and services provided to our regions and business units and considered advice provided by a Corporate Services Task Force as well as strategies and directions from our system governance board and Futures Task Force II.

This recent journey to enhance our position as a high quality/low cost provider was reflected in a recent article by the Korn/Ferry Institute entitled, “ ‘Fast Consolidation’: Creating Value in a Brutal Economy.” In it, they indicated that, unfortunately, most organizational leadership tries to promote fairness by using a “peanut butter” approach to implementation which requires all departments equal pain. We purposely avoided such by following four action plans that were articulated by the authors:

1. Initiatives prioritization and rationalization — taking a hard look at all the existing so-called “strategic initiatives” and stopping the ones that don’t unequivocally support the current strategy will create the expected pay-off.
2. Centralization and standardization of back-office functions — once the downsizing takes place, non-client facing functions should be the first candidates for centralization. Since process standardization can create short-term costs, leaders should have visibility over the cost-benefits analysis of standardizing processes.
3. Redefinition of roles and responsibilities — very often companies go through reductions-in-force but do not take the immediate necessary steps to redefine key roles and responsibilities across the enterprise. This job can’t be fully delegated to HR or organization design functions (even though HR should partner with business unit and functional leaders to make it happen), since it should be a leadership-led exercise.
In fact, once roles and responsibilities principles, criteria and guidelines are clear, the new organization blueprint and leadership selection should be relatively straightforward.
4. Clear and timely communication highlighting the path forward — the remaining workforce should receive clear and timely communication regarding the rationale for the actions taken, the path forward and the role that they are expected to play in the new organization. If not invited to be leaders as opposed to followers, the remaining workforce will likely take a passive and reactive approach. They need to clearly understand what commitments the leadership team can make to them but also what is expected from them in the times ahead.

As I have been repeatedly saying both to our internal and external audiences, CHRISTUS Health sees the global economic crisis as a rainbow in the clouds. It has given all of our regions and business units in our acute, non-acute and international divisions, as well as global corporate services, the opportunity to revisit our operating models, to as effectively as possible assess the value of each program and service we provide, and then eliminate or redesign what is maintained so we continue to strengthen our health and wellness ministries to assure long-term success as we continue our Journey to Excellence.

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