Mending Management: Improving Customer Value by Transforming Operations

By John S. Toussaint, MD
March 1, 2016

Learn about nine principles that can help a health care organization’s operations run more smoothly. 

As physicians, we spent most of our school years focused on learning the science of diagnosis and treatment. We labored to learn the details of how the human body acts as a system, what can go wrong and how the many parts of human biology are interdependent. In essence, we learned the operating system of the human body.


John S. Toussaint

In a surprisingly similar way, the people and specializations of a health care organization are just as interdependent as the organs and systems of a human body. Organizations are not naturally designed to be in balance, however. The organization seeking perfect balance must learn it. People must be taught and coached to work together in teams. Leaders must learn new skills and everyone must learn to reflexively use scientific problem solving to immediately address problems if we expect better patient outcomes.

Over the past decade, as the health care crisis has come to a head and systemic changes have been adopted, organizations have struggled to increase quality, reduce costs and become more flexible to ride the waves of change. These attempts have had wildly varying degrees of success.

Over six years, I have been studying transformation attempts at 153 health care organizations worldwide and have seen what works and why. Let’s look at key components of successful transformations in health care operations.

Managing People Efficiently

For the past 75 years or so, manufacturing companies have been experimenting with ways to manage people who perform complicated tasks so as to deliver better-quality, lower-cost products. The automotive and aviation industries were first to show results, most notably Toyota Motor Co. and Boeing Inc.

Subsequently, many industrial companies followed their lead to create operating systems that allowed them to produce nearly defect-free products. In the 1990s, it was called the quality revolution. Remember how many years you drove your first Toyota? The lessons these companies have learned are now being translated into health care and start with core principles of an operating system known as lean.

Excellent organizations all have a bedrock of values and principles. Those that do not must begin any transformation by writing out their values and principles. First, this exercise will lead to the development of true north metrics. These are the critical few metrics used by all organizations to measure progress. If leadership in clinical research and conservative financial stewardship are deeply held values, for instance, metrics will be selected and principles written that support those values.

Principles guide the design of systems, and those systems lead behaviors. Therefore, we think of core principles as a foundation to guide people. Today’s health care organizations are large complicated bureaucracies that rarely have a common operating system and no real set of guiding principles. Many of these organizations are massive and have been cobbled together through mergers and acquisitions with little attention to a common process for managing the overall organization. This lack of system design leads to chaos and skepticism for caregivers.

Every Clinic Is Not the Same

For those leadership teams that need to write common principles, I always suggest beginning with the principles outlined by Toyota sensei (teacher) Shigeo Shingo in a series of books he wrote in the 1970s. These are the principles that guide people to act and react in a manner consistent with operational excellence:

Excellent organizations all have a bedrock of values and principles. Those that do not must begin any transformation by writing out their values and principles.

Show respect for people. Keep people safe at work, encourage them to identify and solve problems, and ensure they have the tools and training to improve their work.

Lead with humility. Admit that no one person has all the answers, including the physician or CEO.

Seek perfection. This is the antithesis of “good enough.” Bench-marking within the industry can lead to a false sense of what’s OK or good enough. But a target of perfect or zero means flawless health care delivery.

Ensure quality at the source. This is how we refer to being able to quickly identify errors and stop them from causing more damage down the line.

Practice scientific thinking. Everyone reflexively applies plan-do-study-act (PDSA) cycles to daily problem solving. In medicine, we were taught to apply scientific method to our initial and follow-up care with patients. This is subjective-objective-assessment-plan (SOAP). Each time a patient visits, caregivers assess the patient by taking a history. They gather data by examining the patient and checking blood work. They make a plan that includes prescribing treatment. The cycle then starts over each time. This principle simply takes that habit of scientific thinking and applies it to all problem solving — from overcrowded emergency departments to medication reconciliation errors.

Focus on process. Every process is perfectly designed to deliver the results that it does, whether conscious or unintentional. Long years of observation and study have proved that errors are almost always caused by badly designed processes, not by people.

Think systemically. Many problems in health care are the result of not a single process, but of many processes that affect each other. To address these problems, people need to consider the whole system with all the interactions and intersections, planned or accidental.

When physicians at one organization, for instance, analyzed the care of cancer patients they identified 24 different departments or clinics that need to be navigated by a typical cancer patient over a five-year journey with the disease. There were far too many opportunities for miscommunication and bad handoffs. They realized they needed to bring all the caregivers in this massive system together to discuss the ideal state for the patient experience. This led to the mapping of the ideal patient experience, which included everything from radiation treatment to home care:

Create constancy of purpose. This means that all team members understand exactly what matters to the organization. At the Children’s Hospital of Eastern Ontario (CHEO), the senior executive team and physician leaders developed a simple score card with five key metrics (see Figure 1). Everyone at CHEO knows what matters now.

