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Feature: Using Business Knowledge to Advance Academic Medicine: Investing in a Diverse Workforce

The significant problems we face cannot be solved at the same level of thinking that we used when we created them. —Albert Einstein

In 2005, IBM reported a 370% increase of women executives worldwide since 1995. Of the top 52 executives who determine corporate strategy, 52% are women, ethnic minorities born in the U.S., and non-U.S. Citizens. Deloitte and Touche, a global financial consulting company, opened its women's initiative in 1993 and over the next 10 years, increased its percentage of female partners and directors from 6.5% to 14%, then opened a second initiative to bring these numbers from 486 to 1000 in only five years. Both companies recognize dependence of their financial futures to recruitment and retention of diverse and talented staff. Both work actively to improve the working environment of their staff by adopting policies of flexibility and open communications.

Why has the corporate world taken such significant steps to diversify their staff and executive work force? Why do they solicit opinions from communities of those who have been traditionally disadvantaged in the corporate world? How have they accomplished these actions? What can academic medicine learn from the corporate history of change?

Many leaders in U.S. academic medicine have come to the realization that adaptation of methods and experience from the for-profit (corporate) world can advance the management of our medical schools and teaching hospitals. This article synthesizes recent publications and presentations from 2005 AAMC annual meeting sessions of the Council of Deans, Women in Medicine, and Faculty Affairs groups.  

Lessons for Academic Medicine from the Corporate World
1. Measure what you want rather than what is easy to measure.
2. Limit the costs of lost opportunities and reduced productivity.
3. Build a diverse portfolio of talent.
4. Invest strategically and protect your investments over time.

Measure what you want

Deane Waldman, M.D., M.B.A., is a pediatric cardiologist at the University of New Mexico School of Medicine who also teaches strategic management at the Robert O. Anderson Schools of Management. He encourages us to change the metrics from the standard focus on easily measured surrogates for our preferred outcomes.  Traditionally we measure the outcomes we do not desire, such as morbidity, mortality, turnover, and short term costs.  Dr. Waldman cautions, “if you measure it, you get it” and suggests that we focus on function, productivity, longevity, and retention. If we track Net Retention Rates rather than average annual turnover, we would find ourselves focusing on benefits and activities of value to the faculty and staff whom we wish to retain rather than on exit interviews with the small numbers of dissatisfied people.  Waldman has found the net retention rates of academic health centers to be alarmingly low, and likely contributing to high job tensions, decreased morale, and increased loss to the bottom line.  The financial costs of lost opportunity and reduced productivity can be substantial.

Limit the costs of lost opportunities and reduced productivity

Calculations of the costs of turnover in staff of selected academic health centers show that the costs of recruitment and particularly the lost revenues in clinical reimbursements represent about 5% of the annual operating budgets for some academic health centers, which is double the usual net profit margin for most academic medical centers.

Costs of reduced productivity (CoRP) can be calculated using organizational Learning Curve algorithms and retention rate methodologies.  Readers interested in learning more may consult the references at the end of the article and seek consultation from an economist or your local business school. Waldman encourages tracking such unrecognized expenses in annual reports to allow institutions to monitor the effectiveness of recruiting and retaining valuable faculty members.

Build a diverse portfolio of talent

Ted Childs, IBM vice president for global workforce diversity, says “The bridge to diversity is the bridge to the marketplace.”  Recruiting for diversity enlarges the potential pool of talented contributors and increases the likelihood of innovative solutions to old problems.  NOT attending to the changing diversity of America is a lost opportunity for future success of our organizations.

In 1993, IBM made a philosophical shift from a long tradition of minimizing differences (practice of being blind to differences and gathering demographic information only to ensure that hiring and promotion decisions didn’t favor any particular group) to amplifying them and seizing on the business opportunities they present. IBM strives for inclusion and protection from disadvantage those who bring diversity of thought, culture, race, gender, ethnicity, geography, and most recently, genetics.(IBM’s diversity initiatives)

In academic medicine, employing and listening to diverse faculty and staff increases the perspectives and experience of the organization, and thus the potential creativity and synergies. Facilitating rather than minimizing diversity also brings in new contacts and new audiences for our products of research, training, and clinical care systems. With Dr. Jordan Cohen’s call for a 15-30% increase in M.D. graduates, we will need creativity for expansion of talented students, faculty, and staff who can respond to the nation’s need at a time when everything seems to be in short supply.

Anne Taylor, M.D., professor of medicine and associate dean for faculty affairs at the University of Minnesota Medical School, notes the changes in research agendas as a result of investigations into women’s health. “Diversity enriches the science of medicine. The evidence lies in the impact of women’s health evolving from a focus on a single sex and gender to a rich understanding of biologic variation in disease.” Women’s health research has resulted in a new emphasis on sex and gender variation. It has redirected research from controlling for all variation to exploring the nature of variability in biology. The results of this have benefited a wide population of ages and genetic backgrounds.

Invest strategically and protect your investments over time

Strategic investments in medical schools and teaching hospitals require consideration of the missions of research, teaching, and community service and revenue generated to support these missions.   Vivian Reznik, M.D., M.P.H., professor of pediatrics and director of the National Center for Leadership in Academic Medicine (NCLAM), worked with her colleagues to measure what they wanted to get from the program for junior faculty. She and her colleagues from the University of California San Diego NCLAM calculated a return on investment ratio based upon retention of faculty in academic medicine and at UCSD specifically.  Their results, summarized below, were published in Academic Medicine in 2004.

