May 13, 2009- How Mike Duggan used 29 minutes to put the Detroit Medical Center back on the path to profitability
By Erik Cassano, Smart Business
In January 2004, Mike Duggan took over the Detroit Medical Center, a health care system that had lost $500 million during the previous six years, including $130 million in 2003. The available time to turn the system around was growing short. “We basically had about six months to get the place turned around,” Duggan says. “The projection I was handed the day I started was that DMC would be entirely out of cash by May 31 of 2004. That was the very first thing our finance people handed me.” Turnarounds are nothing new to Duggan, the system’s president and CEO. The veteran Detroit-area business leader has been helping perform them for more than 20 years. But saving one of the largest hospital systems in southeast Michigan is something above and beyond what even Duggan normally encounters.
In the months prior to Duggan’s arrival, DMC had announced plans to close the receiving wing of Hutzel Women’s Hospital, which receives around 80,000 patients a year.
“A large number of them are poor, and Hutzel delivers 4,000 babies a year, many of them high-risk pregnancies,” he says. “So the effect on the community would have been catastrophic.”
On top of the financial problems, the system’s talent base had been depleted. Most of DMC’s upper and middle managers had left the organization, leaving it without a clear sense of direction or purpose.
Duggan needed to develop a plan to save DMC, find and cultivate resources to make the plan happen, and along the way, get an organization of nearly 12,000 people on board with the new vision.
Form a plan
Duggan has three basic rules for executing a turnaround. One, talk to your people and involve them in formulating the go-forward strategy. Two, find a major win early in the process to build confidence in the plan throughout the organization. Three, get everyone focused on the go-forward strategy — and as part of that, do not tolerate bickering among your employees.
“If you do those three things, good things will happen,” Duggan says.
Involving your employees from the beginning is crucial. Employees who are left in the dark during a time of transition will begin to form their own conclusions, which is how rumors start. Above all else, you need to make sure you are crystal clear on where your employees stand with regard to job security. In a time of change, that is likely the first concern that will cross every employee’s mind.
Duggan met with groups of employees more than 100 times in the first year of DMC’s turnaround. In those meetings, he consistently relayed the same message.
“When you’re in a turnaround, all you’re going to get asked all day is, ‘Are you going to save my job?’” Duggan says. “I’d tell every employee the same thing: ‘I can’t save your job; nobody can save your job except satisfied patients. If satisfied patients come here and tell their friends and family, we’ll be hiring a lot of employees. If people have bad experiences, there is nothing I can do to help you.’
“‘The turnaround starts with you.’ That’s the message I delivered day and night for the first year.”
Duggan heightened the entire organization’s awareness of patient service in the first year, and used that renewed focus to help roll out a plan designed to create a market differentiator for DMC — and in the process, gain the all-too-critical first comeback win around which he could rally the organization.
“In May of 2004, we launched a 29-minute emergency room guarantee,” he says. “One of our competitors had done a 30-minute guarantee, and I was trying to instill an ethic that we’re not going to be as good as the other guys, we’re going to be better.”
The plan involved streamlining the emergency room process, reducing the time between when a patient arrived at a DMC emergency room and when the patient saw a doctor to 29 minutes or less.
Duggan says it was a matter of identifying one of the primary areas in which his business receives customers and formulating a plan to improve customer service and, by extension, customer loyalty.
“An emergency room isn’t necessarily where a hospital makes its profits, but there are two ways we get patients,” he says. “Nobody comes to the hospital and says, ‘Hey, I need gallbladder surgery today.’ Patients either come in through the emergency room or they are referred by a doctor.
“When I looked at it, it was clear to me that the doctor referral path takes some time. I needed to turn the cash situation around immediately. If you cut your hand open, you decide which emergency room you’re going to that day. So it seemed clear to me that the fastest way for us to conduct a turnaround was in the emergency room.”
From there, Duggan continued to focus on communicating the idea to his employees and selling the idea of the 29-minute guarantee as a path to follow, along with removing roadblocks to the plan’s ultimate success.
“I’m pretty good at laying out a case, but I did have one hospital vice president who disagreed with me on the 29-minute campaign,” Duggan says. “He did not think it was a worthwhile exercise, and I fired him. I did it in a friendly way, but I told him that this is the direction we’re going and you’re either with the program or you’re not.
