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The Harmony Issue

2010 - 2011winter

Can Customer-Centricity Cure Runaway Healthcare Costs?

A Newsletter for the Human Resource Community

Recent OSHA Citations (And How You Can Avoid Them)

optimal knowledge

Harmonizing the Bottom Line with Compliance

Page 2

Heard On The Street

Pages 3 – 4

Pages 5– 6

Pages 6 – 10

E d i t o r i a l N o t e

Optimal Knowledge is published on a quarterly basis for the as-sociates, clients and business partners of Optimum Human Resources Systems.

The Editorial Board would like to take the opportunity to thank you all for your continued sup-port, enthusiastic participation and invaluable contributions.

For comments, suggestions and contributions, please contact [email protected]

Fall 2007

Harmonizing The Bottom Line With Compliance

Editor

Richard WarrenOptimum HR Associates

Richard Warren

Anita Ryan

Vija Kelly

Tom Felling

Eric Heiberg

Chuck Loeper

Dick Lee

Contributing Writers Marcie Levine

Rossitza Ohridska

Stevan Olson

Graphic Design

Vizantia

Ed i t o r i a l No te

Optimal Knowledge is published on a quarterly basis for the associ-ates, clients and business partners of Optimum Human Resource Sys-tems.

The Editorial Board would like to take the opportunity to thank you all for your continued support, en-thusiastic participation and valuable contributions.

For comments, suggestions and contributions, please contact [email protected]

EditorsRichard Warren

Anita Ryan

Dick Lee

Contributing EditorKim Husband

Optimum HR AssociatesRichard Warren

Anita Ryan

Vija Kelly

Tom Felling

Eric Heiberg

Linda Herman

Dick Lee

Katie Birthler

Contributing Writers Rossitza Ohridska

Stevan Olson

Graphic Design

Vizantia

2010 The Anniversary Issue


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By Richard Warren

In a perfect world, there should be a harmony between what business goals dictate and what compliance requirements impose. This idealistic harmony rarely exists for several reasons. Some companies believe that they cannot afford to make changes in their way of doing business and adjust to a variety of compliance requirements regarding affirmative action, safety regulations, manufacturing processes or other employment related regulations. Some other companies believe that since they are stellar performers in almost all aspects of their business they probably will not be hit by an audit. Some companies simply don’t

know better – they don’t follow changing regulations, trends in auditing, etc.

All these practices can, in the end, be more costly and disruptive than complying in the first place. The goal should be to integrate compliance into every process so that it becomes automatic and you are prepared long before the auditor (inspector) shows up at your front door.

In this issue, Dick Warren writes about the recent OFCCP audit trends and suggests several steps to develop an “audit-ready” Affirmative Action Plan. With several examples of the cost of safety procedures in recent OSHA

citations and the steps to avoid them, Vija Kelly stresses the fact that in most cases is less expensive to adhere strictly to the rules out of the gate than to address them after an inspection. Dick Lee speaks about another type of harmony – one that affects us all – the harmony between a costumer-centric healthcare and the business goals of the healthcare providers. His advice applies to any type of organization.

This conversation about harmony should continue at all levels in your organization.

2010-2011 The Harmony Issue


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Heard on the Street

Continues on the next page

What’s happening in the world of Affirmative Action?

By Dick Warren

We haven’t visited this subject for a while and a lot has been happening in the Affirmative Action compliance arena. My broad observation is that the Obama administration OFCCP is becoming much more assertive than the agency was under the Bush ad-ministration. They have hired more than 200 additional compliance offi-cers. They plan to increase the num-ber of audits by 20%. They have in-dicated that they plan to remove the cap on the number of facility audits an organization may see in one schedul-ing cycle. They are asking employers for much more detailed information at the initial desk audit stage than they have previously. They are placing a much greater emphasis on placement of veterans and individuals with dis-abilities than they have in the past.

The OFCCP is moving in the direction of requiring employers to establish numerical hiring goals for individuals with disabilities. In general, the OFCCP is drilling down into employer’s pro-cesses to see if they are really imple-menting the provisions of their AAP.

