About the Author: Kathryn Tang is a current MBA student at Ivey Business School with an undergrad education in Mechanical Engineering and Political Science. Coming from the Wind Engineering Consulting industry at RWDI, Kathryn has experience managing people for greater performance and recognizes the impact potential of effective leadership and the importance of having an ethical foundation.
On August 5th, the MBA class welcomed former Rouge Valley Health System (RVHS) CEO Rik Ganderton to share his insights on the RVHS transformation.
Initially hired as an interim CEO in 2006, Ganderton was tasked with turning around this healthcare corporation which held a $12 million deficit and was at the brink of bankruptcy. At the root of its problems was the organizational culture at RVHS, where competition and jealously between the two hospital sites was pervasive, along with a lack of respect between staff members – especially between physicians and managers. With a history of overspending, a habit of neglecting infrastructure improvements, and an expectation that government bail-outs would always be available, RVHS staff had little motivation to improve their performance.
For the Board of Directors, the senior management team, and Ganderton, there was an urgency to rapidly turn around RVHS's financial position so they could meet Ontario's new accountability agreement to balance their budget by the end of the fiscal year. To relay this message to the rest of the corporation, Ganderton established a basis of accountability and transparency. This included pursuing legal action against a manager who had defrauded RVHS of over $2 million, as well as initiating a series of townhall meetings where questions from staff were answered directly.
Understanding the critical importance of having employee buy-in at all levels, Ganderton spent his first weeks getting out onto the front-lines to establish credibility among his staff, who were initially unaware about his 20 years of experience in the industry. Ganderton focused on conversing with his staff on a first-name basis, where he asked employees about the best and worst parts of their job. This not only provided him insight into the organization's core problems, but also built pathways that could empower him to make change later on.
In order to improve the profitability of RVHS, the Lean philosophy of management was implemented to engage front-line employees and align staff toward a culture of continuous improvement. However, at a time when Toyota had recalls, and against a tide of employees who were comfortable with the status quo, Ganderton's Lean initiative faced much opposition on the premise that "this is a patient business, we don't make cars."
Recognizing that physicians would be the hardest stakeholders to persuade, but also that their "involvement was critical to the success of the lean implementation," Ganderton successfully appealed to this interest group on the basis of their goals. Beyond improvements in patient care, physicians were swayed by the argument that improving their operational efficiency would allow them to attend to more patients and achieve greater total compensation. After pushing hard for internal improvements and achieving some initial small wins, Ganderton invested returns back into Lean initiatives, including previously neglected equipment. This allowed RVHS to build upon its upward momentum and continue to improve its financial performance along with employee morale.
While speaking to the student body, Ganderton touched on factors that were critical to his success in turning around RVHS. At the start of this transformation, Ganderton recognized that his initiatives would be met with resistance, and as a defensive measure, asked for "air cover" from his Board of Directors to provide him with protection when threats emerged. With absolute confidence that he could turn around the organization, Ganderton was determined to "go big or go home", and ensured that he did not give his stakeholders any indication that alternative solutions were available. As a self-described "change junkie", Ganderton leveraged his resiliency and personal drive to "prove that we really could change this low performing organization into a high performing one."
From Rik Ganderton's journey, we learned that cultural norms can have a drastic impact on the financial performance of an organization. When leading an apathetic workforce, it is critical that leaders effectively communicate the impetus for change. To execute on any well-designed strategy, leaders need to have an acute understanding of their stakeholders in order to communicate on the basis of their interests and sustain buy-in. Finally, leadership character, including the dimensions of courage, drive, collaboration, and humility, are crucial to ensure that leaders see their initiatives through to adoption.