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BY: WILLIAM T. BRADEL; SR. VIRGINIA GILLIS, RSM, EdD; JIM HARKNESS, DMin; TERRANCE P. MCGUIRE, EdD; and THOMAS NEHRING

A tool for mission leaders and others in collaborating organizations

Although healthcare organizations continue to come together in various forms of collaboration, many of these arrangements fail to achieve their desired objectives: lower costs, greater efficiency, increased market share, and higher reimbursements from insurers, among others. In fact, some collaborations have dissolved after a few difficult years.

On one study's list of the top 10 reasons why mergers and acquisitions fail, "cultural differences between the organizations involved" ranked second, just behind "insufficient resources."¹ Paying attention to organizational culture is important throughout the process of collaborating—from the initial investigation, on one hand, to the point where a combined culture begins to emerge in the new entity, on the other.

To expand on an earlier resource (see "Integrating Cultures: A Tool for Mission Leaders and Others in Collaborating Organizations,", CHA reconvened the authors, five system mission leaders and a hospital chief operating officer. In the 1999 resource, a "Big Picture View" presented four phases of collaboration: Preliminary Exploration, Due Diligence, Initial Integration, and Ongoing Integration. The resource's authors described desired outcomes and culture integration strategies for the third phase of that continuum, Initial Integration. In this follow-up resource, they describe outcomes and strategies for the first, second, and fourth phases.

PRELIMINARY EXPLORATION
In this early investigation phase, organizations are exploring compatibility and possible mutual advantages of collaboration. In addition to assessing the potential advantages for all partners, a Catholic healthcare organization contemplating any collaboration must also evaluate the benefits such a deal offers to the communities served and to the Catholic health ministry as a whole.

The desired outcomes of the Preliminary Exploration phase are:

• Agreement of all parties—including the support of sponsors, boards, leadership teams, and, if possible, leaders of the medical staffs—to go forward with the due diligence process
• Readiness for the due diligence phase (i.e., a team identified and a plan devised)

Agreement to Go Forward
Typically, few people are involved in this early investigation. Perhaps the organization's CEO appoints a senior executive to explore the possible action with one or two senior representatives from the potential partner. Information is passed to senior management, sponsors, and the board for discussion and a decision on whether to move forward. In this early phase, an important task for the decision makers is determining when and how to inform the local diocesan bishop (or bishops, if several dioceses are going to be involved) of the possible collaboration.

Wheaton Franciscan Services, Inc., Wheaton, IL, has articulated the following evaluation questions in its "Collaboration Guidelines" to help senior leaders determine the need for proposed collaborations:

Purpose: What is the purpose of this collaboration? What evidence do we have that this purpose is shared by our potential affiliate? What need does this collaboration fill for us? For our potential affiliate?

Mission: What effect will this collaboration have on our ability to achieve our Mission of Human and Community Development? To what extent is the substance of our potential affiliate's mission aligned with our mission?

Management Approach: To what extent is the potential affiliate willing to consider mutual learning around management philosophy and theories?

Vision: Will this collaboration opportunity move us toward our Vision?²

Mission leaders may or may not be involved in discussion and decision making during the Preliminary Exploration phase. It is important, however, that mission leaders understand the process occurring during this phase to better understand their role in the subsequent phases. Mission leaders may be involved in developing decision-making tools like the questions above.

Readiness for Phase Two
As the organization prepares to move into the rigor of the Due Diligence phase, two important elements are needed: a plan for due diligence and a team to carry out the plan. Both the planning and the staffing decisions will be dictated by the nature of the proposed collaborative relationship. Some deals may involve a comprehensive investigation, including interviews with employees in the potential partner organization. Other, more confidential investigations may be limited to discussions with the organization's senior leaders and to a review of pertinent documents.

In articulating its due diligence process, Wheaton Franciscan Services named three objectives:

1. The assessment of the organization's alignment with the Wheaton Franciscan System's mission, vision, and values (e.g., in operations, culture, management structure and style, and support of mission, vision, and values);
2. The implications of the relationship for Catholic identity;
3. The assessment of the current state of the organization's financial position and operations.³

In describing the procedure for due diligence, Wheaton Franciscan Services specifies that a "common vision for healthcare and/or housing in the future must be explored" and shared by the potential partners for the collaboration to move forward. The system's due diligence procedure also explores potential partners' openness to utilizing mission services "to ensure that ethical, pastoral care, leadership, and human development needs are met."

