Corporate Darwinism

Three CEOs from change leaders Nebraska Medical Center,Sentara Healthcare, and Scott and White Health Plan share their expertise on:

Corporate Darwinism:Evaluating Your Organization’s

Responsiveness to Change,and How to Improve It

Glenn A. Fosdick, FACHEPresident and Chief Executive Officer

The Nebraska Medical Center

Howard P. KernPresident and Chief Operating Officer, Sentara Healthcare

Allan EinbodenCEO, Scott and White Health Plan

Effective change is critical to long-term company success. Businessgrowth depends on being nimble, change-centric, and constantly self-assessing. CEOs must work to create an organization dedicated to

proactive change. This means grounding your company in a long-term vision,and driving this vision down through every level of the organization.Changing in response to vision, rather than in response to external pres-sures, allows you to create a culture of change and growth that unlocksthe creativity of every employee throughout the company. When they under-stand how their work ties to the company’s future, and are given the free-dom to work smarter and take risks, employees will be more productive,more engaged, more independent, and more adaptable. This, in turn, cre-ates a high-growth organization dedicated to constant improvement at everylevel. It begins with vision, is sustained through talent, and culminates inlong-term growth. ■

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Action Points

I. The Importance of VisionEffective change begins by reviewingand defining your strategic vision for theorganization.

II. The Bottom LineChange is directly related to growth.

III. Must-Haves for Creating a Chance-Centric Talent PoolThe recruitment of, transitioning of, andcommunication with employees is ofcentral importance.

IV. The Golden Rules for Creating aResponsive CompanyTrain true leaders at every level. Develop clarity of purpose. Rewardchange-mindedness.

V. Essential Take-AwaysSuccessful change is based on strategic, proactive management.Organizations that are successful inmanaging change have built a capabilityfor leadership into the organization atmultiple levels.

Contents

About the Authors . . . . . . . . . . . . . . . . . . . . p.2

Glenn A. Fosdick, FACHE . . . . . . . . . . . . . . p.3

Howard P. Kern . . . . . . . . . . . . . . . . . . . . . . p.7

Allan Einboden. . . . . . . . . . . . . . . . . . . . . . p.10

Ideas to Build Upon & Action Points . . . p.14

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© Books24x7, 2008 About the Authors ExecBlueprints 2

About the Authors

Glenn Fosdick has had a distin-guished career in hospital/healthsystem administration. He was

named president and chief executive officer of the Nebraska Medical Center in Omaha, Nebraska, effective August 1, 2001. The Nebraska Medical Center includes a 687-licensed-bed acute care teaching hospital,comprised of the former Bishop ClarksonMemorial Hospital and the formerUniversity of Nebraska Medical CenterHospital. In addition, it incorporatesownership in hospitals in Iowa, Missouri,as well as a freestanding orthopedic facility in Omaha.

Prior to his appointment at theMedical Center, Mr. Fosdick served aspresident and chief executive officer ofHurley Medical Center in Flint,Michigan, since 1995. He joined HurleyMedical Center, a 495-bed teaching

hospital and regional referral center, in1992 as executive vice president and chiefoperating officer.

From 1984 to 1987, Mr. Fosdick wasthe senior vice president of patient careat Buffalo General Hospital in Buffalo,New York. He was promoted to seniorvice president and held the position until1992. His prior experience includes sev-eral administrative positions at DeaconessHospital, Buffalo, and Genesee MemorialHospital, Batavia, New York.

Mr. Fosdick is a fellow of theAmerican College of HealthcareExecutives. He has received numerousawards, including the ManagementExcellence Award by the regents of theAmerican College of HealthcareExecutives for the State of Michigan in1998. Additionally, he holds the rank ofmajor in the U.S. Army Retired Reserve,Medical Service Corps.

Mr. Fosdick holds educationalappointments as a member of the dean’sadvisory council, School of Managementat the at the State University of NewYork, Buffalo; Member, Clarkson Collegeboard of directors, Omaha, NE; andserves as senior associate dean at theUniversity of Nebraska College ofMedicine, Omaha, NE.

Mr. Fosdick received his B.B.A. fromthe State University of New York,Buffalo, in 1973. He received his master’sof health services administration, pro-gram in hospital administration, from theUniversity of Michigan-Ann Arbor.

Glenn A. Fosdick, FACHEPresident and Chief Executive Officer, The Nebraska Medical Center

☛ Read Glenn’s insights on Page 3

Howard Kern currently serves asthe president and chief operatingofficer for Sentara Healthcare, as

well as chief executive officer for its hos-pital division, and chairman of the boardof Sentara’s Bay Primex insurance divi-sion. He has been employed by SentaraHealthcare since 1980. Mr. Kern receivedhis master of health administrationdegree from the Medical College ofVirginia in 1981; he received an under-graduate degree from the State Universityof New York in 1978.