“He was the only one I had to fire. When we made it clear that you were going to follow central strategy or go somewhere else, and the central strategy worked, you put those two pieces together and most people are going to follow because they believe in it. But you also have to be willing to remove roadblocks, otherwise you’re not going to get to where you want to go. And by roadblocks, I mean people.”
Enable your employees.
As the turnaround gained momentum, Duggan could begin focusing on the types of employees he wanted his staff to recruit and retain as DMC moved forward.
Duggan says talent is only part of the equation when it comes to building a staff. You must also inspire your employees to follow your vision and enable them to best utilize their skill sets.
Getting employees on board with a new plan when the company is in a state of crisis is easy compared to keeping that level of buy-in once the situation has stabilized and upper management is no longer speaking in terms of survival.
“In many ways, it’s a lot easier to get people focused when you’re in trouble than when you’re doing well,” Duggan says. “When they’re in trouble, they’re paying attention to you. When things are going well, people are busy patting themselves on the back. So in that first year or so, I had an advantage in that everyone was paying attention to me.”
For his plan to achieve long-term success, Duggan needed to take the big-picture goal of saving the organization and drive it down to the personal level. Individual doctors, nurses and staff members wouldn’t be able to effectively implement a 29-minute emergency room guarantee if each person didn’t know how his or her specific role played in to making the guarantee a reality for patients.
Throughout the organization, Duggan had his managers construct individual goals for many staff members. Each individual set of goals had to play in to turning around the entire organization.
Setting goals helped DMC employees think in terms of the big-picture turnaround and also helped foster a culture of accountability.
“Everybody has a role in the turnaround and is precisely measured on what their role is,” Duggan says. “If you start to make excuses while others are making their targets, you quickly realize excuses aren’t going to work. If you put those kinds of goals and measurements in place and hold people accountable, I’d say 90 percent of the people who can’t get the job done will leave voluntarily.”
Employees thrive when their roles are defined. When Duggan arrived at DMC, many employees either didn’t have a solid grasp of their roles within the organization or were miscast in roles that did not suit their talents and skills.
Improperly leveraged talent can become a major hindrance to a turnaround, and it’s something Duggan addressed in his meetings and conversations with employees soon after he started.
“We had a lot of people here who I was told were poor employees, but they excelled when they were told what their roles were and how they fit in,” he says. “A number of people did extremely well and had been waiting for years for someone to give them a program in which they would succeed.
“That’s the most fun part of the job for me, to watch people who had been beaten down in a job for years come back to become great. We’ve had that happen many times.”
Experience and intuition can help a leader identify how to best leverage talent. But even more important is the willingness to observe and listen to your employees.
“You have to create an environment where people achieve more than they ever thought they could,” Duggan says. “Every employee has individual strengths and weaknesses. The key is to put each person in a position that maximizes his/her individual talents and then set goals that push the employee to reach that potential. You have to evaluate the progress each week and make one of four assessments: One, the employee is meeting the goals or making measurable progress in that direction; two, the employee is not meeting the goals because of barriers outside of the employee’s control (in which case management must act timely to remove those barriers); three, the employee is not meeting the goals due to work ethic, attitude or personal problems (in which case you need to either motivate or remove the employee); or four, the employee is not talented enough to meet the goals and you put him/her in the wrong position in the first place.
“If you’re closely and objectively monitoring performance, it’s pretty easy to figure out which of the four it is. The problem most managers have is the lack of courage or commitment needed to act immediately to correct the problems and assure that you’re getting strong performance from every position.”
If you create an environment where talent is properly leveraged, you will maximize your company’s productivity and increase your employees’ sense of fulfillment in their jobs. That has been one of the biggest keys to the success of DMC’s turnaround. The health system is once again profitable, with $2 billion in revenue in 2008.
“I’ve seen cases where people are failing in customer service jobs, but they understand the statistics and trends of the business,” Duggan says. “So we’d put that person in charge of pulling together reports, and put someone with interpersonal skills out front. All of a sudden, that person is thriving, and it’s not that he didn’t care about his old job, it’s not that he didn’t want to be a good employee, it’s that you weren’t using his talents the right way.
“The leaders I love are the ones who talk in terms of salvageables. The people who I consider to be the greatest leaders are the people who take an employee who isn’t doing well and can salvage them in a different role. There is a great deal of pride on the part of managers when they take an employee who was said to be a bad apple and allows that person to succeed by putting them in the right job.”