Let’s start with the assumption

that you already have a com-

pliant Affirmative Action Plan

(AAP). Here are some things you

should be doing before the next

audit scheduling letter arrives:

1. Make sure that you can produce documentation of your process-es at each of the employment life cycle stages and demonstrate that they are non-discriminatory.

a. Can you demonstrate that your

website is “disability friendly” or that

a person who needs an accommoda-

tion can “opt out” of the electronic

process…or both?

b. Can you demonstrate that your

outreach efforts are generating di-

verse applicant pools?

c. Does your Applicant Tracking Sys-

tem track each disposition decision so

you can demonstrate that your deci-

sions at each stage are even-handed?

d. Can you demonstrate that you

have regular contact with your veter-

an’s representative and other “diver-

sity” referral sources?

e. Can you monitor referrals and hires

from various referral sources to sup-

port your decisions to use some and

not others?

2. Make sure that you understand and can document the reasons for pay disparities between protected and non-protected class workers. Include all disparities in your analysis,

including the ones that favor protect-

ed class workers. You don’t necessar-

ily need to be a statistician to do a

meaningful analysis of pay differenc-

es. The starting point is to look at pay

differences within individual job titles.

a. Do you have people classified cor-

rectly? Is everyone with that title do-

ing the same work? Do you need to

break the group into several job titles

to accurately reflect the nature of the

jobs? Are there local market differ-

ences? If yes, can you produce bench-

mark data to support your pay struc-

ture?

b. Are you attempting to justify varia-

tions in pay with performance data? If



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Heard on the Street (continued)

Dick Warren’s experience spans more than twenty 25 years of hu-man resource management and consulting with organizations rang-ing from start-ups to the Fortune 200, from California to Puerto Rico. This broad exposure has given him an in-depth understanding of the subtleties associated with imple-menting and maintaining positive changes that have credibility with employees, effectively address or-ganizational needs, reduce the risk of litigation and avoid regulatory compliance problems.

About the author:

What’s happening in the world of Affirmative Action?

By Dick Warren

yes, can you demonstrate the validity

of your system? Validation studies are

difficult. HR Generalists should not at-

tempt them.

c. You may need to run regression

analyses if you identify disparities

with no obvious explanation. Be sure

to enlist the help of a statistician or

compensation specialist to do regres-

sion analyses. The ideal person is a

compensation specialist with a solid

background in statistics.

3. Make sure that your CEO is fa-miliar with the contents of the Af-firmative Action plan and can car-

ry on a meaningful discussion with a

compliance officer about his/her role

in implementing the plan and his/her

general support of Plan objectives.

4. Make sure your internal and external recruiters understand the goals established in your AAP and the importance of maintaining ac-curate records. We see more issues

with inaccurate or incomplete appli-

cant flow data than with any other

type of data. It is also important to dis-

cuss how to achieve AAP goals without

blurring the line between “goals” and

“quotas”. Quotas are clearly not per-

mitted.

5. Check your official bulletin board (intranet site) for:a. A memo from the CEO regarding

his/her support of the AAP objectives,

the appointment of the EEO Officer

and the availability of the AAP for em-

ployee review;

b. Your EEO/AA and Harassment poli-

cies;

c. Federal, State and locally mandat-

ed posters and notices.

6. Check your purchase orders and contracts to be sure they in-clude the standard EEO/AA com-pliance terminology.7. Make sure your recruiting agency contracts include a notice regarding your EEO/AA policy and

their obligations to provide data re-

garding searches they are engaged to

execute.

8. Review your sources for veter-ans, individuals with disabilities, women, and minorities. Are they

performing for you? Can you demon-

strate an ongoing working relation-

ship?

9. Check the physical/mental job requirements in your job descrip-tions and solicitations. Can you

demonstrate that they are work re-

lated and consistent with business ne-

cessity?

10. Are your EEO-1 and Vets-100A reports current?11. Check with your contract administrator to be sure you are cur-

rent regarding e-verify compliance.

In conclusion, there are really two

questions that need to be addressed:

1. Are you really doing what you say you are doing in your Af-firmative Action plan? and2. Can you demonstrate that your processes are non-discrimi-natory?



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Recent OSHA Citations

By Vija Kelly

(And How You Can Avoid Them)

One area of compliance that OSHA has been scrutinizing a lot in the last year is the procedures for de-energiz-ing equipment (Lockout/Tagout). The two most common citations are for not having individual procedures for each (or each type) of machine and for not doing annual audits to deter-mine that lockout/tagout procedures are being followed. Since the lock-out/tagout rules have been on the books for a number of years now, inspectors are scrutinizing individual procedures more closely. They are citing deficiencies such as not spell-ing out the purpose of the procedure, who is authorized to perform it and methods of testing that the proce-dure is effective. These are the rules:

29 CFR 1910.147(c)(4)(i): The procedures shall clearly and spe-cifically outline the scope, pur-pose, authorization, rules and tech-niques to be utilized for the control of hazardous energy, and the means to enforce compliance includ-ing but not limited to the following:

1. A specific statement of the intend-ed use of the procedures

2. Specific procedural steps for shut-ting down, isolation, blocking, and se-curing machines or equipment to con-trol hazardous energy

3. Specific procedural steps for the placement, removal, and transfer of lockout devices or tagout devices and the responsibility for them, and

4. Specific requirements for testing a machine or equipment to determine and verify the effectiveness of lock-out devices, and other control energy measures.