Mr. Kern is a fellow of the AmericanCollege of Healthcare Executives and isa member of numerous professional and

community organizations. He is a mem-ber of the board of directors of SentaraHealth Plans, the Virginia Hospital and Healthcare Association, VHACentral Atlantic, Virginia Shared HospitalServices Corporation, Virginia HealthNetwork, and Westminster Canterbury,where he also serves as chairman of theirfinance committee. He has previouslyserved on regional boards for the American Heart Association, theAmerican Cancer Society, JuniorAchievement, and Rotary. He is a formermember of the board of the JonesInstitute for Reproductive Medicine andthe Norfolk Chamber of Commerce.

Mr. Kern was appointed to the boardof visitors for Norfolk State University in2003 by the governor of Virginia; heserves as chairman of that institution’sfinance, audit, and nominating commit-tees, and is a member of the research andtechnology committee. He also serves asan affiliate professor of the MedicalCollege of Virginia, department of healthadministration.


☛ Read Howard’s insights on Page 7

Allan Einboden has an extensivebackground in health care financ-ing, dedicating his career to

improving our nation’s health care sys-tem. Mr. Einboden is the CEO of thenationally recognized Scott and WhiteHealth Plan, where he has served fornearly eight years.

Prior to joining Scott and WhiteHealth Plan, Mr. Einboden was the COOand CIO for Primary Health in Boise,Idaho. Previously, he was a director forIntergroup Healthcare Corporation, nowpart of Health Net.

Mr. Einboden has served in leadershippositions in many state and nationalindustry organizations.


☛ Read Allan’s insights on Page 10

Our Recent GrowthIn the past five years, we’ve madedramatic changes. I came here inJuly of 2001 and our fiscal yearended June 30. Our bottom linethrough that year was $5.7 million.We were budged to make $11 mil-lion. Our cash reserves were around$8 million, which is extraordinar-ily small for a hospital. At that time,we were a $500 million a year operation.

We had some significant financialchallenges. We focused a great dealof attention on improving the qual-ity of our product. We defined ourpriorities with everybody in the hos-pital, and we took them very seri-ously. By doing those two thingsand by focusing on ways to increaseour revenue production, we’vemade remarkable changes.

Last year, our budget was $34million and we made $61 million.The $8 million cash reserve hasgone to $200 million. It’s a dramatically different world for usnow.

Our success has reinforced thatif we commit to improving ourproduct, we will be successful.When you’re not doing well finan-cially, the board does not have con-fidence in letting you do more, butas you repeatedly do things suc-cessfully, the board gains confidencein you.

Our success has allowed us toexpand. We now own 49 percent ofa freestanding orthopedic hospital.We’re breaking ground this month

for a 100-bed community hospitalthat we’ll own 60 percent of, withphysicians owning the other 40 per-cent. We couldn’t have done thosethings six years ago.

ChallengesThere are always challenges withgrowth. We’ve grown quickly.When I first came here, we hadsome bed availability problems. Wewere able to expand by 60 beds.That was great.

Two years ago, we had zerohours of what we call red status,where beds are not available. Lastyear, we went from 0 to 500. Thebottom line is that our marketingsuccess and our strategic successhave resulted in the fact thatdemand on our beds is exceedingour capacity at times, and we needto work on that. We’re taking theissue very seriously.

Cultivating RelationshipsWith the board, I continually striveto find ways to incorporate theirknowledge and expertise. Manyhospitals don’t appreciate or takeadvantage of the fact that theirboard members are very knowl-edgeable about business. They maynot be knowledgeable about healthcare, but they’re often knowledge-able about business practices, cap-ital financing, strategic orientation,and operational issues. By takingadvantage of those skills, you canonly make yourself stronger.

Board members are often pillarsof society. They are resources thatcan help you deal with the state andfederal government, and even localissues. An organization should notbe dependant upon the CEO’sinterest. The fact that I like qualityshould not be what drives it; itshould be because the board is committed to quality.

The board is a significant con-tributor, but there is always roomfor improvement. I’d like to see ourboard continue to get more involvedin understanding quality measure-ments. They’re the ones who areresponsible in the long run, so I

© Books24x7, 2008 Glenn A. Fosdick, FACHE ExecBlueprints 3

Glenn A. Fosdick, FACHEPresident and Chief Executive Officer

The Nebraska Medical Center

“What’s nice about success is that itbreeds success.”

• Fellow of the American College ofHealthcare Executives

• Received the ManagementExcellence Award by the regents ofthe American College of HealthcareExecutives, State of Michigan, in1998

• Holds the rank of major in the U.S.Army Retired Reserve, MedicalService Corps

Mr. Fosdick can be e-mailed [email protected]

Glenn A. Fosdick, FACHEPresident and Chief Executive Officer, The Nebraska Medical Center

Our experience has reinforced that if we committo improving our product, we will be successful.

