Category Archives: Management

Founding Fathers vs Today’s Leaders

In my many years, I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.

John Adams

The Founding Fathers, for all their myriad imperfections, did manage to design a workable form of government. The operative word is “work.”

The Congress was tasked with making laws, the President with either signing or vetoing those laws—although the President’s veto could be overridden with a two-thirds majority of Congress—and the judiciary with interpreting how the laws should be applied.

Congress is made up of two houses; the House of Representatives, with 435 voting members elected for two years, who represent the states and 6 non-voting members, who represent the US territories. The House focuses on the latest legal or social fad.

Each state has two senators, who are elected for six-year terms and are expected to be more deliberative and sophisticated. However, the Senate has spawned members like Joe McCarthy, who are generally dangerous to the country.

Sometime in the last century, Congress decided that certain laws would be unpopular, meaning that a member might not get re-elected and have to get a real job, so many laws were made by virtue of the decisions of the Supreme Court. This gave the members of Congress more time to pontificate and profess their principles without actually doing anything, other than raising campaign funds and running for re-election. Since this gave them more time to talk, even (if you ever watch C-SPAN) if most of their colleagues were not in attendance, they were happy. They rarely had to do anything, except talk, talk, talk. Making sense was optional (and rare).

On those occasions that Congress did pass a law, the law was prepared by lobbyists and most members of Congress were ignorant of most of its content (except for pork barrel amendments inserted to get them re-elected).

Eventually, the President wanted to get in on the action and began to issue Executive Orders. Even though the Constitution stipulates that Congress has the power to declare war, it has not done so since 1941. The Korean War, the Vietnam War, the Gulf War—and the sequel to the Gulf War, and the War in Afghanistan were not wars but “police actions” initiated by various presidents. While it may have been war to those who fought, were wounded, or died, Congress maintained plausible deniability by not declaring them as actual wars.

Executive orders worked so well that presidents began issuing them for whatever issue caught their attention at the moment. Some were good, some were not. The problem with executive orders is that they can be issued by one president and cancelled by the next.

How do we fix it? All we have to do is follow the US Constitution. If you haven’t read it within the last year, please do. It has been amended 27 times to reflect changes in society and its needs. For a copy, go to https://www.gpo.gov/fdsys/pkg/CDOC-110hdoc50/pdf/CDOC-110hdoc50.pdf.

Labor Day

According to the US Department of Labor, Labor Day was first celebrated in New York City in 1882, although there is some disagreement as to whether the machinists’ union or the carpenters’ union can claim credit. It was a municipal holiday, and other cities were invited to follow suit. After 23 states recognized it in 1894, the US Congress passed legislation making it a national holiday.

As one trained in management, it was repeatedly pointed out to us in college that the real job of management is to remove the roadblocks that prevent workers from being productive. Except in very small businesses, managers and owners produce no products nor do they provide services to the customer. Everybody’s paycheck comes from the efforts of the workers.

In many ways, we seem to have forgotten that and tend to believe that the people in the big offices and the expensive suits are the producers. Meetings don’t generate revenue. PowerPoint slides, slickly bound and printed reports, consume a lot of resources, but belong solely to the Expense side of the ledger.

Even as automation takes over many jobs, reports are that the demand for workers is increasing. The workers may perform different functions, but they are still critical to the process, no matter how much the elites may wish to believe otherwise.

Today there are many industries that produce nothing. Instead they move money around, mix it up, and in so doing make a profit. Some of this “profit” is virtual—it exists on paper, but may never translate into cash. Other profits occur when money is moved from one owner to another; this is a transfer—profit means that there is more, not that we’ve moved it around.

We are becoming a banking and finance nation, which is one of the places where a nation moves when it ceases to be great. The great nations of only a few centuries ago—The Netherlands, Spain, Portugal, France, Great Britain, etc. are only a shadow of their former selves.

So, to those of you who build, grow, design, or otherwise create, thank you. It’s your day—enjoy.

