Wednesday, December 16, 2009

Listening to the staff

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:


Dear BIDMC,

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.

Sincerely,

Paul

Here's the follow-up email:

Dear BIDMC,

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.

Sincerely,

Paul

30 comments:

Anonymous said...

"Odd ceding of executive authority."
Hmmm. This means CEO's are afraid of their own staffs, as the feudal kings were afraid their repressed subjects would get out of hand. One thing I know about you is that you are NOT afraid. Your staff is blessed.

nonlocal

Anonymous said...

Your actions are commendable. You at least trust your staff to offer oppinions. The writer of "The difference between them and us is that we have a dedicated and loyal staff" seems to think that BIDMC staff is more dedicated than staff at other institutions.

I was one of your dedicated staff. Unfortunately with family obligations to provide, I needed to examine risk. I did not trust my managers- Your staff, to keep me safe from a RIF. While my group was told we were safe, the trust that my managers were the people making these descisions was not present. I left for the larger instituion accross the street. I can say that it is not the evil empire it is made out to be and there are many dedicated people working toward the same goals that BIDMC strives for.

I wish you luck. I still have friends at BIDMC and for their sake I hope things improve.

Anonymous said...

What about the people you laid off earlier this year? It's great that the people that get to keep their jobs are getting a pay raise but what about the poor folks that still can't find work.

Paul Levy said...

Anon 7:54,

I agree that the other hospitals are also great places. I wish you well there. Sorry you felt a lack of trust here.

Anon 9:37,

That's why we tried to minimize the number of people laid off. It is a very hard time for people to find work.

jessica lipnack said...

For those of us who aren't native BIDMC speakers, what is ET time?

Anonymous said...

Yes Paul, what about the people laid off earlier this year who can't find work? BID let some strong talent go with virtually no support. Perhaps some thought could also be given to assisting these struggling people rather than only retaining your current employees and maintaining a good image.

Paul Levy said...

Actually there was support, but it is really not possible to debate this point with someone who leaves a comment like this.

Why do you think this had anything to do with maintaining a good image, by the way? This had to do with saving hundreds of jobs. You disparage the people who made sacrifices to help their fellow workers by claiming this to be a matter of image.

Paul Levy said...

Jessica,

ET = earned time (including sick time, vacation time, and personal time off)

Anonymous said...

There was support, true. But I agree with the anonymous poster, it's about keeping BIDMC's image looking good. I keep hearing about how BIDMC has done all they can to save employees but let's not forget that there were hundreds of employees laid off from BIDMC this year. You only represent half of the story. I realize that layoffs happen. It's happening all of the country and I'm sure it was something you wanted to avoid. However, when you post articles like this it seems as if you are patting yourself on the back. When you start to hire those employees that you laid off, I'll be truly impressed.

Keith said...

Quite commendable for you to ask your employees how they would like to take there paycuts. I also presume that you also subjected yourself to the same paycut from your 1 miilion dollar plus salary during the 2008 fiscal year (includes your 231,000 bonus).

The question I would also pose is there intent to bonus upper management again for their hard work in light of current economic conditions? The New York Post has a nice article for you to loodk at concerning CEO's who apparently get big raises despite their hospitals being in fiscal distress.

Paul Levy said...

Dear anon 12;37,
Not true about hundreds. It was well under a hundred, instead of what could have been 600.

If you keep hearing good things about us, it is because the media has continued to tell the story because it represents one of the good news stories during the economic downturn. It is a story about shared values and mutual support.

I am also happy to retell it because of what it says about the people who work here. I am happy to pat them on the back anytime.

Paul Levy said...

Keith,

You seem to like to write and ask about about my salary even though I have been totally open about what I get paid and how that salary is set. I voluntarily took a 10% pay cut this year before asking anyone else to make any sacrifices. I also made myself ineligible for the 30% bonus opportunity that is part of my contract.

All of our Vice Presidents took a 5% pay cut and likewise gave up any bonus opportunity. Our clinical chiefs did likewise.

I can't speak for other CEOs. Why don't you ask them?

Anonymous said...