Glenn A. Fosdick, FACHE

President and Chief Executive OfficerThe Nebraska Medical Center

want them to take it as seriously aswe do.

Reconciling VisionIn the case where there is a differ-ence of vision between myself andthe board, we reconcile it by start-ing with our planning process. Ourplanning team represents the spec-trum of our organization. We haveboard members, physicians, andadministrators.

Within that group, there is goingto be conflict of opinion. We workon issues as much as we can. It’s notuncommon in hospitals for some-body to go straight to a board mem-ber with their own opinion. Overall,we try to work by staying involvedand being a part of the process.

Best PracticesWe continually have an open mindabout using the best practices ofother industries. We do things thatother people don’t think of. We’vechanged our entire supply chain sys-tem. They now call it the NebraskaSystem, and it is being used by manyother hospitals in the country.

We use a program called CrewResource Management Training,which is developed by the FAA forcommercial aviation. It was dra-matically successful in reducingairline fatalities. We saw it and weliked it, and we thought it would fitin for us as well.

The program is based on the the-ory that airplane crashes are causedby a breakdown of communicationbetween pilots and their crew. In the1970s, the FAA realized that thiswas happening. They were havingcrashes at a dramatically increasingrate, and they found that the mostcommon cause was that the pilot

and the co-pilot had not flowntogether before. The co-pilot wouldspeak and the pilot would ignorehim.

The FAA made a dramaticchange in the way they did things.They mandated that the pilot listento the co-pilot, and so forth. Werealized that the same thing happensin the OR. We may have a chief ofsurgery working with a six-monthnewly trained nurse, and she’s notgoing to argue with him. We’vetrained over 1,200 people in ourORs, our ERs, our obstetric units,our cardiac units, and our radiologyunits, to take advantage of the FAA’sknowledge.

Top Employment IssuesLike all health care companies, ourconcerns down the road are that asthe baby boom population is reach-ing retirement age, we’re going tolose more people than the systemcan produce. It’s not just the num-bers of people, but the tremendousyears of experience they have aswell.

We are very concerned aboutproper management to best utilizeour employees and keep them fromgoing to other places. We want toget the greatest return and prof-itability out of what we do, whichstarts with good leadership at alllevels. If we don’t have good lead-ership, we will lose more people andbe less profitable. We spend a lot of


Glenn A. Fosdick, FACHEPresident and Chief Executive Officer, The Nebraska Medical Center (continued)

Assemble broad-based planning team

Identify conflicts of opinion in group

Stay involved in the discussion

Keep an open mind about new practices

Build a shared vision of the company’s future

Aligning Vision

time and energy working on gettingbetter managers for employees towork with.

We try to continually find waysto better communicate with ouremployees. Our theory is that if weget all 5,000 people who work herewalking in the same direction, wecan cover a lot of ground. In mostcases, it doesn’t work that way.There are 200 people going east and1,000 going west.

Change is happening in thisindustry whether we like it or not.It’s going to continue, and it’sprobably going to happen faster inthe future. If we can handle it effec-tively and provide a stable andattractive environment, we can notonly recruit talent, but we can alsokeep the best and the brightest here.

Our theory is to settle down anddo what we do best. We want tocommunicate our plans and makethem clear. We want to work withpeople and train them to do thingsproperly. With those actions, we canhandle change better than otherpeople. If we can handle change bet-ter than other people, people willwant to work for us.

The Role of TechnologyHealth care has been somewhatbehind the curve in using technology

to improve performance. In thelong run, we can’t function withouttechnology. The pure volume of whatwe do is too excessive.

We have to find ways to use tech-nology to help us do our jobs bet-ter. There is some progress beingmade; some of it is good and someof it is bad. Overall, we need toenhance our use of technology inthe daily operations of the hospitalenvironment astronomically.

Development OpportunitiesWe openly post any opportunity inthe organization. We don’t have anysecret promotions. We providesome reimbursement for continuingeducation, and we offer a lot of con-tinuing education programs inter-nally. We have programs wherepeople can participate and demon-strate their skills in a lot of different types of projects.

We spend time talking to peopleto identify the up-and-comers. Wespend time in senior managementidentifying people who have thepotential to do more than they’redoing right now.

Change ManagementStrategiesThe people we’re most interested inare the people who can adapt to

change the best. Like all organiza-tions, we have people who wish wewere back in 1961. They still wearflat-top haircuts or have their hairup in a bun. There are people whowant the old days to stay forever,but it just can’t be that way.

