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Practical Wisdom

February 25, 2009
by Joe Bormel
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Practical Wisdom

Great organizations cultivate wisdom, in concert with rules and incentives

This month, in Long Beach, California, there was, apparently, another great

TED conference. "TED (Technology, Entertainment, Design) is an invitation-only event where the world's leading thinkers and doers gather to find inspiration."

The talks are freely available on the Web and can auto-magically appear on your iPod by subscribing to TEDTalks. The closing talk at this recent TED was

"The real crisis? We stopped being wise - Barry Schwartz (2009)." This 21 minute video is worthy of being played in the hospital boardroom, both for inspiration and to review the recipe to become

the best hospital on the planet.

Make Yours The Best Hospital on the Planet? Fifteen years ago I heard John Glasser describe that as fundamental to the vision of anyone truly committed to improvement. I think he's right, so I'm repeating it as often as I can get away with!

In this context, Barry Schwartz does a great job of reviewing the recipe to become the best. He calls out the fact that as a society, the tools we use to try to achieve improvement goals, Rules (read Policy) and Incentives, by themselves uniformly make things worse in the long run. Neither nor both are enough. Schwartz underscores his position using four interesting topics:

- Why Obama is right about virtue.

- Why “practical wisdom,” an idea introduced by Aristotle, is the key to virtue.

- How America has unwittingly been engaged in a war on wisdom.

- Sources of hope to end the war on wisdom.

Given our recent topics of P4P, the incentive provisions of ARRA (economic stimulus package), unintended consequences, and our higher order theme in these blogs of the role of leaders, I think calling attention to Schwartz’s video is in order.

Here are a few quotes excerpted to whet your appetite:

  • Brilliance is rampant; without wisdom, brilliance is as likely to get you into trouble as anything else.
  • Scripts (policies) are insurance policies against disaster, but they assure, in its place, mediocrity.
  • Excessive reliance on incentives demoralizes professional activity in two senses of that word. It causes people who engage in the activity to lose morals, and it causes the activity itself to lose morality.
    • "We must ask not just is it profitable, but is it right." Obama: 12.18.2008
  • Even the wisest and most well meaning people will give up if they have to swim against the current in the organizations in which they work.
  • The single most important thing kids need to learn is character. They need to learn to respect themselves, respect their schoolmates, respect their teachers, and most important, they need to learn to respect learning.

And if your goals include improving your presentation skills, go

here after viewing the video.



Joe. You are absolutely right. The wrong incentive structure, which currently exists in healthcare, must be changed. That's why I'm such a fan of P4P. Again, the details are hard to work out, such as making sure docs don't turn away the sickest patients for fear of lowering their "score," but the current model of churning through patients to generate billing is awful.

I am reluctant to rely on ideas of virtue and moral strength when looking at a system. To me, those ideas are almost the icing on the cake, once the rules and incentives have been established. I fear Schwartz has too high an opinion of the average person. Have you ever seen Leno do his person on the street interviews? Most people don't even know the name of the president (at least the last one). I don't want to rely on THEIR moral compass to take care of my loved one when no one is watching. I want to make sure I've already appealed to their basest motives by having the right rules (punishments) and incentives (rewards) in place.

Morality and virtue are concepts the average person rarely dabbles with during the commerical break of their favorite mind-melting reality TV show. I don't want to rely on the moral enlightenment of someone who's gravest concern is who's going to get voted off the island.

I'm still impressed with your clarity of purpose expressed in an earlier post, when you said

"we could [should] put it all [$900 Billion] into disease research, cure everyone and go home. :)"

I think that comment, obviously a bit tongue-in-cheek, nevertheless gets at the picture. We really do want to cure everyone and go home. And, short of that, compassionately and reasonably efficiently take care of our moms and dads.

The negative effects of incentives is a very real problem in healthcare. I addressed this a bit in "What do Wall Street Bonuses and HCIT Incentives Have in common?"

The AAFP and Professor Black both provide examples explicitly where incentives contributed substantially to the problem in a negative way.

For example, if I'm incentivized to see 40 patients per day, I'm likely to cut my visits shorter than practical wisdom would dictate, especially when I'm running late. If the scheduling department is incented to over-book me by 15%, then we've created incentives that will degrade performance at some point. Patients will get longer wait times, shorter more cursory visits, or both, thanks to 'incentives.'

If I'm on a P4P program where I need to document that I counseled my patients to wear seat belts and stop smoking, at some point, I'll lower my likelihood to screen for a problem with excessive alcohol use. Especially if I'm running even later because of the afore mentioned incentives.  People's judgement to do the right thing can be put into undo tension by incentive systems.  Many management experts have written entire chapters on this topic, because they've seen well intended systems produce understandable yet  undesirable behavior.

"Be the change you seek in the world." Modelling exemplary behavior is a more authentic than 'let's add a new policy and incentives.' Here's an example:

Yesterday, I was at an elegant community hospital in DC. The CEO of the hospital, walking down the hall, greeted people by first name and with a smile. People he had no way of knowing he would pass, he greeted by name. At least one of whom he had only met once and relatively briefly. That's exemplary. I've heard that story and seen that behavior with other CEOs. That's not rules or incentives. That's modeling a virtue.

Thanks for this post Joe. I just watched the presentation and it definitely gets the mind churning. Overall, it's a little far to the left for my tastes (there is no confusion about who Schwartz voted for). I find the idea that incentives and rules are counterproductive to be silly. The first thing that came into my head was how a hospital janitor, who he holds up as a case study, would feel about the following boardroom conversation:

"I think we should put in place an incentive program for janitors who go above and beyond their duties. Whenever a doctor, nurse or family member sees them do something exceptional, we can have an online feedback form. An informal panel can review the suggestions, then those deemed 'winners' can get a $50 gift card."

"That's an interesting idea, but I fear such a program will have a long-term negative effect on their moral compass, so let's forget about it."

It's easy for someone far above the pay grade of janitor to discount the effect of small incentives. And while good people will always do good things, regardless of financial reward, why not just consider the small token a thank you? The idea that such a reward is destructive to long term behavior is hard to fathom.

I agree with him that fostering a love of knowledge and wisdom should be inculcated in all, and that moral role models should be held up for example. I agree that incentives may not always change behavior for the better, but I do not think they hurt. I also agree that creating a work environment where rules are meant as guideposts, not straitjackets, is key.

Many people will do the right things for the right reasons, the rest may do the right thing if there are rules and/or incentives in place, while for those that are motivated by nothing, show them the door. If someone does the right things for the 'wrong' reasons, do we care? I think I need to reread The Prince now.