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See if this sounds familiar. The executive leadership team brought in a consulting firm to find cost savings. They identified $50M in savings in IT and the board says, they agree, make it happen. Welcome to the conversation I had with three CIOs over the last 30 days. Don't get caught in this trap. Today we discuss.

Transcript

 Today in health. It is Friday. It's a day for me to ref. On different topics that are top of mind. And I have spoken with three CEOs over the past month. Who have had consulting firms come in and lay down extremely aggressive cost reduction numbers. That their board has accepted and has given them to hit. And today we're going to talk about that and how to deal with it.

My name is bill Russell. I'm a former CIO for a 16 hospital system. And creator this week health set of channels and events dedicated to transform healthcare. One connection at a time. We want to thank our show sponsors who are investing in developing the next generation of health leaders. Notable service now, enterprise health parlance, certified health and Panda health.

Check them out at this week. health.com/today. Usually, I would say, check out this new story at this week, health.com/news, because we have seven to 10 news stories every day that we're curating just specifically for you and your. Your team. And you could find that on our website and you can also sign up to receive our daily email of insights around that. Check it out.

Let me know what you think. DME, let me know. Twitter, LinkedIn, you name it, send it over. Oh, there was no Twitter anymore. X. There you go. All right. One last thing. Share this podcast with a friend or colleague you said is foundation for daily or weekly discussions. On the topics that are relevant to you in the industry, a form of mentoring, they can subscribe wherever you listen to podcasts. All right, this is becoming too common. It's been common for a long time. Where essentially the executive team goes, Hey, we need to reduce our costs.

We need to find some extra money in the budget and they go, hopefully they start with the team. Although I will say that too many leaders have been taught to. Lean heavily on consultants. Before they lean on their own team. But w regardless of if they do that or not, They hopefully you start with you as an organization.

You come back to them with a series of cuts that you can reduce the organization. Typically they go to. From a strategic, from a consulting firm. If they're looking for maybe a little more drastic cuts or they are looking for maybe a change in business, maybe looking at. Service lines looking at a different way of approaching technology. Whatever it happens to be.

There's. There's this belief that there's a special knowledge within those firms, special research, special knowledge and understanding of how others are doing things and that they bring that to the table. So regardless of why or how they do it or how they approach it. The consulting firms are going to come in.

This is going to be a common practice and we'll continue to be. We could replay this a decade from now. I think my advice would be the same on this. It depends where you get involved in this. The minute you hear that they're bringing in. McKinsey Deloitte. Accenture, Ian, why, whoever they're bringing in and they can bring in any number of other firms, healthcare, specific firms that are out there. And some of those are equally as interesting to have inside your organization when they make that decision to bring them in. You need to engage quickly.

And what I mean is there, you need to understand their methodology. Their objectives. What have they been asked to do? How they are going to engage with your team, the information they are going to be looking for. How they're going to be using that information. This is not a time to sit back and just give them carp launch and, go everywhere you want and figure things out. You want to assign good people to be with them almost at all times. Because. The numbers. Yeah, I hear this all the time.

It's they didn't understand this and they didn't understand that. That's on us. Like we need to provide them the context of these things. This is why this is running this way. This is why we do this. This is why we can't shut this off. This is why we have these systems. This is why the architecture is this way. All those guys.

They need the context. If you don't give them the context, they're going to come back with a. $50 million number, and you're going to be like, where did you come up with that number? They're going to be like we looked at the benchmarks, this company versus this company. And they're able to run epic with this. Number of users and whatever at 20% less than you, 20% less than at a. I mean at the end of the day, it's almost that ballpark ish. They will do a ton of work, but it's almost that ballpark ish, they should be able to run this organization at this level.

And there's a certain amount of truth to that, by the way. There's a lot of organizations that until they're pushed, they do not look for cost reductions. They don't do not think about efficiency because we're too busy doing 158 projects. And we haven't put the governance in place to say no to a lot of the things that come forward. And we don't have the support.

Maybe we don't put the governance in place and then maybe we don't have the support from above us to actually say no to some of these projects that are coming forward. For whatever reason. So anyway. I would say, engage with them, engage early in the process. And then I would hold their feet to the fire in terms of data-driven decisions. I need to understand your math.

I need to understand how you came up with these things. Before this gets presented to the executive leadership team, before it gets presented to the board. I want to see what your seeing. I want to understand what you're understanding. And I would, when they're in there, this is serious as a CIO, I would set aside time to meet with them on a weekly basis.