There are people who don’twant to use computers. Well, com-puters are the way we do businessnow. There are people who don’twant to get into quality improve-ment. Well, that’s the way weimprove things.

For the people who are adept atmaking change, opportunities lie.We’re going to see some peoplestumble and some people stand outin their ability to take change andbe successful with it. Those are thepeople who will be the most attractive to us as we get biggerresponsibilities.

Change is an incredibly impor-tant part of any business, but thereisn’t any industry that has changedas dramatically and as fast ashealth care. I look upon it as anopportunity. I believe that ourorganization can adapt better andfaster than others, which is going tohelp separate us from our compe-tition. People tell you about thegood old days, but they weren’t thatgood. They forget that they didn’t



When I came here, we went by the name of Nebraska Health System; NHS.NHS never worked. We got confused with the National Humane Societyand the National Honor Society. Four years ago, we changed our name toNebraska Medical Center, which has worked much better. We use it as thebasis of our marketing campaigns. We have developed an incredibly strongmarketing program, and we’ve worked very hard to educate the community.

Glenn A. Fosdick, FACHE

President and Chief Executive OfficerThe Nebraska Medical Center

have air conditioning in cars, whichwe now take for granted.

I’m not saying that today is per-fect, but in the old days, they hadmany of the same problems that wehave today with less capability.They didn’t have computers. Theyhad to figure everything out byhand. They had typewriters. If they

made a mistake, they had to try tomanually erase it.

Change is valuable. I look uponchange as an opportunity for us toseparate ourselves. We recognizethat in health care, change is needed.I tell people repeatedly to look at usas an industry. If you compare ourindustry in IT to banking, or in hotel

services to the Ritz Carlton, or inquality improvement to aviation, orin strategic planning to the Dell com-puters, there’s not a lot that we canbrag about. We’ve got to changethat. We’ve got to get better. That’swhat we’re trying to do in thisorganization, and we’ve had greatsuccess because of it. ■



Corporate Responsivenessto ChangeIn the health care industry and ourorganization, change is a constant.The dynamics of health care aresuch that the status quo is not anoption. The current industry modelthat we have is problematic on anumber of fronts.

The growing economic costs ofhealth care, particularly as thedemographic shift occurs, are goingto add significant stress to the econ-omy. The cost of health care is apercentage of the GDP. Consumersare becoming much more aware ofthe issues around quality and safety.In the past, the health care indus-try was not looking at quality and safety as core performanceexpectations.

Doctors and nurses aren’t goingto meet the growing need forpatient care and institutional care.Nursing homes will clearly outstripthe resource potential if nothingchanges. Our expectation for futuregrowth is ironic. We’re expectingsignificant growth in health caredemands as the population ages andnew technology and medicationscome online to allow us to treat anddiagnose diseases that weren’t treat-able or diagnosable before. Thereality is that in doing that, we arecoming up against economic con-straints that the government and theindustry have in terms of being ableto afford care and meeting con-sumer expectations for access, convenience, quality, and safety.

Our company’s overall imagefrom a change perspective hasevolved from one where we wereseen as a class act health careprovider and insurer to being anintegrated deliverer of care that is trying to eliminate a lot of the

fragmentation and gaps in healthcare. We are doing that by linkingup providers and payers to mini-mize the amount of frustrations tothe consumers and the employers.

The notion of integrated deliveryof care was in vogue 10-15 yearsago. It fell out of fashion becauseit’s very difficult to manage, butnow it is coming back into style asa predominant philosophy of inte-grated health care. Going forward,the ability of the organization tomanage change and meet the grow-ing demands of consumers, the gov-ernment, and regulators will requireus to dramatically improve withoutgetting significant new dollarsinvested in the system. Change hasto allow us to re-deploy existinginvestments and dollars in a waythat drives significant improvement.

Best PracticesThe best practice for change man-agement is having highly competentleaders in the organization. I’m dis-tinguishing leaders from managers.The classic definition of manager isthat they manage resources toachieve goals and objectives. Ourdefinition of leader is one whodefines a new vision, sets theagenda for change, and outlines thekey objectives and goals that man-agers need to reach. In that context,it is vital for an organization that

wants to be positioned well to manage change.

Organizations have to be well-vested with strong leaders at mul-tiple levels in the organization,from the board and CEO down tomid level and first line managementpositions. The leadership role has tobe defined in the context of visionfor the organization as well as theability to build relationships withthe organization’s resources, people,and key constituents.

There’s a level of affiliation lead-ership skill that needs to be builtinto an organization to effectivelymanage change. There need to beleaders who are strong coaches andcan help people manage change.

© Books24x7, 2008 Howard P. Kern ExecBlueprints 7

Howard P. KernPresident and Chief Operating Officer

Sentara Healthcare

“CEOs must work toward clear communication of the company’s reason for existing to the rest of theorganization.”

