Smart people, stupid choices: in Chief Executive's quarter century of existence, we've seen CEOs make big mistakes. A few learn from them - Chief Catastrophes - corporate management - Statistical Data Included

Chief Executive, The, August-Sept, 2002 by Catherine Fredman

I came on as COO in 1990, charged with stopping the losses and developing products for managed care. But we didn't address the adjacent activities. Then in 1995, we became too aggressive about our prices in an attempt to regain market share. The result was about a $100 million loss a year later--a wake-up call. Our mistake was failing to have a clear, focused agenda and not being aggressive about following it. That $100 million was the two-by-four over the head that said, "If it's not core to your business, if it's not adding value to your customer's experience, if it's not bolstering the bottom line, get out of it."

We quickly got out of those activities that either were a drain on our energy and resources or were not aligned with our core business.

We stopped worrying about our size. We would stop chasing price in the marketplace. As long as our prices were competitive, we hoped to create such loyalty among customers that we could generate a healthy margin. So we created an incentive program that rewards employees not only on profitability, but also on the satisfaction of customers and the physicians who service them. Our 3,500 employees can relate to the "satisfaction P&L" because their influence feeds it.

By 1997, we were in the black again. By 1999, member satisfaction was among the industry's highest. But we still talk about the lessons we learned in 1996.