Harvard Business Online
Is Transparency Always the Best Policy?
On this week's Harvard Business IdeaCast, I interviewed Paul Levy, President and CEO of Beth Israel Deaconess Medical Center, about the hospital's unusually open approach to financial problem-solving.
Here's some background:
When Paul Levy took over as CEO of Boston's Beth Israel Deaconess Medical Center in January 2002, the hospital faced severe financial difficulties. Levy had been given a short amount of time in which to turn the situation around; if he didn't, the renowned academic hospital would be sold to a for-profit corporation.
Before noon on his first day, Levy sent an email to the entire staff, which knew about neither the hospital's dire finances nor the ultimatum. In it he wrote:
This is a wonderful institution, representing the best in academic medicine: exemplary patient care, extraordinary research, and fine teaching. However, the place is in serious trouble, and we are going to have to work very hard during the next few months if we are to secure our future as a non-profit academic medical center.
I promise to have an open administration, sharing with you as much information as possible to help you be part of solving the problems of the medical center. Here is where things stand, as of today. Over the last several years, during one of the greatest economic booms in American history, hundreds of millions of dollars of the BIDMC's assets have gone toward paying the operating losses of the hospital. This was money that ordinarily would have been used as the source of funds for new facilities and equipment, for expansion of programs, and as a cushion for hard economic times. For whatever set of reasons, there was a failure to act to stop this financial outflow. We now face our last chance to reverse this problem.
To spare you the suspense, the turnaround worked—and became the subject of an HBS case.
In 2002, such radical corporate transparency had not yet become a trend, but to Levy, it was simple common sense, and it soon became a fundamental part of the hospital's culture. After reading that only one CEO of a Fortune 500 firm had a blog, he started runningahospital.blogspot.com. When the Board of Trustees set the goal of eliminating preventable harm within four years, the hospital began posting data about clinical results and medical errors on its public website. Every month, an employee receives a "caller-outer award" for identifying "problems they see in the workplace, problems of safety, efficiency, or anything else." When a surgeon accidentally operated on the wrong side of a patient's body, Levy discussed the mistake at length both in an email to the staff and on his blog. And this March, faced with a potential $20 million operating loss, Levy wrote to his staff:
Part of the solution to this problem will be to lay off people. I'm not sure how many yet, and I am hoping you can help me figure out how to minimize the number by using more creative and less disruptive ways to solve the problem. I am going to hold some town meetings in the next several days to get your thoughts about alternative concepts. I will lay out some ideas here, so you can be thinking about them. You can write back now, or you can tell me in person later. Perhaps you will want to discuss them with your colleagues. Perhaps you have better ideas to suggest. We'll soon set up an electronic chat room, too, to permit people to share their thoughts more broadly with the community.
At the first town hall meeting, employees quickly reached a consensus: those at higher pay grades would sacrifice more in order to protect the lowest-paid workers. Levy received about 3600 specific cost-cutting ideas and comments from the staff. And doctors affiliated with the hospital donated several hundreds of thousands of dollars to help offset staffing costs.
I'd love to hear about other leaders taking such an open and forthright approach to solving their companies' problems. Do you work for—or lead—a transparent organization? What limits to transparency have you hit?
Click here to listen to the Harvard Business Ideacast.