Wednesday, November 14, 2012

MBAs say: This place can't exist

As the years go by, I like the Midwest portion of the US more and more.  There is a palpable sense of community in that region. Here's an example from Jeff Thomspon, CEO of Gundersen Lutheran Health System in La Crosse, WI. 

Jeff was recently interviewed by some management and compensation experts who asked what the structure of the leadership and executive incentive bonus program was.  He summarized the interview in a note sent to his staff:

I pointed out that there was no structure, we had no program.  They corrected me and pointed out that of course our salaries and benefits would follow the market, but they wanted to hear about the incentive program because at their graduate business school it was understood as sure as water flows downhill that to run a high performing organization you needed 15, 30 or 40% of compensation to be delivered in incentive bonus program.

I pointed out that all of our staff deserve to be paid fair wages, good benefits, a long term pension program that is secure, an environment with a consistent set of values, and trust that they will be treated well.  But the amazing success of the organization is not related to large financial payouts for anyone.  Still exasperated, one consultant said, “So what is the incentive?”  I said the incentive is we have a large number of people who genuinely believe in the mission of the organization.  They believe by focusing on the greater good, we can accomplish a greater good.  We all want to be paid fairly and have good benefits, but many of our staff turn down opportunities for just more money because they also value delivering excellence in patient care, education and research and improving the health of our community.

Another person then asked, “So is there nothing at risk?”  I said everything is at risk; the well-being of our patients and their families, the well-being of the community – they are at risk every time we touch a patient or family.  As for the staff, most look at it as an opportunity – the opportunity is to work with others with a high set of values focused on something bigger than any of us individually.  I pointed out that we do have part of our pension plan at risk, but everyone is in that, there are no exceptions.  We will all either get a little less, historical normal or a little more.

The consultants left shaking their heads wondering how this place gets along on a system that their college professors don’t seem to believe exists.

Thanks for all your efforts…all through the days and all through the nights…to serve something bigger than any one of us individually.


Ed said...

I am glad I did not go to a Business school that promotes this view on incentives!!! Thank you for sharing, Paul.

Mark Graban said...

It's a shame that more people don't recognize the power of intrinsic motivation that people have... if we don't drum it out of them through extrinsic incentives.

Dr. Deming's teachings on this are timeless and the contemporary book "Drive" by Daniel Pink is powerful.

John Hunter said...

Thanks for this post. Very well said. And again points out one of the many problems with MBA thinking the last few decades. Not all MBAs are so out of touch, but sadly many are.

Gary Stark said...

Love it. As an Org. Behavior guy who also teaches OM, this is the kind of intersection of the two topics I love to see.
I'd like to think that Deming was the original OM/OB guy. : )
And, just wanted to let you know that not all of us MBA professors teach what these consultants believed!