by Dominic Bria, Psy.D.; Joanne Voordeckers; Dustin Schodt, MBA; Tom Davis, MBA

“Improvement usually means doing something that we have never done before.”
–Shigeo Shingo

“It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change.”
–Charles Darwin


EXECUTIVE SUMMARY

Creative Testing Solutions (CTS) is the largest nonprofit blood donor testing laboratory organization in the United States. In 2014, when CTS had three labs, it began to see the need for improvement in its operations. CTS kicked off its operational excellence journey by developing key leaders in Lean concepts and Shingo Model™ principles. Over the next four years, CTS developed its continuous improvement (CI) capabilities in various ways, making great strides toward creating a culture of operational excellence. 

In January 2018, CTS merged with the national testing labs of the American Red Cross, doubling its number of labs to six and bringing the number of employees to nearly 800. This created the challenge of bringing together two disparate cultures at very different levels of CI maturity. This case study explores how the CI initiatives already in place at CTS affected the merger of the two organizations. It also explores the process that CTS executives used to integrate the cultures of the two sets of labs.



Introduction to CTS
Creative Testing Solutions (CTS) is the largest nonprofit blood donor testing laboratory organization in the United States. In 2019, CTS tested more than 10 million donor samples (75 percent of the blood supply in the United States) at six high-volume lab facilities. CTS is owned by three of the leading U.S. blood service providers: American Red Cross, OneBlood, and Vitalant.

CTS History
In January 2010, CTS was incorporated as a nonprofit organization owned by Vitalant and OneBlood (formerly Florida Blood Services) with three labs located in Dallas, Texas; Phoenix, Arizona; and Tampa, Florida. At that time, CTS was testing 4.3 million blood donations or about 25 percent of the U.S. blood supply.

In January 2014, CTS embraced a company-wide operational excellence initiative designed to change the organization’s culture in order to enhance its operations and its service. As a result of this initiative, CTS teams significantly improved performance in reporting test results on time and increased efficiency by more than 10 percent.

In January 2018, CTS merged with three Red Cross testing labs located in Charlotte, North Carolina; Portland, Oregon; and St. Louis, Missouri. They all became CTS labs. This brought the total number of blood testing facilities operated by CTS to six.

The Need to Improve
Continuous improvement (CI) efforts at CTS essentially began in late 2013. Due to the need to stretch its resources further, CTS leaders began looking for ways to refresh the organization’s problem-solving methods and training. The executives were open to trying something new beyond the Six Sigma training they had previously done. 

“Our Six Sigma and other improvement efforts weren’t impacting our culture,” said COO Gene Robertson. “And at the time we didn’t understand why.”

CTS leaders wanted a new initiative that would make continuous improvement a big part of their organization’s culture. What they created became known as the Operational Excellence (OE) initiative, based on the Shingo Model™ and its ten Guiding Principles.
“We didn’t just wake up to this way of thinking,” said Joanne Voordeckers, vice president of enterprise excellence. “Like so many in the continuous improvement arena, I’d learned from those who came before me and certainly from my own attempts to introduce this employee-centric problem-solving culture at other organizations. I’d attended Shingo Conferences for years prior to joining Vitalant and, later, CTS. It’s the learning and networking gained from participating in those types of events and educational sessions that inspired me to collaborate with Gene Robertson, our COO, in introducing the Shingo Model and Operational Excellence initiative to CTS. Unlike so many other organizations, CTS was ready to hear the message.”

Continuous Improvement at CTS Before the Merger
In January 2014, CTS executives gathered the senior leadership team for the official kick-off of its OE journey, creating the future-state vision for key leaders. They incorporated basic Lean concepts and the Shingo Model into the training. They also established their OE “elevator speech” so that all leaders were delivering the same messaging about OE: “Operational Excellence is a journey of continuous improvement where all of us actively pursue perfection in everything we do, every day.”

Executives and Managers Trained First
The plan was to deploy OE training throughout all three facilities. In order to facilitate the changes needed, training needed to be delivered in short sessions so managers and team members could start applying what they learned immediately. These first few critical months focused on topics of leadership in OE: the Shingo Model and the 10 Guiding Principles, basic Lean principles, team huddles, and what it means to be an OE leader. Leaders read the book, On the Mend, by Dr. John Toussaint to understand the kind of impact an OE journey could have in a healthcare environment. 

Introducing Daily Huddles and OE Thinking
The highest-level operational leaders modeled OE behaviors and initiated daily huddles. The daily huddles cascaded to managers, supervisors, and natural workgroups over the following six months. Still new to operational excellence concepts, CTS was learning and experimenting with new ideas. Perhaps most important among these ideas was that employees needed to become problem solvers and that the person closest to the work was best suited to improve it. Employees were the ones who raised problems, issues, and opportunities during the huddles, and they were also the ones who implemented solutions.