It’s Good to Be the Tsar!

putin

Vladimir Putin, according to reports, is wealthier than the next two richest people combined with a net worth of $200 billion. Pretty good for someone who grew up as Communist with enough commitment to work for the KGB.

His career with the KGB was unremarkable (his highest rank was lieutenant colonel), but once he got into politics, he found his niche. Trained as a lawyer, he adopted the Don Corleone business model (“One lawyer with a briefcase can steal more money than 100 men with guns.”–The Godfather). When the Soviet Union fell, various Russians began to acquire wealth. Putin apparently made many of them an offer they couldn’t refuse.

It might be good to keep that in mind before considering doing business with Putin.

Goodbye to an Old Friend

Long before my time, Theodore and Milton Deutschmann started a business to cater to the new field of wireless—specifically, amateur radio. They called their business Radio Shack.

rs

Why? Ships were among the first to adopt wireless communications, and since early transmitters created a signal by generating a huge spark, there was the risk of starting a fire. To minimize risk, the radio equipment was placed on the main deck, in a separate small building, which came to be called the radio shack.

Ham radio operators (no one knows for sure why they’re called “hams”) tended to call the place where their radio station was located as the radio shack, or ham shack. Amateur radio was shut down during both world wars, but hams returned to the air as soon as it was legal to do so. The end of the Second World War provided an added advantage with huge selection of inexpensively priced military surplus radio equipment.

When I was a youngster, there were a few radio stores around town where you could buy components or tools. However, periodically the mailman would deliver a catalog from Lafayette, Allied, or Olsen Electronics. The Sears Christmas toy catalog couldn’t compete with these for the pure lust they generated. I remember building a set of Knight Kit walkie talkies, purchased from Allied.

In the late 1960s, Allied began opening stores in malls, outcompeting most the other companies, which gradually faded away. Allied purchased Radio Shack, but the combined Allied-Radio Shack was determined to be too monopolistic, and the two companies were split up. Allied became the industrial supplier while Radio Shack stayed as the retailer in the malls. Radio Shack sold things that you couldn’t find elsewhere. The TRS-80 computer was one of the first personal computers. They introduced a pocket-sized computer and one of the first laptops. Radio Shack had a niche market—the nerds—but nerds were paying $2,500 for a radio shack computer before the general population knew personal computers existed.

You could find all the parts to build a stereo from tuner to speaker wire. How about a multimeter and a soldering iron? They sold CB radios, of course, but also some ham radio transceivers. Most everything was manufactured by someone else, but carried one of Radio Shack’s brand names.

If you were working on a project and need a 47 ohm resistor (usual price, 10 cents—Radio Shack price, two dollars) you could drive to the mall on a Sunday and finish your project before dinner, even on a Sunday afternoon. Yeah, their components were overpriced, but the convenience made it worth it.

Then, one fateful day, the brainless
pencilnecks management of Radio Shack decided to sell the same products (e.g., cell phones) that you could buy for less money at Best Buy, WalMart, RiteAid, etc.

I’ve been told by Radio Shack managers that the really profitable part of the store was the parts section with those overpriced resistors, capacitors, and semiconductors. You know, the ones you could buy whenever you needed them? The parts selection went from a large section of wall to a metal cabinet with multiple drawers. I think the cabinet got smaller, but in any case, there were fewer and fewer parts available. Cell phones—no problem. Parts? Sorry.

I hear that Radio Shack is still sort of, kind of, in business, but you couldn’t prove it by me. The last local store is now empty. Like Bigfoot or the Loch Ness Monster, you only hear about someone who knows someone whose brother-in-law saw one. It’s too bad—they could have coasted a few more years just on what I spent there.

Fixing Healthcare – Part Three

Physician’s Assistants (PAs) and Advanced Registered Nurse  (ARNPs) are helping lower costs and increase access. While some nurse practitioners, can operate relatively independently; other nurse practitioners and most physicians’ assistants, cannot. Why?

