A board's impact on the Affordable Care Act rollout
With the Affordable Care Act’s botched Implementation on everyone’s mind, I sat down with Mark Levy to discuss what private companies can learn from the mistakes made. Mark is a former president of a government outsourcing and technology firm, and an advisor to boards and executives.
Are the problems implementing the Affordable Care Act technology similar to those faced by private companies?
Pretend for a moment that the technology implementation for the Affordable Care Act (ACA/Obamacare) occurred in a corporation. We have seen it happen many times. It looks like this:
- The executive determines that a major technology change is needed to meet a strategic goal.
- Budgets and schedules are created that meet the functional requirements of the business case. The deadline set is arbitrary, but it takes on a life of its own.
- Design and development get started and then get bogged down in unexpected complexities and changing business requirements from effected business units.
- Implementation deadlines loom and technology managers realize they cannot adequately test the system to ensure it works and still meet the deadlines.
- There is a last moment emergency management meeting to decide whether to implement on time. At this meeting the truth comes out that some people knew for months the schedule could not be met, but they were afraid to tell anyone.
- The Executive decides to implement the untested system on time because no preparation for a delayed launch was made, and delay is too painful to contemplate.
- The system crashes and the company descends into finger pointing and chaos.
- It is soon clear to everyone that a delayed launch would have been better for the Company.
The all too human traits that lead to the damaging scenario described here happen every day in businesses. It can be major technology implementations or other major projects that follow the same pattern. It likely describes well what happened within the Obama administration leading up to the ACA implementation date. Perhaps one benefit of the difficult ACA implementation is to provide a cautionary tale to companies approaching major initiatives.
Can corporate boards help prevent mistakes like this?
One of the critical functions of an effective board is to provide perspective for the CEO and management team that make crises like these less likely. Here are a few of the issues faced by executive teams that lead to failed initiatives, and the role of boards in keeping things on better path.
Inability to Rise Above Sunk Costs. Most executives understand the concept of sunk costs; that decisions should be made looking forward without undue regard for expenses already incurred. But in practice this is hard for executives to do. Not only is it difficult to change direction when it means wasting resources previously spent on an initiative; it is hard to cope with the psychic sunk costs. If you championed a direction that has serious flaws, and that you spent weeks getting buy-in too, you may choose to push on rather than let go of a direction you are emotionally attached to.
- Board role. Boards are less involved in the day to day grind of preparing for major initiatives. They have less emotional attachment to the effort poured into meeting the impossible deadline; and can advise on a more rational course.
Tunnel Vision. CEOs are expected to raise their vision above the day to day. CEOs should be seeing the big picture and not be trapped by focusing too much on day to day execution. Still when a major initiative is underway, CEOs are often drawn in because they fear without their attention there will be errors in execution they will be held accountable for.
- Board role. Board members do not have the time or access to delve into the details. The big picture is all they can see, and they need to use that perspective to help pull the CEO up to 20,000 feet and see the big picture.
Fear. A little fear can be clarifying and motivating. A lot of fear can be blinding. Executive teams are often afraid to deliver bad news to their CEOs and boards, so they keep real problems to themselves until they are bigger problems. People fear being seen as incompetent, so they try to accomplish impossible things on impossible deadlines rather than admit it cannot be done. I could go on. Fear creeps into most of our bad decisions.
- Board role. Well, board members live with fear too. But they are less likely to be paralyzed because their board role is not their whole professional life. Boards need to help their executives take a deep breath, realize bad decisions are often made out of fear, and help assess the pros and cons of various ways forward.
Could the President have been helped by a good board?
If President Obama had an effective board to which he reported, perhaps they could have asked the tough questions and helped the President see the bigger picture; that the Affordable Care Act was better off delayed than implemented before the technology could function effectively. Whatever we think about the Affordable Care Act as policy, it is bad for all of us us to see our government unable to make a plan work. Companies should learn lessons from this experience. They need boards with the courage to ask hard questions that others are afraid to ask, and that provide the perspective needed to make thoughtful decisions at moments of high stress.
Mark A. Levy is the former President of Policy Studies Inc., a firm that developed technology and ran operations for Medicaid and other State government human services agencies. Levy serves now as an advisor to boards and executives to help them maximize their effectiveness. He can be reached at: email@example.com