“We thought we were doing well before we started our OE journey, but once we got going, we realized we had a long way to go,” said Sigrid Francisco, production coordinator at the Tampa lab.

For instance, it took some time to determine what a team’s daily huddle should look like. Leaders had to engage each team in the process of identifying and solving problems that kept them from hitting their performance targets. Once daily huddles began to be the norm for all internal teams, the OE team took the concept a step further by initiating weekly huddles with each of CTS’s vendors. These huddles soon led to increased vendor responsiveness and improved performance at CTS. 

As is typical of any organization working to change its culture to one of continuous improvement, employees at CTS viewed the OE initiatives as extra work. This perception was followed by feelings of insecurity, such as:
• I won’t have enough time to do all that is expected of me now.
• I will be evaluated against criteria I don’t fully understand.
• My quality of life will decrease because I feel more stress about work.

It took time to help employees understand that the intent was not to increase workload but simply to change the nature of the work being done. Michael Martyn, author of Own the Gap (SISU Press, 2012), succinctly stated this concept when he said, “Improving the work is the work.”
CTS teams found that OE is not just about training or huddles, which are some of the tools of improvement, OE is about delivering results. By the end of 2014, the organization achieved a new record of greater than 92 percent for Test Results Reported on Time, its primary performance indicator of customer service to its healthcare partners. Improvement efforts continued during 2015 and 2016 even as the organization stretched to handle higher volume and new testing to deal with the Zika virus. 

To add more accountability to its OE initiative, CTS executives decided in early 2016 to find six internal team members to volunteer for some add-on OE duties. They would be Operational Excellence Practitioners (OEPs) and two would be assigned to each of the three labs. Each OEP agreed to shift some of his or her workload in order to take on the challenge of leading OE projects at their respective facility. Each OEP was trained in Lean Six Sigma at the yellow belt level and received training in communication and influencing skills. The OEPs were quick to become effective, identifying both local and systemic issues with the organization’s OE program and escalating larger concerns to leadership, when appropriate.
By the end of 2016, the director of operations at each of the three labs had embraced operational excellence duties as their own and not just something done by the OE team. Enthusiasm for OE had also spread to many of the frontline team members. To keep the momentum going, in 2017 CTS leaders initiated the Glowing Embers program. This program introduced optional brown bag lunches with training on the eight wastes, visual management, and many other topics. About 60 people participated.

CTS Merges with the American Red Cross Testing Labs
The announcement of the merger with the American Red Cross came in July 2017. CTS would merge with the national testing labs of the American Red Cross, doubling the number of CTS labs to six and increasing the number of CTS employees to nearly 800. The re-capitalization of the company was completed on January 1, 2018, with the parent companies being American Red Cross, Vitalant, and OneBlood. CTS added the three Red Cross labs located in Charlotte, Portland, and St. Louis to its existing labs in Phoenix, Dallas, and Tampa. The merger was intended to gain operational efficiencies and reduce vendor costs.

At the time of the merger, the Red Cross, which had been providing life-saving services and programs for nearly 130 years (established in 1881), had reduced the number of its national testing laboratories from nine down to five (2005) and then down to three (2014). Despite these reductions, employees at the former Red Cross labs were resilient and committed to the mission of the organization. Many had long-standing tenure of 20 to 30-plus years. 

On January 1, 2018, with the stroke of a pen, over 300 people were no longer American Red Cross employees. Creative Testing Solutions, a company of which most Red Cross employees had never heard, now replaced American Red Cross on their name badges. The three former Red Cross labs were nicknamed the “New Labs” for ease of reference during the integration.

Challenges of the Merger
COO Gene Robertson compared the two sets of labs before the merger. He said, “Perhaps the biggest difference between the CTS labs and the Red Cross labs was that the Red Cross labs had been focused entirely on internal customers [other Red Cross divisions] while the CTS labs focused on external customers who had a choice of where they got their blood testing done.” Employees in the new labs had to shift their thinking about customers.

“Another early challenge we faced was the employees in the new labs losing the brand recognition of American Red Cross. It was hard for those team members to lose that very well-known brand that was a source of pride for them,” said Robertson. “We did our best to be respectful of that.”
Many team members at each lab felt that their team was different from the teams at the other labs and they were apprehensive at having to adopt new practices they might not understand. One of the earliest challenges was to help these team members understand that their teams were not nearly as dissimilar to the other teams as they thought. 

