Tag Archives: university of chicago

How to Unleash Employee Talent

Your company’s financial performance is below plan. You need to act! The most common response is to cut costs to improve the bottom line or fire or reassign a senior executive to create a sense of urgency. But these actions create disruption and distraction at a time when the organization needs to be aligned and focused.

There’s another approach: Empower your employees to find the solution. Step back and let them take the lead. Invest them with the power to effect change. There are three basic approaches:

  1. Create a cross-functional team to focus on the problem. Early in my career, I was summoned to the office of the CEO of a major carrier along with two other people from different departments. The CEO told us that one of our smaller divisions was not doing well. He said everyone in the group was working hard, but no one had any solutions. He asked us to come up with a plan within a week to improve the division’s performance. He said there were “no sacred cows.”  We should not concern ourselves with whether our solutions were politically correct. We came up with a plan that adopted an open-architecture product approach, where the company’s product was just one of many that our insurance salespeople could offer. Broadening customer selection highlighted the benefits of our product offering, and sales increased markedly.
  2. Empower your front-line employees to find the solution. Zappos, the online shoe website, empowers its customer service representatives (CSRs)to control the customer experience. Most call centers evaluate performance based on the length of a call. Calls that last beyond a certain time hurt the CSR’s performance reviews. Early on at Zappos, the CSRs reported that callers had a lot of questions and that the calls could last 10, 15 even 30-plus minutes. They suggested that Zappos not evaluate their performance based on the time a call lasted. Zappos adopted this policy and allows its CSRs to stay on the line as long as needed with a customer. This has translated into pricing power for the company. Zappos’ customer loyalty is so high, it enables the company to charge full retail for its shoes.
  3. Show your employees they come before you. In the March 22, 2014, Corner Office column in the New York Times, Don Knauss, the CEO of Clorox, recounted one of his first leadership lessons while in the Marines. After a hard day of drills in the field, the commanding officer had arranged for a special meal for the soldiers. Hungry, Knauss, a lieutenant, walked to the front of the line to get dinner. A gunnery sergeant tapped him on the shoulder and said, “In the field, the men always eat first. You can have some if there is any left.” As Knauss recounted, “It’s all about your people; it’s not about you. And if you’re going to lead these people, you’d better demonstrate that you care more about them than you care about yourself.”

Companies with CEOs who empower their employees perform better. In a study led by University of Chicago Booth School of Business Professor Steven N. Kaplan, titled, “Which CEO Characteristics and Abilities Matter?” to be published in the Journal of Finance, performance characteristics of approximately 400 CEOs were evaluated. There was a direct correlation between company performance and whether the CEO was “open to criticism” — another way of describing CEOs willing to empower others.

Technology and the Great Recession have reduced the number of management layers between the CEO and front-line employees. This creates an opportunity for more engagement and collaboration. CEOs must spend more time focusing on how they create a culture of engagement — in other words, a two-way conversation.

Little-Known Loophole Inflates Health Costs

The rising cost of insurance is putting a squeeze on American families. And this problem could get even worse if lawmakers don’t fix a little-known federal drug program called “340B.”

Created by Congress in 1992, 340B was originally intended to provide low-income people access to needed medications. This program allows hospitals, clinics and other healthcare providers
serving large numbers of poor and uninsured patients to buy drugs at a deep discount. The idea was that these facilities would pass along those savings to their patients.

But 340B is not working as intended. Instead, it’s being manipulated by hospital systems to increase profits. It isn’t helping the poor. And this exploitation is driving up health insurance costs for all Americans.

Price Disparity

The program’s major flaw is it doesn’t actually require healthcare providers to pass along those drug discounts to low-income patients. Participating facilities are free to buy huge volumes of cheap medicines and then sell them at full price to insured patients — and pocket the difference.

That’s exactly what many participants are doing. Duke University Hospital has accumulated $280 million in profits from 340B over the last five years. The drug chain Walgreens is projected to make a quarter of a billion dollars off the program over the next half decade.

Established hospital systems have increased their revenue from 340B by buying up specialty clinics. These smaller practices often use a high volume of expensive drugs. By acquiring these clinics, hospitals can purchase even more discounted medicines through 340B and further boost profits.

In 2012, hospitals enrolled more clinics in 340B than in the previous 20 years combined. A new University of Chicago study shows that most of these clinics are located in relatively affluent areas. In other words, they aren’t even pretending to serve the low-income and uninsured populations 340B was intended to help.

Unfortunately, lawmakers have not responded to these abuses by fixing 340B’s structural flaw. Instead, they’ve blindly expanded the program. Back in the early ’90s, just 90 health care facilities participated in 340B. Today, that figure is more than 2,000.

The acquisition of smaller clinics, precipitated by 340B, will seriously drive up insurance costs for average Americans. Large, established health providers tend to charge more than smaller, independent clinics. And insurance companies respond to these higher treatment expenses by raising premiums.

Indeed, a study from three Duke University researchers published in the October issue of the journal Health Affairs looked into the price disparity between key cancer drugs provided at both corporate hospitals and clinics. Researchers noted that, between 2005 and 2011, the proportion of cancer services administered at independent clinics dropped by 90%. They found that the price gap between the two settings can be as much as 50%.

Pharmaceutical manufacturers are now incurring heavy losses from 340B abuse. In 2010, this program cost the industry $6 billion. By 2016, that’s expected to more than double, to $13 billion. Simple economics forces firms to compensate for losses by raising their prices, leading to higher medical expenses for average patients.

Noble Purpose

340B has a noble purpose. But it’s not fulfilling its mission to provide vulnerable patients with discounted drugs. Instead, 340B is being exploited by rich hospitals to boost their bottom lines. And these abuses are leading to higher insurance costs for everyone else.