Hawley hopes that the smaller staff size and improved efficiencies will help Slidell, which earns about $120 million in net revenue annually, improve its margins. "We figure these adjustments will get us back to the $9.5 million range. Not back to where we were before we had all the competition from physician-owned specialty hospitals, but pretty close to what will work for us," he says.
SSM Healthcare-St. Louis took a somewhat different path to achieve similar goals. In June 2008, SSM cut about 120 jobs, including vice presidents and COOs. Much like Slidell Memorial, SSM wanted to streamline its decision-making processes. At the six-hospital system, that meant a shift toward centralization. "Historically, we treated each hospital as a standalone entity. We wanted to change that and to start to function as one organization across all of the St. Louis markets," says Jim Sanger, president and CEO of the SSM Healthcare-St. Louis Network.
In fact, Sanger didn't downsize his network executive team; he added three new positions to it. Sanger replaced a position that oversaw networkwide operations with two group presidents, and added a CNO. The two group presidents head two administrative councils—one oversees three hospitals in the north region, and the other handles three hospitals in the south region. Each of the system's hospitals had its own leadership group before Sanger restructured the organization into a regional format, replacing the six councils with two.
The strategy behind the restructuring is to empower employees, make decisions faster, and create more standardization across the system. The organization is still in the early stages of the reorganization, but Sanger projects that the structure change and some of the standardizations could save the organization roughly $15 million.
Sanger stresses, however, that the goal is not to pull decisions out of the hospitals. "It is about streamlining the executive team and trying to move more decisions down into the actual hospital at the worker level."
The decision to lay off any employee, whether they have been with the organization for six months, four years, or 20 years, is not an easy one for CEOs to make. Cutting an employee who has been with the organization for a long time is particularly difficult, because that person is often not just a loyal employee, but also a trusted colleague and friend. Here's some advice on how to approach the difficult task of eliminating positions in your organization:
Remove personalities from the equation. CEO Bob Hawley pretended he was opening a new hospital. Equipped with a blank piece of paper, he created the organizational chart that would be the most efficient for Slidell Memorial Hospital. Then, he filled in the employees' names and made a few minor adjustments.
Focus on organizational goals. Organizations need to determine if the changes will make the organization better, says Jim Sanger, CEO of SSM Healthcare-St. Louis. "We believe—or we wouldn't have done it—that we will be providing better patient care and more efficient patient care and providing better service to people and patients."
Give plenty of notice. As a public hospital in Louisiana, Slidell Memorial can't give out severance pay. So Hawley verbally informed staff members that they would be laid off in three or four months so those employees had time to prepare. "They are still here through the transition, which is sort of awkward," Hawley says. "But that way we are being fair to the people who are affected."
Recognize that it will be hard. Knowing that the decision is in the best interest of the organization will not make it easier to lay off people who have done a good job for a long time, says Jim Sanger. "I don't think there is any way to make this easy."
Be patient. The decision to lay off staff members will disrupt the organization's culture, says Hawley. "We are working on rebuilding that. It is like a death in the family—it takes time."