The New Labs were structured quite differently from the Original Labs. The New Labs had centralized their HR, IT, QA, and training departments several years before the merger. While there were no redundant positions to reduce in the integration, this increased the integration complexity and number of transition points. The centralized structure of the New Labs enabled some good standardization, but the way responsibilities were divided created a culture quite different from that of the Original Labs. 

At the Original Labs, minimal centralized resources existed in HR, IT, and QA. CTS had not established a formal training/education department for leadership or technical staff. The Original Labs also did not have a testing support function and they relied heavily on operations managers/directors to perform documentation and other administrative functions. 

While the New Labs certainly had their strengths, those strengths were in different areas from the Original Labs.
Dustin Schodt, director of operational excellence, said of the New Labs, “Their leadership was leaner and had been there many years. They also had a lot of attention to detail in their SOPs. They had great training documentation; even more so than the Original Labs. They also had a separate group dedicated to maintaining equipment.” Some of these strengths needed to be carried over into the Original Labs as part of the integration.
Even though the three Original Labs collaborated on changes and were standardized in some areas, each had a significant degree of operational autonomy. Many SOPs and job aids were customized to be lab-specific, and the middle-management structures were not consistent. These differences were not seen as shortcomings at the time of the merger because, while a significant degree of autonomy existed, they were unified by a common purpose and they all embraced operational excellence. After the merger, it became clear that these methods were not scalable and not sustainable. 

Structurally and culturally, it appeared that all the labs—both new and original—would have to undergo significant changes in order to become truly integrated. Additionally, CTS faced other merger-related infrastructure challenges. The most significant of these were that they needed to integrate data networks, quality systems, HR systems, training systems, and document management systems. Each of these changes would heavily impact frontline team members and management teams at all labs.

Beginning the Transition
The Operational Excellence leaders of the merger started by asking for volunteers from the New Labs to be OEPs. They also began to require all teams at the New Labs to increase the frequency of their team huddles from every two weeks to daily, which would begin to bring them into line with the Original Labs’ huddles. The lab in St. Louis had been holding 15-minute informational huddles three times a day, so there at least, daily huddles were easy. 

“The culture was very different in the New Labs in that they weren’t used to having their ideas heard and acted upon,” said Josh Moon, a member of the team who traveled to the New Labs to help with implementing a CTS-wide software system. “Once people realized it wasn’t just lip service, there was a lot of excitement and a flood of ideas.” 

Shingo Insight™ Assessment
Less than three months after formalizing the merger of the two sets of labs, CTS engaged the Shingo Institute to conduct the Shingo Insight assessment. CTS leaders hoped that this organizational behavior assessment would reveal the cultural differences between the New Labs and the Original Labs. The intent was also to create a baseline to determine the degree to which CTS employees observed that the behaviors of its executives, managers, and team members were aligned with the principles of the Shingo Model. They wanted to know the state of the Original Labs’ culture after four years on the OE journey and what the culture was like at the New Labs. This was possible using Shingo Insight because, while results are reported for the organization as a whole, they can also be divided by facility or department. 

Shingo Insight Findings
All employees were asked to participate in the survey. Participants are assured anonymity so they can feel safe to answer honestly. The participation rate was over 80 percent. The Cultural Enablers dimension (with principles Respect Every Individual and Lead with Humility) was identified as the biggest opportunity for improvement. This was also the dimension that indicated the largest disparity in opinions between executives, managers, and team members. Many employees from the New Labs selected a “Don’t Know” response to the questions. Those who provided a score revealed that the difference between the two cultures was not as large as expected. This information was encouraging.
Interestingly, the lowest score from each lab was either, “My group makes personal development a priority,” or, “My group invests time and energy developing the potential others.” This was disappointing at first glance. Employees at all labs were, and are, highly educated and motivated to learn more. They had participated in consistent training classes such as Speed of Trust, Crucial Conversations, and Operational Excellence. This result brought into sharp relief the fact that no system existed to support employee development. There was an absence of development-related KPIs or KBIs and no requirement for individual development plans. “Getting the work done” to support the life-saving mission was always the priority. Development had been little more than a checkbox exercise. 

Contrasted against the safety scores and systems, the revelation of leveraging systems became a “lightbulb” moment for the CTS team. CTS leadership scored themselves the lowest in assessment questions related to the principles Think Systemically and Embrace Scientific Thinking. Further examination made it clear that while CTS had many key elements present for strategy deployment, management measures, continuous improvement, development, and enterprise alignment, no true system existed. The essential foundations of a true system, including standard work, reports, feedback, scheduling, and improvement logs, were missing or only partially constructed.

The Shingo Insight assessment results provided a much better understanding of the components of each guiding principle of the Shingo Model and how existing systems were driving behaviors, sometimes in unintended directions.