Help me understand what you're seeing. Are you running into any roadblocks? Is there any information that you need that you are not getting. What are you finding? Yeah. You don't have to give me the, the final findings on this, but give me an idea directionally of what you're seeing, what inefficiencies are you seeing?

I'd like to know those things. So that, I can provide some context to those things for you, make yourself available to them. So you're having those conversations and it could be any number of leaders that are engaged at this. This is a serious project. The other thing I would hold their feet to the fire on is prioritizing two things. One is patient care and don't assume that they are. And the second is clinician experience. And don't assume that they are, that either. Because there are some things that you have done for quality and patient care.

And there's some things you have done for the clinician experience based on burnout that they need to understand before they just Willy nilly give a number. And I don't, I'm not suggesting that they Willy nilly do anything. There's typically some things behind it. But a lot of times, what I hear from people is we just got a number and it's 50 million, it's 70 million, it's 30 million, whatever it happens to be, it's still a very aggressive number.

And it's a very difficult number. Also understand the contract that was. Side is this a, gainshare kind of a contract where they are getting a percentage of the savings. Or is this just a straight up consulting contract? It matters. It matters. What kind of contract you signed as an organization? It might seem better to sign a gainshare kind of thing, but then they might do abnormal cuts in order to make more money.

So be careful on those contracts and understand. The incentives that have been created when the contracts are written in certain ways. The other thing is I would have them Talk, I would have them categorize. Look, if I were doing cuts myself and not bringing in a firm. I would essentially look at it and I'd say, look, there are some things we can do very quickly.

There are some things that are long-term. There are some things that require set up in order to make happen. And there's some things that you can do just right out of the shoot there's inefficiencies that naturally. Present themselves over time. That you don't take care of. And those are the quick wins.

Let's just get them out of here. Let's, take care of it. But there's other things where they say, oh, you should move to the cloud or you should eliminate that contract. And as soon as you hear it, you're like, Yeah, you can't do that overnight. That's a 12 month project. We have to do the correct organizational change management and the things around it.

In order to do that, I would have them classify the timing of the cost reductions. Just get getting a $50 million number from them is it's not doing the work. The work needs to be. You can achieve, 5 million within six months, another 10 million within the next 12 months and another 15 million in the next 12 months.

And here's where we see those savings coming from. I would push them on that kind of stuff. And I would get the buy-in from your executive team to push them on that kind of stuff. I think if you lay it out ahead of time, Hey, you're bringing them in. Great. I'm looking forward to working with them. I welcome another set of eyes. Let me tell you what I would like to do with them and how I'd like to work with them. Get the buy-in. Have everybody understand how you're going to work with them.

Meet with the partner. There's a partner associated with this, and this is the person at the top. It is a big part of the cost reduction that partner should want to meet with you, and you should be able to meet with that partner. I met with our Deloitte partner. I constantly, quite frankly, I met with him on a monthly basis. And he, he received value from it.

I received value from it. Because Deloitte was the internal auditor. He gave me perspective on the entire organization that I wasn't getting from other people within the organization. So I gained a lot of value meeting with him. But conversely, it was a big part of what he was brought in to help with. And so I would give him insights into what we were doing. And then I would say, I, identify those things that are operational efficiencies and those things that are going to require even more capital.

It's hard for people to grasp, but some savings require investment in order to receive savings. And just cause they gave you a $50 million number, the board and the executives should not think that some of that does not come without investment. And that investment should be identified. And it should be set aside so that you can get that money in order to get the savings.

And they need to understand that. The other thing is if they're going to be reviewing your contracts and more than likely they are use. For, somebody else is paying right now. To have your contract reviewed. I collect that information. Don't let that go to waste. That is really valuable.

They're going to find the contracts. They're going to review the contracts. They're going to, they're going to identify key things within the contract. Give them a framework and a structure to capture that information for you. And if they're going to ask about vendor relationships and potentially meet with your vendors. Again, capture that information, have somebody from your organization there.

If they're talking to vendors and they know of different strategies that can be utilized to drive down your overall costs. It does you no good to have them say, Hey, we think you can get 20% less from this vendor unless they tell you what the strategy is that they got that. Because if you knew the strategy, you would have already gotten the 20% discount.

So anyway use that labor, collect your contracts, have them mark them up. Tell you what they're seeing in those contracts. And then. I would say the art. So that's, if you get in early on. Let's assume they've already done the thing they were hired. You didn't do any of the things I just said. And now you have a number to it. That's all well and good. To have that number to hit and you should strive with every. Fiber of your being to meet that number because that's what your organization. Needs potentially desires, definitely, but needs in most cases.