• CEO of company’s hospital division,and chairman of its insurance division

• Joined company in 1980

• Fellow of the American College ofHealthcare Executives

Mr. Kern can be e-mailed [email protected]


The best practice forchange management ishaving highlycompetent leaders inthe organization.

Howard P. Kern

President and Chief Operating OfficerSentara Healthcare

Organizations that are successful inmanaging change have built a capability for leadership into theorganization at multiple levels.

It is critical to have clarity of pur-pose and a clear reason why youexist. Too many organizationsassume that everybody understandstheir relevance. They don’t take thetime to communicate what they aretrying to accomplish, why this isimportant to our customers, andhow they are going to get it done.

It’s vitally important to reward,recognize, and incent managers,employees, and leaders for makingchange happen versus protecting thestatus quo. Too many organizationshave old-style compensation andincentive plans that are not gearedtowards recognizing the need forflexibility and innovation. There’snot a level of appreciation in theway goals are set and incentives arepaid out.

Improving ResponseWe’re focused heavily on develop-ing our leaders. It’s been a majoragenda for us and we’re continuingto do it through 360 evaluationsand leadership training and devel-opment. We are looking at highpotential leaders for the future,identifying them early on, and promoting them up through theorganization. We put a heavy

emphasis on promoting peoplewithin the organization and developing a change culture.

We are looking at a culturaltransformation. It’s important torecognize that there’s a cultural biasin any organization. To facilitateeffective change, you’ve got tochange at the cultural level.

Hindering FactorsFactors that hinder an organiza-tion’s capacity to change are nottypical problems or regulatory con-straints. Health care is very regulated, but external regulators

tend to not be current with change.They often inhibit change becausethey restrict and restrain how youdo things. In health care, that’s amajor issue.

The other major factor that hin-ders organizational change is thenature of health care as a science.You’ve got to have all kinds of doc-umentation for an improvement.The FDA is slow in managingchange because of the safety con-siderations around new drugs andnew therapy technologies. There isa delicate balance between notwanting to do something that willbe inherently dangerous because it


Howard P. KernPresident and Chief Operating Officer, Sentara Healthcare (continued)

We did a patient safety program. At its core, there was a fundamentalchange in the way we would manage and operate to put patient safety first.We did more than just create slogans; we built behavior-based expectationsand performance-based evaluations. We defined best practices at every levelin the organization and let managers and employees make determinations.

Howard P. Kern

President and Chief Operating OfficerSentara Healthcare

Components of Leadership

Definesnew vision

Sets agendafor change

Outlineskey goals

True Leadership

hasn’t been fully tested and notwanting to hold back changebecause you’ve got to test the heckout of it for five years and by thatpoint it’s too late to effect thechange.

Development OpportunitiesWe put a lot of time and energy intoemployee development and training.It’s a huge area. We have a chieflearning officer (CLO) and staffwho work out of our humanresource division. The CLO’s

primary job is to build a system thatfacilitates employee training anddevelopment to support change.

Information technology is essen-tial to change. Other technologiesthat support change relate to trans-formational behaviors and transformational structures. Majorinnovations around businessprocesses can be very important.

In health care, technology is amajor driver of ROI and bench-marking. If you’re going to make achange, it is important to measure

the baseline and evaluate whatyour targets are as result of thechange. You have to ensure thatyou’ve measured to see whether yougot the change you wanted.

You have to be explicit in termsof outcomes, whether they arebased on financials, performanceimprovement, quality, safety, oroperating efficiency. It’s very impor-tant to build benchmarks on thefront end. ■


Howard P. KernPresident and Chief Operating Officer, Sentara Healthcare (continued)

Updating the Strategic Plan In recent years, the pace of changehas increased constantly across allindustries. Our company had beencomplacent for many years, focus-ing upon a successful, but increas-ingly uncompetitive, product line. Itbecame apparent that we needed tomove forward or we would be leftbehind. Therefore, we began aneffort to redefine our organizationin a way that reflected markettrends.

We began the effort by review-ing and defining our strategic visionfor the organization. The initial planfocused the organization in specificdirections that every employeecould understand. The strategicplan was prepared in formal formand presented to the board forapproval. This became a writtenagreement between managementand the board directing all of ouractivities over the ensuing years.The strategic plan provided us witha mandate and we executed deci-sively. It was amazing to see howthe plan could propel the organi-zation forward. We began to makesignificant strides in positive directions with clarity of purpose.

Changing Management As we began to change, weaknessesbecame apparent throughout theorganization. Critical failures in per-formance results with little to noaccountability, let alone corrective

actions taken, became apparent.Some departments failed to delivereven the most basic reportsrequested.

