Kaiser Permanente Northwest Laboratories Airport … Lab Case Study 10-21-2004 final...Table of Contents Section Page I. Introduction.....1

Case Study

Kaiser Permanente Northwest Laboratories

Airport Way Regional Lab

Table of Contents

Section Page I. Introduction.................................................................................................................1 II. Background.................................................................................................................1 ▪ Who is Kaiser Permanente? .....................................................................................1 ▪ Northwest Regional Laboratories ............................................................................1 ▪ History of the Labor-Management Partnership .......................................................2 ▪ Pathways to Partnership...........................................................................................3 III. Change Effort..............................................................................................................4 ▪ Steering Committee .................................................................................................5 ▪ Organizational Social Design Architecture .............................................................6 IV. Design Elements .........................................................................................................9 ▪ Work Structure.........................................................................................................9 ▪ Pay Systems ...........................................................................................................12 ▪ Governance ............................................................................................................13 ▪ Management Systems ............................................................................................15 ▪ Human Resources ..................................................................................................17 V. Performance Results .................................................................................................20 VI. Opportunities for Improvement ................................................................................22 VII. Conclusion ................................................................................................................25 Appendix............................................................................................................................26

Kaiser Permanente Northwest Laboratories 1 Airport Way Regional Lab - Case Study

I. Introduction

This case study discusses the organizational transformation of the Kaiser Permanente Northwest Regional Laboratory in Portland, Oregon. The Northwest Regional Laboratory was the setting for one of the first full organizational redesign efforts within Kaiser Permanente to create a high-performance organization based upon its Labor-Management Partnership and principles. This case demonstrates how high performance design principles were applied to processes in a science-based operation involving numerous and complex protocols that are highly regulated. II. Background Who is Kaiser Permanente?

Kaiser Permanente is the largest not-for-profit health maintenance organization of its kind, serving 8.4 million members in nine states and the District of Columbia. The organization is a partnership of two separate entities: the Kaiser Foundation Health Plan and Hospitals, which operates and manages the health insurance operations, facilities and staff (with the exception of the physicians), and the Permanente Medical Group, which consists of over 11,000 physicians and health care providers. The Permanente Medical Group is a for-profit organization that contracts its services only to the Kaiser Foundation Health Plan and Hospitals.

Founded in the 1930s, the organization opened to public enrollment in 1945. Its services encompass “members' care, including preventive care such as well-baby and prenatal care, immunizations, and screening diagnostics, hospital and medical services, and pharmacy services.” i Kaiser Permanente, headquartered in Oakland, California, employs approximately 100,000 people, 90,000 of whom are represented by a labor organization. Northwest Regional Laboratories

Kaiser Permanente’s presence in the northwest region of the United States originated in 1938 with the need to care for workers and their families at the Grand Coulee Dam in northeastern Washington and at the Kaiser shipyards in Portland, Oregon, and Vancouver, Washington. Today, Kaiser Permanente’s operations in the northwest consist of 18 clinics, one Medical Center and one Regional Laboratory which covers two states, 15 counties, and 6,930 square miles. The Regional Laboratory receives specimens from other regions and organizations around the United States for testing, and more than 3.5 million tests are performed in the Regional Laboratories annually, most at the main facility.ii Over 400 people staff the various Northwest laboratory facilities. The Laboratory staff consists of technical experts and degreed specialists, including physicians and doctorates in a wide range of pathologies and biochemistry, as well as Medical Laboratory Technologists, and Laboratory Technologist Assistants.


History of the Kaiser Permanente Labor Management Partnership Kaiser Permanente and its unions experienced generally good labor relations for

many years. Kaiser Permanente has historically been the healthcare provider of choice for many unionized companies because of the organization’s long and positive history with unions and its emphasis on high quality care at an affordable price. Much of Kaiser Permanente’s growth was over time, and is today, due to union support. In the 1990s, however, Kaiser Permanente faced a financial crisis that was in part due to aggressive competition from the for-profit sector of the healthcare industry providing lower-cost coverage and services. The company reacted by changing its labor relations strategy to include concession bargaining, which led to poor labor relations, followed by facility closings and layoffs. In response, the unions representing Kaiser Permanente employees started a "Corporate Campaign" and instigated challenges to the organization’s not-for-profit status.

The Service Employees International Union (SEIU) represented a significant portion of Kaiser Permanente employees, and John Sweeney, then president of the union, recognized the seriousness of the growing crisis. He attempted to persuade Dr. David Lawrence, CEO of Kaiser Permanente at the time, to pursue an alternative working relationship with the unions. Sweeney, then president of the AFL-CIO, identified Peter diCicco, president of the Industrial Union Department of the AFL-CIO, to lead a committee of union representatives from the Internationals to meet with Kaiser Permanente to discuss new ways of working together.

In 1997, Kaiser Permanente and eight unions from the AFL-CIO signed a national labor-management partnership agreement – the largest and most complex in the history of the U.S. and organized labor. In the Partnership agreement, Kaiser Permanente agreed to stop its focus on concessions in bargaining. Kaiser Permanente and the coalition of unions agreed to six tenets:

Improve the quality of health care for Kaiser Permanente members and

the communities served Assist Kaiser Permanente in achieving and maintaining market leading

performance Make Kaiser Permanente a better place to work Expand Kaiser Permanente’s membership in current and new markets,

including designation as provider of choice for all labor organizations in the areas served

Provide Kaiser Permanente employees with the maximum possible employment security within Kaiser Permanente and/or the health related field

Involve employees and their unions in decisions.


