Obamacare's Leadership Lessons

We've all known leaders who complete a project on time or heroically make a revenue number, but leave chaos in their wake. This week in Washington seems to be one of those times. Washington is in chaos. American's approval rating of Congress is now at 17%, down from 42% 10 years ago. This is not "Washington politics as usual," this is dysfunction on an entirely new scale.

Despite last week's Rasmussen poll findings that 45% of Americans were "strongly" opposed to the health care bill, it passed on Sunday. It's difficult to blame the bill itself; at 2,700 pages no one really knows what's in it. Today's turmoil is a direct result of ineffective change leadership.

Leading change may be the hallmark of leadership. In corporations and in government, effective leaders are able to pull together people with diverse views to build innovative policies and processes. Effective change leadership is a highly complex task that requires many years of large-scale change experience. President Obama embarked on one of the most challenging change leadership initiatives imaginable with no previous large-scale change experience. Some have said that inexperience doesn't matter if the president surrounds himself with experienced people. They were wrong. Effective change begins with an approved project plan. To claim success, this change has a very long way to go.

For years, John Kotter has been Harvard Business School's change management expert. Kotter is famous for identifying eight common change management errors. The three that deal with crafting change plans are described here.

Change Error No. 1: Not Establishing a Great Sense of Urgency

From the time the new administration took office, Americans have been overwhelmingly concerned about the economy and its impact on their financial situation. A Franklin & Marshall poll in February found that 64% consider the economy and personal finances as America's most important problem while only 11% felt that way about health care.

More importantly, American's felt that health care would negatively impact their most pressing concern. In a March 9 Rasmussen poll, 57% said the health care bill would hurt the economy, American's No. 1 priority, while only 25% said it would help. Not only did the administration fail to create a sense of urgency, most Americans became actively opposed to a change they worried would have significant personal impact but that they didn't understand.  

Change Error No. 2: Not Having a Clear Vision

Ronald Reagan was a masterful visionary leader. Smaller government, lower taxes and a strong defense were the touchstones for his administration's initiatives. In contrast, the Obama administration doesn't have a tight message on its overall priorities or one on the vision of health care itself. Frustrated progressives argue that the president "has lost control of the message" during the health care debate. That "message" has changed several times. The administration's health care vision began with America as a wealthy, benevolent country that will provide health insurance to all of its citizens. However, as the recession deepened, Americans became more and more concerned with unemployment and budget deficits.

Scott Brown's election in Massachusetts shifted the focus from a compassionate bill to a method for reducing budget deficits through improved cost controls. Yet, the administration never publicly presented an analysis of system cost drivers with plans to improve each. Rather, the president shifted the message again to blame cost problems on excessive insurance company profits and greedy executives. He backed up his assertion with cases rather than with data.

A look at readily available data suggests that insurance companies aren't a big driver of health care costs. In 2009, for example, the CEO of WellPoint (WLP), the nation's largest health insurer at $61 billion, earned $1.21 million. In comparison, the CEO of Boeing (BA), with $60 billion in revenue made $8 million and the CEO of Johnson & Johnson (JNJ), a $63 billion company, earned $10.76 million. Additionally, the industry's operating margins are 5.57% -- even lower than Wal-Mart's (WMT) famously razor thin margins.

Unlike successful corporate change efforts, the administration did not craft its vision from fact-based analyses.

Change Error No. 3: Not Creating a Powerful Guiding Coalition

A guiding coalition is a leadership team that represents critical constituency groups. An effective coalition includes powerful leaders from a broad array of stakeholders. In theory, each member of the guiding coalition will bring on board his stakeholder group.

The administration initially was quite effective in building a representative coalition of industry lobbyists and unions. These leaders agreed to a bill that represented the interests of their members. The result was a 2,700-page document that detailed special favors for each constituency. However, from March 5, 2009, to the Blair House meeting in February 2010, Republicans were locked out of negotiations. Throughout the process, progressives have complained that Republicans were sabotaging the bill. Of course they are; they were never invited to the table and they are angry. Any experienced changed leader would expect such opposition. Although moderate and conservative perspectives may be at odds with the administration's beliefs, these individuals represent more than half of the American public. When they cry "foul," their constituencies listen. And the place to listen in 2009 became Fox News , whose cable news market share increased by 6% to 47%, while CNN dropped by 7% to 19%.

Corporations experienced at large-scale change know they cannot exclude powerful groups with potentially conflicting opinions. As Kotter wrote, "Efforts that don't have a powerful enough guiding coalition can make apparent progress for a while. But, sooner or later, the opposition gathers itself together and stops the change."

In manufacturing companies, this means union representation in the guiding coalition. In government, it means including powerful people that may hold dissimilar political views.

Large-scale change is the ultimate leadership challenge. Rookies need not apply. The recent health care debacle provides an excellent case study for what happens when change principles are violated. Yet this journey has only begun. Implementation, now that's the hard part.

Hall is managing director of Human Capital Systems (www.humancapitalsystems.com), a firm that designs systems for improving workforce performance. He is also an instructor in Duke Corporate Education's teaching network and author of The New Human Capital Strategy. Hall was formerly a senior vice president at ABN AMRO Bank in Amsterdam and IBM Asia-Pacific's executive in charge of executive leadership and organization effectiveness. During his tenure, IBM was twice ranked No. 1 in the world in Hewitt/Chief Executive magazine's "Top Company for Leaders." Hall completed his Ph.D in industrial-organizational psychology at Tulane University, with a dissertation on people management practices of Japanese corporations.

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