The natural assumption was that the two organizations, with two very different paths, would be in two completely different places. The intent was to find the gaps between Original Labs and New Labs. But the results showed surprising commonality in attitudes and behaviors across all six labs. Leaders were surprised to find that there were still many improvements needed in both sets of labs. As the assessment is not prescriptive, work immediately began to identify which systems needed the most attention in order to affect the behaviors CTS sought to improve, while at the same time integrating the two sets of labs.

With the feedback from Shingo Insight in hand, CTS took a systems-based approach to acting on the results of the assessment. This approach was derived from the Shingo Institute’s Three Insights of Organizational Excellence, specifically Insight 2, which states that purpose and systems drive behavior.
Insight 1: Ideal Results Require Ideal Behaviors
Insight 2: Purpose and Systems Drive Behavior
Insight 3: Principles Inform Ideal Behavior

Post-Assessment Strategies
CTS executives knew this merger was breaking new ground, where the owners, who are fierce competitors, became collaborators for the purpose of improved efficiencies in the testing aspects of the business. At one of the first joint board meetings, the executive team emerged with a simple, powerful vision statement for the 2018 strategic plan: ONE CTS. They moved quickly, with the focus on integrating the labs, aligning work efforts, and merging necessary software systems. Each lab threw a kickoff party within weeks of the official merger. The theme for each party was “One Team. One Mission. One CTS.”

Incentive Metrics
ONE CTS incentive metrics were rolled out immediately after the merger was announced. The metrics were tied to a financial award that varied depending on the team member’s level within the organization. Each of the six labs had their own goals established for turnaround time (TAT), productivity, and net margin. Daily huddles occurred at all levels focused on TAT while productivity and net margin were reviewed at the monthly senior leadership meeting. The director of operations at each lab was asked to develop an A3 for any “red” on their metrics. However, the executive team never wavered in its commitment to ONE CTS. This meant that while each lab had its own performance measures, CTS would ultimately be evaluated on the aggregate result of TAT, productivity, and net margin. This decision reinforced the culture of teamwork at CTS by opening the door for collaboration, resource sharing, and information sharing while ensuring visibility and accountability at the local level. 

Huddles and Kaizens
One of the highest priorities in 2018 was to roll out Operational Excellence Leader training in the New Labs. The vice president of enterprise excellence and director of operational excellence delivered the training at each site, which focused on the Shingo Model, implementing daily huddles, and Kaizen Reports, which were one-page summaries of an improvement that included before and after photos. 

Cory Jones, an OEP at the Tampa lab who was instrumental in onboarding the New Labs, said, “Having OEPs at each lab gave our CI efforts ‘boots on the ground’ for talking about and implementing the Shingo Guiding Principles. It was an important factor to our success.”

The kaizen reports are displayed in a public hallway for all to see in each lab. They became an important element in onboarding the New Labs because they were small, visual examples of the kinds of improvements to be made on a day-to-day basis by the employees themselves. It was the beginning of shifting the cultures at the New Labs toward continuous improvement. While the New Labs had been making less-formal improvements before the merger, they had to be sold on why formalizing the reports was important. It was an important step toward building the CI culture at the New Labs because the reports showed that the input of team members really mattered. Improvements were made public on the kaizen wall and shared across other labs for possible implementation. 

This simple practice led to more than 140 kaizen reports documenting improvements in St. Louis alone (from May 2018 thru April 2019), and more than 600 kaizen reports across all of CTS in 2018. This happened gradually at first but then increased dramatically. Every week in the OEP meeting, each lab’s OEP would report on how many kaizens were documented the previous week and set a goal for themselves for the following week. Every documented kaizen was shared with all OEPs as well as with the senior leadership team. This led to several kaizens being adopted or enhanced at other labs. These key behaviors served as artifacts to show that ONE CTS was beginning to take hold. 

Directors of operations from each lab began to include the kaizen reports in their presentations to company executives. In this way, OE became a part of the directors’ jobs, not just something the OE team was doing. It became part of their standard work. 

CTS operates in a highly regulated environment. Multiple internal and external audits are performed in every lab, every year. It can be a daunting challenge to generate positive process improvement in an environment where mistakes can violate federal and industry regulations. Focusing each Kaizen Report on “non-SOP” efforts proved to be the difference maker. Most of the Kaizen Reports were related to eliminating waste, visual management, and 5S. The priority was to gain momentum by recognizing every positive effort. Next was to establish a weekly cadence to report on the progress and keep the momentum going. They also established stakeholder teams, a forum for front-line clinical lab specialists to collaborate on these improvements.