29 CFR 1910.147(c)(6)(i): The em-ployer shall conduct a periodic inspec-tion of the energy control procedure

at least annually to ensure that the procedure and the requirement of this standard were being followed.

Enforcement of the requirements outlined has been subjective. In nu-merous instances over the years, OSHA inspectors have accepted a written “Lockout/tagout Program” which addresses such things as pur-pose, authoriza-tion, lock and tag style and tech-niques for use, responsibility for use, transfer of lockout devices as complying with the requirements of the regulation. To address each of these specif-ic items in every single procedure when a company may have well over a hundred pro-cedures to cover all equipment is tedious at best.

To put things in perspective, how-ever, the average fine for not having individual lockout procedures for ma-chines is $1200.00 The fines can be assessed at $450.00 per machine not having a procedure for locking it out. A crushed hand with damaged tendons costs a company about $15,000.00. Hardest hit by strict enforcement of the regulations are small businesses with limited staff time to devote to writing procedures. The following are the costs of various methods compa-nies are using to achieve compliance.

How Small Businesses Are Meeting Requirements

■ Seven Man Plastics Injection Molding Shop

This shop chose to write down in de-tail how each machine was shut off and locked out. It was a cooperative effort of machine operators and the maintenance person. The lockout/tagout procedures ended up running to 41 pages. They were compiled into a book. One copy was hung on the wall in the shop. A master copy




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How Small Businesses Are Meeting Requirements (continued)


was placed in the front office with the other written safety programs. The project took several weeks. The cost of the project has to be calcu-lated by the number of hours spent times the average hourly wage of the employees involved--$2100.00.

■ Thirty-Five Man Machine Shop

This shop had the Safety Direc-tor take charge of the project. Each machine was identified by a serial number. An individual procedure was written for each machine. Since many of the machines, however, were locked out in a similar man-ner, there were only four or five ac-tual procedures developed and the headings changed for the machine to which the procedures applied. The Safety Director spent approximately 80 hours on the project for an ap-proximate labor cost of $2400.00.

■ A Ninety Man Stamping House

This shop already had a complete inventory of equipment in use. A con-sultant was hired and went through the inventory with the maintenance department identifying the different types of lockout that were needed (cord and plug, knife switch, etc.). Then the consultant wrote the pro-cedures for each type of lockout and compiled the lockout/tagout program which ran to 21 pages. Company time invested was about two hours. The consultant’s bill was $1800.00.

■ A Sixty-Five Man Small Manu-facturer

This shop had already identified their equipment and the energies which powered it. When they went to write individual lockout/tagout pro-cedures, each department identified whether the energies to the machines in their area were cord and plug,

locked out at the machine, locked out at the circuit breaker or discon-nected from the buss drop. This in-formation was forwarded to a consul-tant who wrote a procedure for each type of lockout. There were nine procedures. When the procedures were assembled in a book, the whole program ran to about 16 pages. Company time invested was about 20 hours, approximately $400.00. The consultant’s bill was $1200.00

Vija Kelly has more than 27 years of experience training and con-sulting with industry on regulatory compliance issues. Working with companies as small as 10-person machine shops and as large as 3M on both health and safety and envi-ronmental issues has given her the hands-on experience to deal with the toughest regulatory compliance issues that face industry today.

An excellent teacher and public speaker, she specializes in educat-ing organizations on their regulato-ry compliance responsibilities. She writes several columns on com-pliance issues for trade magazines and publishes a newsletter to keep clients abreast of changes in EPA, DOT and OSHA regulations. She has also produced customized writ-ten training materials for all man-dated training.

About the author:

Can Customer-Centricity Cure Runaway Healthcare Costs?

If you’ve had surgery in the U.S. lately, you already realize hospitals are hell-bent on improving internal process. Mitigating risk – not doing the right procedure on the wrong pa-tient or the wrong procedure on the right patient – has become a near obsession. So has sanitizing every-thing touching the patient – includ-ing exacting hand-washing proce-dures. And data sharing within (but not across) healthcare systems con-tinues expanding. But all these and more new internal improvements are primarily designed to lessen regulato-ry and legal exposure and cut costs. Customers are the lessor concern.

