How not to undertake a public project

(Part 2 in a comparison of public projects)

In the previous post on this site, I described a successful project to design and construct a new public library in my hometown of Harvard, Massachusetts.  It’s interesting to compare some of the key managerial decisions and actions in that case with a public construction project in Iraq.

Clearly, the construction of the Basrah Children’s Hospital in Iraq, now three years behind schedule, is being done under much more difficult conditions than was the Harvard town library.  Yet, many of the basic management decisions involved in these two public projects are the same.  The Basrah Children’s Hospital project in Iraq is an example of a public project beset by managerial problems, and in many ways it seems to symbolize the overall U.S.-led reconstruction effort in Iraq.

In August 2004, the U.S. Agency for International Development issued a job order to Bechtel National, Inc. to construct the 50-bed pediatric facility in the city of Basrah. The construction of the hospital was to be part of the overall U.S.-led effort to rebuild the Iraqi infrastructure following the invasion of the country in 2003. Congress authorized $50 million in funding for the hospital project, which was intended to improve the quality of care and life expectancy for women and children in that war-torn country. 

The hospital project was apparently one of some 20 projects being undertaken by USAID under a single $1.4 billion contract with Bechtel.

The scope of work was expanded in July 2005 to increase the number of beds to 94 and to upgrade the faciity to be an oncology center, according to a 2006 report by the Special Inspector General for Iraq Reconstruction.  The schedule and projected cost of the project, however, remained the same.  The hospital was projected to be complete as of December 2005.

According to a July 2006 report by the Special Inspector General, USAID’s accounting systems and processes were inadequate, and the agency failed to identify and report project costs to the U.S. Chief of Mission in Iraq and to Congress.  The Special IG noted that the completion date of the hospital had slipped by nearly 270 days as of March 2006, and the projected construction cost had risen to between $150 and $170 million.

Corner view of Basrah Children's Hospital, March 2008 (SIGIR)

 Here are some highlights from the Special IG’s report on the construction of the hospital through July 2006:

• USAID did not establish an appropriate program management structure for the hospital or for its other reconstruction projects.  The agency relied on one “administrative contracting officer” and one “cognizant technical officer” to manage the entire $1.4 billion in projects under contract with Bechtel, and never appointed a program manager with sole responsibility for the hospital project.
• Even though Bechtel briefed USAID in March 2006 that the hospital project was 273 days behind schedule, USAID’s report to Congress the following month reported no problems with the project schedule.  In addition, the agency continued to report the project cost as $50 million, even though Bechtel was estimating the cost at $98 million by April 2006.
• USAID did not include the installation of medical equipment in its cost estimate for the hospital.
• A consultant to USAID recommended that the agency discontinue Bechtel as the prime contractor for the hospital project.  The consultant, Louis Berger Group, projected that discontinuing Bechtel would reduce costs by some $8 million, primarly from the reduction in contractor overhead.

In the wake of the Special IG’s report, the U.S. Mission in Iraq transferred the the hospital project from USAID to the U.S. Army Corps of Engineers.  In addition, the U.S. Mission ordered Bechtel to stop work on the project, at least until the Corps of Engineers could take over management.

As of now, the hospital is still not finished.  An April 2008 quarterly report by the Special IG listed the project as 85 percent complete.  The total cost of the project, now projected to be finished by February 2009, is pegged by the Special IG at $163.6 million–a roughly 227 percent increase over the original cost estimate.

To me, a key difference between the hospital project and the Harvard town library that jumps out is the level of involvement by public managers in each case.  It appears there was a higher actual number of public-sector managers overseeing the construction of the $7 million Harvard library than were overseeing the entire $1.4 billion USAID reconstruction effort in Iraq, including the $163.6 million Basrah Children’s Hospital.

Undertaking a successful public project

The new library in the center of the town of Harvard, Massachusetts, where I live, is a clear example of a successful public project.

Construction of the library was completed a little over a year ago, on time and on budget.  CBT, a Boston-based architect, came up with a design that seamlessly matched a new brick structure to the existing historic Old Bromfield school.  Inside, the refurbishing of the old has been done with sensitivity and the new has been matched to it just as flawlessly.  The project recently won an award from the Massachusetts Historical Commission.