In the Wheaton process, persons with expertise in mission integration, ethics, spiritual care, and leadership development are—along with those representing communications, finance, legal services, fund development, human resources, information services, insurance, and other areas appropriate to the transaction—recommended members of the due diligence team.

When planning for a due diligence effort, planners must consider that such an investigation interrupts the operations of the potential partner and should attempt to minimize the disruption. It is also important, when enlisting consultants to assist with the due diligence process, to orient them to the mission, values, and culture of the Catholic healthcare organization that they will be representing.

DUE DILIGENCE
In Phase Two, potential partner organizations research and collect detailed information in order to make a decision either to acquire a partner—through merger, affiliation, or some other arrangement—or to refuse to do so. The Due Diligence phase begins with the signing of a letter of intent, although some information can be gathered prior to the signing.

Efforts in the Due Diligence phase are directed toward the following outcomes:

• A clear assessment of the compatibility of the potential partners in areas of mission, culture, finance, management, and other areas of concern.
• Shared understanding of Catholic identity issues in the final, definitive agreement to collaborate. These issues include adhering to the Ethical and Religious Directives for Catholic Health Care Services, creating mission positions (or at least some sort of mission function) in the new organization, providing pastoral/spiritual care services, and others.
• The development of a transition plan.
• The creation of corporate documents and bylaws.

Clear Assessment of Compatibility

In addition to surveys, key interviews, often conducted by mission leaders along with sponsors and board members, are a useful mechanism for assessing a potential partner's organizational culture.

During the due diligence that preceded the 1999 acquisition of Franciscan Health Partnership (FHP), Latham, NY, by Bon Secours Health System, Marriottsville, MD, the chairperson of Bon Secours' board visited with FHP board members, leaders, and sponsors. A delegation led by Bon Secours' director of mission effectiveness visited all the FHP facilities, interviewing leaders, department directors, and groups of employees. The interviews, which lasted a minimum of six hours at each site, covered mission and spiritual care functions, high-quality patient care, leadership and staff development, performance evaluation, continuous improvement, community commitment, care for poor and underserved persons, ethics concerns and ethics committees, and care for persons at the end of life. The Bon Secours visitors also asked how FHP organizations handled regulatory issues and complaints and which advocacy efforts they had under way. (Documentation of these activities was required by Bon Secours' "Mission Due Diligence Checklist."⁴)

Shared Understanding of Catholic Identity Issues

Discussions during the Due Diligence phase should address the various operational aspects of Catholic identity: for example, provision of mission and spiritual care services, community outreach and care for poor and vulnerable people, relationships with bishops, and display of religious symbols. Leaders, boards, sponsors, and medical staff members should discuss the prohibition in Catholic-sponsored facilities of abortion, elective sterilization, and euthanasia/assisted suicide, thereby ensuring clear understanding among all these groups. Achieving this clarity is an imperative for the due diligence process, and mission leaders can be effective facilitators of discussions of these issues among decision makers and stakeholders, making sure that each party voices his or her understanding, questions, and concerns.

Sometimes the negotiating parties neglect to come to an understanding on these Catholic identity issues, assuming that the issues will be resolved at a later time. However, unless members of the prospective partner's medical staff clearly understand and accept the Ethical and Religious Directives, they may later refuse to comply with them; and employees may complain when benefits for contraception are removed. It is imperative that the Directives' implications, particularly for human resources policies and community outreach services, be articulated and understood during the Due Diligence phase.

Corporate Documents and Bylaws

At this time, it is also important to inform the local bishop or bishops of the elements of the final agreement, thereby precluding any eleventh-hour surprises. (The bishop should be given initial information about the possible collaboration in the Preliminary Exploration phase of the continuum, before the due diligence process begins. Progress reports to the bishop are a key element of communications at every point in the development of the collaboration.)

The definitive agreement should also spell out what happens if the collaboration should fail—the "escape" clauses, which may include penalties for dissolving the arrangement.