Sixty-seven assistant professors from 12 departments completed the program between 1999-2002.  Of the 67 junior faculty, 855  remained at UCSD, and 93% remained in academic medicine 1-4 years after completing the program. All women and minorities remained in academic medicine.  Using estimated recruitment costs of $250K per M.D. (only M.D.s departed during the years of study), and comparing turnover of UCSD to national data, suggests that 4 faculty per year, who would otherwise have departed, were retained.  The program cost $670,000 (including departmental reimbursement and $1000 mentor stipends) over four years. Thus, ROI was estimated at 49% or $1.49 for every dollar spent.

More complex projects, such as strategic decision-making about new hires for faculty, require more complex methods of valuation. Keith Joiner, M.D., M.P.H., dean of the University of Arizona College of Medicine, believes that rigorous methods of valuing potential revenue generation lead to fiscal discipline” and thus, better advised recruitments such that both mission and margin can be healthy. In an environment in which requests for recruitment support exceed available funds, “opportunity costs” and the comparative value of pursuing one initiative over another must be carefully weighed.

By considering each faculty recruitment as an investment project, the potential value to the organization can be estimated by considering contribution to the missions of research, clinical care, education, and service and by calculating the net present value (NPV) of the “project”. NPV applies a discount rate for all positive and negative cash flows associated with a project over its lifetime, and then calculates the value of the project in time zero dollars. Time zero is set at the date of the start of the project, in this case, the date of hire of the recruit. All cash flow is then projected back to the start date. This allows a direct comparison between projects, and hence an explicit determination of opportunity costs. Furthermore, because NPV intrinsically incorporates the time value of money, the timing of cash flows (both positive and negative) is a key determinant of project value.

Positive cash flows for a faculty recruit “project” include sponsored research, clinical revenues, tuition, development, and technology transfer. These generally increase over time after the recruitment. Negative cash flows are associated with salary plus fringe, administrative and research personnel, and capital equipment and facilities costs. The institution’s commitments for these negative cash flows generally decrease over time. Because the negative cash flows occur early, and the positive cash flows later, projects must be sustained for a substantial period to generate a positive NPV.

Calculations at the University of Arizona show that NPV becomes positive for assistant professors with a laboratory-based research program only after 8-10 years on faculty.  This reflects the large negative cash flows (yellow triangles) associated with the recruitment package, and the progressive increase in positive cash flow (magenta squares) over time, primarily from sponsored research support.   Viewed in this context, retention is equivalent to protecting and maintaining one’s investment, in order to yield a positive NPV project.  Supporting faculty becomes an issue of protecting margins as well as mission for extended periods of time!

IBM realized the impact of executive and staff retention years ago. In the global diversity initiative begun in the 1990’s, they identified four key factors for change:

1. Demonstrate leadership support

  • Hold executives accountable for modeling desired behaviors in day to day decision-making and development of talent.

2. Engage employees as partners

  • Establish mutual expectations, mutual influence, and trust in task force members responsible for change.

3. Integrate diversity with management practices

  • Make discussion of women and minority talent explicit with each new recruitment
  • Assess manager performance in diversity as a core competency

4. Link diversity goals to business goals

  • Develop relationships with businesses operated by and oriented to populations of diversity

How can we adapt successful corporate models to invest in the future vitality of our medical schools and teaching hospitals?

  • Measure retention and contributions to both mission and track organizational savings from increased retention of productive individuals. [Rubenstein: balance the business and revenue concerns with those of the missions with transparency and organizational teams]
  • Recruit talented faculty and create an environment. Deane Waldman calls this, “ a system of mutual support.” Tom Viggiano, M.D., professor of medicine at Mayo School of Medicine and 2005 Chair of the AAMC Faculty Affairs Forum, describes this as  “institutional and faculty vitality with mutual striving for shared goals”. Create a workplace in which individuals need not choose between personal and professional success; track overall satisfaction and sense of organizational value as well as individual contributions to institutional mission and margin. Aim for high 10-year retention rates.
  • Recruit for diversity of thought, considering culture, background, and experience; work to bring those new perspectives into the mainstream of creativity and decision-making. Aim for initiatives that focus on diversity and variability; invest in the America of today.
  • Invest in the development of careers; make it easy for faculty and staff to contribute to organizational success through increasing communications and professional education programs that bring diverse experiences together, opening dynamic mentoring processes; create visions and goals openly, by consensus methods; align incentives with desired outcomes.

References

Joiner KA. A Strategy for Allocating Central Funds to Support New Faculty Recruitment, Acad Med 2005; 80:218-224

Thomas, David A Harvard Business Review ( www.hbr.org External Link) September 2004. Diversity as Strategy (abbreviated summary through Harvard Business School)

Waldman JD, Kelly F, Arora S, Smith HL. The Shocking Cost of Turnover in Health Care, Health Care Management Review; Jan-Mar 2004, 2-7

Wingard DL, Garman KA, Reznik V. Facilitating Faculty Success: Outcomes and Cost Benefit of the UCSD National Center of Leadership in Academic Medicine. External Link Acad Med (79) 2004: S9-S11.

Additional References:

Bachrach D. Academic Physician and Scientist March 2005. Retain or Replace: The True Costs of Unintended Faculty Departures and How to Minimize Them. 

Bachrach D. Academic Physician and Scientist May/June 2002. How Can You Increase Racial Diversity Among Faculty at Your Institution? 

Waldman JD, Arora S. Measuring Retention rather than Turnover—A Different and Complimentary HR Calculus. Human Resource Planning (2004) 27:6-9

Waldman JD, Yourstone SA, Smith HL. Learning Curves in Health Care, Health Care Management Review (2003) 28:43-56

Faculty Vitae

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