Psychology of Success The Business of Healthcare

Avoid This Error of Measuring Leadership Success 

January 25, 2016

In an organization, we tend to be judged for what we do – not for the decisions that we make not to do something.

For example, consider the issue of responding to an RFP. If you respond and your organization is successful, you’ll tout your genius and the others will toast to it. Yet it’s very difficult to tout your genius in not responding and it’s not very likely that anyone would pop a cork in celebration.

We humans tend to place tremendous importance on what’s observable and ignore that which cannot be seen or experienced.

Accordingly, your supposedly rational colleagues will neither pat you on the back nor buy you a glass of bubbly for deciding to do nothing.

So we have what I call the yardstick problem. If there’s a decision that results around an observable event, it can be measured. If there is no observable event, then the heuristic yardstick is useless.

But the truth is that success is just as dependent upon what you pass up on — on what you decided not to do.

In this sense, saying “What gets measured, matters” is only partly true. A lot of what matters can’t be measured at all.

This disconnect between what is truly important and what is easily measured and therefore incentivized has a significant impact on medical group management and even more so on hospital management where success is measured and rewards are dispensed pursuant to the yardstick rule.

Consider this in terms of a hospital’s administrative decision to move ahead with the formation of an ACO.

Many other hospital executives at other facilities are pushing ahead with their ACOs. The CEO remembers the failures of the PHO movement in the 1980s but feels that unless she makes the decision to forge ahead she’ll be viewed as less than decisive. And, being decisive, she will receive a bonus for her strong leadership.

Yes it might cost millions to get an ACO off the ground but if it fails she will point to those other hospital CEOs and say that they couldn’t all have been wrong and it was the market that changed. Or she will argue that she cannot be blamed because forming an ACO was consistent with “best practices.”

There are at least two important lessons here:

The first is that the leaders of the organizations with which you deal will sometimes make ridiculously stupid decisions because they are consistent with the way they are evaluated and rewarded.

The second is that your medical group must avoid the tendency to fall back upon the yardstick rule in measuring your own leader’s success or failure. You must develop a compensation formula consistent with the larger long-term success of your entity.

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