Our organization took a benevo-lent approach to correcting theseissues by engaging consultants towork with these key areas of theorganization to attempt to providedirection. The consultants completelymapped the existing processes andinteractively redefined the processesand reporting dimensions. Basically,they created a road map for a manager to follow to success.Management also began to holdindividuals accountable for reportingperformance goals.

It is important to note thatwhile it is critical to act decisivelyonce a deficiency is identified, thescarcity of talent often challenges anorganization to make heroicattempts to retain staff. However,there are some situations where itis better to end relationships withmanagers if they are unable to meetcompany standards.

Preparing for GrowthWe know that change is directlyrelated to growth. An organizationmust be willing to learn from itscustomers’ evolving needs andadapt to those changes to maintainexisting business. Growth requiresexponential efforts in order to propel the organization into newterritory.

A successful growth companyrequires more from staff in order tosucceed since companies seldomhave access to capital to fund newdevelopment outright. Staff may beasked to take on additional respon-sibilities to help the company reachthe next level. This type of envi-ronment is attractive to certain typesof individuals. Therefore, as a com-pany moves from being relativelystable to tackling growth, it mustaddress the workforce issues thatmanifest when employees are notable to meet company needs.Getting the right people on boardis perhaps one of the most chal-lenging aspects of an evolving,growing enterprise. It is difficultenough to recruit a team over

© Books24x7, 2008 Allan Einboden ExecBlueprints 10

Allan EinbodenCEO

Scott and White Health Plan

“Our approach is based on a strategic,proactive management.”

• Extensive background in health carefinancing

• Has held leadership positions inmany state and national industryorganizations

• Has served company for nearly 8years

Mr. Einboden can be e-mailed [email protected]


While it is critical to act decisively once adeficiency is identified, the scarcity of talent oftenchallenges an organization to make heroicattempts to retain staff.

Allan Einboden

CEOScott and White Health Plan

many years, but a changing envi-ronment requires the selection of many new, highly talented individuals.

Changing TechnologyIt is now necessary to adaptprocesses in order to meet thedemands of supporting multipleapproaches and provide servicesthrough existing infrastructure. Wemust utilize technology in a muchmore significant manner in order toeffectively address multiple processvariations, all while deploying acompetitive employment level.

It is also important for functionaltransfers to be handled in a mannerthat is more streamlined.Monitoring systems must beenhanced to ensure that properaccountabilities are maintained.Therefore, our organization begana sustained investment in complex,integrated technologies to deliverthe experience our customersdemanded. Technological changesrequire much more than just theimplementation of hardware andsoftware. It requires staff thatunderstands how to fully utilize anew operating reality.

Drivers of ChangesThere are three top drivers ofchange. The first is the introductionof new products. We implementedas many as five new products overthe course of three years. This wasextremely challenging for an organ-ization that had not innovated formany years. The second driver isnew markets defined by new geog-raphy. For example, we have nowexpanded into new, neighboringmarkets. This was challenging as wewere not structured to handle the demands of working with a

significantly larger supply chain. Wehad to increase and retool severaldepartments.

Adapting to new requirementsfrom suppliers and purchasers is thethird and final driver. Expectationsfrom new customers were very dif-ferent from the historical experienceof our customer base. Despite goodplanning, there will always beunexpected demands that will stressoperating systems. We had to meetmany unexpected demands reactingto oversights in implementation ofthese new products.

Overcoming ChallengesWe pulled together to tackle chal-lenges as they manifested. As wepulled together, we discovered thatmanual interdepartmental trans-fers were major barriers to creatingeffective and efficient processes

that delivered value to our cus-tomers. Solving the issues ofautomation across functional areasincreased the demand for even moresophistication from our technologyteams.

The requirement to integrateacross functional areas brought tolight the need for cultural changes.We needed to instill a culture morededicated to the ultimate customerexperience. We needed to instillintolerance for defects. We neededevery employee to feel responsiblefor ensuring that the end productmet our high expectations.

Changing the CompanyImageWe decided to transform the com-pany image due to environmentalchanges principally caused by customer preferences and supplier


Allan EinbodenCEO, Scott and White Health Plan (continued)

Rede

fining

the O

rgan

izatio

n

Renewaland redefination

Decisive execution

Clarity of purpose

New, market-cemtric strategic vision

strategies. Suppliers began seeingthe opportunity to change their rela-tionships with purchasers by grad-ually eliminating exclusiverelationships with our organization.As a result, we needed to create anindependent relationship from oursuppliers.

