Who Pays for Growth?

When the Costs and Rewards Don’t Align

A healthcare group decides to invest in a new specialty service.

The commercial team expects growth.

The clinical team must provide experienced staff.

Operations absorbs scheduling complexity.

IT must support new workflows.

Finance carries the implementation costs.

If the specialty succeeds, the revenue may be credited to one business unit. But the workload, disruption, and cost may be distributed across several others.

Now consider the predictable outcome: the department being asked to support the investment pushes back, delays implementation, or protects its own budget.

Leadership may label this resistance to change. But what if the real problem is the design of the decision itself?

Can your organization pursue enterprise-wide value when the costs and rewards fall on different teams?

The Enterprise Wants Growth. The Departments Want to Survive.

Strategic decisions are often approved at the enterprise level and experienced locally.

A new service may improve the group’s market position while increasing pressure on an already stretched clinical team. Centralizing a function may reduce total costs while making one facility’s performance metrics temporarily worse. Investing in a shared technology platform may benefit several clinics, even though the initial expense sits in one department’s budget.

Each local leader may be acting rationally according to the measures they are expected to deliver.

The problem emerges when those measures conflict with the organization's broader ambitions.

In “What Is Strategy?” (Harvard Business Review, November–December 1996), Michael E. Porter emphasizes the importance of fit among an organization’s activities. A strategic position cannot be reduced to isolated initiatives; the activities must reinforce one another. That logic has a direct implication for healthcare leaders: incentives that reward departments independently can undermine the coordinated choices required to create enterprise value.

A strategy may be coherent on paper while its internal economics encourage people to work against it.

The Hidden Tax of Misaligned Incentives

When costs and benefits are distributed unevenly, healthcare organizations can incur several less-visible penalties:

• Delayed decisions: Teams negotiate over who should pay before work can begin.

• Local optimization: Departments protect their own margins even when a different choice would improve total organizational performance.

• Unfunded responsibilities: A team is expected to support growth without additional capacity or an adjustment to its targets.

• Credit without contribution: One unit receives recognition for success while other teams absorb the work required to deliver it.

These patterns can be mistaken for cultural problems or poor communication. Sometimes they are. But repeatedly asking people to collaborate will not resolve a structure that penalizes them for doing so.

Paul Rogers and Marcia Blenko, in “Who Has the D? How Clear Decision Roles Enhance Organizational Performance” (Harvard Business Review, January 2006), examine the role of clear decision responsibilities in organizational performance. For healthcare executives, decision clarity must be matched with economic clarity: who decides, who funds, who contributes capacity, and who receives credit for the outcome?

Five Questions for the Boardroom

Before approving a cross-functional investment, CEOs and boards should ask:

1. Who pays—and who benefits? Map the costs, workload, risks, and expected returns across the functions involved.

2. Are local leaders being penalized for supporting enterprise priorities? Examine whether departmental targets discourage the very behavior the strategy requires.

3. Who absorbs the operational burden? Identify which teams will provide staff, specialist expertise, technology support, and management time.

4. How will success be credited? Ensure that performance measures recognize shared contributions rather than rewarding only the unit where revenue appears.

5. Can we pursue enterprise value without redesigning the incentives? If the answer is no, the solution may be organizational redesign—not another strategy presentation.

These questions are especially relevant when UAE healthcare groups expand across facilities, introduce shared services, launch new specialties, or invest in capabilities intended to benefit multiple business units.

Design the Economics of Collaboration

Enterprise-wide value does not require every department to benefit equally from every decision. It requires the organization to make trade-offs explicit and ensure that local accountability supports the agreed strategy.

That may mean assigning investment costs centrally, adjusting departmental targets during implementation, recognizing shared contributions, or establishing a clear executive owner for outcomes that cross functional boundaries.

The goal is not to eliminate accountability. It is to stop holding individual leaders accountable for outcomes they are structurally discouraged from enabling.

Phoenix MedStrategy helps healthcare leaders connect strategic priorities with decision authority, performance measures, and the economics of execution—so the organization's internal systems reinforce the strategy rather than quietly resist it.

The executive test: Can your organization pursue enterprise-wide value when the costs and rewards fall on different teams?

If the answer is uncertain, the next growth constraint may not be the market, the budget, or the workforce.

It may be the way the organization is designed to make decisions.

Sources

Porter, Michael E. “What Is Strategy?” Harvard Business Review, November–December 1996.

Rogers, Paul, and Marcia Blenko. “Who Has the D? How Clear Decision Roles Enhance Organizational Performance.” Harvard Business Review, January 2006.

Jensen, Michael C., and William H. Meckling. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure.” Journal of Financial Economics, October 1976.