Three constituencies signed the agreement and comprise the Labor-Management Partnership today. These include Kaiser Permanente Foundation Health Plan management, the Permanente Medical Group physicians and health care providers, and eight unions that represented 26 local bargaining units, known as the Coalition of Kaiser Permanente Unions (CKPU). Pathways to Partnership

The Pathways to Partnership is the implementation roadmap for the Labor-Management Partnership. The map identifies five key stages of workplace transformation:

1. Traditional. An environment characterized by unilateral decision-making,

lack of staff involvement, and a paternalistic culture. 2. Foundation-building. Involves introducing new norms, practices and

behaviors. 3. Transitional Phase I. Some traditional and foundational characteristics in

evidence along with movement toward full partnership, including some improved performance.

4. Transitional Phase II. Partnership emerging as envisioned and high performance mainly in evidence; few old practices remain.

5. Full Partnership-High Performance. Incorporates joint governance and decision-making, staff involvement, staff educated in the business of the organization and management educated in the business of the union in order to function as effective partners.

The Pathways describes Partnership teams of top managers, union leaders and

physicians within each Kaiser region. The role of these teams is to determine the strategies and action plans to enable the region and worksites within the region to progress toward the fifth phase. The original expectation was that each phase of transformation would take twelve to eighteen months. Regions have progressed at various rates.

Through L-M Partnership, the Northwest Regional Laboratories converted to a

team-based organization over the course of 19 months, and in so doing represents an early success model within Kaiser Permanente, with progress along the Pathways roadmap.1

1 More information regarding the Labor-Management Partnership may be found on-line at www.LMPartnership.org.


III. Change Effort Originally, specimens from medical clinics and hospitals around the region were transported to the regional laboratory. The Lab performed manual chemical analysis, and results were returned to the local clinicians for interpretation. Automated and semi-automated equipment has been introduced over time to conduct many of these tests, with the results posted to an intranet site for physicians to interpret.

In the late 1990s, the Northwest Regional Laboratory, located then on the Sunnyside Medical Center Campus, suffered from cramped space, needed technology improvements and had difficulty filling the highly-skilled positions required by conventional testing methods. Kaiser Permanente leadership repeatedly asked for cost reduction in the Lab operation. The Lab needed change, and creativity to achieve it.

Leadership at the Lab determined that with the installation of a high-speed line,

referred to as the AutoLine, the Laboratory could substantially decrease cost per test. With the high speed technology, the Lab could centralize many routine tests, eliminate duplicate equipment, and consolidate testing at one central location. These changes would also help ease the pressure created by the shortage of Medical Technologists, who under the traditional testing system validated and assured consistency of results.

There were also operational issues related to the warehousing of chemicals,

reagents and supplies. Space and design of the two-story building at the Regional Lab Sunnyside campus were inadequate for proper controls and code requirements for expansion.

By upgrading to new high-tech equipment, the Laboratory would increase

capacity, and, if it functioned well, provide a highly reliable service level to clinicians, customers and members. Analysis indicated that it would cost more to retrofit the building than to lease and design a new one from scratch to accommodate the Autoline, equipment upgrades, and improved materials storage.

In the year 2000, the Northwest Regional Partnership Team selected the Northwest Regional Lab as a targeted project to implement the partnership principles. The project established a Regional joint labor-management-physician Partnership Steering Committee. The Steering Committee would design a new facility with the involvement of front-line employees throughout the organization. The facility would be designed to cultivate a workplace culture of high performance enabling achievement of the Lab’s business objectives. The Steering Committee had a “blank slate” with which to begin the design.

Two teams worked on the design of the new facility. One team designed the physical layout of the lab, where equipment, workstations, and offices would be located. The other team focused on the “Social Design” of the lab – a plan which outlined what the joint group determined were the most effective and efficient ways for working together within that physical space.


Steering Committee

A joint Steering Committee (SC) was formed at the Regional Laboratory in August, 2000 (separate from the region-level Steering Committee) and chartered with creating the organizational Social Design of the new laboratory. Twelve members from the three partnership constituencies - the Kaiser Foundation and Health Plan, the Permanente Medical Group, and the Coalition of Kaiser Permanente Unions (CKPU) – comprised the committee. The SC had co-chairs, one selected from the CKPU and another selected by Laboratory Management. The remaining Committee members included a doctor from the Permanente Medical Group, managers from the Kaiser Foundation Health Plan, members of SEIU Local 49, and members from both the professional group and the technical group of OFNHP Local 5017.

The SC and its joint subgroups met from August 2000 until mid- 2001, and mapped the work processes for different tests used within the Lab. They identified the major problems experienced with each test type and developed design recommendations to address the problems. The SC and subgroup members also attended training about high performance organizations, including experiential exercises, case studies, and design simulations. The SC developed a set of design principles and values which would guide their future design work. (See Appendix)

The SC formed four subgroups to focus on specific aspects of the organization’s social design – Governance, Rewards and Training, Structure/Leadership Roles, and Team/Job Design. The sub-groups reported to the Steering Committee and each included members from the population at large.