Provide transparency through visual management. Track and display all errors and improvement efforts on large boards for everyone to see. Displaying performance visually makes it more likely to be improved because staff is reminded each day of what the problems are and what’s important to focus on.

Mending Management graphic  plj

With this set of principles in place, it is possible to create continuous improvement systems. But organizations need structure for the work. This is best accomplished with a central improvement team, including individuals from throughout the organization interested in creating dynamic change.

We define non-value-creating work as work that is unnecessary from the perspective of the patient. We ask patients, “Would you pay for this step?” When patients look at much of a hospital’s activity, such as nurses running around looking for medicines or IV poles, or physicians waiting for lab results critical for treatment decisions, the answer rarely is affirmative. Much of the daily frenetic activity of caregivers qualifies as non-value-creating.

The full-time improvement team members train and assist teams in eliminating these non-value-creating wastes in care processes. These experts are not deployed just anywhere, however. There are important business problems in every organization and resources such as improvement facilitators are focused on these problems.

The most successful organizations focus attention and resources on critical business problems through use of a model cell. The model cell is an area — usually one clinic, inpatient unit or hospital department such as emergency or surgery — where there is a significant quality, cost or service problem. The model cell will be where all components of the lean operational platform will be implemented and demonstrated.

The model cell runs an inch wide and a mile deep. This means that the scope of the project must be focused and the depth of change must be dramatic. When organizations employ a model-cell transformation, a new system of care is created by frontline caregivers and improvement facilitators over several months.

The frontline caregivers, not management experts or consultants, develop standard work for people within the cell. At the Palo Alto Medical Foundation (PAMF) in California, leaders chose a very busy multispecialty clinic that had high costs and new competition moving into the area.

To completely reimagine the workflow, teams eliminated the physicians’ private offices and co-located them with their medical assistants in an open-seating area. The enhanced communications and trust between teammates led to remarkable improvement. They saw more patients faster and at lower cost. Service measures improved and, in 2014, the clinic was rated No. 1 in the busy California Bay Area by Consumer Reports.

Finally, the model cell work must involve senior leadership. Without a senior leader sponsor it is unlikely that this work will sustain. Sustaining the work is the goal, and one of the most effective tools in this effort is a redesigned management system.

St. Mary’s Hospital in Kitchener, Ontario, for instance, used the work of Kim Barnas,1 former president of ThedaCare hospitals, to build a daily management system that helps sustain the work. The daily management system was redefined to include standardized tasks at all levels of management and daily dialogues about the most important facts of the business. It was built to ensure that everyone was working on the right problems.

It also was a system approach. Everyone from the president of the hospital to the frontline nurse and physicians were involved, all learning new leadership habits. Each manager and executive was matched with a coach, usually a peer, who was deeply knowledgeable in the leadership behaviors required for the management system.

Only at this point — after principles have been established, a model cell built and running, a central improvement team in place and the management system redesigned — are organizations usually ready to spread continuous improvement and the work flow of the model cell throughout the organization.

michael erikson

Michael Erikson

Early adopters of lean health care have learned much about this aspect of the work, as well. For example, Michael Erikson, chief operating officer for the Palo Alto Medical Foundation in California, was the executive in charge of spreading the model cell outpatient work at Group Health in Seattle, Washington, before he left for PAMF.

In the first wave of spread, senior executives simply told clinic leaders that the new standard work created at the model cell clinic was the way of the future and that every physician should comply. Not surprisingly this didn’t work. In fact, they had to back up and allow each clinic to modify the standard to the circumstances of their own clinic.

Every clinic is not the same. There may be different patient demographics, different types of doctors and different geography. Erickson learned that to spread standard work is not to copy and paste, but instead to copy and improve.

We have also learned that administrative support functions such as information technology, finance and human resources are critical to the success of the system transformation. Without alignment of these functions to the overall goal of continuous improvement, insurmountable barriers occur.

For example, if improved work flows point out some staff members to be redundant, finance leaders might insist on reducing headcount to grab some quick savings. This does not work in a lean system.

When frontline workers improve an area or work process, they must be confident that they are not improving themselves out of jobs. Lean managers know that respecting people means finding new jobs of equal or higher value in other areas. In order to be aligned with lean efforts, finance and HR leaders must know that an important part of the job is to assist in job transitions after big improvements.

John S. Toussaint, MD, is founder and CEO of Catalysis, a Wisconsin-based nonprofit that focuses on transforming health care value through education programs for physician leaders. It was formerly known as the ThedaCare Center for Healthcare Value.


  1. Barnas, Kim. “Beyond Heroes.” (ThedaCare Center for Healthcare Value, 2014)

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