I keep hearing good things about BIDMC on pretty much just this blog, not really the media in general. And really, I can't say it represents a good story for the media to tell. People lost money, lost benefits, lost their jobs... Really, it's hardly a happy story. I work at one of your competitors and we haven't laid anyone off. Please understand, I respect the work you have done in general at BIDMC but the fact that we haven't laid anyone off over here is a much better story.

Paul Levy said...

Interesting that you think there have been no layoffs at your place. They may not have been public, but we know of layoffs at every one of our competitors.

Anonymous said...

No, there have been no layoffs here and I work in an area that I would know. But it's interesting that you think that were some here.

Paul Levy said...

Perhaps you will say where you work so we can let others validate the assertion.

Anonymous said...

I work at Children's. We've had a freeze but no layoffs. I'm interested on where you may have heard that we have had layoffs. But regardless, I think you are missing my broader point. You are congratulating yourself by asking your employees to sacrifice so you can save some jobs. And you know, that's great. Not really unique but still it's a nice story. But really you should start patting yourself on the back when you begin hiring back those employees that you've laid off.

Paul Levy said...

Children's is certainly not a competitor, as we are an adult care hospital. I'm pleased, though, that you could avoid layoffs.

You keep thinking this is about me. It is not. It is about how our staff participated in a process in which they made suggestions for joint sacrifices to save the jobs of their colleagues.

Yes, I may have asked them to do that, but their response -- particularly to help lower wage workers -- was a sign of their humanity and values.

I am congratulating them. I think they deserve it. Check the newspapers at the time and watch the television shows from that time. What they did was, if not unique, very unusual. Compare this to other places where people absolutely refused to do that and where layoffs resulted.

Anonymous said...

I love this discussion - it epitomizes why other CEO's questioned Paul's decision to be open with his employees (and us) about these matters rather than making decisions behind closed doors. Doesn't it say something that he knew these comments would be out there, and yet publicized this anyway? Far from patting himself on the back by my reckoning.
I hate to say it, but Boston is spoiled rotten in the health care business, and it can't last. Take care whom you wish to be working for when the REALLY hard times arrive. I've been there, done that - elsewhere.

nonlocal MD

Anonymous said...

Paul,
I agree that your actions are commendable and BID is a wonderful employer. Keep patting your current employees on the back. However, I am also very impressed by your readers who have a heart for and concern for employee who were let go. An effort to restore jobs for effected employees sounds reasonable. Quite possibly your readers are thinking of individuals they know who were affected by a layoff and struggling during this holiday season or maybe their own situation. It is tough out there.

Anonymous said...

Well, I guess we may just have to agree to disagree. Yes, your employees did agree to sacrifice to help save jobs. And that is truly something to be congratulated. However, even the ones you laid off had agreed to those same sacrifices. Did those poor folks not demonstrate their humanity and values? And their thanks was a chance to join the ranks of the unemployed. Sorry, I don't mean to attack you but you make it seem as if it's all about you when you post this on your website and people write telling you that "your staff is blessed" to have someone like you. I understand the current economic environment and the havoc that it has caused on jobs in the Boston area. I also understand that layoffs were not avoidable for you. My humble opinion is that it will truly be a day to celebrate at BIDMC when you can hire back the employees that were laid off.

Derek said...

Paul,


I certainly commend every action that you and the staff has taken at Beth Israel. As a business major at BU, I dream of one day being a CEO of any company, and you represent the epitome of what I want to be. CEOs get a bad rep because of the "fat cats" that take huge golden umbrellas and leave companies, and shareholders, penniless. The fact of the matter is is that those people are the minority, they are just the ones who get all the media. The media LOVES bad stories, hence why we're hearing SOO much about Tiger and his many lives, and we don't hear about the celebrities that have been happily married for 13 years (read: Tim McGraw and Faith Hill). It's so easy for people to ridicule when masked behind the LCD screen, but when push comes to shove, not many people could do what CEOs do.

That's my ramble for the day.


Thank you.

Paul Levy said...

Anon 1:36,

I absolutely agree: That is exactly why we wanted to avoid the layoffs in the first place. With 10% unemployment, a job saved today is a job created.

And of course we want to hire people back when we can afford it. How would that even be a question?