A significant challenge for us wasthe fact that customers did not dif-ferentiate our company from that ofour supplier, as we had co-marketedfor so many years. Customers per-ceived that our value was solelybased upon our relationship withour supplier. Further complicatingthe issue, we needed to maintaingood relations with this importantsupplier. To solve this challenge, webrainstormed new ways to createunique value with our supplier,while simultaneously differentiatingour value to customers. Oneapproach we used was providingimportant information about otherpotential customers for our supplier.This helped our supply partner tomatch capacity with demand.

The image of the companybecame more visible to our market-place through intensive advertisinginitiatives. We began advertising the

unique qualities of our individualproducts, which resulted in a 100percent increase in our business forthat product. This helped improvesales results. We began changing ourimage of being inflexible and startedto be seen as an innovative organi-zation that responded to customersneeds.

Working with the BoardOur board governs all aspects ofour organization. We have devel-oped unique relationships witheach board member based upon theperspective they bring to the board.We have some board memberswho have been with the organiza-tion for 25 years. They have agreater understanding of the com-pany than newer board members.We need their help in maintainingrespect for our heritage. Newerboard members bring new ideas andchallenge the status quo.

We are always looking for waysto achieve greater, more meaning-ful participation from our boardmembers. Board members want tocontribute, but we must use theirtime efficiently. Board members

were selected for their tremendousexperience, but we can’t be a drainon them. We have to get their guid-ance and then bring back responsiveplans for their review.

Change Management BestPracticesWe address change at two levels:one from the vision level and onefrom the operational level. Thestrategic plan establishes a vision ofwhere the organization wants to beover the next three to five years.This vision frequently requires theorganization to change in order toachieve these new objectives and thestrategic plan creates the catalyst forchange.

Separately, we are always seek-ing to improve the effectiveness andefficiency of company functions. Tothis end, we continuously identifythe lowest performing departmentfor targeted improvement. Weengage outside consultants withexpertise in the area to review ourperformance and provide guidanceon ways we can improve.

Commonly, organizations makechanges in response to external



We have sought to increase board involvement to help guide the direction ofthe organization by working with them to create a strategic plan. We usedour strategic visioning efforts to solicit their desires for the company. Weshare market demands with our board and help them understand the basisfor our recommendations. We responded to their input by creating adynamic plan that they could support. As we implement our strategy, weprovide updates at each board meeting. Everything that we do is related tothe strategic plan. Our annual operating plan is based upon and flowsdirectly from our strategic plan.

Allan Einboden

CEOScott and White Health Plan

impetus. We want to find ourweaknesses before our customers,or worse, our competitors do. Thechanges we have made have focusedupon effective management of per-sonnel changes required as a resultof evolving practices.

Implementing ChangeAll change begins with effective,engaging, and personal communi-cation. Significant changes requireinternal and external public rela-tions efforts aimed at convincingemployees and customers that thechange is good for them. Thechange must also be shown to helpfocus the direction of the organi-zation. It is vital that the messagebe repeated and reinforced until itbecomes part of the culture of theorganization. Key employees musttake up the cause and repeat themessage until it becomes embeddedin the culture.

Improving ResponsivenessWe are beginning to focus on ourculture in order to develop into acompany that is self-learning acrossall levels. We need every employeeto be empowered to alert the organization when processes are not meeting expectations. We cannot grow at planned rates unlessmore employees are able to propelthe organization through difficul-ties. The massive weight of histor-ical precedence will challenge thisplan. The organization operated ina hierarchical manner for so manyyears that asking employees to actmore collectively has been resistedat all levels. This behavior will haveto be cultivated by reinforcing thebehaviors that are desirable andaddressing hierarchal issues as theyarise. We will know we are suc-ceeding when we see employeesidentifying problems, communicat-ing them across the organization,and making rapid changes to correct the deficiencies.

Employment IssuesThe top three employment issuesour company currently faces arerecruiting the right employees, tran-sitioning employees that are nolonger meeting expectations, andcommunicating with and trainingcurrent employees. It is critical tofind the right talent to lead theorganization, especially in a growthcompany. It is almost equallyimportant that existing employeesbe matched to positions in step with their capabilities. Frequently,employees who functioned well inthe past find themselves over-whelmed as the company evolves.Unless management addresses thesemismatches, the organization willstruggle. Finally, communication isalways a challenge for a quicklygrowing organization. It is essentialthat key messages be repeated by allexecutives and key employees inorder to instill the ideal. ■



I. The Importance of VisionEffective change begins by reviewingand defining your strategic vision forthe organization.

• The CEO’s vision provides amandate and vision to propel theorganization forward.

• A change-centric organizationrequires energized employees, andthe vision is what gives them thatenergy.

Vision has two components: thestrategic level and the operationallevel.

• At the strategic level, the strategicplan establishes a vision of wherethe organization wants to be overthe next three to five years. It isthe catalyst for change.

• At the operational level, the visionmust be translated into culturalvalues that should permeate theorganization and its day-to-dayoperations.