The Governance sub-group made recommendations regarding the establishment and direction of policy-making groups at the Lab, decision-making processes, communication systems, performance management and human resource issues. The Rewards and Training subgroup investigated and made recommendations about team pay systems, grandfathering procedures, pay for performance, recognition, and all issues related to team, technical and business training. The Structure/Leadership Roles subcommittee developed recommendations for an organizational structure to support the day-to-day operations, and leadership roles, including Facility Management, Team Advisors, Coordinators, and Support Staff and Specialists. Finally, the Job Design/Teams subcommittee recommendations addressed how people and work would be organized, team responsibilities, operating policies, and communication between teams. Also included in the Job Design/Teams subcommittee’s scope was staffing levels, membership, multi-skilling and rotation of staff into different tasks.

After a full review of all subgroup recommendations, the Joint Steering Committee created the Social Design for the new Laboratory, and recommended plan implementation. In April 2001, the SC presented the Social Design to over 150 staff and other interested parties and requested feedback. This feedback was taken into consideration as the final version of the design was created. Following approval by the union leadership and health plan management, an implementation plan was created.


Organizational Social Design Architecture

The organizational Social Design encompasses work structures, compensation, governance, employment and management systems. A set of design principles reflected the goals of the new Social Design, as well as the mission and values of the Lab. Future Vision

The SC developed a future vision of the member/clinician’s experience at Northwest Regional Lab to shape the design.

“As I drive onto the campus I see a large building surrounded by landscaped gardens. The Kaiser Permanente logo directs me to the reception area. Entering the foyer I see pictures of individuals grouped together in teams. Statements of Values and recent Turnaround Time results are displayed. Also displayed are pictures of customers, patients and plaques showing their appreciation, as well as quality and service awards for outstanding achievement. Walking through the work area, I see diverse teams of people working effectively, making decisions and solving problems, all toward a common goal. Team members easily explain to me what they are doing. I am pleased with the depth of medical and business knowledge they possess. They quickly return to their high tech, automated, efficient equipment. I sense a feeling of satisfaction, harmony and competitive service provided by the staff. I feel proud to be part of Kaiser Permanente as a member. They have achieved world-class status. If they care that much about their work, think how much they will care for me.”

The Steering Committee kept this vision state as its goal while designing the new organization and while making plans for implementation. Mission Statement

The SC also created a mission statement: “The People of our internationally-recognized laboratories proudly provide information of the highest value to our clinicians and community, through a Labor/Management Partnership using quality systems and technology.”


Developing and stating the vision and mission were key steps in completing the design and implementation. The vision and mission enabled the SC to be clear about the desired outcomes for the new Social Design. Design Principles

The design principles, shown in the Appendix, outline the foundation from which the High Performance Social Design was created. These socio-technical design principles reflect a belief that organizations are systems, and that each part of a system is dependent on the others. When one part of the system is changed or does not function, the other parts of the system are affected. The goal of using socio-technical design principles is to create a system of high performance; that is, where all parts of the system are working in tandem, complementing and leveraging one another to meet the “People” or employee needs, the business needs, and customer needs. These principles also encompass the belief that without the involvement and support of an organization’s people, the business will not succeed, nor achieve optimal results.

Another fundamental principle of the organizational design is the Principle of Incompletion -- that organizational design is an ongoing process that will grow and change based on the needs of the business and people. All employees – physicians, management and labor -- will continuously work on improvement. Further, company and union leadership will encourage joint employee involvement to make successful changes in the way the organization provides service and strives to meet the business, staff and customer needs. The Northwest Laboratory Partnership Steering Committee was designated the keeper of the Social Design and proposed changes. Values

The Steering Committee also clarified the Values of the new organization. These Values were intended to guide staff through day-to-day activities and decision-making. The values the Steering Committee identified include: Trust and Integrity, Equality, Customer Service, “People are Key Assets”, Continuous Improvement, Customers, Quality and Affordability, Teamwork, Diversity, Social Responsibility, and Integrated Care.

The plan was to implement many of the basic social and technical changes in the system immediately, and phase in the more intricate aspects of the Social Design over the next five years. This type of design, by necessity, requires a new way of working that was dubbed “S.M.A.R.T.”

Specific: Clear tasks and outcomes Motivated: Enthusiastic workforce Accurate: Quality (done once, done right, done well) Responsible: Our people own the results Teams: Groups working together for common goals


Objectives of the New Laboratory The Steering Committee also developed a set of performance objectives which

helped establish benchmark practices as they opened the new laboratory. Key areas of performance and specific targets within each category include:

Cost • Return on Investment of 11% in six years or less. • Decrease net per member per month. • Create capacity for increased revenues. Quality • Monitor and decrease rework through our Quality System. Service • Turnaround objectives are met 90% of the time. • Core lab turnaround time of 1 hour or less (from specimen arrival time to

release of results). Infrastructure • Communication – face to face staff meetings as a measure of team

implementation. Partnership • Training hours supported by adequate staff replacements. • Partnership – related questions of People Pulse Survey results improve. • Ongoing High Performance Organization (HPO) Training. • By 12/31/04, 75% of teams will be self-directed. Staff Satisfaction • Decrease staff turnover by 50% less retirements at Sunnyside and Regional

Laboratory. • Resolve issues using Interest Based Problem Solving. • Staff Satisfaction:

o Decrease short notice replacement use. o Work is fun.

• Improve score on People Pulse Survey – Average (7). • Decrease ergonomically related injuries.


IV. Design Elements Work Structure Neighborhood Concept

Through the design discussions held by the SC and its subgroups, a sense of community emerged. One leader pointed out that communities are made up of many different, yet interdependent, neighborhoods, which together create a viable community. Past organizational designs at the Northwest Regional Lab, it was revealed, had department barriers that often prevented this sense of community.