Heading the project were three longtime town residents, two of whom chaired a volunteer town building committee that shepherded the project to completion.  A couple of months ago, I had the opportunity to interview the three citizen managers for a book I’m writing for the American Society for Public Administration on managing public projects.  Given that the prevailing perception of public projects is that they are plagued by cost overruns, schedule delays, and poor quality construction, I was curious to find out what steps were taken to ensure that the Harvard library project didn’t end up fitting that prevailing view.

 

View of Harvard library with Old Bromfield building on left and new building on right

Sitting down in the library’s elegant first-floor conference room, Roy Moffa, Pete Jackson, and Mary Wilson had a lot to say about how they were able to make the library project succeed.  It came as a shock to me to find out a few days later that Moffa, a retired software company executive and entrepreneur, library trustee, and avid bicyclist, had suddenly passed away, at the age of 65. I’m glad he was able to realize the biggest dream of his retirement and to know it was a success.

Speaking in our interview specifically about the private funding that supplemented the library project’s public funding (private funding was, in itself, a key reason for the project’s success), Moffa noted:

We raised this money…on the commitment that we were going to build something extraordinary, something that was worthy of their contributions. We’d made a lot of promises. ‘We’re going to take your money, but we’re going to treat the money well and we’re going to communicate with you and show you what we’re going to do,’ and I don’t think we’ve disappointed a donor yet.

Here are some highlights of the planning and construction process for this project:

• Moffa, Jackson, and Wilson exercised maximum due diligence in selecting the architect.  They personally visited and toured more than 30 libraries in Massachusetts that had been designed by four architects they picked as finalists in the selection process.
• The three citizen managers, building committee, and other key project supporters undertood, involved, and satisfied the potential stakeholders in the project.  For instance, they agreed to cap the town’s financial exposure at $2.6 million, no matter what happened during construction.  This forced the managers to critically assess the project’s risks and take steps to keep costs under control.
• The managers and the entire building committee stayed involved in the library design process and  established an effective partnership with the architect, CBT. That partnership was characterized by frequent brainstorming of design alternatives. One example of that was a decision to redesign the planned children’s room, which had originally been designed to be split between the old and new buildings, and locate it entirely within the new building.
• The three managers attended all of the weekly construction meetings with representatives of the general contractor, architect and project manager. The three were at the site so often, in fact, that they got to know all the subcontractors.
• The three pushed hard in support of moving forward with construction in the fall of 2005, rather than waiting until spring when costs, particularly for steel and glass, were expected to be much higher. The brainstorming over the design had to come to an end. “My words to the rest of the building committee was ‘it’s time for pens down’” Jackson said.
• The three developed an effective and quick process for analyzing and approving change orders.  Jackson, a former project manager with the U.S. Army Corps of Engineers, was given discretion to approve changes in consultation with a professional project manager.  The process was done via email.

In the end, the undertaking of successful public (and private) projects comes down to effective leadership and teamwork, and it’s clear that was the case with the Harvard library project.  As Wilson, a former town librarian, who became library director in 2002, put it:

This was the last shot.  In our lifetimes, this was the only chance we would have and we wanted to make sure we did it right.

The Globe’s view of the “best” companies in Massachusetts

About a year ago, shortly after I first started this blog, I took aim at the The Boston Globe’s annual Globe 100, which the paper touts as “The Best of Massachusetts Business.”

The problem I had with the ranking is that it is entirely based on financial measures, such as return on average equity, total revenues and and one-year change in revenue and profit margin.  Do bottom-line or profitablity measures alone really tell you which companies are truly the “best?”  The Globe’s ranking seemed to be failing to take into account the dimension of ethics or corporate social responsibility, which has steadily gained acceptance as an important measure of a company’s overall performance.

In other words, do companies exist just to satisfy their shareholders’ interests, or are there other stakeholders involved here, such as consumers, workers, the environment? 

I noted, in fact, that those additional societal dimensions are taken into account in the annual Corporate Responsbility Index, which is compiled by a nonprofit, UK-based organization called Business in the Community.  The 2006 CR Index was published by The London Sunday Times earlier this month.  The Index ranks the 100 most “responsible” companies in Britain based on measures of environmental and social impact.  The ranking process is a rigorous one that requires companies to fill out a survey that takes up to two months to complete, and requires site visits to the firms and internal auditing.

Last year, I asked The Boston Globe about their business ranking criteria, and Caleb Solomon, The Globe’s business editor then in charge of The Globe 100 responded by saying that “augmenting our coverage with some social meaures is something we’re looking at.”  

