An open letter to former Treasury Secretary Paul O'Neill:
Dear Paul,
Don't get me wrong, it is great to have you on board the lean team. Even though your 'think tank', Value Capture, is really a wheel re-invention tank, the basic idea of promoting lean in health care is a really good one. You, however, can do a whole lot better than that.
Sooner or later your team is going to figure out what the rest of the leading thinkers have figured out. Right now you have only mastered that which Mark Graban figured out and wrote up a long time ago. You and your guys got on top of all of the lean tools, then found out that the tools are not enough, so you are doing a good job of pounding the importance of leadership and commitment on the part of health care executives. So far, so good. But pretty soon you are going to go back to the tank and figure out that even that is not enough and that fundamental changes in management structure, processes and, most important, accounting are needed.
With all due respect and with sincere hopes that you live to an age that puts Methuselah to shame, you are 76 years old and we might not have time for you to keep learning about lean the hard way.
Business in this country – manufacturing especially and health care not far behind- are severely hamstrung by accounting practices that drive everyone to short term optimization at the expense of the long term, are right next to useless in terms of putting clear information in the hands of people who can do something with it, and utterly fail to capture the actual value formed and delivered. Those accounting practices are the prime driver of organizations being so non-lean, and they are institutionalized by your old posse – the IRS.
As great as it is to have you promoting continuous improvement, the highest and best use of your time and talent is in straightening out that problem. Please, please – pretty please with a cherry on top – quit mucking about with hospital CEO leadership lessons – and read a good book on lean accounting. Show up at the Lean Accounting Summit. I have a few connections and can pull some strings to get you in cheap if it is money that is holding you back. We have lots of folks who can do what you are currently doing, but only one former Treasury Secretary committed to lean and in a unique position to have a critical impact on American competitiveness. Don't waste any more time.
No doubt there is good money to be made on the lean consulting trail, but as lucrative as being a Mark Graban imitator probably is, you can and should do a lot better. I will be looking for you in Orlando this fall.
Mark Graban says
Bill-
While flattering, this post is off-base on a number of levels.
For one, Paul O’Neill is not a newbie to Lean healthcare. He was involved as the chair of the Pittsburgh Regional Health Initiative going back to 2001, I believe. Lean was always a big part of what PRHI was teaching.
Secondly, I didn’t invent lean healthcare. Far from it. So to suggest that O’Neill is copying me is just silly.
Third, the news story you linked to said O’Neill was at ThedaCare to learn Lean healthcare, but former ThedaCare CEO John Toussaint MD would be the first to tell you how much he learned from O’Neill about Lean leadership. O’Neill was there to support a group of CEOs who were visiting ThedaCare last week to learn from them.
Fourth, to suggest that the “convince healthcare CEOs about Lean leadership” battle has been won is flat out wrong. You can suggest your Lean accounting issue is important or more important, but I wish you hadn’t written such a disrespectful open letter to Mr. O’Neill and I certainly wish you hadn’t dragged my name into it.
I have learned a lot from O’Neill’s work about safety, quality and leadership. I wish you had researched some of that or talked to me before popping off in a blog post.
Mark
Bill Waddell says
Mark,
I did not state or insinuate that O’Neill is new to lean. My point was simply that he is involved in tools and leadership, while he can and should be using his unique background and authority to address it at the financial level. I don’t know where he learned lean, or how much he actually knows, or what your influence on him or his on you might have been. I was simply pointing out that the role he has carved out for himself and his organization is one that others can fill – namely you and I am sure others who are also aware of the lean tools and the role of leadership.
The description of lean on his web site and in his quotes strikes me as quite similar to manufacturing’s understanding 6-8 years ago: That the failure of the tools to take hold and become a sustaining aspect of organizations could be solved by a stronger commitmment of leadership to lean philosophies and principles. Manufacturing has gone beyond that, however, and is at the point of understanding that such an institutionalization of lean requires fundamanetal changes in the organizational structure and financial function and how it measures improvements.
No one is able to address the impact of accounting on lean with the authority the former T Sec has, and therefore, he can best serve the lean cause by taking his understanding of lean to the next level, and filling that role.
Jim Fernandez says
According to Mark Graban Paul O’Neill is not a newbie to Lean. “He was involved as the chair of the Pittsburgh Regional Health Initiative going back to 2001, I believe. Lean was always a big part of what PRHI was teaching.”
