In manufacturing, the term Lean has far too often been synonymous with layoffs. Doing so is more L.A.M.E. than Lean. People get anxious and throw around an acronym LEAN – Less Employees Are Needed.
Ironically, Toyota (the inspiration or model for Lean) doesn't rely on layoffs as a form of cost cutting the way GM and the Detroit automakers do. See this post for a clear comparison that shows how Toyota is more committed to their employees and that's a great illustration of the Lean philosophy.
In a Lean culture, we don't view employees as a cost or a necessary evil. Employees are a treasured resource and leaders are responsible for engaging them and developing them, as today's Toyota leaders teach us.
In healthcare, hospital and health system CEOs don't need Lean as a way to slash heads and fire people. That's the traditional approach in healthcare. Uncreative leaders try to balance budgets on the backs of employees, going first to layoffs instead of making layoffs a last resort.
Some hospital CEOs have seen the light and realize now that the cycles of layoffs don't really reduce costs and that Lean is an alternative (read one such story here).
There's so much waste in healthcare, hospitals have tons of options for reducing costs in a way that doesn't destroy morale or potentially harm quality.
As I've written about before, great Lean hospitals like ThedaCare and Denver Health have some variation of a “no layoffs due to Lean” or “no layoffs” philosophy. #Lean is the alternative to layoffs & traditional hospital cost cutting Click To Tweet
Chris Van Gorder, CEO of Scripps Health in California, wrote this article in HBR back in January: “A No-Layoffs Policy Can Work, Even in an Unpredictable Economy.”
I'm not sure I'd describe a no layoffs policy as “paternalism,” as Van Gorder does. I'd call it smart business that looks at the long term instead of this quarter's or this year's numbers.
Van Gorder writes:
“In the 15 years since I joined Scripps Health, we haven't laid off anyone. That isn't the norm in my industry, obviously. Hundreds if not thousands of hospitals have responded to trends such as shorter average hospital stays, fewer surgeries, a shift to outpatient and home care, and reduced reimbursements by consolidating or overhauling their operations and laying off staff.”
Does Van Gorder not care about costs? Of course not. They don't always replace people who leave voluntarily. They redeploy staff to new clinics or opportunities.
“We believe a no-layoffs philosophy is good for employees' physical and psychological health — it's well known that job insecurity can be harmful.”
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Van Gorder also talks about the need to “avoid the kind of blame-driven, watch-your-back culture” that he's “seen in some organizations.” That's in keeping with a Lean philosophy.
I've heard good things about people who have visited Scripps to learn about Lean. I'd certainly like to applaud them for setting a great example with this no layoffs approach. It sounds Lean to me.
He also wrote:
“I've seen what it's like to carry out mass layoffs — I had to do that in the 1990s at a hospital that was in bad financial shape. I vowed never to let myself get into that position again.”
That sounds exactly like the Toyota's history. In 1950, then-president Kiichiro Toyoda resigned in shame after 1,600 employees took early retirements, according to the Toyota website. That's part of the reason Toyota has been good about retaining employees even during plant shutdowns and hard times. They do this, again, because it's smart business, not because it's nice.