Going big — hiring the biggest consultancy, the global or industry leader in this or that field — is a fact of life in business even though going big does not guarantee innovation, quality, value or success. It will guarantee a premium fee, higher costs.
Some executives go big because they feel size equals market leadership and that kind of leadership equals security, or quality. If something goes wrong with the advice or in the execution, the decision maker cannot be faulted because they hired an industry leader, right?
Back in the day when selecting a computer or telephone system could be a career ending event, no one ever got fired for buying a more expensive AT&T telephone system or an IBM mainframe. There were fewer choices then and executives did not want to fool around with the innovator, taking a risk that might cost them their job if everything was not absolutely perfect.
However, more often than not, the big firms rarely are the innovative leaders. They are competent enough, but the vast majority make their money by scale — using standardized product templates and staffing engagements with younger, sometimes less experienced junior associates. They have a product template for whatever ails your organization and they produce a work product built around that process. And while they are working on project A, they are working to sell you on engaging them for project B.
When healthcare organizations began their slow recovery from their first misadventures of trying to build integrated systems by buying, and frequently overpaying for physician practices, they began to incur huge unsustainable losses. To cut the flow of red ink they then engaged the top consulting firms to help them look at costs, finding the right staffing levels to “refocus on core services,” a frequent refrain in healthcare that comes at the end of a diversification misadventure. As one skeptical hospital CEO once said after witnessing the carnage wrought by these cost reduction consulting engagements, “There has been a lot of downsizing and an enormous amount of dumb sizing but very little right sizing.”
Some healthcare organizations had to hire more consultants to fix the problems created by the first set of consultants. Going big did not insure that the problem was solved. Too much emphasis on the consulting template and not enough insight or flexibility to focus on the unique needs of the client.
So now we find ourselves again venturing into the development of integrated delivery systems to deal with the rash of impending changes in payment systems and accountability for the quality and satisfaction of the care we deliver. We are buying physician practices again, hopefully at rates and performance structures that make sense, and we are experimenting, again, with taking risks for our patients. What is different this time is that there is probably no going back given the need to reduce federal spending on healthcare (Medicare), among other things.
Today you hear more and more CEOs say, in effect, “bigger is better.” But is it really? We have certainly heard that before.
The real question is whether a huge mega system with extensive overhead costs will have the flexibility to adjust to changing market conditions and respond to the pressures to actually lower costs, not just slow the rate of price increases.
I am in the camp of believers who think that if nothing else is true about the future path of healthcare it is that price, quality, and patient satisfaction will be key to any organization’s success. Mega mergers, while achieving some reductions in duplicative costs, have never resulted in lower prices for the consumer.
Healthcare vendors that thrive in this turbulent market will be those who can innovate to produce services with a higher value at a lower cost, and who will truly partner with their clients to share the risks for the outcome of the services they provide.
That will be true of hospitals in its dealing with local population groups, including businesses, as well as for firms that serve those hospitals. Like executive recruiters.