Something doesn’t add up.
By Michelle Jenck, M ed
Colleges and universities are going broke. Hospitals continue to struggle financially despite record healthcare spending. Public schools receive more funding per student than at any point in history, yet many districts still can’t meet basic learning outcomes. Retailers are closing stores because they are losing money, despite the price of eggs. Small businesses are squeezed from every direction, and families with good incomes are working harder but not getting ahead.
There is an ever-increasing amount of money flowing through these environments. Where is all the money going?
The obvious explanation is that everything costs more. Inflation certainly plays a role. So do labor shortages, regulation, insurance costs, debt, and any number of other factors. Those long-standing explanations all have merit, but they don’t explain the explosive effects or why the same pattern keeps emerging across sectors that have very little in common.
These head-scratchers are usually the point where I stop looking at individual factors and start looking at systems.
One thing I’ve learned from working with organizations and community coalitions is that systems rarely become simpler over time. They accumulate. New programs are added. New reporting requirements are mandated. New technology is either adopted to save money or required for better reporting of how money is being spent. New policies bring new job titles, more meetings and more trainings. More committees. New expectations. The majority of these changes are made with good intent to solve real problems.
Very few of the “new things” ever go away. New mandates are stacked on prior workflows designed to fulfill the old mandates. By the time you retool, there is yet another set of mandates requiring an entirely new operating paradigm.
Over time, the system becomes responsible for more than it was ever designed to perform.
Think about a public school. Teaching children is still its central mission, but schools are now expected to provide added meals, transportation, mental health services, behavioral support, technology, career readiness, after-school programming, safety planning, extensive reporting, and much more. None of those responsibilities are misplaced. These are real needs.
The same thing has happened in healthcare. Providing medical care is only one part of what a modern hospital does. Behind every patient encounter is an enormous infrastructure of billing, compliance, cybersecurity, electronic health records, accreditation, contracting, regulation and reporting. Every one of those functions serves a purpose and increases accountability. Together they require an extraordinary amount of coordination, which leads to more administrative functions, which diverts more money from providing patient care.
The pattern extends well beyond education and healthcare. Businesses face growing compliance requirements, rising insurance costs, expanding technology needs, increasing cybersecurity risks, and layer upon layer of administration. Families experience their own version of these challenges through housing, childcare, healthcare, taxes, subscriptions, prescriptions and debt. Different systems. Similar patterns.
It’s not just that these systems have become inefficient. It’s that they have become increasingly complex. And, complexity has a cost.
Every additional layer requires someone to coordinate it, maintain it, communicate it, measure it, improve it, and connect it to everything else. Eventually the system begins devoting more of its resources to sustaining itself than to the purpose for which it was originally created.
Money isn’t being flushed down the drain. Each individual expense is accounted for and generally defensible. In aggregate, however, those same expenses may be contributing to greater dysfunction. In many cases, those budget line items are non-negotiable, driven by government regulations that are often influenced by interest groups outside the systems they affect, or by America’s favorite pastime: fear of litigation.
The financial strain we’re seeing across society looks less like a series of isolated problems and more like a pattern. Healthcare isn’t failing for entirely different reasons than higher education. Schools aren’t struggling for entirely different reasons than local governments or small businesses. They may all be at the same threshold where complexity is growing faster than the system’s capacity to function within it.
That doesn’t mean the solution is indiscriminate cuts to personnel, programs or functions. It also doesn’t mean every layer is unnecessary. Many of them represent real progress.
It does suggest that we may have to work more collectively to address the problems caused by complexity. The government regulation that makes it twice as expensive to offer childcare at the community center, that causes the family to not be able to afford childcare, that requires that person to stay home instead of earn a paycheck, may have to be revisited for the downstream effects it is causing. Well-intended policies for isolated optimization often seem to contribute to systemic dysfunction.
So, where is the money going?
It is going toward attempts to solve isolated problems which do not, in fact, exist in isolation. They are part of much larger networks of complexity, which must be addressed holistically. Until we begin designing solutions with the whole system in mind, complexity will continue to outpace our ability to manage it.
In a world of black and white thinking, where quick-fix solutions are celebrated, it can be difficult to find leaders willing to step back and work across systems and levels of governance. That takes time and effort – and a lot of patience – but it will be worth every penny.
Thank you for your interest. Follow more of my work on Substack at The Tao te Mitchy – Subscribe here for more or go to PQ Initiative, and Divergent Ideas.
Photo by Luke Jones on Unsplash