To foster the idea of community and interdependency in the new Lab, the laboratory leaders used the “Neighborhood” concept to structure the lab operations in the Social Design. The “neighborhoods” are business units or key process areas that specialize in specific testing and are made up of a varying number of self-directed teams. Listed here are the neighborhoods developed for the new organizational design and the services provided by each area:

Sam/Tox Process samples for manual and semi-automated testing, toxicology and referred test.

Prep and Read

Prepare and process samples for Histology, Cytology, Wet & Dry, Microscopy, Pathology and Microbiology.

Core Lab

Process Automated Coagulation, Chemistry, Immunochemistry, Hematology, Urinalysis and Labotix.

Sunnyside

Collecting, processing and testing of inpatient menu and campus stat menu samples.

Client and Customer

Service Center

Process incoming calls, client calls, admitting visitors, mail and report routing, and monitor critical equipment alarms.

Support

Provide clinician, regional and operational support to the Kaiser Permanente Northwest Laboratory organization. Staff in the support neighborhood includes, managers, clinical leadership, represented and non-represented staff. They support teams, neighborhoods, and clinicians.


Figure 1: This diagram shows the overlap of neighborhoods and support of clinicians.

Each neighborhood unit consists of multiple self-directed teams that collectively

are accountable for performing all of the tasks for which the unit is responsible. Team members rotate within the team and may rotate voluntarily outside of the team as well, if they meet the responsibility requirements of another area.

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Each neighborhood has the following internal roles and functions:

Team Members Team members are skilled, flexible workers that perform all tasks for which they are qualified, based on the needs of the team and the business.

Team Coordinators Functional leaders for one or more specific areas where self- directed teams are in place. The individual coordinator manages day-to-day team activities on behalf of the team members. This role is rotated among team members. Each team has Coordinator roles for each of the following areas:

Operations – oversees day-to-day team operations Staffing – schedules team members Training & Competency – monitors team training QS2 – monitors and audits quality Safety/Sanitation – monitors safety and cleanliness Finance/Budget – monitor team’s financial performance

Team Advisors The Team Advisors work with teams to reinforce the values and principles of the organization. The Advisor role coaches and develops the team and its members toward behavioral and group process effectiveness. This development is separate from content expertise, which comes from team and functional support staff. Team Advisors report to the Neighborhood Manager.

Technical Specialists The Technical Specialists provide expertise in a specific discipline, such as Microbiology, Toxicology and Histology. Examples of duties include interpreting results, consulting with clinicians, or trouble shooting processes and procedures within a discipline, training staff and developing and validating testing processes.

Neighborhood Managers

The Neighborhood Manager oversees the day-to-day operations at the Neighborhood level. This includes monitoring, planning, organizing, training, coaching, motivation and corrective action of the neighborhood. The Neighborhood Manager reports directly to the Operations manager.

Regional and Operational Support

Leadership

These administrative areas support the entire Northwest Region and include Education and Training, Regulatory and Compliance, QS2, Business Finance, Human Resources, Building, Facilities and Planning, Clerical, Administrative Assistants, and Word Processing.


Clinical Leadership Lab Administration has oversight responsibilities for the operation’s mission and region-wide focus. The Clinical Leadership is responsible for: ensuring a cost effective overall process of care; defining tests and turnaround times necessary to support these processes; and providing resources, advice support, and problem solving skills to the teams and clinical staff within their area of expertise. The Clinical Leadership may report directly or indirectly to the Laboratory Director.

Flexibility

Rotation by team members from Neighborhood to Neighborhood and from team to team was an important aspect of the design. Eighty percent of the Lab’s specimens are processed by the Core Lab Neighborhood. Keeping the Core Lab fully staffed was, therefore, critical to the Lab’s success. Having qualified staff that could move from team to team, particularly with in the Core Lab, to fill in during meetings, vacation, training and sick leave was identified as a business necessity. Rotation also provides the opportunity for team members outside the team to learn additional skills and is supported by Pay-for-Flexibility, an important design lever. Pay Systems

No major changes were made to the job classification system in the new Lab Social Design. During the design process, however, the Medical Technologists bargained their first agreement with management, including a new pay provision.

The SC had a strong interest in providing additional opportunities for team

members to broaden their skill base and increase their pay. Pay for Flexibility (PFF) was included in the design to encourage and reward team members’ development of transferable skills. The intent of PFF was to encourage team members to reach at least a minimum level of competency in specific skills relevant to their team. It was also designed to encourage them to obtain skills relevant in other teams, and to rotate to other teams as needed. PFF would reward those team members who obtained these multiple skills and flexibility with the opportunity to earn a higher base wage. Another goal of having PFF in the Social Design was to maximize Core Lab staffing. By increasing individual skill sets and mobility among teams and neighborhoods, the organization increased staffing flexibility, provided a higher level of employment security, and promoted system understanding among employees. Reduced overtime and other labor costs were also presumed to be an outcome of PFF, based on other organizations’ experience with similar programs.

The Lab also has a Pay-for-Performance (variable incentive) plan structured according to parameters negotiated in the 2000 National Agreement.


