Are Layoffs A Sign Of Good Or Bad Management?

Are Layoffs A Sign Of Good Or Bad Management?

By

Leonard Zwelling

http://www.houstonchronicle.com/news/houston-texas/article/MD-Anderson-set-to-announce-layoffs-today-10837056.php

http://abc13.com/news/watch-live-md-anderson-announces-layoffs/1687649/
http://inside3.mdanderson.org/streams/FullVideoPlayer.cfm?mediaID=9AB90015-DA18-407E-B23B-3DBACA6A360D

http://www.click2houston.com/news/md-anderson-to-address-layoff-announcement-thursday

http://abc13.com/business/md-anderson-cancer-center-to-cut-800-900-jobs/1687649/

Isn’t that the essential question?

When any organization stops turning a profit, even a non-profit, that’s a sure sign that those in charge of that organization are either spending too much, not bringing in enough, or both.

At MD Anderson, it has been known for quite some time that this imbalance between revenues and expenses was on-going. Largely, it was ignored in any major way. Lots of little austerity maneuvers were tried like eliminating cake for graduating students and brown bagging at lunch meetings, but no major impetus to increase revenues or cut expenses was successfully employed.

MD Anderson, like most tertiary care medical institutions runs on a model of large fixed costs and hopefully, larger variable revenues. That is, the fixed costs are the large burden of personnel and real estate and the revenues are patients using the institution for cancer care. Somehow, this balance got out of balance.

How?

The last president built many structures, most of which generate no revenue. These buildings include one that is purported to be the third largest in Houston in terms of square feet and is solely for administration. It generates no money. Many research buildings have sprouted on the South Campus of MD Anderson and most of them throw off no revenue either. All use air conditioning though.

MD Anderson personnel also exceeded 21,000. That is way up from only ten years ago. Has the clinical activity kept pace with the expansion of the workforce?

Today we got the answer.

No.

We got the answer but not the explanation. The leadership of MD Anderson got before the microphones and from what I could see explained nothing as to why this happened and why now.

As I have pointed out in the past, I believe the basic business model of MD Anderson is flawed and now the chickens have come home to roost. The prices are too high for most insurers. This is secondary to the huge fixed costs. Deductibles have risen and placed MD Anderson at a distance from many cancer patients. The many MD Anderson outlest around Houston that have “got you surrounded” also surrounded and choked off some business at 1515 Holcombe. The various MD Anderson franchises outside of Texas are also creating competition for 1515. Surely the many other possible sources for cancer care in Houston have negatively affected the flow of patients to 1515.

Today the clinical leadership assured the public that there will be no fall off in the quality of patient care. How would that leadership know? Is care quality really measured? If so, how?

Will there be no layoffs in the clinical areas at all?

We shall see.

It is safe to say that the leadership of Anderson was forced into this decision and took it reluctantly. But do they take responsibility for the mismanagement that got the institution to this point? Is the layoff a good move? If they have a $2.8 billion war chest of cash reserves as they claim and if the “balance sheet is strong” is this layoff a statement of managerial neglect up to now on the part of these leaders. When they should have been running lean, were they running fat? Did the electronic medical record’s slowing of the pace of care really account for the majority of this budget shortfall or are there other factors to blame like poor operations, a bloated workforce, and over investment in drug development?

I have no idea. But the media and the faculty ought to be asking these questions. And getting answers.

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