Well, The Globe has just published its 2008 edition of the Globe 100, bound in a sleek magazine edition to mark the 20th anniversary of the business rankings.  They must still be looking at augmenting their coverage with some social measures because their criteria this year for selecting their 100 “best” companies haven’t changed.  The ranking is based on the same financial measures as it was the year before and the year before that.

The Globe’s current ranking notes that five Massachusetts companies have made the 100 list in the past 20 years.  They are the financial firms of Eaton Vance Corp and State Street Corp; defense contractor Raytheon Co.; retailer TJX Cos.; and the uniform-service company UniFirst Corp.  Granted, these are probably great companies to own stock in right now.  But are they the best companies from a societal point of view?  Are there not other Massachusetts companies out there that may not be posting as high a return on equity as these five perennial makers of the Globe 100, but that might be doing more for their workers, consumers, their immediate neighbors, and the environment?

We won’t know the answer to that because The Globe isn’t yet interested in those additional measures.  IMHO, our Massachusetts’ major newspaper of record is behind the Times on this one.

Saving us from the credit industry

There has been a lot of discussion lately about the need for more regulation of hedge funds and investment banks to prevent another credit crisis from even further damaging the U.S. economy.

But what about another, potentially even darker side of the credit industry–those unscrupulous mortgage, credit card, and other lenders who are slowly drowing the middle class in America in a sea of unpayable debt?  In Making Credit Safer, Elizabeth Warren makes a persuasive case that more regulation is desperately needed in that arena as well.

Warren, a Harvard Law School professor, notes that it is impossible to buy a toaster that has a one-in-five chance of bursting into flames and burning down your house.  But it is possible to refinance your home with a mortgage that has the same one-in-five chance of putting your family out on the street.

In addition, while it is impossible for the seller to change the price on the toaster once you’ve bought it, your credit-card company can triple the price on the credit card you used to finance your purchase, even if you meet all the credit terms.  Products sold in America are regulated by the Consumer Product Safety Commission, but credit products “are regulated by a tattered patchwork of federal and state laws that have failed to adapt to changing markets,”  Warren writes.

Americans turned over $89 billion in fees, interest payments, added costs on purchases and other charges associated with their credit cards.  As Warren notes, that’s $89 billion that didn’t go to new cars, new shoes, or any other goods and services.  And not all of these costs are measured in dollars.  There is also the anxiety and shame that accompany Americans struggling with debt.

Warren makes the case that foolishness and profligacy on the part of those in debt doesn’t explain the entire problem.  Lenders, she notes, “have deliberately built tricks and traps into some credit products so they can ensnare families in a cycle of high-cost debt.”  Credit card interest rates often hover around 30 percent, while so-called Payday loans can have interest rates of nearly 500 percent.

The average credit card contract has become an incomprehensible morass of clauses that culminate, in one case, in the statement by one prominent credit card company that, “We reserve the right to change the terms at any time for any reason.”  Then there are the “yield service premiums” or YSPs that mortgage companies pay to brokers who steer families into high-cost, teaser-rate mortgages.  These YSPs helped drive the wild selling, Warren says, that led to the collapse of the subprime mortgage market.

Congress, under the pressure of the mortgage broker industry has done little so far to curb these abuses.  And the traditional state role in regulating credit card interest rates has been usurped by federal legislation that allows lenders with federal bank charters from locating in states such as Delaware and South Dakota that allow them to export uncapped interest rates.

Warren suggests it’s time to create a Financial Product Safety Commission (FPSC), which would be charged with reviewing new credit products for safety and requiring modification of dangerous products.  It would evaluate mortgages, credit cards, car loans and other forms of credit and review such things as unlimited and unexplained fees, inordinately high interest rates increases, and claims by issuers that they can change the terms after money has been borrowed.

Interestingly, the Federal Reserve and other regulatory agencies have just proposed regulations to limit some of the most egregious credit card practices.  Similar prohibitions against excessive fees and interest rates have been proposed in Congress by Sen. Christopher Dodd, D-CT, and Rep. Carolyn Maloney, D-NY.   Hilariously, the banking industry is fighting the move and saying it will hurt consumers.

All of this sounds like a great start, although I wouldn’t get my hopes up that any of it will make more than a small dent in the credit problem in America.  It’s not clear from Warren’s article, for instance, whether she believes the FPSC would have power to do more than evaluate and make recommendations about unscrupulous and dangerous credit practices.  And as she also points out:

Unfortunately, in a world in which the financial-services industry is routinely one of the top three contributors to national political campaigns, the likelihood of quick action to respond to specific problems and to engage in meaningful oversight is vanishingly slim. 