Governance Joint Governance Structure

The SC adopted a joint governance structure for decision- and policy-making and oversight for policy implementation. The structure puts the SC at the center of policy-making, with separate joint committees linking to it. These subcommittees represent Planning/Research and Development, Operations, Union/Management Appeals, Neighborhood, Training, Regulatory, Safety, Social and QS2 (Quality System) The joint committees are co-chaired by labor and management leaders, and membership includes neighborhood managers, administrative managers, team advisors, team coordinators and union officials. The Social Design outlined the desired number of members and the specific desired composition and scope of the committees.

Decision-Making The SC sought to give daily decision-making to the people most directly involved in the work, issue, or situation, and have little involvement by people not directly affected. This approach to decision-making is a key design element of high performance organizations. The SC wanted to empower individuals and teams to make and take responsibility for decisions that directly affected them. They wanted these individuals and teams to use their knowledge and experience to consult with technical advisors or other resource personnel as necessary or to provide direct input on decisions beyond where their expertise or interests were at stake.

Social

Regulatory

TrainingNeighborhood U/M Appeals

Operations

Safety

KPNWL STEERING COMMITTEE

Planning/R&D

QS2


The SC agreed that consensus decision-making would be the norm for joint groups within the lab.

Consensus decision-making means that participants in a decision agree to it, and to support and implement the decision, if they can “live with it” even it is not their first choice. Policy decisions made using consensus at the team level are then usually implemented by individual team members or coordinators. The SC recognized that not every decision is appropriate for consensus. It determined that criteria for participation in consensus decision-making includes the interests or stake participants have in the outcome of a decision; the ability and knowledge of participants to contribute to the decision; and the criticality of a participant’s support and commitment following a decision. If a team, neighborhood or joint group cannot reach consensus after making a good faith effort, the decision could be resolved by the SC. If the SC cannot reach a decision then it would be handed off to the Regional Partnership team. Hourly Coordinators

Another principle of high performance organizations is that people who perform the work can and should understand the business well enough to function with a minimal amount of management. In following this principle, the SC developed Hourly Coordinator positions in the Social Design for the new Lab. These are Coordinator positions held by bargaining unit employees. The SC believed that Hourly Coordinators would enable team members to develop business skills through applied workplace education, practice and refinement of skills on the job. These skills would then enable team members to make effective decisions within the team’s circle of influence. Team Advisors

The traditional role of the front-line supervisor fundamentally changed with the new design. In the new Lab, Team Advisors are expected to manage results of the teams, and transfer many of the day-to-day administrative tasks of a traditional supervisory role to the Hourly Coordinators. This role transfer frees the Advisor to function as a coach and counselor to team members and to focus on managing the team’s exchange with other teams and individuals beyond the team’s boundaries.

During the design process, some committee members believed that the new system would reduce the need for traditional forms of disciplinary action. Further, if this need existed, the neighborhood manager would be able to handle it. Front-line supervisors would no longer be needed or responsible for disciplinary action. However, the coalition union members on the SC had a strong interest in filling Team Advisor positions with members of the collective bargaining unit, thus providing their members more career opportunities without leaving the bargaining unit.


The coalition unions and members were interested in providing its members with more career opportunities. Historically, supervisory/administrative/technical specialist positions were not in the bargaining unit. The coalition saw the Team Advisor position (without responsibility for disciplinary action) as a means to enhance one’s career and earning potential.

A pilot was conducted in the Shared Prep area of Microbiology to test the role of Team Advisor with bargaining unit members fulfilling that role. For the most part, the pilot was successful. Difficulty arose, however, regarding the implementation of the corrective action process. Neighborhood managers felt too far removed from the issues to have a full understanding of the situations. Taking corrective action placed union members as Advisors in a strained position. If the action had to extend to discipline, a manager had to administer it – for a union member to do so for another union member was illegal.

The Regional LMP team chartered a task force to address the changing roles of Supervisors and Managers throughout the region. For the transition phase, due primarily to the corrective action/discipline issue, the LMP team determined that only non-represented employees would serve as Team Advisors. Management Systems Quality Systems

The Kaiser Permanente Northwest Regional Lab instituted the ISO 9000 quality system as the standard throughout the lab. Presently, the primary application of ISO 9000 at the team level is to identify variances. Once individuals or teams identify variances, staff works collectively to resolve the issue and implement necessary changes Performance Results Communication

The Regional Lab’s “vital signs,” or performance results, are posted regularly on a bulletin board in the break room outside the Core Lab. Charts and graphs display each month’s and year-to-date performance results. Labor and management jointly identified operational, safety, service, training, quality, financial and people measurements and the targets for each that would be tracked. Performance Management System

With the goal of reopening the Northwest Regional Lab as a fully functioning high performance organization, the Governance Subgroup designed a performance management system for the lab enhances the prior system within the lab. This system sets performance objectives, measures actual performance against the objectives, and provides feedback on performance to all staff. The performance management system elements exist at the regional, neighborhood, team and individual level. In following the design principles of a high-performing organization, all employees know and understand


the business, know the performance goals they are trying to achieve, have a line-of-sight linking their own individual actions and contributions to achieving overall company goals, and regularly receive information and communication regarding Lab performance and achievement of objectives.