As the work of due diligence is proceeding, planning for the next phase, Initial Integration, is also under way. One important step is the identification of a "transition team," which will design the transition plan, oversee the plan's implementation, and evaluate the effectiveness of the actions taken. Typically, the transition team consists of the organization's CEO (or the CEO's delegate), the mission leader, the directors of human resources and organizational development, and appropriate management representatives (e.g., finance and information systems). In selecting persons for the transition team, it is important to decide who is most capable of influencing the organization's employees, physicians, and others as the process of merging cultures moves forward.

ONGOING INTEGRATION
This phase begins one or two years after the closing of the collaboration. The aim of this phase is to assess, plan, and implement continuing integration activities. Ongoing work in this phase is intended to yield the following outcomes:

• A positive, "healthy," evolving culture
• A positive impact on the communities served
• Executive leaders and managers assuming responsibility for fostering and maintaining culture integration
• Examples of integration in operations

A Positive, Healthy, Culture Internally and a Positive Impact on the Communities Served

A number of groups were asked for input in the evaluation process: members of three boards (those of the parent system, the community hospital, and the Catholic hospital), sponsors, medical staff presidents and members of medical committees, department directors, community religious leaders, and (through focus group discussions) the general public. After gathering information for six months, the system's senior leadership team held a one-day retreat to analyze the information. In the retreat, the leaders asked themselves: "What are the top 10 issues? What is our reaction to these issues? Why have we been successful? What would we do differently?"

The evaluation process led to several initiatives designed to address system issues and emerging cultural needs. The system enlisted the assistance of an organizational development consultant. It also convened monthly meetings of senior leaders and department directors to address consolidation issues, standardization of policies, best practices, and improved communications. And it conducted a system-wide employee attitude survey to identify key work satisfaction issues and overall morale; the survey became the baseline for measuring future progress.

Executive Leaders and Managers Assume Responsibility for Fostering and Maintaining Culture Integration

In creating a coherent, integrated culture that involves two or more organizations, leaders will be the most influential figures. They will maximize their impact on the culture integration process when they are perceived by the organization's constituents as modeling the new cultural norms.

A FINAL NOTE
Author and consultant Daryl Conner says that when collaboration efforts fail to produce desired results, this is not necessarily an indication of bad strategy on the organization's part. Rather, he says, such failures frequently reflect inadequate assessment of the "return on change" (ROC).⁵ ROC is determined by dividing the ultimate yield accomplished by the collaboration by the cost of its execution (including the expenses involved in modifying the partner organizations' operations and in addressing the effects of change on human resources, losses in productivity and quality, and expenditures on new infrastructure).

Conner recommends "human due diligence" as a way of better informing collaboration decision making and, ultimately, of increasing the odds for long-term successful culture integration. "At their core," he writes, "our organizations are not numbers, they are human beings. The people of our organizations—along with the numbers—determine the outcome of our [collaboration] initiatives."⁶

Mission leaders bring valuable skills to the process of collaboration and culture integration. From assisting in early decision making to mission due diligence—as well as "human due diligence"—to ongoing integration efforts, mission leaders play an important role by contributing to the creation of a positive new organizational culture and its rewards.

NOTES
1. Joanne M. Todd, "The Trouble with Mergers," Healthcare Business, September-October 1999, pp. 92-101.
2. "Collaboration Guidelines," Wheaton Franciscan Services, Inc., Wheaton, IL, 1996.
3. "Collaboration Guidelines."
4. "Mission Due Diligence Checklist," Bon Secours Health System, Marriottsville, MD, 1994, revised 1999.
5. Daryl Conner, "Human Due Diligence," Executive Excellence, October 1999, p. 10.
6. Conner, p. 10.

The Authors

William T. Bradel
Chief Operating Officer,
St. Agnes HealthCare
Baltimore

Sr. Virginia Gillis, RSM, EdD
Vice President, Mission Integration
St. Joseph's/Candler Health System, Inc.
Savannah, GA

Jim Harkness, DMin
Director, Mission Development
Bon Secours Health System, Inc.
Marriottsville, MD

Terrance P. McGuire, EdD
Vice President, Mission Services
Alexian Brothers Health System, Inc.
Elk Grove Village, IL

Thomas Nehring
Vice President, Transformation Resources
Wheaton Franciscan Services, Inc.
Wheaton, IL

CHA Staff

Regina M. Clifton
Ed Giganti
Julie M. Jones
Carol J. Tilley

Four Phases of Collaboration: The Big Picture View