A selective account of de-Baathification in Iraq

I’ve just read My Year in Iraq, L. Paul Bremer’s account of his management of the first year of the American occupation.  And what stood out about the book for me, other than the deadliness of the accounts of the endless inconclusive meetings, were the omissions and often erroneous details provided about what may have been Bremer’s most momentous and controversial decision: his de-Baathification orders.

Much has already been written about Bremer’s first two orders as head of the Coalition Provisional Authority in Iraq.  CPA Order No. 1 led to a wholesale purge of Saddam Hussein’s Baath Party members from Iraq’s government ministries and industries.  Order No. 2 dissolved the Iraqi military.  Many comentators have rightly pointed to these orders as critical mistakes in the U.S. occupation because they helped start the insurgency, which has caused so much havoc and death and destruction to American troops and Iraqis alike.

Little appears to have been said, though, about the contradictions and apparent mistatements in Bremer’s attempt to defend his de-Baathification policies in his book.

First of all, as Rajiv Chandrasekaran points out in Imperial Life in the Emerald City: Inside Iraq’s Green Zone, his book about how we screwed up the post-war reconstruction effort in Iraq:

While the [Baath] party did have plenty of thugs, many of Iraq’s most capable scientists, engineers, and other professionals also belonged. To gain admission to the best colleges and graduate schools, to get a coveted government job, to get a promotion, you had to be a member. If you excelled at your job, you might be promoted into the party’s upper ranks, even if that was not something you sought. Turning down a promotion could get you fired or sent to jail.

In his book, Bremer seems to aknowledge this reality, saying that the CPA “had no gripe with” people who had joined the Baath Party to get a job or because they had been coerced into doing so.  He notes:

Our concern was only the top four levels of the party membership, which the [de-Baathification] order officially excluded from public life. These were the Baathist loyalists who, by virtue of their positions of power in the regime, had been active instruments of Saddam’s repression.

What Bremer never explains is why CPA Order No. 1 actually went beyond those four levels of party membership to prohibit rank and file Baath Party members from holding positions in the top three layers of management in every national government ministry, affiliated corporations and other government institutions.

Bremer, by the way, doesn’t even discuss in his book the history of the dispute between the State and Defense departments over how deep the purge should go or the more lenient NSC-brokered compromise that President Bush reportedly agreed to.

Bremer says he explained to his staff that the White House, DOD, and State had all signed off on CPA Order No. 1.  But Chandrasekaran’s book says that neither Rice nor Powell were ever shown a copy of the order. Moreover, Bremer doesn’t mention that both Jay Garner, whom Bremer succeeded in managing the occupation, and Stephen Browning, an engineer in the U.S. Army Corps of Engineers who was tapped to head four ministries, had come to him to personally object to the order as too harsh.

Chandrasekaran describes Garner as as saying to Bremer: “You’re going to drive 50,000 Baathists underground before nightfall.  Don’t do this.”  Browining objected that Baathists were “the brains of the government…,” without whom the CPA would have “a major problem” running most ministries.  According to Chandrasekaran’s book, Bremer responded tersely that the subject was not open for discussion.  Apparently, none of this was open for discussion in Bremer’s book either.

Bremer further doesn’t note that the CPA began to receive reports that 10,000 to 15,000 teachers had been fired as a result of Order No. 1. They were level-four party members who had joined because they were told to do so by the Ministry of Education, according to Chandrasekaran.  Entire schools were left with just one or two teachers in some Sunni-dominated areas.

Bremer later lays the blame in his book for the teacher firings on the Iraq Governing Council’s implementation of his policy. “This went well beyond the intent of our initial policy. Iraqi children were paying the price…,” he writes.  Maybe, but the order certainly set a tone for the Council.

Finally, Bremer appears to completely misjudge the impact of his de-Baathification decrees, saying of Order No. 1:

On the plus side, the reaction of the Iraqi people to the de-Baathification decree was overwhelmingly favorable. Literally hundreds of times over the next fourteen months I would hear that Order No. 1 was the single most important step I had taken as administrator…”

Somehow Bremer doesn’t appear to realize that “with the scrawl of his signature,” as Chandrasekarn put it specifically in describing Order No. 2, “he (Bremer) created legions of new enemies.”

