THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, October 15, 1995 TAG: 9510140266
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY LON WAGNER, STAFF WRITER
LENGTH: Long : 150 lines
Sentara Health System is ``reengineering,'' and 11,000 workers will feel the ramifications.
An early retirement offer to 500-plus employees is only the first and most visible signal that Sentara is in the early stages of the 1990s management process that has been both heralded for saving companies and vilified for gutting work forces.
But the workers who remain will experience more profoundly the company's jostling than those who decide to leave.
``I'd say almost everyone in the organization . . . their job will be different five years from now,'' said Ed Berdick, a Sentara vice president and its reengineering guru.
Sentara uses the words ``reinventing'' and ``redesigning'' rather than the more well-known term to avoid being ``branded with connotations of reengineering,'' Berdick said. Still, the higher-ups at Sentara know the work force is anxious about what might result from the changes.
``In many cases, they don't know what it's going to look like, because we haven't designed it yet so we can't show them,'' Berdick said. ``So there's always the fear of the unknown.''
Norfolk-based Sentara Health System holds more than 60 percent of the HMO market share in Hampton Roads. It is regarded by industry experts as one of the more innovative regional health companies in the country. In fact, rarely does a week go by that Sentara CEO David Bernd isn't asked to speak at an industry seminar or asked to show a group of out-of-town executives Sentara's leading-edge operations.
Unlike Richmond-based Trigon Blue Cross Blue Shield and many others in the health care industry, Sentara has no visions of becoming a national health system. Sentara, with $929 million in gross revenue in fiscal year 1995, is a nonprofit company that aims to compete by staying a step or two ahead of industry behemoths.
In other words, Sentara executives like for the company to be a moving target - and it's moving again.
Bernd's goal is to cut $50 million in annual expenses by reducing the work force and centralizing nearly every function the company performs.
``Half of our cost is related to labor,'' Berdick says, ``and as we redesign and become more efficient, we'll need fewer people.''
Sentara prides itself on an unwritten contract with its workers: The company says it has never laid off workers and hopes not to issue pink slips as a result of the reengineering. The early retirement offer is voluntary. Sentara has a 15 percent yearly turnover of its work force, which should allow room for some downsizing without layoffs, Bernd said.
``We believe that through attrition, through retraining, that we will be able to offer a position to anyone who's affected,'' Berdick says. ``Now, there's no guarantee of that. If we're not successful we may have to change from that and that's a possibility. But jobs will change.''
The ultimate success or failure of Sentara's effort - and the jobs of its 11,000 employees - rests with a group of 25 managers handpicked by Bernd and Berdick. They plot, chart and theorize the company's future from a third-floor wing of Sentara Leigh Hospital.
The company couldn't have found a better metaphor to show why it needs to reengineer. The third-floor wing of the hospital is available for managers because it's empty of patients.
HMOs, those run by Sentara and other companies, make money by keeping patients out of hospitals. Sentara was a ``hospital company'' until it got into HMOs in the mid-1980s. Now, Sentara is a ``health care system'' with four hospitals that on any given day sit with more than 40 percent of their patient beds empty.
Bernd calls the third-floor wing of Sentara Leigh the company's ``think tank'' or ``reengineering lab.'' It looks like a business-management book exploded and its pages stuck to the walls. Flow charts lead to more flow charts, diagrams, lists and goals.
Folding tables and computers have been set up in the patient rooms to convert them to work spaces.
The 25 people in charge of reengineering the company are so immersed in their duties that they speak a language understood only by themselves and management consultants. They talk of I.T. - information technology - and the need to ``integrate compressed tasks.''
In broad terms, the 25 people - ``the best and brightest,'' Bernd calls them - intend to integrate Sentara's four hospitals, its doctors' offices, nursing homes and outpatient centers into one integrated system.
An early example is found in the company's human-resources department. Sentara once had six divisional and one corporate human resource departments - with a separate director in charge of each office. By the end of this month, it will have one employment center on the Peninsula and one in South Hampton Roads.
Sentara officials said it was too early for them to spell out what would happen to the department heads no longer needed in human resources or how many workers would be shifted as a result of the change.
Sentara is looking to change anything that could make it more efficient, and therefore less costly, to care for its patients. What should doctors' office hours be? Who answers the phone when someone calls to find out about coverage? Should they have an automated answering system or not? Why aren't pediatricians located near day-care centers?
Those on the reengineering teams throw their perfect world ideas onto a page, then reexamine them to see if they are possible. They acknowledge that selling some of this thinking to the employees who are doing Sentara's business every day may be difficult.
``When we present it it's even harder for them,'' says Ken Rice, one of the team members. ``They're thinking in the current world and we've been thinking in the future for so long.''
Lou Ponticas, a consultant with CSC Index in Boston, works with the Sentara employees several days a week to help them map out their ideas and steer them through some of the problems that may crop up when the new set-ups are introduced.
One difficulty Sentara may have is convincing its employees of the need to change their jobs, since the company didn't appear to be struggling in the first place.
``They're coming to work every day and doing things and for the most part they're being very successful,'' Ponticas says. ``And now we're up here and saying `Well, we're going to ask you to change it,' and they could say, `Why? We're being really successful here.' ''
Part of the success of Sentara's attempt to reengineer over the next three years will be determined by how management reacts to workers' concerns about the changes, Ponticas says. People not selected for the reengineering team likely have ideas for improvements that the teams have not considered - and it's management's job to find those people.
``There are people in this organization somewhere out there who are visionary and who know how to do this in the future,'' Ponticas said.
``A lot of times they're being seen in the organization as naysayers, as whiners, as people who are just malcontents,'' he added. ``The reality is they're thinking about tomorrow and they're uncomfortable and impatient with today and they feel like we can't get there fast enough.''
What the 25 people seek to pull off won't be easy. ``Reengineering'' is a concept popularized in 1993 by management gurus Michael Hammer and James Champy. In their bestselling book ``Reengineering the Corporation,'' Hammer and Champy advocate that companies ``blow up'' the way they operate and start from scratch.
In the past few years, ``reengineering'' has been co-opted as a buzzword for laying off workers.
Champy has written a sequel to the first book because he has seen many companies botch their reengineering efforts.
Champy is chairman of the company that Sentara hired as consultants, CSC Index.
Bernd doesn't see Sentara having much choice other than to make a concerted effort to redesign. If they make mistakes along the way, they'll fix the problem and keep moving.
``You know what's going on in this industry,'' Bernd said. ``If we don't change, we'll get buried.'' ILLUSTRATION: STAFF COLOR PHOTOS BY BETH BERGMAN
The committee of 25 is divided into four teams. Above, Elisabeth
McNamara and other members of the customer acquisition team ponder
new ways for Sentara to recruit patients for its HMOs. THe other
three teams are the care delivery team, the enabler team and the
short-term initiative team. Left, Ken Rice organizes ideas during a
meeting.
by CNB