Declining reimbursements and rising costs in the healthcare sector continue to present a challenge to organizations and their bottom line. New technology, new treatments, changing regulations, etc. don’t go away because reimbursements are reduced. It simply makes dealing with these more challenging making the success of new initiatives paramount. You must get the most out of every dollar you spend. By maximizing the level of acceptance and adoption of new initiatives and projects, you maximize the return on investment (ROI). We express this line of thinking with the simple equation below:
R = Qs x As
Results = Quality of Solution x Acceptance of the Solution
Organizations decide to make a change because the results from the way they do things currently are not getting them where they need to be, i.e. the R in the equation is unacceptable. When this is recognized, they set about finding a solution to the problem by either building or buying something. The focus is on getting the best solution possible for what they can afford. This is the Qs portion of the equation. We find that many business case ROI calculations focus on only these two portions of the above equation — Results (R) and Quality of the Solution (Qs) — by describing the opportunity, alternatives considered, proposed solution, total cost of ownership and projected benefits — which are most likely expressed in limited financial terms.
While the quality of the solution and the anticipated results are important parts of any initiative, rarely do assessments account for the acceptance of the change by the people tasked with implementing and adopting it.
This incomplete justification of the investment in the change completely ignores the Acceptance of the solution (As). Unfortunately, most business cases assume a 100% acceptance rate, with absolutely no recognition of the total costs needed to get there, and no plan to meet that unspoken target. Let’s face it, faced with change we did not initiate, human beings can be emotionally driven, sometimes irrational, and accept change to varying degrees or not at all. So, is it rational to assume 100% acceptance of any change without a plan to get it?
Or is there a better way?
As a leader in your organization, its your job to provide the project team with the leadership, support and resources they need to successfully manage all aspects of each change. But are you equipped to manage the people part of that change?
You need to resource both the ‘hard costs’ — like purchase of new equipment, software or real estate — and the ‘soft costs’ that are more difficult to capture, track and report – like managing the anxiety, fear and frustration of the people who are impacted by change. The cost of these resources, whether as dollars, staff and/or time, must all be factored into the choice to make the change or not. From a Return on Investment (ROI) standpoint, the decision to change should be based on both the data you have and an understanding of readiness to change from your leaders and those impacted. Regardless, it is our experience that accurate calculation of projected ROI is a bit of both art and science.
Even the very best solution has a high likelihood of failure if you have poor or mediocre acceptance and adoption which in large part is driven by leaders. If effective management of these people aspects is not employed, you won’t realize the results you need.
Conversely, if you use effectively manage the change and acceptance is high, even with a solution that is not the very best, your results will still be greatly improved. This second potential outcome should force us to closely evaluate the Qs and answer the following four questions:
- What are the minimum Results (R) we must achieve to be successful?
- What will it really take to implement the best Quality Solution (Qs)?
- What support do we need to provide to those who are impacted so that they achieve Acceptance/Adoption (A)?
- What level of Acceptance/Adoption (A) is required for this change to be successful?
A McKinsey study of 40 large-scale change projects found ROI to be 143% when supported by an “excellent” change management program compared to just 35% with “poor” or no change management program support. In the end, it’s important to bring in change management at the start of the next implementation and to factor change management into the ROI discussion from the very beginning.
For healthcare organizations facing declining reimbursements, this represents an exciting opportunity to ensure greater ROI on new projects and initiatives. It’s something we have been focused on at LaMarsh Global for over 40 years.