But one of the things I've seen over and over again, as the consultant comes in and says 50 million, 75 million, 30 million. And then you go out as the leader of technology and take all the arrows. Hey, we're going to be cutting this. We're going to be cutting that. We're going to be cutting this. Part of what I used consultants for.

And part of what I did as a consultant was I played the bad guy.

Or I had consultants play the bad guy. And it better, better way of saying it. The consultant is paid to be the bad guy they're paid to. Not only tell the board that you can reduce it by 30 million, but they're paid. To go out to all those meetings that you have to go to and explain why you're doing cuts. And how you're doing those cuts. And if the consulting firms unwilling to go out there and explain their logic and where that's going to come from. Then find another consulting firm. Because that's part of the job.

Part of the job is to explain it to the organization, take the arrows. So that the people who have to live their day-to-day, don't have to take the arrows. Now you come alongside of them and say, look, this is really important to the organization. We're going to try to find these savings. We we're taking in all the feedback that you're giving us around these cost savings and we're going to incorporate them.

But we, we have a commitment to try to achieve these things, but let the consulting for. Be the bad guys. Let them set up the slide deck that they're going to talk to. When you have to go to the five or six boards that you have to go to. Depends how big your organization was. I would have to go to five or six different boards.

I'd have to go to hospital boards. I'd have to go to medical group boards. And have these conversations. And if there was something like this, I would have the consulting firms come in and go first. If a firm was missing their deadlines visit. Completely off the topic here, but if a firm was missing their deadlines on software development or something like that, I wouldn't do the presentation. I'd have them come and do the presentation. They should take the arrows.

They're missing the deadline. They're the ones who, whatever. Now it, clearly I brought them in. I'm supporting this project. I would, get up immediately after them and say, they were full confidence that this is what we're doing to correct this situation. Here's how we're moving forward. No those things, but let other people take arrows, especially the people who are creating the problem.

Let them take the arrows. So those are just a couple of things that I'm thinking as we move forward. Um, we've already covered like top 10 ways. You can find savings within health. It, you come back and find that on a today's show. So I'm not going to go into the specifics of where I would find savings and how I would go about doing that.

But cost savings is a huge organizational change management job. And this, those kinds of projects will define you as a leader. How do you do that? You could be the hands-off leader that says, Hey, nothing I can do. They said 50 million. I cut 50 million. So there's the hands-off approach to it.

There's a very hands-on approach to it. Which I described earlier, where you're heavily engaged in how they come up with the number. And you engage them in going out and helping to set up the. The a foundation for the cost savings. Why are we doing this? How are we doing this? Have the consulting firm alongside with you.

That's a very engaged way of approaching us. And there's probably some middle of the road. I haven't really defined it in my mind. As I said, this is a Friday riff. Hopefully some of that stuff will help you. If you're going through this, I want you to know you're not alone. I want you to know that it is very difficult.

And I also want you to know that it's also very possible. To get cost reductions. I healthcare is one of the most inefficiently run it organizations. Almost just categorically across the board. And a lot of that has to do with the you might have good governance now, but you didn't have good governance five years ago and eight years ago. So you have a lot of tech that you have a lot of legacy. And so there is savings to be had.

It's probably one of the easiest things for consultants to do is go in and find savings in a health it organization. So there is savings to be had there's savings in your contracts. There's a duplicative services in your contracts, there's services you're not using in your contracts. There's a lot of things. That are available to you.

I don't know if it's 50 million and it's likely not 50 million. But when you get a big number like that, you're likely going to have to do things different than you did yesterday. In order to do that, and it's not just cutting people. It's really looking at. Can we do it differently? Is there a level of automation we can bring to this?

Is there a level of I don't know, just changing the architecture. Changing the complexity. One of the. One of the things we know is a complex environment. Just put dollar signs next to that. And it's like the $5 sides and simple environment put fewer dollar signs. It says smaller attack surface it's fewer tools.

It's fewer. Man, hours to patch and all those things. So it's simple as better than complex, all those things. Anyway. You got the, you have the picture. That's the end of my Friday Friday, top of mind. A ref. Have any questions, you know where to reach me? You can reach me on LinkedIn. You can reach me on my email. That's all for today.

Don't forget to share this podcast with a friend or colleague. You said it's foundation for mentoring. We want to thank our channel sponsors who are investing in our mission to develop the next generation of health leaders. Notable service now, enterprise health. Parlance certified health and 📍 Panda health.

Check them out at this week. health.com/today. Thanks for listening. That's all for now.

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