Thursday, October 9, 2008

Aetna CEO Ronald Williams on corporate transformation and leadership in the health care industry

Another day, another CEO turnaround story. Gotta love business school. Yesterday, it was James Schiro of Zurich Financial Services talking about his role in turning around the Swiss reinsurance giant. Today, Aetna’s Chairman and CEO Ronald Williams dropped by MIT Sloan to talk about how he has transformed Aetna into arguably the worst company in the entire health care space to one of the best and most admired. In 2001, Aetna was #9 out of 9 companies in the Forbes most admired health care company’s list. In 2007, it was #1, and profitable. Williams was very impressive in how articulate he was and how nuanced his answers to difficult questions about health care were.

Aetna's Business Transformation Strategy

First, Williams described the principles behind Aetna's business transformation, which I captured in this table.

An amazing metric – before it took Aetna 28 days to close the books; now it takes them 6 days, with infinitely greater real visibility.

The Aetna Way – Corporate Values

Beyond the business principles, Williams emphasized leadership and values. The Aetna Way, he stressed, has four main principles:
1) Integrity
2) Quality service and value
3) Excellence and accountability
4) Engaged employees

Williams has put these front and center. As a result, there has been a remarkable transformation. In 2002, 46% of their employees said they were proud to work for Aetna, a depressingly low number. In 2007, that number was 78%.

Like Schiro, Williams walks the talk. Last year, he gave over 270 talks to his employees, all of which emphasized the Aetna Way.

Leadership and management principles

Williams also talked about his key leadership and management principles, which I have summarized into these bullet points.
1) Managing change is an essential skill.
2) When someone says something that can be interpreted ambiguously, assume positive intent.
3) Give bad news early and personal.
4) Drive performance through expectations rather than demands.
5) Invest in talent management and succession planning.
6) Establish a core leadership curriculum within your firm.
7) Take assignments that are fit for you, both in terms of skill sets and where you are in life.
8) Live by a core set of values and stick to them
9) Be willing to re-invent yourself – Williams cited his time at MIT Sloan as a time he decided to reinvent himself from someone strong functionally to a person with strong general management and leadership skills. It worked out okay, no?
10) Embrace diversity on all fronts; having different perspectives on a management team is incredibly valuable.
11) Know the difference between leading and managing
12) Share what you know with others.
13) Make a goal to be 15% better every year.
14) Always add value.
15) Maintain eternal vigilance.

Demographic breakdown of the US uninsured people

Out of the 45.7 million people in the US who are uninsured (and consequently, a drag on the health care system, since hospitals are often required to treat them regardless):
11 million are Medicaid eligible
9.7 million are not American citizens
4.7 million are college and university students
9.1 million have an income of over $75,000 (!)

Some of these areas have relatively easy solutions. For instance, the 11 million who are Medicaid eligible just, well, need to be put on Medicaid. They're eligible and need to sign up. The problem is that these people have problem - drugs, literacy or just plain not understanding the system.

College students should probably have compulsory plans offered by the universities, although that's subject to a more nuanced debate at some other point.

People with over $75,000 can pay. They should either be required to, or truly accept the risk of not being insured, which isn't typically what happens.

Sources of Health Care Cost Increases

27% is general inflation (wage inflation being a big part of this)
43% is increased utilization (defensive medicine, technology improvements, new treatments)
30% is cost increase in excess of inflation (poor lifestyle, broader access within plans, provider consolidation)


geovani said...

Other key elements are values. According to Williams, senior executives must continually talk about values and act as examples. They must also set expectations, and change those expectations over time as various objectives are met and different areas for improvement present themselves.

Buzz Marketing said...

Ron also emphasized on how to win. He said ''to win,provide good result and good leadership''. His stress on leadership can be said to be his major secret of transforming Aetna from the list in the table of Forbes listing to first in the health care services companies.