10 BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018 EXECUTIVE KNOWLEDGE SERIES Our work with Sankara pointed us to two key dimensions that influence the degree to which organisations in emerging markets are able to scale up, while at the same time improving or maintaining overall healthcare accessibility A pathway to scale in emerging markets Ridhima Aggarwal IN 2012, CHINA LAUNCHED a series of reforms aimed at incentivising growth in the private sector of the country’s healthcare system. Like many emerging economies, China faces a host of challenges in delivering high-quality healthcare access. An ageing population combined with a high prevalence of chronic conditions has imposed a significant burden on public hospitals. The result has been long wait times and shortages in care that the government has been unable to address on its own. Consequently, private hospital chains such as China’s Aier Eye Hospital Group have seen rapid growth in recent years: Aier currently operates more than 100 hospitals across China, with plans for continued investment to expand its reach. Although the private sector in emerging markets has often been successful in alleviating the strain on public healthcare systems (particularly against the backdrop of a rising middle class), firms in this sector face significant challenges as they approach the process of “scaling up”. Growth and access are often intertwined objectives in an emerging market: More than half of the population in China, and nearly 70 percent in India live in rural areas with limited or no access to healthcare. How can private healthcare delivery organisations in emerging economies simultaneously scale up while at the same time meet the challenge of ensuring access to the rural poor? The cross-subsidisation approach We examine the scaling-up issue in a recent case study on Sankara Eye Care, a chain of specialty eye hospitals in India. In the case, “Double Vision: Making Eye Care Accessible through Cross- Subsidization”, developed with INSEAD Professor Stephen Chick, we explore Sankara’s business model, which relies on a crosssubsidisation approach where revenue from the 20 percent of its patients who can afford the market price for services is used to fund services for the remaining 80 percent of customers, who are generally poor and non-paying. Sankara’s network includes some urban hospitals run strictly for profit, as well as community hospitals that offer free and heavily subsidised care for the poor. This allows Sankara, where appropriate, to operate within easy access of affluent, convenienceseeking patients in big cities, like Bangalore and Mumbai. However, the rising urban middle class can choose from a wealth of eye-care options, necessitating competitive pricing even as Sankara tries to raise enough profit from paying customers to fund its outreach work. Sankara’s altruistic aims have limited marketing appeal because the cross-subsidisation model has become so familiar in India. Other healthcare delivery organisations there have adopted similar models in cardiac care (Narayana Health hospital group) and maternity care (LifeSpring Hospitals). In addition, other Indian organisations in eye care have adopted such models (Aravind Eye Care System and the LV Prasad Eye Institute), with the key focus, like Sankara, of eliminating avoidable blindness caused by cataracts. Where Sankara differs from their direct competition is in its aggressive plans for scaling up. Sankara’s ten community hospitals – eight of which are less than a decade old – currently span the north, south and west of India, with further expansion planned. Operational focus and funding model Our work with Sankara pointed us to two key dimensions that influence the degree to which organisations in emerging markets are able to scale up, while at the same time improving or maintaining overall healthcare accessibility: the scope of operations and the funding model. Sankara operates a lean service in which operating rooms are organised as an assembly line, accommodating anywhere from eight to ten non-paying patients at any given time. Physicians can perform up to eight cataract surgeries per hour. Apart from the cost differential (relative to the West) associated with running a hospital in India, efficiency is derived from having multiple patients in the operating room, with nurses setting up and processing two patients per station to the left and right of the doctor at any given point. Strict procedures are maintained for monitoring patient clinical outcomes. Surgical complication rates are lower than those in developed countries. A second dimension influencing Sankara’s ability to scale up is its funding model. Whereas both Sankara and Aravind are organised as non-profit trusts, only Sankara utilises a dedicated fundraising arm, the Sankara Eye Foundation. As of 2013, the U.S.-based foundation was raising about US$3.5 million annually. Sankara’s grant-based approach enables the organisation to reduce the percentage of patients paying above cost (as compared to Aravind and LV Prasad), with operational deficits and hospital expansion costs covered over the short run through donations. Established Sankara hospitals are driven to reach financial self-sufficiency; two have already achieved this. In the meantime, grants allow for the creation of new hospitals alongside those that are financially sustainable. Multiple goals, multiple pathways Scaling up is indeed a key challenge in emerging economies, where the goals of accessibility and sustainability must be pursued simultaneously while keeping costs low. Emerging markets across Asia, Africa and Latin America face similar challenges, which firms address in various ways. On the funding dimension, for example, in 2015, Brazil’s largest hospital provider, Rede D’Or São Luiz, agreed to an investment deal with the Carlyle Group, the global private equity firm, which should provide Rede with the capital necessary to expand its locations across the country. The particular ways in which private sector healthcare delivery firms manage the scaling-up process to provide access to large population groups, particularly those at the bottom of the pyramid, will be important over the next decade. Within this context, healthcare organisations will have to make a set of important choices across the operations and funding dimensions that will shape how the objectives of growth and access can be pursued in tandem. Ridhima Aggarwal is a Research Programme Manager with the Healthcare Management Initiative at INSEAD.
BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018 EXECUTIVE KNOWLEDGE SERIES 11 To manage millennials, lead them well A COMMON VIEW about the millennial generation – generally defined as individuals born between 1980 and 2000 – is that they can be difficult to engage and retain as employees. The stereotype suggests that they rapidly hop from one job to another, and companies that hire them grumble about bad attitudes and high employee churn. As with most stereotypes, some data supports this narrative. Analysis from Gallup reveals that 21% of millennials reported changing jobs in the last year, a rate three times higher than the number of non-millennials, costing the U.S. economy $30.5 billion annually. However, a growing body of research minimizes the actual differences in attitudes, values and actual job-hopping behavior compared to previous generations. This was certainly the experience of John Sanchez, whose organization found success by resisting the temptation to pile on the millennial-bashing bandwagon and instead focused on delivering meaningful leadership. Sanchez is the former executive vice president of global operations at Sysomos, a fast-growing, high-tech startup with offices in Toronto, New York, San Francisco and London. In this opinion piece, he explains how he and his colleagues implemented a strategy to engage and retain 100% of their largely millennial operations team for three years. At the end of my first day at our Toronto headquarters, I was invited to “an airing of grievances.” The newly appointed CEO of Sysomos, a high-growth cloud service startup, had called a meeting with customer-facing teams to hear concerns about the direction of the business, and he asked me to tag along. At the front of a room full of 20-somethings, an energized young woman with a French- Canadian accent paced around the easel, jotting down the group’s objections with an air of urgency. I found myself wondering: What have I gotten myself into? In my mind, I played back my discussion with the CEO defining my role and responsibilities, held shortly before my official start date. Sysomos delivered important insights from conversations on social media to some of the world’s largest and most important brands, and had a great vision for the future. I was to focus was on professionalizing operations and preparing the business for the challenges of scale. To be fair, during our hiring discussions the CEO briefly addressed some of the turnover and engagement issues. While the trend of 25%-30% annual churn did not fall outside of norms for the tech industry or for millennial workers, neither he nor I expected the level of discord that was playing out before us. As our scribe dutifully added comments to the long list of concerns, the true weight of the challenge began to dawn on me. It was clear that the teams felt frustrated, disengaged and marginalized and were now at a breaking point. I hadn’t worked in the tech space or exclusively with millennial teams, but I had spent decades leading teams, about half of that time as an executive in a traditional service environment. My experience bore out the exhaustive research and case studies that establish the positive relationship between strong, engaged teams and thriving service organizations. Attending to our team could not be an afterthought; it had to be the foundation of our strategy, grounded in effective leadership. The Imperative of Leading Well Rather than downplaying the apparent low engagement among client-facing teams and writing off problems to any of the popular theories that blame millennials, I spent time speaking with our staff to corroborate their concerns. It was obvious that our leadership practices were not serving the team. “Leading well” goes beyond checking the box of the specific actions that address the core responsibilities of leadership. These include setting objectives, organizing resources, training and motivating followers, balancing needs, and ensuring that the organization and members benefit from the relationship. The most critical and difficult dimension of leadership responsibility is the balancing of needs, also called the dilemma of leadership. Employees join organizations expecting to learn and develop skills, become part of a team, and to satisfy economic and other needs. When organizations consistently fail to address those needs, people typically disengage and ultimately defect. That pattern was emerging at Sysomos. “Unfortunately, today’s millennials often join organizations only to find themselves diminished, maligned and marginalized by the very leaders and tenured colleagues who should be mentoring them.” Simply attending to team members’ needs, however, is not enough. A leader’s actions only take root in a healthy atmosphere. A leadership climate is the pattern of shared assumptions that inform the way members perceive, think and feel about problems. Leaders must act as positive role models and use their power to influence in the service of the organization to reinforce values of fairness, respect and dignity. Unfortunately, today’s millennials often join organizations only to find themselves diminished, maligned and marginalized by the very leaders and tenured colleagues who should be mentoring them. When I joined Sysomos, the leadership climate was out of balance, and because of that, the effectiveness of our engagement efforts were diminished. A Turnaround Plan With input from the team and key leaders, and the support of our CEO, we executed a turn-around plan. Our approach had two points of focus: Developing solid leadership actions that concentrated on the core responsibilities and creating a healthy leadership climate. Leadership Actions With an eye towards effectively leading every team member, regardless of generation, and maximizing their engagement, I focused on thorough implementation of an established leadership model and recognized best-practice approach called “service profit chain.” The idea of the “service profit chain” was popularized in the 1990s by James Heskett, Thomas Jones, W. Earl Sasser, Leonard Schlesinger, and Gary Loveman, professors of service management at Harvard. The service-profitchain model describes the positive relationships between “employee loyalty,” “service value,” “customer loyalty” and profitability. I personally experienced the power of this strategy from my work at Caesars Entertainment, where Loveman deployed it as a capitalefficient source of competitive advantage that helped propel Caesars Entertainment to the top of its industry. For the purposes of this discussion, I will focus on the elements of the Service Profit Chain relevant to developing team-member loyalty: job p. 12 Rather than squander management capacity on wrongheaded initiatives, leaders should work to earn the loyalty and respect of their teams through time-tested principles