II. The Bottom LineChange is directly related to growth.

• An organization must be willingto adapt to customers’ evolvingneeds just to maintain existingbusiness.

• Growth requires exponentialefforts in order to propel theorganization into new territory.

• These efforts come jointly fromthe CEO’s vision and from yourtalent base, which must be highlyengaged, aligned, and talented.

• Business growth is impossiblewithout this.

There are three top drivers ofchange:

• Introduction of new products.

• New markets defined by newgeography.

• Adapting to new requirementsfrom suppliers and purchasers.

CEOs must drive exploration in allthese areas.

III. Must-Haves for Creating aChance-Centric Talent Pool

Recruitment• It is critical to find the right talent

to lead the organization, especiallyin a growth company

• Look for high-potential employeesat every level — this will unlockthe leadership and innovationpotential of every layer of yourtalent structure.

Transitioning • Existing employees must be

matched to positions in step withtheir capabilities.

• Frequently, employees whofunctioned well in the past findthemselves overwhelmed as thecompany evolves.

• Unless management addressesthese mismatches, theorganization will struggle.

Communication• Communicating with and training

the current employees is central tocontinued engagement.

• Communication is always achallenge for a quickly growingorganization.

• It is essential that key messages berepeated by all executives and keyemployees in order to instill theideal.

IV. The Golden Rules forCreating a ResponsiveCompanyTrain true leaders at every level.

• Organizations have to be well-vested with strong leaders atmultiple levels in the organization,from CEO to first-linemanagement positions.

• The leadership role has to bedefined in the context of visionfor the organization as well as theability to build relationships withthe organization’s resources,people, and key constituents.

Develop clarity of purpose.

• Too many organizations assumethat everybody understands theirrelevance.

• It is critical to have clarity ofpurpose and a clear reason whyyou exist.

• Work toward total clarity ofcommunication around vision,goals, and raison d’être.

Reward change-mindedness.

• It’s vitally important to reward,recognize, and incent managers,employees, and leaders for makingchange happen.

• Recognize and reward the needfor flexibility and innovation.

V. Essential Take-AwaysSuccessful change is based on strategic,proactive management.

• Discover and buttress your ownweaknesses before customers orcompetitors do.

• Drive change in alignment withyour vision, rather than inresponse to external changes.

Organizations that are successful inmanaging change have built a capabilityfor leadership into the organization atmultiple levels.

True leadership engages employees atevery level as partners in the company’svision, goals, and future. ■

© Books24x7, 2008 Ideas to Build Upon & Action Points ExecBlueprints 14

Ideas to Build Upon & Action Points

© Books24x7, 2008 Ideas to Build Upon & Action Points ExecBlueprints 15

Ideas to Build Upon & Action Points (continued)

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10 KEY QUESTIONS AND DISCUSSION POINTS

In what ways has your company grown or changed in the past five years? How has this affected yourexpectations for future growth and change? What challenges has the company experienced from this growthor change? What are the top three drivers of change in your company?

How has your company’s overall image changed in the past five years? What factors have driven thesechanges? Does this new image represent a new direction for the company?

Going forward, what type of relationships with your board of directors, stockholders, and other seniorexecutives do you seek to cultivate? What are key aspects of these relationships? What areas do you wantto change? What areas do you want to sustain?

What are your company’s current best practices for change management? Why are these considered thebest? In what ways are they similar to those of other companies in your industry? In what ways are theydifferent? If they are different, why have you evolved these particular best practices?

How do you intend to improve your company’s responsiveness to change in the next 12 months? How willyou encourage and support changes in management practices to promote resilience/agility? What revisionsin policies and procedures will be necessary to improve response capability? What types of challenges orresistance are you likely to face?

What are the three top employment issues your company is currently facing? Why are these important? Inwhat ways do these issues impede and in what ways do they promote your company’s ability to handlechange? How will you prepare the company to respond to these issues?

What are the top five factors that currently hinder your organization’s capacity for change? In what ways arethey typical and in what ways are they atypical for your industry? What will be your role in addressing thesefactors? How will you measure success?

What changes is your company planning to execute in the next 12 months? What is driving these changes(e.g., expectations of customers, technology, competition)? How are these changes expected to affect yourcompany? How do you expect resources to be realigned to accommodate the changes? How will youprepare employees and motivate them to embrace the changes?

What types of development opportunities does your company offer to its employees? In what ways are theytypical and in what ways are they atypical for your industry? What is the primary purpose of these programs?How do these opportunities support your company’s change management strategies?

How is technology presently being used to improve your company’s capacity for change? In what ways isthis typical and in what ways is it atypical for your industry? What technological changes are you planningthat could impact agility?

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Documents

Corporate Darwinism