Quality and cost

Last week I wrote about the Mayo Clinic, and how their most recent Quality Initiative pushed them to the very first rank among the world's hospitals. When I looked for what principles undergirded or enabled this achievement, one of the ones I identified was this:

Mayo chose to focus on Quality first, not cost; and their metrics for Quality were tied directly to patient outcomes. This is the correct way to define metrics: start by defining what results you want to achieve, and then build metrics to support those results. In modern management, metrics drive so much other activity that it is critical to get this part right up front.

Now that's great, but it's fair to ask, How can Mayo afford to focus on Quality before cost? Don't they have bills to pay? For most companies—maybe all—neglecting cost is a quick way to go broke. What's special about Mayo's situation that apparently allowed them to defy this basic law of corporate gravity?  

Of course the answer is that Mayo didn't literally neglect cost. In fact, the article that I summarized last week (ASQ's "Journey To Perfect: Mayo Clinic And The Path To Quality") makes clear that an earlier quality initiative in the 1990's was in fact canceled for reasons of cost. What happened since that time (apparently) was that Mayo reëvaluated their approach, and began to address costs intentionally, and consistently with their mission. This intentionality shows up in several ways.

For example, Mayo has pushed to standardize practices across its multiple facilities. As my post last week pointed out, the criterion for selecting which practice to choose (among various alternative ways to do the same thing) was generally based on data about patient outcomes. But the mere fact of standardizing at all lowered costs. And cost is one factor tracked (among many others) in the massive data collection that Mayo hosts about all its surgical activities.

Mayo's approach to paying physicians is equally intentional. Physicians are compensated with salary only—no bonuses or special treats. The goal is "to remove financial incentives to do more than is necessary or less than desired for the patient." Of course the salaries are structured so that physicians with more experience earn commensurately more, and the various specialties are compensated competitively with peer institutions. And an additional benefit of this structured, salary-only compensation plan is that it makes it easier for Mayo to find and correct inequities, in order to avoid pay discrepancies based on non-relevant factors like race or sex. But the core motivation is to reduce the risk of corrupting the patient experience.

The key, though, seems to have been when Mayo realized "that patient-centered care is a win for financial outcomes. Quality was not simply continuous improvement; it was the vision and mission of the organization." In other words, while an awareness of costs matters internally (in order to keep the books balanced), cost is not a market-differentiator externally, at least not for the Mayo Clinic. Patients don't come to Mayo to get their x-rays done cheaper. They come to Mayo to get their care done better. Patients seek out the Mayo Clinic because they want its Quality.

Can other businesses do the same thing? Yes and no. To some extent, Mayo benefits from the economics of health care. The proliferation of so many different insurance models for health care means that almost nobody pays the "list price" for any given medical procedure, and so those prices mostly are not posted or even visible. Often enough, a patient won't even know the price for any but the most routine care until after the care has been provided. And health care is simply a different kind of good from candy bars or movie tickets. If movie tickets cost too much, people may try to stream the movies at home for less or simply forgo seeing them at all. But someone who needs an important medical procedure is much less likely to forgo it because of the cost. For all these reasons, cost is a weak market differentiator in the health care industry.

All the same, companies with a reputation for Quality can thrive in any industry even if their products cost more. I used to work for Bosch, which is a manufacturing company. And manufacturing is an industry where even minor differences in cost can make a huge difference. Bosch's products are never the cheapest ones available; but people buy them eagerly because they know the products are going to work. Every time.

A few months ago, we discussed that—Philip Crosby notwithstanding—Quality isn't really free. Building any kind of Quality System takes time, effort, and money. But in the long run, such a system pays for itself by reducing defects. And if you are good enough, it draws customers from around the world who want to work with you because you are the best.

          

Building a healthy Quality culture

For much of this spring, I've written about system and culture failures. I've written the most about Boeing, but I've addressed other companies too (even ones like Toyota and Patagonia, who are mostly pretty good). After a while it can get grim. One reader wrote me to say, "I am too depressed about the Boeing issue."

What if we look at a success story, for once? A company that built on a history of doing good work, and lifted themselves to world-class performance? It could be a refreshing change, if nothing else.