Paul O’Neill was the Treasury Secretary from 2001 to 2002.
So for two years we had a U.S. treasury secretary apparently interested or at least aware of Lean. What a great opportunity that would have been to apply Lean principles to the U.S. government system. Or maybe he did apply Lean and I just missed it.
Bill Waddell says
I noticed the dates too Jim, but I don’t doubt O’Neill’s involvement, understanding or committment to lean, six sigma and the Deming model. I think it is great to have someone with his background on our team. It would be interesting to know if he tried to apply lean thinking to the Treasury Dept, and with what results.
Mark Graban says
First off, Bill, I do think your tone insinuated that O’Neill was relatively new to Lean, hence your silly claim that he is copying me. But I’ve said enough to try to dispel that.
To Jim Fernandex, O’Neill was actually involved with PRHI going back to 1997, according to his wikipedia page:
In December 1997, O’Neill together with Karen Wolk Feinstein, President of the Jewish Healthcare Foundation, founded the Pittsburgh Regional Health Initiative (PRHI).[2] They assembled a wide-ranging coalition of healthcare interests to begin to address the problems of healthcare, as a region. PRHI adapted the principles of the Toyota Production System into the “Perfecting Patient Care” system.[3] Mr. O’Neill became a leader locally and nationally in addressing issues of patient safety and quality in healthcare.[4]
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I haven’t read W’s memoirs, but allegedly one of the first things O’Neill did as Sec Treas was to focus on employee safety at the U.S. Mint and other operations (following his pattern of success that came through focusing on safety first at Alcoa, when he was CEO). Supposedly, W. mocked this in hindsight, implying that O’Neill wasn’t focusing on the right things.
http://www.issues2000.org/Archive/Decision_Points_Paul_O%60Neill.htm
From that page, quoting W’s book, Decision Points:
“My treasury secretary did not share enthusiasm for tax cuts. Paul O’Neill’s strong resume included success at the Office of Management and Budget and as the CEO of a Fortune 100 company. I felt that his practical business experience would command respect on Wall Street and Capitol Hill.
Unfortunately, things started going wrong from the start. Paul belittled the tax cuts. He and I met regularly, but never clicked. He didn’t gain my confidence, nor credibility with the financial community or Congress. I was hoping for a strong treasury secretary who would advance my economic policies in speeches and on TV. By late 2002, nearly two million Americans had los jobs in the past year, and Paul wasn’t conveying our determination to get them back to work. Instead, he used his meetings in the Oval Office to talk about tangential topics, like his plan to improve workplace safety at the US Mint.”
Jim Fernandez says
Thank you for the info Mark.
Now my head is spinning wondering how Lean principles could even be applied at the top levels of the federal government. I have heard of success stories in many governmental settings. But I guess I’m being naive to think the people at the very highest levels could actually make Lean improvements on a large scale.
Greg says
Mark,
I would like you to get Paul and Bill on a podcast…
Kevin Carson says
In “The Healthcare Crisis: A Crisis of Artificial Scarcity,” I relied heavily on your analysis of Sloanist accounting in Rebirth of American Industry to describe exactly how healthcare is “severely hamstrung by accounting practices that drive everyone to short term optimization at the expense of the long term…”
http://c4ss.org/content/2088
The healthcare version of Sloanism is obsessively poring over direct labor hours because “nursing staff is our greatest cost,” despite the fact that total salaries of the boys in C-suite are roughly the same order of magnitude as total hourly pay of all nursing staff.
The healthcare version of Sloanism has skyrocketing infections, med errors and falls, as a direct result of understaffing, whose costs exceed the alleged savings from gutting staff (see Crosby on the cost of low quality).
The healthcare version of overhead absorption embeds the costs of irrational capital expenditures and bloated administrative salaries in the markup on a $3 bag of saline that bills for $300.
Sloanism equates to what Paul Goodman called “the great realm of cost-plus,” the same accounting system whose cost-maximizing incentives are associated with public utilities and the Pentagon’s $600 toilet seat. The internal transfer prices set under Sloanist overhead absorption rules, exactly like the transfer prices established in the Soviet planned economy, treat the consumption of inputs by definition as an output. Same thing for GDP: the less waste and the more intensive the extraction of value from inputs, the lower the national income.