Stakeholder Teams
Stakeholder teams were established for each specialized area of the labs, and the composition of each team was given a great deal of consideration. Each stakeholder team was led by a different director of operations, facilitated by a process excellence specialist, and attended by QA as well as front-line subject matter experts from each of the six labs. They held 60-minute meetings every other week and the agenda focused on implementation of improvement ideas across all labs. Often, when kaizens passed from one lab to the next, they were not only implemented but improved upon as well. One example saw the Phoenix lab produce a kaizen, the Dallas lab improve upon it, and the Phoenix lab return to it to further improve their original kaizen. These early victories and behaviors were shared across the organization and highlighted at the senior leadership meeting. 

Ana Alsina, technical trainer at the Dallas lab, said, “The stakeholder teams are one of the best things we’ve done for continuous improvement at CTS.”

Support Resources
The executive team had made it a point to dedicate strategic resources toward the integration effort prior to the merger being formalized. Two directors of integration and a VP of enterprise excellence who had oversight of process excellence and technical training were key in supporting organizational improvement initiatives. This degree of executive-level commitment continued throughout the merger and beyond. 

Continuous Learning Applied
The director of operational excellence and the VP of enterprise excellence were engaged in learning and then teaching Shingo principles to CTS teams. In late 2018, they began to pursue a systems approach to improvement based on their learning from multiple Shingo workshops, the 2018 Shingo Conference, and the Shingo Insight assessment performed in 2018. While huddles and kaizens were a great start, they knew that an emphasis on leading measures (key behavioral indicators, or KBIs) would be required to advance the organization to the next level of excellence.

Lessons Learned
Early in the merger everyone felt some apprehension, which is to be expected with such a big change. The New Labs had a different organizational chart as well as cultural differences. But when CTS executives traveled to the New Labs, they were surprised and encouraged by what they found. While there were certainly differences, there were also striking similarities between the New Labs and the Original Labs. The workforce in the New Labs was highly intelligent and educated, just as in the Original Labs. The work being done was nearly identical in many ways. The team members were highly engaged and had the same basic objective of saving lives. After spending time to understand the workflow, the teams from the Original Labs realized that, while the terminology being used in the New Labs was different, the workflow and supply chain were quite similar. This commonality became the pathway to early wins in the process of unifying the two sets of labs. 

Before the merger, the St. Louis lab had a turnover rate of 45 percent. After the merger, it dropped to below 10 percent. This was primarily due to an increased pay rate and significant safety/cosmetic updates to the building that followed. (Some employees received pay increases to bring them in line with the wages at the Original Labs.) Change leaders who went to the St. Louis lab speculated that the safety updates, even more than the wage increases, were the major factor in the drop in turnover because it told the employees of the New Labs that they were important to CTS. The same message was conveyed when CTS sent leaders and executives to assess the New Labs and talk to the team members. It was a strong signal to the New Labs team members that they mattered. 

When asked what he might do differently if he had to do such an integration again, COO Gene Robertson said, “I might take it at a slightly slower pace and be clearer and more transparent up front. I worry that parts of it felt to the New Labs like a takeover instead of the merger it was intended to be. We were very focused on keeping the costs of the merger down, so sometimes maybe we didn’t look closely enough at the way the New Labs were doing things to see if it might be better.”

Josh Moon echoed this sentiment when asked what he might do differently. “I would use even more redundancy in communication. We had trouble getting all the information all the way to the extremes of the company: night shifts, weekend shifts, etc. You have to communicate more than you think is necessary.”

Ongoing Challenges
Among the things that CTS team members and leaders mentioned when asked what challenges lay ahead in the near future, they said:
• Better cause mapping to help all labs
• Improved organizational design
• More robust training programs
• Building a strategic framework to operate on, including a documented five-year plan
• Better systems in place that will allow leaders to articulate leader roles, duties, etc.
• Reduced number of meetings
• Reduced number of goals on which to focus
• Even better standard work for huddles

Conclusion
By the end of 2019, all six labs had begun using the same laboratory information system, a major goal of the ONE CTS program for integration. The Operation Excellence initiative was also active at all labs.

In early 2020, Cory Jones of the Tampa lab said, “The lines between Original Labs and New Labs are rapidly blurring now. We will shortly all be using one set of SOPs and one computer system. Now we’re just working to make our culture consistent through all labs.”

Director of Operational Excellence Dustin Schodt said, “CTS was formed ten years ago. Now it’s essentially a new organization.” Certainly, CTS is new because of the merger, but also because of its embrace of the Shingo Model, its ten Guiding Principles and the spirit of the integration’s theme: “One Team, One Mission, One CTS.”
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