A couple weeks ago Dale Weeks, another reader, called my attention to an ASQ Case Study about the Mayo Clinic. The study, titled "Journey To Perfect: Mayo Clinic And The Path To Quality," was written in July 2012. That means it is more than a decade old, but it is hardly out of date. The Mayo Clinic is still among the best hospitals in the world. This Newsweek website rates them, in fact, #1 in the world. Mayo's own website states, more modestly, that "Mayo Clinic Hospital — Rochester is top-ranked in more specialties than any other hospital and has been recognized as an Honor Roll member by U.S. News & World Report's 2023–2024 'Best Hospitals' rankings." Whatever they are doing, they are doing it right and it seems to be working.

What are they doing? The article describes a history of Quality initiatives at Mayo, so the first thing is that Quality has been a sustained focus over many years. But the heart of the article is about the Quality initiative in the early 2000's, and this had several elements. We have discussed some of them before. 

• Mayo implemented a "Fair and Just Culture," in which "every member of the medical team is encouraged to report anything that does not seem quite right, without fear of reprisal." Even better, the article gives examples which suggest that Mayo really means it. (By contrast, for example, Boeing's culture sounded good on paper, but did not encourage transparent communication in practice.)
• Mayo asked all departments to display their performance data, so that any room for improvement would be visible to everyone. (Back in the first year of this blog we discussed the value of making your performance data visible to everyone.)
• Mayo used this performance data to look for best practices, and then spread those best practices across all their multiple hospitals. Sometimes the data related to patient outcomes: when one hospital had a much-lower patient failure rate than all the others in administering warfarin, Mayo studied that hospital's procedure and made it standard. Other times, the data was frankly economic: when they found that one orthopedic surgeon could do hip replacements more profitably than any of the others (while all of them had the same rates of patient outcomes), his method became the one to use.
• While of course Mayo had to track their financial metrics the same way any business does, those were never the center of attention. Mayo's key metrics focus on "patient and quality outcomes, patient safety, and the patient experience." We've talked before about why it is more valuable to measure problem-resolution than operational activity, and also about why it is essential to see how the problem looks to your customer. These are lessons Mayo has clearly taken to heart.
• Mayo made training available to all employees on Quality methods, including topics like Six Sigma, lean, and reengineering; and encouraged everyone to take them. They even issued pins of different colors that employees could wear, to show how far they had progressed through the curriculum.
• Finally, Mayo implemented an extensive knowledge management infrastructure.

All of these measures are excellent, of course, and it is no surprise that the outcomes have been so good. But I found myself wondering, Why doesn't everybody do this? If the Mayo Clinic can focus on Quality this relentlessly and achieve such glowing results, then it is clearly possible. And if it's possible, why doesn't everyone else do the same thing? Why—not to put too fine a point on it—isn't Boeing following this very same game plan right now?

The article isn't structured around cause-and-effect. It's a case study, and not a root-cause analysis. But as I combed through it, I think I found three fundamental points that made all the others possible.

• First, Mayo had a history of selecting executives from among its practicing physicians. I have sometimes argued that management roles should not be handed out as rewards for the very best physicians or surgeons, because it's better that those experts continue to save lives in the examining room and the surgical theater. At the same time, it clearly makes a difference when the executives understand the work at a deep level. Once upon a time, Boeing's executives were engineers, too.
• Second, Mayo chose to focus on Quality first, not cost; and their metrics for Quality were tied directly to patient outcomes. This is the correct way to define metrics: start by defining what results you want to achieve, and then build metrics to support those results. In modern management, metrics drive so much other activity that it is critical to get this part right up front.
• Third, it is clear that the whole Quality initiative had unflinching management support over the long haul. Without a clear vision of what to do, and an unwavering commitment to doing it, none of this could have been accomplished.

These three points aren't universal. Not every company selects its executives from its working experts; not every company prioritizes Quality over cost; and not every management team is committed to implementing Quality in every aspect of their business. But they could do. If Mayo can keep finding ways to improve, so can we all. 

                

Does my test car have to be safe?

Last week I got a call from a friend and former colleague, who wanted to talk about stage gates. (You remember I've discussed them before here and here.) Specifically, he wanted my perspective on the question, "When do all the formal requirements have to be incorporated into a product? Can you wait till you release it, or do they have to be there before you start testing?"