Another key element of the performance management system is managing the performance of suppliers (both internal and external) based on the premise that supplier performance has a direct impact on Lab performance. Suppliers may include regional division, program support, or contractors and external service providers. To help manage performance of and improve relations with suppliers, designers of the Performance Management System established a supplier Service Level Agreement (SLA), a standardized approach to managing supplier relationships that includes clearly defined standards, performance reviews, penalties for nonconformance to agreements, and a conflict resolution process. Team Performance Management

In developing a team performance management system, designers focused on a system that would effectively evaluate the performance demanded of a high performance organization. In this performance management system, teams work with Team Advisors to develop standards and measures internal to the team and to provide a shared understanding of performance targets and consistency across teams. Teams also conduct annual performance reviews with Team Advisors to review the group’s performance of the previous year and to set performance objectives for the coming year. Individual Performance Management

Individual performance management begins at the start of a staff member’s career in the Lab, rather than after the fact as is the case in many organizations. During orientation to the system, the staff member receives an initial review to ensure that she/he understands his or her role in the organization and performance expectations and to develop his or her individual training plan. Individual performance feedback is provided during the probationary and initial training period, which ends with a first performance appraisal. Performance appraisals are then conducted annually.

The goals of the annual performance appraisal are to review the previous year’s

performance and to establish new individual performance goals for the next year, as is the case with team reviews. Individual reviews are performed after the team reviews are complete. Also included in the individual reviews are career planning discussions.

Another aspect of individual reviews is informal team feedback sessions

facilitated by the Team Advisor. Team members give each other feedback on their contribution to the team’s goals, along with regular day-to-day performance feedback at daily “stand-up” team meetings.


Human Resources Selection and Hiring

Prior to the implementation of the new social design, most of the interviewing, and hiring of new staff was solely the responsibility of management. During the design process, the Core Lab piloted a process in which the team members interview and select new employees. When positions need to be filled from outside the organization, teams of staff and supervisors collectively select new team members following an initial screening by the Human Resources Department.

Training and Qualifications

The SC realized that in order to remain flexible and support the social and technical needs of the lab, staff would have to retain their current skills and broaden their business acumen and individual skill sets. Achieving this would require education in basic business skills related to finance, operations and performance management, and building an understanding of the business of Kaiser Permanente among employees. They recommended a training system that would provide staff with the skills needed to rotate among and within neighborhoods, support team self-management, and be consistent with the Lab’s Pay for Flexibility system. They understood that an incentive pay system would not thrive if the requisite skills are not provided for staff to be successful with such a system. Some of the types of training provided to employees have included:

• New Staff Orientation • Team Training • Technical Training • Business Understanding Training • General Training Courses • Leadership Training

The technical training process is also a key component of the ongoing system.

Annually, staff is required to sign off on a Learning Education Document (LED). A signed LED indicates that an employee has reviewed and re-qualified for tasks with in the team’s technical area of responsibility. The neighborhood committee also created training manuals for each neighborhood to assist with training and help to standardize work processes and procedures at the lab. The training program details the training progression, the qualification process and process for re-qualifying staff.


Issue Resolution

Kaiser Permanente implemented a new issue resolution process developed under the Labor-Management Partnership which was modified to fit within the new Lab social design. The goal of this process is to resolve issues, thoroughly and effectively through joint problem-solving. The overarching goals of the issue resolution process are:

• Resolving issues at the lowest level of the organization possible. • Using Interest Based Problem Solving to resolve issues. • Putting forth good faith efforts to solve the problem. • Taking accountability by acknowledging that there is an issue, aiding

in finding a solution and committing to an action plan. • Using flexibility and common sense when resolving issues. • Exhausting all means at the lower steps before moving on to the next

step in the process.

One-on-one/TeamDiscussion Individual, Team, Groups,

Team Advisors, UnionOfficials, Management,Support Staff & others.

Steps Participants

NeighborhoodCommittee

1A

1B Those involed with theissue and the Committee

1C

Those involed with theissue and the CommitteeKaiser Permanente

Northwest LaboratorySteering Committee

ISSUE RESOLUTION PROCESS

Resolved?

No

YesEnd

Resolved?End

No

Yes

End NoResolved?

STEP TWO

Yes

Note: At no time does thisprocess deny representedstaff members of his or herright to use the grievance

procedure.

Figure 2: Diagram of Issue Resolution Process


Though staff members have the option to use the Issue Resolution process to solve a problem or resolve an issue, represented staff members may use the grievance procedure which is separate from the Issue Resolution approach. If a represented staff member chooses to use the grievance procedure, he or she forgoes the Issue Resolution process and procedures, the issue is no longer part of the issue resolution process, and the problem is resolved in a traditional manner, with a union steward, employee and manager present. Contractual issues are deferred to the Management-Union Appeals Committee after the individual and teams have made a good faith effort to resolve it.

Corrective Action

Kaiser Permanente’s Corrective Action process is another means to resolve

problems and correct inappropriate staff behaviors. It incorporates the interest-based problem solving/issue resolution process in the early steps. Corrective Action provides direct feedback to individuals or teams after a joint discovery process focusing on correcting inappropriate or unacceptable behavior. The discussion should result in an action plan to correct the behavior. Steps involved in the corrective action process are:

Level 1 - Initial Discussion Level 2 - Developmental Action Plan Level 3 - Corrective Action Plan Level 4 - Day of Decision-making Level 5 - Termination

Communications

Coordinated communications in the Lab involve staff communicating at the team level, the neighborhood level, and within the facility and region. As a result, designers devised the “Stand-Up Meeting” for teams for information exchange. The entire team meets daily for five to ten minutes, at a specified time during the shift, to discuss the previous day’s performance, the team’s best performance-to-date, and personal matters, and to hear reports from Coordinators. At these meetings, free-flowing information is expected, everyone comes prepared, and decision-making is kept to a minimum.