We’re halfway through the credit crisis

We’re about halfway through the current mortgage credit crisis, and it will take a combination of self-discipline from the financial markets and government intervention and regulation get us the rest of the way through it.

That’s the message I took from Robert R. Glauber, a former chairman and CEO of the National Association of Securities dealers, who discussed the origins of the crisis and  what needs to be done to end it, in a seminar at the Harvard Kennedy School last week.  Glauber described the credit crunch as “an accident waiting to happen.”

He noted that housing prices have dropped 10 percent in the past year and are projected to drop another 10 percent until possibly well into 2009.  Mortgage delinquencies will continue.  Projected losses due to defaults in the subprime mortgage market could reach $300 billion.  But Glauber doesn’t think it will end there.  Another $200 billion in defaults on commercial real estate loans are likely among other losses.

He compared the “credit bubble” to the “dot-com” bubble of the late 1990s.  In both cases, Wall Street had “manufactured” companies as investment opportunities.  In the current crisis, hedge funds invested in mortgage securities.  Regulators allowed investment banks to create highly leveraged, off-balance-sheet investment mechanisms that were built on subprime mortgages.  It was a natural thing to do because there was a trillion-and-a-half dollar supply of those mortgages around.  This created a housing bubble, which started to collapse at the beginning of 2007.

How will it all end?  Two things have to happen, Glauber says: One, the markets, aided by government, have to stop the downward spiral of contracting capital markets.  The feds have started this to some extent by lending to investment banks.   Glauber termed it a “major step” in easing fears among banks and investors.

Secondly, investment banks have to write down their assets and raise new capital.  The problem is that the banks are reluctant to take that second step.  They’ve gone about halfway, but they are waiting for the cost of capital to bottom out.  

Meanwhile, the U.S. Treasury has proposed a “Blueprint” for tighter regulation of Wall Street, including standards for mortgage participants and the first ever regulation of hedge funds and private equity funds.

Thus far, Glauber said, the markets haven’t done a very good job in policing themselves.  The question is how much additional regulation will be needed to supplement market discipline.  That regulation can range from information gathering to systemic controls on investment banks and other mortgage institutions.  Glauber suggested that the line should be drawn between institutions that are federally insured (they should have more regulation) and those that aren’t (not as much regulation needed).

Glauber also acknowledged that part of the reason for the mortgage crisis involves a conflict of interest on the part of ratings agencies such as Standard & Poors, Moody’s, and Fitch, which investors relied on to rate mortage-backed securities.  Those ratings agencies are paid by the issuers of the securities to rate them.  But the conflict may not explain the whole thing.  The argument can be made that the magnitude of the mortgage defaults have turned out to be so massive and unprecedented that the ratings agencies could never have predicted it.  Even if the ratings agencies had considered the the most dire data they had on the securities they were rating, they would have missed the crisis by a factor of three, he said.

 

Why can’t we get the cost of building our infrastructure right?

Is it just everyone’s imagination, or does just about every large public construction project ever undertaken end up costing signficantly more than expected?

A number of researchers say we’re not imagining things.  In fact, says one, project promoters consistently lie about what their proposed projects are likely to end up costing.

In a 2002 paper in the Journal of the American Planning Association titled  “Underestimating Costs in Public Works Projects: Error or Lie,” Bent Flybvjerg, M.S. Holm, and S. Buhl, reported on the results of a review of 258 public transportation infrastructure projects around the world worth $90 billion.  They found that costs had been underestimated prior to completion in 9 out of 10 of those projects, and that actual costs were 28 percent higher on average than estimated costs.

They also found that no learning appears to have occurred over the 70-year period of the projects they examined.  Cost underestimation has continued in the same order of magnitude over that time.  “Project promoters routinely ignore, hide, or otherwise leave out important project costs in order to make total costs appear low,” they wrote.

In a followup paper in 2005, “Policy and Planning for Large Infrastructure Projects: Problems, Causes, Cures,” Flyvbjerg maintained that these cost understimation problems apply to a wide range of other project types including power plants, dams, water projects, concert halls, museums, sports arenas, convention centers, IT systems, oil and gas extraction projects, aerospace projects, and weapons systems.

The policy implications are clear, Flyvbjerg argued: Lawmakers, investors, and the public can’t trust information about costs, benefits, and risks of large infrastructure projects produced by promoters and planners of those projects. The current way of planning large infrastructure projects is ineffective and leads to bad investments. And there is a strong need for reform in policy and planning for large infrastructure projects.