Physicians are adamant that they maintain a high degree of control over these and other healthcare workers. This is a throwback to the nineteenth century—which is kind of interesting in a weird sort of way. The story, and I cannot vouch for its accuracy, although all my research seems to support it, is that the country was besotted with traveling medicine shows hawking patent medicines (You’ve seen it in the movies—“One for a man, two for a horse”). The physician industry supposedly promised to get things under control if they were put in charge of medical practitioners, i.e., physicians and surgeons (MD). It, at best, minimized, if not blackballed, osteopathic physicians (DO), chiropractors (DC) and chiropodists, now known as podiatrists (DPM).

A physician, at the time, could authorize any hireling under his license to perform any duty under the concept that the doctor was “the captain of the ship” and was responsible for everything. Therefore, he had authority to authorize any employee to do anything—hopefully, but not necessarily, after some training.

Today, many non-physician healthcare workers are licensed in their own right; in most states this includes nurses (of all levels), therapists (of all varieties), and technologists (ditto). These people are trained and possess technical skills that physicians do not. Generally speaking, only television doctors leave their practice in order to operating high technology devices. It’s good theater but bad economics.

Many of the other healthcare careers such as nurse practitioners, physicians’ assistants, etc., have made significant advances Unfortunately, old attitudes die hard, and there are too many physicians who try to maintain an inordinate control over everything, including these other professionals. Nurse anesthetists and physicians’ assistance must be “supervised” by a physician, although such supervision does not require actual observation or even the presence of the supervising physician.

Efforts to keep others under control have led to some bizarre arrangements. In radiology, for example I’m told that the technologists are now required to periodically retake the examination that initially proved their competence even though there has been continuing education requirements for 40 years. If true, I believe this is a unique requirement, but a warning to all others. Of all the physicians’ assistants, only those specializing in radiology are not permitted to interpret x-ray or other diagnostic images.

Why?

Some blame the American Medical Association, a very powerful organization with effective lobbyists. However, it apparently speaks for a self-selected group of physicians. Out of 923,308 practicing physicians, the most recent numbers available indicates that only 228,000 belonged to the AMA. If you don’t round, that’s just less than 25 percent.

Nobel Laureate Milton Friedman and his wife, who wrote the book Free to Choose, asserted that the AMA functions more like a guild with the goal of increasing physicians’ wages and fees by limiting both the supply of physicians and the competition from non-physician groups.

This is yet another issue that must be addressed if we are truly interested in fixing healthcare.

Fixing Healthcare in America

First in a series

To correct healthcare and get costs under control, we must first acknowledge, then change the healthcare industry’s unique and outrageously dysfunctional business model.

  1. Physicians and other practitioners who decide which resources will be used in a hospital are often neither the direct provider, the one who pays, nor the beneficiary of the service. Basic economic rules, therefore do not apply. Medical tests, which are intended to provide information that will in some way impact the patient’s course of treatment, don’t. Many test and other procedures are ordered even when the outcome of the test will in no way affect the treatment of the patient or its results.
  2. Medical products and services are priced without any rationale. Often, prices are set artificially high in order to allow large discounts to insurance companies. This means that patients without insurance can be charged list price; eighty dollars for an aspirin or $100 for a BandAid®. Hospitals, which were once a ministry, stewardship, or public service have changed their priority to the bottom line. Some hospitals now own and operate their own collection agencies augmented by a small army of lawyers to guarantee that they collect what they have billed. This is why it is not uncommon for a small-town hospital to have millions of dollars in the bank—and still retain their not-for-profit status.
  3. And the insurance companies that get those big discounts? The hospital needs a staff of trained bureaucrats to generate the paperwork that is sent to the insurance company in order to receive payment. Payments may not be received for several months (for the MBAs out there—remember the first rule of finance—a bird [dollar] in the hand is worth two in the bush [accounts receivable]). When payment does arrive, administrative staff must reconcile the payments and file additional paperwork as necessary. All this adds to the hospital’s costs without adding any value. The insurance companies, on the other hand, are usually quite profitable, even after spending a lot of money on lobbyists. But just like Don Corleone said, “It’s nothing personal, it’s strictly business.”