Teams also participate in weekly meetings to review team performance, analyze variances in performance, solve problems, and receive reports from Coordinators; these meetings typically last thirty to sixty minutes in length.

In order to have communication across neighborhoods, the neighborhood managers meet regularly. Various other meetings, including team advisor, committee, facility-wide, management, and union and support neighborhood meetings, ensure that issues are addressed that effect a variety of areas and interests. These meetings occur as needed.


Because communication is a key value of the organization, the Lab also provides extensive communication, meetings, via notice boards (which display information such as performance results, meeting minutes, and job vacancies), newsletters and flyers (including information on safety issues, regional news), electronic display on equipment (to present performance issues), an intranet web page, e-mail. V. Performance Results

The new social design was implemented at the Northwest Regional Lab when it moved to its new facility in August 2000. The following performance results were recorded at year end 2003 from the baseline in August 2000 and show the progress achieved by the organizational redesign over that period. It should be noted that certain details of the new social design are being phased in over the 5-year implementation plan, and results are expected to continue to improve. The cost per test increased by 3 percent, however, this is low relative to larger private labs where cost increases are in the 7-10% range.

Cost

Cost per Test Increased by 3.0%

Inventory Turns + 11.8%

Expired Inventory -76.7%

Inventory on Hand -53.8%

Tests per FTE +6.3%

Quality

Accuracy of tests that leave facility 99.92%

Ultra reports done right first time 99.99%

Service

Turnaround time: Dwell Time in Core Lab Average16.6 minutes2

Urgent Orders per month -100%

2 Compared with 1-4 hours depending on the Lab test under the traditional design.


Staff Satisfaction

Staff Turnover 4%3

Total Overtime -55.3%

Workplace Injuries -54.0%

People Pulse Survey Results

The People Pulse is a Kaiser Permanente internal employee satisfaction survey that is conducted annually. The data reflects the percentage of survey responses in the affirmative.

2001 2002 2003

Partnership

Know about the LMP 51% 60% 70%

LMP helped involvement in decisions to improve work environment n/a 40% 43%

Involved in LMP activities 32% 39% 50%

Staff Satisfaction (Motivation)

At work, I have the opportunity to do what I do best every day. 57% 69% 65%

My work group/team leader lets me know when I am doing a good job. 55% 62% 57%

I receive recognition for doing good work. 53% 56% 52%

3 Baseline in 2000 was 10%


Major Accomplishments and Achievements Successful Opening

The most noted accomplishment of the Kaiser Permanente Northwest Regional Laboratory staff to date is that they met their objective to implement the design plans, close the existing lab and open the new lab within a period of six months. The transition took place both within the planned timeframe and within the budget established for this project. The laboratories offered uninterrupted service during this transition. One union leader credits the success in part to the support and necessary release time provided to the design team. Successful Job Bid Process

The job bid process that accompanied the opening of the new Lab under the new design was also a success. Union leaders, SC members and union representatives agree that about 90% of staff got their first-choice job bid. Other staff eventually entered their first choice through open positions. Local union leaders also noted high satisfaction with the transition and an absence of grievances during the process. ISO 9000 Re-certification

The Lab received ISO 9000 certification within six months of operating at the new location. The Lab also passed the CAP Inspection and the Washington State Inspection. The first Coordinators to be trained in their new roles at the Lab were the QS2 Quality Coordinators; a competency based training program was designed, developed and delivered to those selected as the first QS2 Quality Coordinators. The successful hand off of quality management to team members has been attributed to the initial training. VI. Opportunities for Improvement at Year Four Managing Expectations

When asked about opportunities for improvement to the new system and advice for leaders hoping to undergo a similar organizational re-design process, several committee members commented on “managing expectations.” They cited the difficulties of managing expectations during the early stages of moving from one location to another one 13 miles away, and difficulties as employees changed their ways of work. Staff and management worked as a team to “get the lab up and running,” they said. Some found it difficult to change their long-standing habits and to work in a process-oriented environment, versus a department-oriented environment. Many tests that had been run in specific departments at the old lab were now being run in the Core Lab on highly automated equipment. The increased automation resulted in a change in the work for many staff and eliminated duplication of tests. Team members in some areas needed to adjust to new work schedules. In some cases, staffing arrangements have changed such


that some staff has had to change child care arrangements. In other cases the longer commute and traffic jams have led to staff frustration. Decision-Making

Joint decision-making is a principle of the Kaiser Permanente Labor Management Partnership. Though joint decision-making is used by leadership at the national level, the Lab organization has had difficulty integrating this principle at the workgroup level. The redesign of the Laboratory introduced joint decision-making model to the Northwest Region.

In some cases Lab management is slow or unwilling to transfer decision-making

to teams. In other cases, the team is hesitant or resistant to accepting accountability for decision-making. Confusion has arisen over which decisions would be made by consensus, and confusion has also been expressed over the time it takes to make consensus decisions. A consultant in the Organization Effectiveness department at Kaiser Permanente commented that “Old habits are difficult to change. For a while it was difficult for management to remember to slow things down with decision-making. They understood the value of consensus decision-making, but were frustrated because it took a long time.” Lucy Andersen, Staff Development Trainer for Laboratories, noted that “I think that we’re realizing that decisions take more time. If it affects the work area, it is a consensus decision and people are frustrated because they want things now” (sic).