Among the projects Flyvbjerg cited as having large cost underestimation and overestimations of benefits were Boston‘s Big Dig, in which costs rose from $2.8 billion to $14.6 billion in constant dollars; Denver‘s $5 billion International Airport, in which costs were close to 200 percent higher than estimated; the cost overrun on the San Francisco-Oakland Bay Bridge retrofit of $2.5 billion, or more than 100 percent, even before construction started; the Channel tunnel between the UK and France, which came in 80 percent over budget for construction and 140 percent over for financing; the $4 billion cost overrun for a Pentagon spy satellite program and the over $5 billion overrun on the
International Space Station. He cited many others as well.

Some megaprojects become so large in relation to national economies, he noted, that cost overruns and benefit shortfalls from even a single project may destabilize the finances of a whole country or region.  Flyvberg pointed out that technical, psychological, and political reasons have been advanced to explain the cost underestimation problem.  The psychological explanation is sometimes referred to as “optimism bias,” a form of self deception.  The political explanation is that project planners purposefully underestimate project costs in order to get approval for their projects—in other words they lie about the costs.

Flyvbjerg contended that the explanation that planners purposefully lie is the best explanation for the data.  Optimism bias would disappear, he argues, after people estimating costs and benefits became experienced and began drawing on the knowledge and skills of more experienced colleagues.

But Flyvbjerg seems to discount the possibility that many of these people don’t have the opportunity or inclination to draw on the knowledge and skills of others.  If those people with knowledge and skills were consistently hired for these projects, then what Flyvbjerg is saying would certainly be true.  But it may well be the case that projects are often begun with inexperienced analysts and managers.  It’s not that they necessarily are lying about costs and benefits.  It’s just that there is no opportunity or inclination to learn from others and that idealism and ideology take over.

Why is it that presidents continue to make unsupported presumptions about the projects and situations they face that lead them into trouble without seeming to learn from the experience of those who came before them?  Those presidents may not always be purposely deceiving others in underestimating the risks of political events and undertakings. They may truly be deceiving themselves because they often don’t ask key historical questions and learn from past events.

Flyvbjerg maintained that the profession of forecasters would indeed have to be an optimistic–and non-professional–group to keep their optimism bias throughout the 70-year period his study covered for costs and not learn that they were deceiving themselves and others by underestimating costs and overestimating benefits.  It’s not a credible explanation, he concluded.  I’m not so sure.  I think this may be exactly what often happens.

 

 

The patient loses: a whistleblower’s experience

[Guest post by Mike Gordon jgordon30@msn.com]

I have been a Respiratory Therapist for 19 years. I have seen hospitals try to increase productivity to unsafe levels, even though there is a Medicare mandate to have adequate staff.

I was the only therapist on at night at one hospital. Things were not right.   I entered into the Kansas Human Rights mediation process and cannot discuss the case further.  I can tell you that if you say something is not right and leave notes, those notes can be used against you. I am living proof.  Retaliation is very real in healthcare.

Mediation was the only way for me to get to work in another state.  But the state medical boards would not give me a license until this mediation was resolved, which meant if I didn’t go along with the mediation, I couldn’t work at the only job I have done for 20 years.

You want medical retaliation. Try this: The Joint Commission will not investigate, state medical boards will not investigate, which means there is no one to complain to.  The hospital really can say anything they want and you have no defense.  When I heard the airline whistleblowers on CSPAN, I heard what happened to me.

Management must use the same playbook. The Kansas Human Rights Commission is “not favorable to employees” is what I was told.  So I got what I could and will try to move on.

Want a really nice Catch 22?   I’m terminated for bringing up wrong things, and the Medical Board, Joint Commission, and CMS all refuse to investigate.  I try to go to another state to work.  A second hospital hires me, lets me work 90 days, and fires me for not getting a full license.  The Oklahoma Board stops me from working further. (Their reasons keep changing.)  I am told they said something different to this Board.

To those who try to use mediation, don’t think the charges against the employer will be the only items used in mediation.  Don’t expect to be believed.  I had convincing proof, but it wasn’t enough.  If all state human rights commissions are operated like the one I used, then they need to be shut down. I thought I was going to get help.

Don’t expect real reforms in the way treatment loads are handled and in interaction between the sexes.  Not to mention how different disciplines interact.  When the physicians, nurses, and therapists all have their own agendas, the patient has been left out and that’s one way that bad things happen to good patients.  As long as physicians see the hospital experience as one of “write orders and call me in the morning,” the patient loses.

