Financial Daily from THE HINDU group of publications
Monday, Mar 29, 2004
Columns - Errors & Omissions Expected
Skilled experts often see eye to eye with profits
ARAVIND Eye Hospital was founded in Madurai about a quarter century ago with the mission to eradicate needless blindness in the State. But now it is a success story that finds a mention in Arun Shourie's speech and Harvard Business Review.
To start with, however, bankers rejected the hospital's project as `uncreditworthy'. Now, it is with pride that the Web site www.aravind.org announces that with "less than one per cent of the country's ophthalmic manpower" it performs "about five per cent of all cataract surgeries in India."
In what could lead to shiploads of cataract patients heading to Indian shores, Mr Shourie pointed out recently that a cataract operation costing $1,500 in a US hospital would cost only $12 in Aravind, including the cost of the lens.
For every Aravind, there are thousands of organisations that don't perform well. Why? If you were to ask V. Kasturi Rangan of Harvard Business School, he would say that most nonprofits don't have a strategy at all. In his article titled `Lofty Missions, Down-to-Earth Plans' in the latest issue of HBR, he points out that there are "broad, inspiring mission statements" but what is missing is "a systematic method that connects their callings to their programmes."
Decision-making based on mission rather than strategy doesn't help. For instance, phrases such as `end hunger' or `remove blindness' could be too broad. "Acting without a clear long-term strategy can stretch an agency's core capabilities and push it in unintended directions."
A prime example of a well-conceived strategy platform, according to Kasturi Rangan is that of Aravind Hospital. From 20 beds in 1976, it is now more than 2,500 in a four-hospital network.
Eye care is the motto, and patient's ability to pay is not focussed on. Cataract is concentrated on because "cataracts cause roughly 75 per cent of the 30 million cases of blindness in India". In 2002, it screened nearly 8 lakh patients free of charge and another 6 lakh for a fee.
The HBR mentions that the average ophthalmologist in India performs about 200 cataract surgeries a year, while "an Aravind doctor performs about 1,500 - an efficiency multiple of 7.5." How are they able to keep costs low? "In 1992, it decided to produce intraocular lenses in its own facility, Auro-Lab. It cut the cost of each lens to just $7, so by 2002, all patients were able to receive it."
There is also "the paying segment" which is important to nonprofits. In the case of Aravind, this segment subsidises the cost of free care, and also helps set the benchmark. "Paying clients set high demands on quality care, and those standards are used as a benchmark for non-paying clients as well."
It is not enough to have good intentions, because they say the path to hell is paved with only them. What is required is the application of the best of management tools and economic models to the delivery of service.
So if you were to go around to look for organisations that can do better with some modern inputs, there would be no dearth of them. It would, however, be a different story if you were hunting for a management expert or financial analyst to help such organisations.
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