There is also disagreement at the Northwest Regional Laboratories about the level

of employee involvement in decision-making. A common feeling among both management and union members is that the partnership principles and the joint decision-making model are being used at higher levels of the organization, but are not visible within day-to-day operations or within work groups as envisioned by the Steering Committee and in the Social Design. Represented staff are frustrated when management makes decisions that they feel should have been made jointly and via consensus. Self-Directed Teams and Hourly Coordinators

Teams have been slow to develop into self-directed units for reasons including staff scheduling and scarce resources. Both issues have made it difficult for supervisors to train Coordinators. Many team members work part-time which makes it difficult to plan and coordinate training. In some cases, because of coverage issues, two or three Coordinators on the same team may need to be trained on the same Coordinator tasks.


Team Advisors Issues have also emerged regarding the role of the Team Advisors. The SC plan

was that, with Hourly Coordinators incorporated into self-directed teams, many of the administrative tasks of the former supervisors would be handed off to team members. Management has been hesitant to follow through on the transition. Nearly four years after the new Lab opening, the Hourly Coordinators have not been trained. The issue of having represented staff serve as Team Advisors has not been addressed. Trust

As new members enter committees or replace original committee members, trust may erode. The team often has to rebuild relationships and trust as it brings new members up to speed. New members on a team may fall back on “old habits” and behaviors as they step into new roles, rather than consciously adapting to behaviors that foster trust and partnership.

Staffing Levels

One national CKPU official believes that the Lab is inevitably “looking at a reduction in force. Kaiser’s projections for growth are lower and they are looking at dealing with cutbacks.” The Director of Laboratories for the Northwest Region notes that the Lab “took 16 FTE’s out of the budget for the region.”

The start-up required additional FTE hours. Then, the year after the lab was

opened, Kaiser Permanente membership declined, and tests related to patient visits declined as well, so there was concerted effort to move routine tests to the regional lab. As a result, the clinics within the region had cutbacks. This stimulated a sense of mistrust and called into question previous agreements related to the impact of the new Lab. Recently, there has also been a restructuring of management in an effort to reduce cost.

Staff Training and Development The Lab has delivered 4000 hours of team training to employees over two years, averaging approximately 20 hours of training per employee. While this level of training exceeded norms within Kaiser Permanente, other high performance workplaces invest on average four to five times this amount during the early stages of a new design. Many high performance organizations allocate close to 10% of the payroll budget to training and staff development.


VII. Conclusion

The Kaiser Permanente Northwest Regional Laboratory has made a significant investment in both the technical and social designs. The investment yielded initial return in the achievement of significant performance results on key measures within the first two years of plan implementation. Other milestones of success to date include the new Lab opening within a planned budget and planned time frame of 6 months, achieving ISO 9000 certification within the first six months after opening, and conducting a wholesale job bid process. The Lab has also begun to develop a high performing climate from the many elements of high performance designed into the organization: joint decision-making, corrective action and issue resolution systems, joint communication systems, business education for employees, and an innovative performance management system. Although it still struggling to implement some portions of the social design at the new facility, such as Pay for Flexibility, changing roles of managers and supervisors and widespread joint decision-making, organization leaders remain hopeful for continued improvements and successful implementation of the design. The challenge for the Lab in the future is to translate “the incredible desire of everyone sitting at the table to make it work” (as observed by Director of the Lab) into a fully functioning high performing work organization.


Appendix

Kaiser-Permanente Northwest Regional Lab Design Principles

• Design Principle One Organizational units need to be flexible, and adapt to changing business

environments.

• Design Principle Two People who are multi-skilled and capable of performing multiple functions

allow the organization more flexibility and adaptability.

• Design Principle Three Work activities should be arranged in natural work units so that members of

the natural work units can understand either an entire process or a significant part of it from start to finish.

• Design Principle Four Interdependent activities should be grouped together in a single unit without

barriers.

• Design Principle Five People need jobs that allow them to feel that their work is meaningful.

• Design Principle Six People need jobs that give them responsibility for the outcome of their work.

• Design Principle Seven People need jobs that allow them to see the results of their work.

• Design Principle Eight Jobs should include management tasks that increase a person’s autonomy.

• Design Principle nine The gap between doing and controlling should be minimized.

• Design Principle Ten Jobs should be designed to provide feedback about how well one is doing

and whether performance is improving or declining over time.

• Design Principle Eleven People should be involved in decisions that affect the performance of their

work.


Appendix (continued)

Kaiser-Permanente Northwest Regional Lab Design Principles

• Design Principle Twelve Pay systems should reward performance and the critical behaviors needed by

the organization.

• Design Principle Thirteen People must understand and be well trained in order to perform well.

• Design Principle Fourteen People must understand and be well informed about the business, its

objectives, and its costs in order to perform well.

• Design Principle Fifteen Standardized processes that are statistically monitored perform better.

• Design Principle Sixteen Status differences are minimized.

• Design Principle Seventeen Non-adversarial methods of conflict resolution are used.

• Design Principle Eighteen: Labor/Management and support systems are aligned with changes in

operations.

• Design Principle Nineteen Organizational Design is an ongoing process (Principle of Incompletion).

• Design Principle Twenty Organizations are based on shared values that are established and nurtured.

• General Principles Focus on the implementation.

Diverse work force that encourages [employees from all cultures] an enriched environment

Staffing levels support organization design and operational requirements.

i http://www.kaiserpermanente.org/about/whoweare.html 6/10/03 ii Kaiser Permanente Northwest Laboratories Quality Manual 2/27/01

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