Phrased like that the question sounds pretty innocuous, and also simple: It depends. Naturally all the requirements should be in place before you release the product, because otherwise you're not really done. And you'd like everything to be ready before you start testing, so that you can test it all together to make sure it works. If one feature isn't ready when you start testing, you can't test that feature; then when you finally get to it, there's always a risk you'll find a problem which impacts something else you thought was already buttoned-up. At the same time there are plenty of projects where this or that feature isn't quite ready when testing begins, and the project makes a conscious decision to proceed at risk. As I say, it depends.

Then as we talked some more, I began to understand that my friend had a real-life example in mind, one which made the discussion a little more pointed.

Last October, a GM Cruise self-driving taxi struck and dragged a pedestrian 20 feet.* This accident was only the latest of several last year, some of which got significant attention in the news.** After the October accident, the National Highway Traffic Safety Administration began an investigation; the State of California suspended Cruise's permission to operate autonomous vehicles; and Cruise recalled its entire fleet for reprogramming. Cruise's interaction with regulators appears to have been remarkably clumsy; while Cruise says they had no intention to mislead either the regulators or the public about what happened, apparently their first communications did exactly that. Since then Cruise has fired nine executives and let go a quarter of its staff. The CEO and one co-founder both resigned, and Cruise published a blog post blaming its corporate culture.*** 

So my friend's real question was something like, "What precautions do you have to take before you let an autonomous vehicle out on the public roads? Let's say you are still in the test phase; can you legitimately skip some of the safety features because your car is 'not released yet'? And if so, what stops you from ending up like Cruise?"

It's a good question, because it calls attention to the difference between formal requirements and pragmatic requirements. Often we think of formal requirements as more numerous than pragmatic ones: pragmatically, a hammer should drive nails; formally, there's an entire ISO standard of technical specifications for steel hammer heads. (That's ISO 15601:2000, in case you wondered.) But in a pre-release situation, sometimes the distinction reverses. Depending on how your Quality Management System is written, many product requirements might not be formally mandatory before release. But you may need them for pragmatic reasons, all the same. 

To be clear, Cruise's vehicles had been fully released, because Cruise was operating a business and collecting fees. But there are plenty of other companies making autonomous vehicles, or wanting to make them. So my friend wasn't asking "What did Cruise do wrong?"—though it would be fascinating to dive into that question, if we had the data—but rather, "If Whizzbang Motors decides to build an autonomous car tomorrow, what's to stop one of their test drives from ending just as badly as this well-publicized accident?"

So I started at the beginning. Quality means getting what you want. And obviously you don't want to hurt people. So Quality means making sure that you don't. For a released product, especially in the automotive market, that means complying with a long list of federal regulations; and that, in turn, means proving that you comply with them by providing objective evidence like documented test results. For an unreleased product, you may not have all of that documentation yet. But you still have to avoid hurting people, and that means you have to figure out what it is going to take.

The earliest tests, when you are first developing a new car, can probably be carried out in a laboratory. After that, you move to a test track, or proving grounds. These are environments that simulate real driving conditions, but without the innocent bystanders. The only people on the test track (at any rate during a test) should be people attached to the development project, who know what the vehicle is capable of and where the errors or problems are likely to be. Even so, sometimes test drivers die in accidents. The only consolation is that nobody takes a job as test driver without knowing the risks ahead of time.

And when the day comes that you finally have to test on the public roads? Doubtless there will be public, legal requirements that you have to meet before you can put your car on the roads, even if it's not released yet. But beyond those legal requirements, you have pragmatic and moral requirements to have done everything in your power ahead of time to make sure the car is safe. Some people will insist that "Nothing can be made 100% safe," and in a literal sense they are right. But that is never an excuse for doing any less than you possibly can.

When it comes to the safety of any pre-release product, your first thought should never be "What do the rules make me do?" Ask yourself instead, "How do I avoid hurting people?" 

__________

* See, for example, either of the following articles: 

• GM Cruise robotaxi unit faces US probes over dragging incident, vows reforms | Reuters
• GM’s Cruise reveals dual US probes into grisly collision and company’s response | Self-driving cars | The Guardian.  

** See for example this accident in April 2023, or this one in August. In all of 2023, Cruise vehicles were involved in 23 crashes, out of a fleet which numbered at least 950 at the time of the October accident. 

*** Wow, where have we heard that before? 😀