BTW, I very deliberately say “cus-tomer-centric” where you might ex-pect “patient-centric.” Over the years,

By Dick Lee

By Vija Kelly


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Can Customer-Centricity Cure Runaway Healthcare Costs? (continued)

By Dick Lee

I’ve developed a near-gag reflex over the term “patient.” I won’t use it. In-stead, I get blank stares when I re-spond to, “Are you Dr. Jones’ patient” with, “No, I’m Dr. Jones’ customer.” And I’m not playing head games, al-though it’s fun to watch the reactions. “Patient” describes a lord-vassal re-lationship, where one side orders the other around – and the other doesn’t dare question, much less object. We have to mitigate this im-balance for healthcare to heal itself.

Putting on a customer “ face”I actually did have shoulder surgery

last month, and among the “read it while you wait” brochures shoved into my hands were two glossies en-couraging patients to “take charge of their own healthcare” by stay-ing informed and asking questions. Very customer-friendly sounding. But asking questions stops far short of “questioning,” getting a second opinion, or even saying “no” when appropriate. Informed customers – unlike empowered customers – are still easy marks for unnecessary procedures, overtreatment, ques-tionable treatment and even out-right incorrect treatment, which is the antithesis of customer-centric.

What too often lurks behind “the face”

Am I overreacting? Let me cite several eye-opening examples of customer-unfriendly health-care I’ve personally experienced.

● Recommendations for unnecessary surgery

● Refusal to authorize a sleep apnea test by a doctor who doesn’t believe in them (my walking blood oxygen level turned out to be so low when finally tested I was at risk of a stroke or heart attack)

● Dental surgery by an unqualified dentist (who I subsequently named “Idi Amin”)

● Recommendations for very expensive and very unnecessary dental work

● An erroneous diagnosis of hepatitis-c, caused by switching lab results

● An alcoholic physician who missed my wife’s breast cancer (she was lucky, but wound up going through lots of extra, painful treatment)

And I could go on. This stuff hap-pens at an alarming rate and some-times on a grand scale. Do you be-lieve there’s a medical reason why OB/GYNs in some regions perform C-sections at twice the rate of oth-er regions? I don’t. Nor do I be-lieve there’s a rationale for Medicare treatment costing twice as much as the national average in Brownsville, Texas – or some physicians perform-ing astronomical numbers of ton sillectomies compared to national averages. And the beat goes on.

Broken beyond repairHow broken is the U.S. health-

care system? Consider these widely acknowledged conditions.

Abjectly poor performance. But not if you’re a doctor, hospital ad-ministrator, insurance company, de-vice company or drug company. Our system is skewed towards meeting their financial needs, not custom-ers’ healthcare needs. Just today I read new data from Duke University Clinical Research study reporting that 22.5% of defibrillators implanted are in inappropriate patients who they don’t benefit – and worse yet people they can harm or even kill. The report stated that a considerable percent-age of doctors implanting this device don’t know or understand the “when to” and “when not to” guidelines. Of course, the device reps sure aren’t going to correct that and cut sales.

Provider mentalities like these are how we wind up with a sys-tem we can’t afford providing healthcare we can’t accept.



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How would a customer-cen-tric healthcare model reduce costs (and raise quality)

Virtually all organizations looking to seriously reduce costs will look first at internal process, including organi-zational design and staffing. However, as the more progressive elements of the process industry have discovered over the past 15 years, letting cus-tomer wants and needs drive pro-cess design - starting with points of customer involvement and working inward (often called “outside-in” pro-cess) - eliminates far more cost than conventional, cost-cutting process de-sign. Why? Because customer-centric process doesn’t start with “what is.” It starts with what customers need and want. Which is akin to starting over and designing ideal customer process rather than streamlined versions of what’s much less than ideal. Paradox-ically, customers want organizations to be much more streamlined with less administrative bureaucracy more so than organizations themselves.

Traditional cost-cutting, risk miti-gating, efficiency-driving process redesign focuses on how work is done. But meeting customer needs and preferences almost always re-quires changing what work is done, who (functionally) does it, and the underlying technology that will en-able customer-driven what, who, and how. In healthcare, rather than just streamlining and perhaps automat-ing current tasks, customer-centric process design will help determine: the most and least effective proce-dures; which procedures are best used when; who should manage these procedures (physician, PA, nurse, generalist, specialist, hospital, clinic); how to inform and automate both decision-making and task man-agement - as well as how to work.

