On Institutional Failure - Part 1


                Careful readers of this series will recall that I started by arguing the need to rebuild our shared “commons” at the hospital. In discussing factors necessary to maintain the commons, I mentioned institutions. The imminent closure of Lambuth University has gotten me to thinking again about institutions, and particularly the issue of institutional failure.

                As a child, I attended different schools in different cities for first, second, and third grade. Since history began with me, at least from my child’s perspective, it never occurred to me to question that there would be schools at each of these new places, that they would be organized by grades (ages), and I never considered what the adults had to do to raise the money, pay the taxes, and make sure the schools were doing what was expected. They were just there and had always been there.

                By the time I chose a college, I had at least intimations that history did not begin with me, so I paid some attention to issues such as endowments, facilities, and institutional track record, but my perspective was still primarily personal—did these data make this a good school for ME to attend. I never considered that the place I went would want me to send contributions to the endowment for the rest of my life. I will even confess that I have not supported that institution very faithfully, have attended only one reunion and don’t have plans to go again despite the biannual pleas for money.

                By the time I came to Jackson, though, I had been a tax-paying adult for more than a decade, had school-aged children, and was sensitive to the idea that it was now my time to contribute to the health and stability of the institutions, both civic and medical, that were important for me and our community. Having lived here nearly thirty years, educated my children, and grown old, I am now acutely aware of the need to pass on stable institutions for those who are following behind me. In this context, then, it is interesting to consider Lambuth’s failure after more than 160 years of institutional history, particularly as it relates to our future at the hospital. You may think the analogy strained, but stick with me, and I think you may find interesting parallels.

                Although I had never heard of Lambuth before moving to Jackson, I found myself involved in its support through my church affiliation. Over the years, I have helped pay the tuition for a student from Indonesia, supported choral musicians with scholarships, and made capital contributions. I am sure the dollars contributed exceed those I have given to my alma mater. I have also known the last four presidents of the university and many of the faculty and so have some notions about the reasons for its ultimate failure, but I must admit I was not involved to the point where I foresaw its collapse much before the bad news started appearing in the newspaper. However, conversations have led me to identify several places where decisions were made that led more or less directly to institutional failure.

                The first critical choice occurred when Dr. Baker Hubbard, also a loyal Methodist, approached the leadership of Lambuth about endowing a school of nursing. His offer was rejected, because the people at the school said “That is a trade school and that is not what we are. We are a traditional liberal arts college.” He made the same offer to Union University, which had no such inhibitions, and today we have many graduates of Union’s nursing program helping us care for our patients.

                The second critical choice occurred when it became obvious that enrollment in small liberal arts colleges was shrinking across the country. Some proposed that Lambuth get involved in “distance learning,” which now means on-line courses. Again, those in charge decided “We are a residential liberal arts college—we are not interested in going this way.”

                The third critical choice occurred when the enrollments shrank, as predicted. Those in charge decided to inflate the numbers of students by using generous scholarships to attract them. They also decided to “get on the map” by stressing college athletics, which was seen as a competitive advantage. Unfortunately, extra funds were not secured to support the scholarships, which were funded by the “profits” of the endowment fund. When the economy tanked and endowment funds shrank everywhere, the cash ran out, accreditation was lost, and the end became inevitable.

                What lessons would I draw from this? First, the institution had a very strong internal vision of itself and how it was going to perform its mission to educate young people. While this vision had worked for a long time, signs that the world was changing were ignored. The comfortable past was preferable to the changing future. Second, the institution thought it could escape the secular trends affecting like-minded institutions. It thought it was unique, and that uniqueness would see it through. Lastly, once things got tight, they started trying to create the appearance of success by “eating the milk cow.” The end result was closure of the institution, with negative impact on students, faculty, and the community.

                I think the parallels to our situation are striking. Most in our community see the hospital as wealthy and strong. Many of those who work here have a strong vision of itself, and how it should perform its mission, based upon past performance. There are many signs that the external environment is changing in a way that is negative for the hospital, but there continues to be a belief that we are unique. Lastly, we are still striving to keep the numbers (admissions) up, even though there is plenty of evidence that the payer mix is getting worse, so we may be “eating the cow.” Given these parallels, I am very anxious about the future of our hospital. Can we make good decisions to avoid the fate that befell Lambuth? Do we have the sense of urgency needed to make these decision quickly  Can we be adults?  I am not sure—what do you think?

Written 31 May 2011, revised 4 May 2014.

Further Reading

On Change
Why do people change? A consideration of the desirable future state.

On Failure       
 Failure is inevitable. Successful organizations expect failure even from highly reliable processes. A consideration of how to tolerate failure.

On Strategy
 A central question for healthcare organizations as they face the future is what is our goal?  While taking care of patients might seem the obvious answer, it is the one that is usually not considered.