So, what do we do?

First, it would be valuable to have the physicians evaluate how tests really affect the outcome for their patients and develop appropriate protocols. Malcolm Gladwell relates an excellent example in his book, Blink. The cardiology staff at Cook County Hospital was able to reduce tests while simultaneously improving patient outcomes.

[Gladwell, Malcolm (2005). Blink: The Power of Thinking Without Thinking. New York: Little, Brown.  ISBN 0-316-17232-4 (Especially the chapter on Cook County Hospital Cardiologists)]

Second, revise medical pricing so that it reflects reality—and that must include adequate margin to offset costs for necessary but expensive services. Emergency rooms are expensive to operate while an intensive care unit for patients suffering from burns is actually cost prohibitive. However, hospitals have an obligation to the community to provide necessary services—either directly or by affiliation—to the community. The community, in turn, must ensure the hospital is resourced to provide a wide range of services. If hospital prices reflected cost plus a reasonable margin to offset other costs, and everyone paid the same price—patient or insurance company, it might lead to more rational decisions—outcomes first, but economics as a consideration. If Grandpa—God love him—is a 96-year-old heavy smoker with high cholesterol and other morbidity factors who was hospitalized because of a stroke, a battery of tests that will not affect his quality of life or his longevity are not appropriate, and the insurer should not be expected to provide carte blanche payments. However, if the prices are realistic, the family may decide that they would be willing to pay for those additional procedures on their own.

Third, emphasize cooperation over competition. Is there any other business, other than hospitals, that would allow someone to work in their facility AND directly compete with it? Radiologists have their competing imaging centers, surgeons may have their private surgery centers, etc. Should specialty practitioners be entitled to benefit from the hospital’s patients and compete with the hospital for those same patients? It should be the practitioners’ choice—one or the other, but not both.

Two excellent resources for these issues are:

Brill, Steven (2015), America’s Bitter Pill: Money, Politics, Back-Room Deals, and the Fight to Fix Our Broken Healthcare System. New York. Random House. ISBN 978-0812996951

Rosenthal, Dr. Elisabeth (2017). An American Sickness, New York: Penguin Press. ISBN 9781594206757

If you want to fix American healthcare, pass this along to your friends, neighbors, doctor, etc. I’ll get a lot of hate mail, but we need to have the discussion.

More to follow.

THE Interview

Today, an interview with a man who needs no introduction. Good evening sir.

Good evening. It’s a pleasure to be here.

The world today is chaotic, yet in other ways, not so much. It was not that long ago—less than a century—when a number of nations were either at war or threatening war.

It has calmed down a bit, but one never knows when some radical leader will appear, appeal to those who have nothing to lose, and create all kinds of mayhem.

As the leader of the world’s only superpower, you have, in many ways, a responsibility to keep some semblance of order in the world.

That’s much easier to say from the chair you’re sitting in than from my chair. It’s a lot of responsibility to commit our blood and treasure to some fracas in a far-off land. Maintaining a military that can accomplish that is expensive and complex. When we station troops in some trouble spot, we still have to keep them supplied with everything from food to weapons. That supply train itself is expensive. People forget that our troops are stationed around the world—Europe, Asia, Africa.

Not to mention the fact that your primary duty is keeping the people back home happy.

The economy is always a major issue with the citizens. Everyone wants protection, good roads, and plenty of fresh water, but no one likes paying for those services through their taxes.

And then there’s politics—a truly demanding and dangerous game.

Dealing with politicians is different than dealing with any other group—they’re all trying to hang onto their power, and line their purse. I swear, there are senators that would stab me in the back, if given half a chance.

Well, let’s hope that they never get such a chance. I know your time is precious and your schedule full, but I do wish to thank you for taking time today.

The pleasure is mine.

Ladies and gentlemen, let’s have a round of applause for the most powerful man in the world—Julius Caesar.