Can Customer-Centricity Cure Runaway Healthcare Costs? (continued)

By Dick Lee

Designing work around customers expands opportunities to have the right person (or facility) do the right work at the right time with the right support, with no wasted motion or unnecessary complexity – and pre-serving only value-adding administra-tive functions. Healthcare is rife with wasted motion, unnecessary com-plexity and bloated administration.

What would customer-centric healthcare look like?

Here’s a sampling of customer-centric processes and policies con-trasted with what’s happening today.

Obviously, a very abbreviated list of customer-centric possibilities, and we could work from several alter-native customer-centricity models. But implementing only these chang-es would produce dramatic effects.


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Outcomes of customer-centric healthcareAdopting only these customer-centric concepts would change the face of

healthcare as we know it in the U.S.

The scale of these benefits is so high it begs the question: “Why not just do it?”

Can Customer-Centricity Cure Runaway Healthcare Costs? (continued)By Dick Lee

The politics of changing healthcareWe’ve managed to turn U.S. health-

care into such a political football that all factions have lost rational-ity and objectivity. For example:

Single payer system: If we convert our current insurance reimbursement system into a single payer system we’ll transfer all our current dysfunction over to a new payer. That’s about all.

Socialized medicine: The 2010 healthcare legislation the Democrats passed has nary an element of social-ized medicine. In fact, it eliminates the most socialistic aspect of our current system – spreading the cost of treating non-insured people across the entire insured consumer base. The problem with the legislation is that it’s trying to change outcomes without looking under the hood to see what’s driving outcomes – the requisite first step for designing a customer-centric “to-be.”

Local control: A good way to say good-by to best practices and encourage local and regional dis-parities, which are about prof-its far more than healthcare.

Death panels: Paying a doc-tor to sit down with willing custom-ers to discuss their end of life treat-ment invests not only in quality of life for customers and their families but will greatly lower unwanted end-of-life treatment. What’s not to like?

Preserving free markets: Healthcare will never be “free mar-ket” until we stop insurance com-panies, profit-motivated physi-cians, drug companies, medical device companies and others from artificially inflating healthcare costs.



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Can Customer-Centricity Cure Runaway Healthcare Costs? (continued)By Dick Lee


Getting off the dime

Up until now, we’ve been miss-ing the objective, reasoned discus-sion needed to identify that putting healthcare customers first is the best and perhaps the only way to design our way out of our current mess. Government is far too fraction-ated to produce rational thought. I do know academia is trying to build new models (I have some first-hand exposure to work underway at Uni-versity of Minnesota). But academia has far less clout than needed to trig-ger change, rather than just guide it. Customer anger may help move healthcare off the dime, but most customers remain too subservient to question – much less demand better.

Where will the “big push” towards customer-centricity come from, if at all? Provider self-interest, in all like-lihood. When providers (as opposed to all the peripheral players) real-ize they’ll benefit competitively and financially by adopting customer-centric practices, they’ll start chang-ing. Plus, the provider community would much rather change itself than told how to change by government.

Provider recognition of “what’s in it for them” to go customer-centric may seem a long way off. But perhaps it’s not. Sometimes just one hand gre-nade thrown into the right pocket will

Dick Lee is founder and prin-cipal of High-Yield Meth-ods, a pioneering consulting firm focused on helping clients achieve customer alignment. In addition to his long involve-ment in developing customer-fo-cused approaches to business, including CRM, he is also the de-veloper of Visual Workflow—the first process design approach de-veloped expressly for the variable (non-manufacturing) workplace.

In addition to his consulting, Dick has written several books including The Customer Rela-tionship Management Survival Guide, and he speaks globally on customer-alignment topics. His work and perspectives have been featured in “Business Week,” National Public Radio’s “Mar-ketPlace,” “Newsweek,” and “The Wall Street Journal.”

He holds a BA from Reed College, Portland, Oregon and an MBA from the Sawyer School of Busi-ness, Suffolk University, Boston.

About the author:

get industry leaders up and moving. In the interim, we have to keep writ-ing, speaking, challenging criticiz-ing – and constantly reinforcing the “what’s in it for them” to healthcare providers. Then, with a push from government and another from aca-demia we might see success sooner rather than later. We’d better see it because our current system is too ex-pensive and broken to let continue.

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