As long as nursing only cares for their part–”call Respiratory because they don’t want to deal with the patient” –or they enjoy calling Respiratory to lord over them (some hospitals will fire you if don’t play a nurse tech role), or they are too incompetent to know when a patient is going bad, or they misuse the physician order to call for every little thing, then the patient loses.

For a Respiratory Therapist, you are really caught in the middle. You are given the maximum amount of work to do, expected to find time for all the emergencies that occur during the shift, and try to survive for another day. The patient loses in so many ways.  You can’t fix a patient when three other nurses are calling you and the ER calls.

You can only do so much.  The hospitals use consultants to cut staff.  The hospitals are becoming a production line and the patient is the product. There is no quality control inspection process like there is for the airlines. The patient loses.

Why have a doctor order something I don’t have time to give?  Then the nurse orders therapy.  Most of time, the patient doesn’t need what is ordered and then I have to try and get the proper order.  What does that patient need? Do I have time to give that therapy?

Into this mix is a management that only wants productivity, not patient care.  It is very complex and you feel good when things go well, but this is happening less and less.

Have we ruined Iraq’s economy yet?

The Bush administration has transformed failed nation building into an artform.  

Here are some of the nation-building principles that the administration has used: 

First, you rush in to the situation with a pre-set ideology—e.g., free-trade policies and privatization are the answers to the country’s problems—that blinds you to all alternative options and objectives.  You do not listen to pleas for caution or reason, especially when it comes from people with knowledge and experience.  For that very reason, you are careful not to employ anyone with knowledge or experience.  Better to have people around you who share your ideology and your political party affiliation.

You do not make any effort to understand the history of the country you are rebuilding or the political, societal, or economic aspirations of its people.  Remember, not knowing anything about them allows you to know what’s best for them.  Moreover, you do not do advance planning for your nation-building project, and if there are any plans kicking around, you must do your best to keep everyone in the dark about them.

Other important principles include:  Do not give contracts to companies indigenous to the country you are rebuilding or to any firms with knowledge or experience in the areas in which you are seeking their help.  Give out contracts to politically connected friends and political contributors to the president.  Make sure those contracts are cost-plus, and do not attempt to monitor the companies’ performance or audit their use of the funding they get.

The results have been predictable.  As Naomi Klein has pointed out in her book, The Shock Doctrine: The Rise of Disaster Capitalism:

(L. Paul) Bremer was sent to Iraq to build a corporate utopia; instead, Iraq became a goulish dystopia where going to a simple business meeting could get you lynched, burned alive or beheaded.

A clear step-by-step account of how the U.S. has implemented these principles of failed nation building can be found in the book, Imperial Life in the Emerald City: Inside Iraq’s Green Zone, by Rajiv Chandrasekaran.

The key ideological assumption that Bremmer and his staff had regarding Iraq was that there was an imperative to impose free-market reforms and privatization in the country and to do it quickly. 

There were those who understood that there were problems with that approach.  One was Timothy Carney, who had been recruited to advise the Ministry of Industry.  Carney agreed it made no sense for the Iraqi government over the long run to own all the factories.  But “Carney figured the decision of what to sell, when to well, and for how much rested with the Iraqis.”

Glenn Corliss, a member of Carney’s team, was another who advocated caution.  He had worked for Fidelity and JPMorgan and had specialized in restructuring businesses.  As Chandrasekaran notes, Corliss worried that the sale of factories to private investors would result in layoffs.

That view wasn’t shared by the neocons in the Bush administration, including Bremer, who wanted fundamental economic restructuring of Iraqi society.   Had Bremmer, the neocons, their consultants etc. been aware of Iraqi history and its current society, they would have realized that unemployment was indeed a key concern throughout Iraq, even among those who were glad that Saddam had been toppled. 

Before Saddam fell, government jobs in Iraq had been plentiful and guaranteed people a salary for life.  While salaries were low, the cost of most goods and services was subsidized by the government.  Every family received monthly food rations from the state.  Education, even college, was free, and so was health care. 

Most Iraqis were particularly concerned about unemployment in the days after Saddam’s government was toppled.  They were also wary of foreign ownership of domestic businesess and privatization of the oil industry, in particular.  But Bremmer et al. didn’t heed those viewpoints either.  One of Bremmer’s key aides, Peter McPherson,  told Chandrasekaran: “We need to shrink government employment, not increase it.”

