CEO’s Letter: The Leap to Profitability
By Elliot H. Clark, CEO
Is the leap to profitability a leap of faith?
For investors, it often is. Is the leap an act of discipline? For service providers and technology firms, it often is. So when is it an act of innovation?
When a practitioner has a plan to go from the buy side to the sell side of an HR department, that is innovation. When a company has a plan to offer its HR services to other smaller companies as a way to extend and defray the cost of its own infrastructure, well that is new, exciting, and a bit revolutionary.
That is precisely what is being contemplated and initiated at North Shore-LIJ Health System. On page 8, you will find our cover story on Joseph Cabral, the senior vice president of HR and chief HR officer (CHRO) for the organization. He is the 2014 HRO Today Magazine CHRO of the Year for Not for Profit organizations. During our investigation of his nomination, it was hard to find a referee among his employees, his external partners, or staff that did not at some point in our conversation use the word “innovative.” I wished at the time that someone could innovate a new word for “innovation” because it is so overused. I recognize now that I was being jaded and a bit too skeptical. Because in visiting North Shore-LIJ with our Executive Editor, Debbie Bolla, I discovered that innovation is excellent way to describe what they are doing.
First, some background on Cabral. He was born in the Azore Islands in the central Atlantic and spoke his native Portuguese when he emigrated with his parents to the United States at the age of six. He is a self-described math geek—the invasion of the math geeks in the senior-level HR suite is an epidemic. He joined the U.S. Air Force prior to going to college, where he worked in logistics and routing. He was responsible for load balancing air transports. This was a complex series of processes and calculations. His Air Force experience formed his foundational commitment to efficiency, measurement, and process design.
He came to North Shore-LIJ Health System at a time of great change. The system is only 16 years old. During his 10-year tenure, the organization has grown to be one of the largest nonprofits in the U.S., increasing in total annual revenue of $2.7 billion to more than $8 billion. They are now one of the largest—if not the largest—employer in every one of the five boroughs of New York, let alone Long Island. In addition, they are navigating the significant changes in the wake of the Affordable—-and HIGHLY CONFUSING—Care Act. In this time of regulatory pressures and high growth, the nature of their product has to evolve as well. Responsible for the care of more than seven million local residents, the system needed to recreate itself as an organization promoting wellness and preventative care as opposed to a pure provider of acute care.
This evolution required HR to develop a significantly different workforce plan. Wellness and preventative care requires different professionals than acute care. A shift on a scale of this size necessitated changing the leadership format. HR implemented a leadership development program for 600 leaders throughout the organization and began teaching a new model. More than 80 percent of these leaders have been promoted and the employee retention of this group is extraordinary at 95 percent. Also, overhauling the benefits structure and HR processes has saved the system more $100 million in the last year.
But the real innovation is from what comes next. Under Cabral’s leadership, North Shore-LIJ is beginning a program to offer HR services to smaller clinical organizations, nursing homes, rehabilitation centers, and other small-care or service providers that it does not own.
Basically, they will extend their infrastructure to like organizations on a shared services basis and become an outsourcer. This fee-for-services model will allow them to gain efficiency and defray part of their own infrastructure costs. They offer wellness services to other companies, argues Cabral, why not administrative and operational services such as HR? They have all of the software and skills on managing and certifying professionals in a healthcare setting and scale to be best in class.
Now before all of the providers crawl out onto the window ledge, contemplating eternity as they envision a world where they will be competing against practitioner organizations, this does not preclude North Shore-LIJ from pursuing outsourcing partners—in fact, they do outsource certain services. But it is a paradigm shift—not one that threatens the provider community if they can figure out how to ride the wave if this idea does become a trend. It is innovative: The idea of turning HR into a profit center as well as a driver of the workforce and performance is an intriguing concept. Can practitioners sell these internal services or have a team to do so? Can they price a model to ensure success and benefit to the providing business? I am not sure, and this may take the form of cooperative or partnership agreements, but it has possibilities. Most CHROs think of HR as a service business anyway so why only service internal departments? Of course, there are counter arguments about strategic focus and competitive advantage, but this model may work for some companies and in some industries. You decide if it makes sense for your company and industry.
￼￼For the rest of the interview, please see page 8.