Many people around the country followed the dramatic story last March when our employees generously gave up salary increases and benefits to help save hundreds of jobs of their fellow workers. A key part of that process was that staff members had multiple paths to contact me with suggestions and reactions to various proposals. Thousands of people did that, and it was very helpful as I made decisions on these matters.
Several months have passed, and our financial situation has improved. We hope to be close to the time when we might restore salary increases and/or benefits. I needed to know which of those items would be most important to our workers, to help set the priorities for restoring them. It was time to check in again.
Two emails follow. I sent out the first just before Thanksgiving and the second one yesterday.
As I have talked about all this with people around the country, many have expressed surprise that, as CEO, I would "take the risk" of consulting our staff on these matters. For some, this is considered an odd ceding of executive authority. My view is just the contrary. If a CEO cannot rely on the judgment and opinions of those doing the work in an organization to help him/her make the final decisions on matters affecting those very people, what does it say about the level of mutual respect in that institution?
Here's the first email:
As Thanksgiving approaches, it is good to remember that we are blessed to work in a place devoted to healing and characterized by mutual support. Our collective decision in March to adopt a different approach to balance our budget to avoid what might have been hundreds of layoffs is consistent with our deeply held values. It brought national and regional acclaim to our hospital and to those of you who work here. I am proud of your participation in making those decisions during that difficult time.
But that does not mean everything is easy. Here is a representative note from Carol:
I am writing you to express my concerns after reading the Annual Operating Plan where it says that we want to "Create and implement programs to recruit and retain an outstanding and diverse workforce including competitive benefits and compensation programs, career development programs to prepare employees for jobs in areas facing skills shortages, and leadership development programs to enhance the strength and capabilities of our managers."
My concern is that it may become harder to recruit and retain “outstanding people” with the loss of benefits. Everyday we all go to the grocery store, the gas station and pharmacy and pay more for the things that we need, not want but need. I would appreciate any feedback in regards to the time frame of reinstituting some our lost benefits.
In talking to my colleagues I find that I am not alone in these concerns. At this point it seems that the surrounding hospitals are better compensated then we are. The difference between them and us is that we have a dedicated and loyal staff.
Here was my short answer, but I am writing to give you a longer one and, once again, to ask your advice:
Thank you, Carol. We are working to restore the benefits as soon as possible. More to come on that front. I do not believe our compensation is out of line with other hospitals, but I do know that we laid off many fewer people than those hospitals because of the sacrifices that everyone here participated in. That was the choice before us, for which we and the staff here received tremendous credit. If I were to make the choice again, I would do the same thing.
So, what's going on and what are our plans?
What's going on is that we ended the fiscal year on September 30 with a $10 million operating margin for the year, much better than the $20+ million loss we were projecting in March. Frankly, through the spring and summer we were just on a pace to break even, but then we had a few lucky one-time events in September (like a commercial dispute that went our way) that were pleasant surprises.
For FY2010, we are budgeting for a 2% operating margin, or about $30 million, but that is based on retaining the same sacrifices in salary and benefits that we discussed back in March. That margin is less than we would like, in terms of our investment needs in physical plant and equipment, but we can get by.
Here's the issue we face right now. The economy still stinks, with a 10% unemployment rate, reduced consumer spending, and the like. It is really hard to know how we will fare in that kind of environment. Is there really an economic recovery about to happen, or will the region slide further down? Will the governor be forced to cut Medicaid payments again? What will Congress do with Medicare as part of health care reform?
So, how do we answer Carol's question? When should we go back to business as usual and restore salary and benefit cuts?
We have an agreement with our Board that we can start to restore those cuts if our operating results for the year show a consistent pattern that is better than our budget. A consistent pattern is something we would see in mid-January, based on our operating results through December.
Let's assume the best! In preparation for what might be, I'd like your help to plan our actions.
The question is this. If and when we are able to start to phase in the things we took away, which would you like to get back first?
Restoration of ET time
Restoration of the 401(k) match
Restoration of the annual merit salary increases
...You can write me directly, but also please respond on this survey instrument so we can get the overall view from lots of people. Click here between now and Monday at 5pm: [link omitted]. I'll post the results on our portal. Your opinions will be one input into my decision on the matter.
I will let you know that decision, and I will also provide you with the specific financial metrics that would trigger the decided-upon restoration of benefits and/or salary increases. I will keep you informed as the weeks go by of our progress towards those metrics, and you will know -- as soon as I do -- when things will be restored. That seems most fair to me: You have a right to know as much as I do on this matter, and you have my commitment that everything will be presented to you in a clear and open way.
Best wishes for a happy holiday for you and your family.
Here's the follow-up email:
I hope you and your family had a happy and safe Thanksgiving holiday. Back before the holiday, I asked you to help me decide which of the salary and benefits you would like to have restored if and when the hospital's financial picture rebounds. Remember that back in March, I told you not to expect any restoration through all of FY 2010, so the fact that I am even bringing this up now should be viewed as a relatively positive sign.
Almost 2000 of you responded (a third of those working here), and results were overwhelming:
Restore annual salary increase: 65%
Restore 401(k) match: 21%
Restore full ET accruals: 14%
Thanks for your help in setting our priorities: So that will be our goal, to restart annual salary increases. Here's how I would like it to work. We will look at our financial results late in January and if we are at or better than budget, we will start up raises again. We would do that effective April 1, the date raises stopped last year. That way, it would be much easier to keep track of everything, and everybody would have faced exactly the same period (one year) without an increase. The amount of increase would be 3% if everything goes according to plan, and you would receive it on your regular anniversary date, thereby keeping everyone on par with those who received a 3% increase in the October through March period last year. Managers and supervisors who had their raises revoked as of April 1, 2009 would have them restored effective April 1, 2010.
Regardless of what happens for the larger group of staff, employees in grades 1-4, who received their 3% raise throughout last year, will continue to receive the additional 2% raise announced earlier this year, consistent with our desire to protect those staff members from any gap in salary increases over this time period.
Where are we right now, relative to budget? Well, October was a strong month, and November was a slow month, and December thus far seems about on target. I am cautiously optimistic, but we live in uncertain times, and I am not guaranteeing that we will be able to do this. I will keep you informed over the coming weeks about whether we are able to meet our goal of restoring increases as of April 1st. This does not mean we are giving up on restoring other benefits, but my hope is to start with the salary increases.
I wish everyone an enjoyable holiday season and prosperous New Year.