McPherson, on leave of absence as president of Michigan State University, also advocated a “clean-slate” approach to debts and assets held by Iraqi companies.  Partly because those companies had largely all been looted and their financial records were either missing or un-auditable,  McPherson reasoned that all debts and assets of those companies should be nullified.  Corliss, however, knew this approach would simply penalize the stronger, more valuable companies, and benefit “the dogs that you got to take out back and shoot.” 

McPherson also had another interesting theory that as inefficient state companies shrank or went out of business, imports and new private firms would flourish.  He termed the theory “shrinkage,” and he went so far as to suggest that looting was a much-needed form of shrinkage because the theft of government property promoted private enterprise.  McPherson persuaded Bremer to eliminate import duties and slashed Iraq’s top tax rate for individuals and businesses from 45 percent to a flat 15 percent rate.

But as Chandrasekaran noted, the predicted foreign investment in Iraq has never materialized. 

Do companies do well by doing good?

Three academic researchers have produced the most comprehensive review to date of 35 years of studies on a question that seems to have become more timely and pressing than ever—do efforts by corporations to benefit society also benefit their bottom lines?

A draft version of their paper, “Does it Pay to be Good?”, by Joshua Margolis, Hillary Anger Elfenbein, and James Walsh, can be found on The Economist website and has been discussed in The New York Times.  Margolis said the authors are continuing to revise the paper.  Last year, Margolis asked me to hold off in posting a blog entry about the paper, but yesterday he extended permission to cite the paper and post this blog entry.  He said he hopes to have an updated version of the paper by May.

The authors have so far produced an analysis of 167 studies, and concluded that, in general, these studies found there was a mildly positive relationship between corporate social and financial performance.

So, what does that really mean?  The attention to that question is the real strength of this analysis.

First of all, the authors note the stakes involved in the three decades of research they reviewed:

If only doing good could be connected to doing well, then companies might be persuaded to act more conscientiously, whether in cleaning up their own questionable conduct or in redressing societal ills….A positive link between social and financial performance…would license companies to pursue the good…

In 1970, they note that Milton Friedman laid down the gauntlet by criticizing any firm that made so-called socially responsible investments, arguing that such activities amounted to theft from the shareholders.  As a result, at least 167 studies have been conducted since 1972 to study the effect of corporate social performance on corporate financial performance, and there have been 16 reviews of this research.   Margolis et al. are the first to offer a comprehensive appraisal of all these studies, and to suggest an entirely new path for future research.

They found that most of the 167 studies did not find statistically significant relationships between corporate social and financial performance.  Yet, certain conclusions can be drawn from the studies, among them that companies do not appear to suffer financial harm due to socially responsible investments.  Only 2 percent of the studies reported a significant negative effect on financial performance in undertaking socially responsible activities.   This appears to negate Friedman’s warnings that companies that undertake these activities will destroy shareholder value in the process.

As the authors put it:

Companies can do good and do well, even if companies do not always do well by doing good.

And, on the negative side, companies that act irresponsibly and are caught, often suffer costly consequences.

Yet, the authors also note that the studies have shown that the next marginal dollar spent on a socially responsible investment is not necessarily going to provide as great a financial return as other types of investments.  Therefore, there should be reasons other than just the potential financial benefits for pursuing corporate social performance.  Those conclusions would seem to jibe with those of David Vogel, author of “The Market for Virtue,” who has argued that Corporate Social Responsibility initiatives are an “insurance premium” for businesses rather than a consideration at the core of a business’s processes.

In fact, Margolis et al. suggest that the studies they reviewed show corporate social performance is a legitmate activity that may not produce hugh financial returns; and yet, companies ignore it at their own peril.  The authors cite the case of Wal-Mart, which found its investment plans disrupted because its corporate and marketing policies generated so much opposition.

The authors further conclude that one of the most under-explored effects of corporate social performance is whether those policies actually result in measurable benefits to society as a whole.  And they suggest that it may now be time for researchers to stop trying to find a causal link between corporate social performance and corporate financial performance, and turn their attention to three possible questions for future research:  1) why do firms pursue corporate social performance?  2) how do they go about it? and 3) how can they pursue both corporate social performance and corporate financial performance at the same time?

In other words, the question shouldn’t be: do firms do well by doing good, but rather, how can firms do good and do well at the same time?