Sunday, June 22, 2014

Cause for VA Cheating: Pay for Performance

America's foremost quality guru, Dr. W. Edwards Deming, was known for saying, "Will they ever learn?"  U.S. leaders remain unaware of the long proven toxicity of extrinsic rewards for work that requires teamwork and interdependence.  CNN reported:

At the Phoenix Veterans Administration (VA) patient wait times were directly tied to VA employees' bonuses and raises. By manipulating doctor's appointments for the veterans, the wait time to see a doctor appeared to be shorter, a factor considered in VA employee bonuses and raises, according to a VA inspector general report said.

The VA secretary's audit of a number of medical centers that concluded "some front-line, middle, and senior managers felt compelled to manipulate" the scheduling process to meet performance goals established by the agency.

The first public revelation that salary increases and bonuses may have been a factor came with the release of the agency's inspector general report.

Factor?  Try cause.  Extrinsic motivators cause major harm to any organization that performs complex work which requires teamwork.   Motivation expert Alfie Kohn, author of "Punished by Rewards" wrote:

Not a single controlled study has shown a long-term improvement in the quality of work as a result of any reward system. That would be an astonishing fact were it not for the existence of scores of studies – conducted with adults as well as children, in real workplaces among other venues – that have demonstrated how rewards tend to be not merely ineffective but powerfully counterproductive

Bribing people to do good work and management by fear are root causes of systemic cheating.  

The pattern of widespread cheating under pay for performance systems is long established, but apparently invisible to most leaders.  Lying, cheating and stealing occurred in the 1990's under executive stock options, sold at the time as the most pure incentive reward.  Thirty percent of executive stock options were backdated.  

Teachers and healthcare workers are just as smart as CEO's.  Cheating reappeared in numerous school systems, where administrators and teachers lied to show improvement.  It's back under the Veterans Administration and unfortunately it's foundational to PPACA, otherwise known as health reform.  Numerous federal agencies, Medicare and HRSA, offer "pay for performance."

PPACA's larger aim is to reshuffle the healthcare deck. President Obama's health reformer Nancy-Ann DeParle came from private equity, CCMP Capital Partners, and returned to it post "public service," as a founder of Covenant Capital.  How did Nancy-Ann receive a distribution for a PEU investment not shown on her federal financial filing?  It happened.

Congressional aides may have enriched themselves along the health deform path.  The issue is trading on insider information and whether Congressional representatives or aides leaked a forthcoming policy change.  NYT reported:

S.E.C. investigators have subpoenaed Representative David Camp, Republican of Michigan and the chairman of the House Ways and Means Committee, for records. The Justice Department has also subpoenaed one of Mr. Camp’s committee aides, Brian Sutter, to testify before a federal grand jury.

Former Office of Management and Budget Chief Peter Orszag told Carlyle Group co-founder David Rubenstein the feds would throw a lot of "stuff against the wall to see what sticks."   Medicare/Medicaid Chief Marilyn Tavenner, a former HCA executive, leads implementation of federal bribes, manipulations and sticks.  They'll end up like executive stock options, school testing and the Veterans Administration, distorting behavior and turning people's attention to money, instead of the important work of improvement/innovation.

The last fifteen years have seen leaders use the words "continual improvement" while trashing its underlying management theory.  Dr. W. Edwards Deming's System of Profound Knowledge has been set aside for the altar of command and control, bribes/manipulations, and sleight of hand budget cutting.

Dr. Deming decried leveraged buyout organizations for lack of constancy of purpose.  They re-branded as private equity and today are as widespread as school cheating or corporate lying.    Private equity firms have billions in dry powder with healthcare clearly in their sights.

My pet nickname for this mendacious group is private equity underwriters (PEU's).  They focus on capital structure, industries supported by Uncle Sam's trillion $ wallet, bolt-on acquisitions for affiliates, dividend bleeding, covenant light debt and fees, fees, fees

Management's propensity to view people as solely motivated by money is crude, ignorant and lazy. The feds, by incorporating pay for performance, makes the same error.  Add increased healthcare ownership by the greed/leverage boys and it won't be about delivering quality healthcare anymore.  It'll be about optimizing people's pay and affiliate resale value.  As a group, management, the feds and PEU's will have excised the heart of healthcare.

Consider how crude management becomes when they embrace systems of fear and manipulation.  A VA report stated:

OIG received numerous allegations daily of mismanagement, inappropriate hiring decisions, sexual harassment, and bullying behavior by mid- and senior-level managers.
Even their response to "systemic inappropriate scheduling practices" is crude, i.e. it points to individuals vs. those imposing distorting pay practices:

We have and will continue to conduct comprehensive interviews of numerous individuals to evaluate the many allegations, determine their validity, and if appropriate, assign individual accountability.

Quality will not improve in organizations bribing and manipulating people.  Lying and cheating will explode as it has done before.

President Obama has the answer to his 2009 statement "if performance pay works."  It distorts behavior, frequently making things worse.  The fish rots from the head down.  Leadership is required.

Update 7-13-14:  USAToday reported on the direct link between bonuses and cheating  reported to the White House.  President Obama remains a slow learner in this regard.

Update 8-9-14: This is the case with Dr. Deming's "continuous improvement" or "quality":
“You cannot imagine what sorrow and anger seize one's whole soul when a great idea, which one has long and piously revered, is picked up by some bunglers and dragged into the street, to more fools like themselves, and one suddenly meets it in the flea market, unrecognizable, dirty, askew, absurdly presented, without proportion, without harmony, a toy for stupid children.”
Fyodor Dostoyevsky, The Possessed
This applies to Obama's PPACA and corporate board rooms, especially in the health and education arenas.

Update 4-26-15:  Evidence of horrific management practices distorting behavior can be seen in "the explosion of False Claims Act suits in recent years."  Law360