Nonlocal,

I won't comment on the first point, but you are certainly right on the second. The lack of effort in this city to improve quality, safety, transparency, and efficiency is all too evident. There is an odd self-satisfaction, lack of introspection, and failure to learn from others around the country.

Anonymous said...

Paul;

The 3 descriptors in your last sentence of the 1:44 comment add up to one word: complacency. An extremely dangerous attitude in the current environment. The next 5 years are going to be the most trying for providers, employees, and patients alike, that we have ever seen.

nonlocal

catsandmusic said...

Paul, I am a former employee who can echo the poster above who cited mistrust of and maltreatment by, the managerial staff of my area, as the prime mover of my decision to cross the street. I loudly advocated for the pay freeze if it would save jobs.

Re the layoffs, we were all told that they were performance-based, as opposed to sheer bad luck of being overstaffed in a certain area. You do not mention that here, and if that was the case I would think it would preclude hiring back any of these folks.

Maybe you should listen to what people are saying about the managerial performance. I loved my work and would have gladly continued to work at the salary I was frozen at, even though your competitors brought me up to market, a substantial increase.

Keith said...

Paul,

As you can tell I am impressed by your benevolence towards your employees, but totally puzzled by outsized compensation in health care management that seems to have exponentially grown over the years, all while the American Hospital Assoc. crys about lack of inadequate payments to hospitals. I simply wanted to give you an opportunity to demonstrate your shared sacrifice since shenanigans tend to be all too common in CEO compensation (I take a 10% pay cut, but get a bigger bonus at the end of the year, which allows management to claim it is sharing in the cuts, when indeed they are not).

Your willingness to share in this sacrifice is not commonly shared by many of your corporate brethren. It seems that oversized salaries feed the ego, which then requires a signifcant raise the following year to maintain this inflated ego. When you guys show me that you can run a higher quality organization at a cheaper price, then I will see the value of highly compensated management. Currently all I see is hospitals chasing the dollars of high tech medicine and competing to see who has the shiniest Da Vince robotic machine with which to extract more dollars from insurers. All the while ignoring the mundane items that do not generate as much profit but could provide better health to your community. Somehow your efforts of attempting to be one of your fellow employees and the theme of shared sacrifice ring hollow when you walk off with 25-50 times more in compensation than some of them. Please try to justify to me how terribly difficult you job must be and how many exhausting hours you must work so I can better understand what makes hospital CEOs such supermen! Then explain to me why half your yearly salary could not be put to better use somewhere within your hospital that has some significant need. If you can do that, then I will understand how valuable hospital CEOs really are.

Paul Levy said...

C&M,

Perhaps you don't recall all the details, but you have it wrong. Here is what my memo to the staff, which is also published here on this blog (url below), said about the layoff process:

The order of layoffs will be based on the following four criteria, in this order....

Performance: Poor performance will be the first factor in selecting individuals to be laid off. In fairness to those thousands of you who work hard and well, we will be moving more quickly that we would have in normal times when it comes to removing people for poor performance....

Volume: Where volume, hours of care or other demand metrics have not met budget and are unlikely to grow in the near future, we need to reduce salary expense so we do not carry over future structural problems.

Structural Reorganization: Some areas have the opportunity to restructure operations, streamline workflow, improve productivity and save personnel expense.

All Other: If these measures which are tied to performance and productivity can’t get us to the needed goal, then the least desirable alternative will become part of the solution.

http://runningahospital.blogspot.com/2009/03/final-budget-decisions.html

Paul Levy said...

Keith,

In essence, you ask me to explain why some people in society get paid more than others and whether they are worth it. That occurs in most fields and in most organizations, and I am not going to try to justify or explain why society works that way.

Sicilian said...

I am following your blog. I have worked at a non profit hospital for 15 years. I appreciate your willingness to reach out for opinions.
I think your employees are extra special. I am glad that we have not had to make the decisions that your hospital has had to make.
Ciao

Albert Maruggi said...

I am an outsider looking in, take that for what it's worth. But as an outsider you are not someone I would work for, you are someone whom I'd dedicate my career for in pursuit of a shared goal.

I tell my college age kids about your leadership and pray they understand what I'm saying enough to find an environment like the one you and all of the employees at BIDMC are trying to create.