Title: How Leadership Matters: The Effects of Leaders’ Alignment on Strategy Implementation (Subscription or fee required.)
Author: Charles A. O’Reilly (Stanford University) et al.
Publisher: The Leadership Quarterly, vol. 21, no. 1
Date Published: February 2010
To study the effect of leadership on organizational change, the authors explored the results of a change management initiative at Kaiser Permanente, a California-based HMO with more than 1 million members, 3,000 physicians, and 19 medical centers. Historically, Kaiser Permanente’s business plan had been predicated on its expansive relationships with a huge number of patients and providers, which enabled the company to offer competitive healthcare at reduced costs. But by 2001, management found that patients generally viewed Kaiser Permanente as bureaucratic and impersonal. Under a new CEO in 2002, the company attempted a significant shift, refocusing on quality and service. This meant introducing a new scheduling system, revamping call centers to improve responsiveness throughout the organization, and improving communication links between physicians and patients. After tracking the results of the initiative over two years (2001–03) in real time, the researchers concluded that efficient, thorough organizational changes resulted not because of the technology or procedures being introduced, but because of the commitment of Kaiser Permanente’s leaders — and not just those at the very top level.
The researchers used data from detailed satisfaction surveys of 50,000 patients and more than 300 physicians to gauge the success of the new plan. The study followed physicians in eight departments — including emergency medicine and pediatrics — at six Kaiser Permanente medical centers. At Kaiser Permanente, physicians report to a department chief (also an M.D.), whose immediate boss is the physician-in-charge (PIC), the executive responsible for the overall operations of the individual medical center. Kaiser Permanente’s CEO oversees all the PICs. The physician surveys explored how well the supervisors at all three leadership levels articulated a vision, set measurable goals, rewarded progress, dealt with organizational hurdles, and motivated employees. The research found that the more physicians perceived their department chief and PIC to be competent managers in all aspects of their job, the more they supported the strategy shift; in addition, patient access and service ratings improved most when physicians viewed both the CEO and PIC as effective leaders. However, when physicians felt that their bosses were less than adept, their performance on patient satisfaction surveys was markedly lower. Although the CEO imparted the same call for transformation in responding to patients throughout the organization, physicians who lacked respect for their managers tended to interpret this change agenda more negatively. Overall, patient ratings improved over the two-year study period.
It has long been assumed that CEOs drive organizational change, and that success or failure hinges on how well a single leader can articulate his or her vision. But this paper finds that organizations are much more nuanced, and leaders at many different levels can have a significant impact on whether their departments embrace or shun new initiatives. The authors advise CEOs to spend time making sure their leaders throughout the organization are fully informed, committed, and effective before undertaking a major change initiative.
Bottom Line: Organizational change is much more effective when leaders at all levels of a company are united behind the shift in strategy. Although CEOs can articulate an overall vision, the success of a new initiative often depends on the competence of managers at lower leadership levels.
- Matt Palmquist was a founding staff writer and is currently a contributing editor at Miller-McCune magazine. Formerly, he was an award-winning feature writer for the San Francisco–based SF Weekly.