3 Steps for Turning Failure Around Through Continuous Innovation

In May, the Veteran's Health Administration’s former CEO, retired American Four Star General Eric Shinseki, began hitting a bit of a rough patch in his once highly decorated career. With an employee culture in free-fall, patients dying because the production system couldn't meet customer demand and employees lying and hiding results about key performance indicators, you'd think Shinseki, a 1965 West Point graduate with 50 years of leadership experience, would have learned something about failure and the need for continuous improvement.

Instead, the root causes of inefficiencies in the VHA system have yet to be identified, or better yet, eliminated.

While costs are clearly measured in the American executive’s psyche, the causes behind those costs rarely are. Now these causes of failure in their system have resulted in 23 American deaths, customers (i.e. veterans) continuing to wait for service, and a system failing everyone it was intended to serve.

For all CEOs, there is a very important lesson here: failure can lead to great success if you and your employees know how to harness it properly.

For all CEOs, there is a very important lesson here: failure can lead to great success if you and your employees know how to harness it properly. Consider the Virginia Mason Medical Center (VMMC), founded in 1927, which reached a crisis of its own in 2002. Unlike the VHA, which had American taxpayers to fall on to backstop their financial loss, many in the healthcare industry were suffering major pecuniary losses and had no one to turn to. Stakeholders at VMMC recognized if they did not contest and change the way they had always done things, they would have to close their doors. With nurses only able to spend 30% of their time with customers, long wait times for patients to see doctors and a widely held internal belief that defects were to be expected in overall healthcare, for patients, employees, and the local community, the business, and the medical center’s culture were failing.

To overhaul the organization, stakeholders at VMMC turned to implementing lean manufacturing, and the cultural benefits derived from Dr. Deming’s “14 Points of Management.” In a radical rethink of how to best convince individuals that this new way of doing things was needed, teams of workers and executives were flown to Japan to work in various production facilities. Working side by side with Japanese-speaking production workers, nurses, doctors, and executives were able to work in conditions that allowed them to observe and experience first-hand why continuous process improvement knows no specific industry, or geographical boundaries. Whether it’s building air conditioning units in Japan or improving American healthcare, great culture means employees get to spend a higher percentage of time doing things the customer pays for, and less time on wasteful practices that prohibit it from occurring.

Since these ideas are in radical opposition to what American executives typically are taught and believe about employee commitment and engagement, the new CEO at VMMC knew it would be a challenge to change the culture. He really wanted his teams to see and experience things differently in a process the Japanese call Genchi Genbutsu—which means go see and experience things for yourself where the actual work for the customer is accomplished. The team’s experiences in Japan proved that spending more time doing things customers want leads to increased quality, productivity and profitability. Employees’ contributions to these management principles are what make improvements possible. As employees begin to feel their contributions matter, they have, as Deming once said, more purpose in life, and higher levels of dignity and self esteem.


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