Culture Eats Compensation for Breakfast

Illustration: Lee Sauer

You’ve undoubtedly heard the expression that “culture eats strategy for breakfast,” credited to Peter Drucker (perhaps incorrectly but that’s another blog topic!). After decades working in healthcare, I’ve learned the same is true for physician compensation. This was recently reinforced for me while listening to the gifted presenters and leaders at ACC.24 in Atlanta.

Perhaps no industry spends more time designing, measuring, comparing and negotiating compensation plans than healthcare – with an incredible amount of energy and money spent on this subject in cardiology. It has become an industry (and yes, I recognize my participation in this.)! We agonize over crafting a plan that creates appropriate incentives and promotes hard work while balancing the need for teamwork, incentivizes quality and patient satisfaction, fosters good citizenship within the organization, keeps it simple enough to be understood, and – last but not least – stays within legal and market compliance guardrails.

If that sounds like getting an elephant through a needle, it is! 

Let’s say we actually achieve the impossible and design “the perfect model” – one that balances the various priorities and creates harmony between the competing needs of the organization and the individual. If our organizational culture does not value the same priorities, our “perfect model” will fall miserably short. Think of culture as a flywheel spinning at a high velocity and our physician compensation model as a feather trying to drag it to a stop. It just won’t get the job done. 

Here’s the uncomfortable truth about culture: it’s a direct reflection of our organization’s leadership.  Whether formal or informal, behaviors that are promoted, tolerated, rewarded, penalized, praised and condemned by leadership weave together to form a tapestry of culture. This obviously starts all the way at the top, but it can also emanate from within our service line or practice.

For instance, our leadership team may say it values quality and service, yet the bulk of every meeting and dashboard are centered on production and increasing volumes. Likewise, our group may say that the team should take priority over the individual, yet behaviors to the contrary are tolerated with zero consequences. 

Don’t think that these types of dissonance are lost on your team members. They are not. As outsider consultants at MedAxiom, we hear about them all the time. The shame of it is how demoralizing these disconnects are, particularly for the people who are playing by the rules and doing it right. This dejection – a sense that nothing matters and a lack of control – often leads to burnout and turnover. The flywheel gains momentum – in the wrong direction.   

On the flip side, when leadership instills and lives by certain organizational values, the cultural flywheel can repel nearly any individual challenges. Earlier in my career, a physician came to me lamenting a recent board decision that he felt impacted him negatively. He noted – correctly – that he had little recourse because the physician president and board chair was impacted in the same way as he and was steadfastly adhering to and advocating for the change. He shrugged his shoulders and asked rhetorically, “What choice do I have?” The flywheel spins on!

In another personal example, our group of cardiologists had an equal split compensation model. As part of this income sharing, there was an unwritten expectation that no one would go home until the work was done, regardless of what role you were covering on that day. So around 5 p.m., a group text would go out to see if anyone was jammed up. If someone cried “help”, the first responders were our founder and every member of the board. Leadership by example.

Physicians who bucked this team culture would get some “arm around the shoulder” management from a physician leader. In other words, there were consequences. And the flywheel gains momentum.   

My example could have just as easily been a 100 percent productivity model. That’s not the point. The point is that it’s the group’s culture – as driven by leadership – that has the larger role to play in whether organizational objectives are met. This is not to say that our compensation model doesn’t matter. I believe it does and would further posit that it should reward and value behaviors and activities that promote our organizational mission and objectives. If it doesn’t, it can present a value conflict – or just the perception of conflict – which slows down our flywheel.

For the past five years, I’ve had the privilege of a front-row seat, experiencing the difference expert leadership can make. It has been transformative. Perhaps in healthcare, we’d be wise to divert time and resources to developing the skills of our leadership teams, instead of predominantly focusing on how we pay our physicians. I feel our organizations, physicians, associates and patients would be the winners in this trade.