Directional
Strategies Report
This assignment is the second
component of your course project. Read the Directional Strategies Report
Scoring Guide to learn how you will be graded on this assignment. Review the
Balanced Scorecard Analysis and Strategic Plan course project description to
see how this assignment fits into your course project.
Instructions
For this assignment, complete the
following:
Review the mission, vision, and values statements of
your health care organization.Evaluate how well each statement addresses the
components defined in Chapter 5, “Directional Strategies,” from
the course text, Strategic Management of Health Care Organizations.Assess the quality of the organization’s directional
strategy, including its vision, mission, and values.Include the changes you would make to ensure a
foundation necessary for the current structure and strategies of the
organization.
Requirements
Length of paper:
3–5 double-spaced, typed pages.APA formatting:
Resources and citations are formatted according to current APA style and
formatting.Resources:
Use evidence from the literature to support your recommendations.Number of resources:
You are required to use a minimum of 10 peer-reviewed research resources
throughout your compiled course project.The uploaded file is Chapter 5 that is needed to assist in the process of this assignment.Directional Strategies
Mission, vision, values, and strategic goals are appropriately called directional strategies
because they guide strategists when they make key organizational decisions. The mission
attempts to capture the organization’s distinctive purpose or reason for being. The vision
creates a mental image of what leaders want the organization to achieve when it is
accomplishing its purpose or mission. It is the organization’s hope for the future. Values are
the principles that are held dear by members of the organization. These are guiding principles
the managers and employees will not compromise while they are in the process of achieving
the mission and pursuing the vision and strategic goals. Strategic goals are those overarching
end results that the organization pursues to accomplish its mission and achieve its vision.
Unfortunately, there is rarely a clear distinction among the concepts and terms actually used
in these statements – especially in the mission, vision, and value statements. Studies of actual
statements reveal that even though the statements are clearly labeled there is a wide variety
of terms used to express the ideas contained in them.1
Organizational Purpose and Mission
Chester Barnard, in The Functions of the Executive, stated that only three things are needed
to have an organization: (1) communication, (2) a willingness to serve, and (3) a common
purpose (for more detail, see the Health Care Manager’s Bookshelf at the end of this chapter).
The inculcation of the “belief in the real existence of a common purpose” is, according to
Barnard, “the essential executive function.”2 Purpose, among other things, helps managers
make sense of the environment. When the purpose of an organization is clearly understood,
the complexity of the environment can be reduced and organized in a way that can be
analyzed in light of the goals the organization wishes to achieve. The complex environment
is no longer a “mere mess of things.”3 As a statement of purpose, the mission plays an
important role in focusing strategists’ attention on relevant aspects of the environment.
For example, if the CEO of a long-term care facility simultaneously considers all the
turbulence in the organization’s environment, the environment will appear confusing and
overwhelming. Can anyone effectively track all of the changes taking place in biotechnology,
cultural values, demographics, and politics? However, if the CEO focuses on only those
aspects of the environment that relate to the mission of the long-term care organization, the
task becomes more manageable.
The common purpose (mission) to which Barnard referred is the reason that organizations
exist. Some organizations exist to make money for the owners; some are founded to provide
health care to indigent patients; others are started to deliver health services in as convenient a
way as possible or to provide the care needed by groups of individuals who belong to the
same managed care plan.
Mission: A Statement of Distinctiveness
In the hierarchy of goals (end results and organizational plans to accomplish them), the
mission captures the organization’s distinctive character. Although a well-conceived mission
is general, it is more concrete than vision. An organizational mission is not an expression of
hope. On the contrary, it is an attempt to capture the essence of the organizational purpose
and commit it to writing. DaVita Inc., a Fortune 500 company, is a leading provider of
kidney care. In its mission statement, DaVita states that the company is committed “To be
the provider, partner, and employer of choice.”4 In this case DaVita chooses to emphasize the
way it does business rather than the services it provides. The company attempts to
differentiate itself from other kidney care companies by focusing on quality outcomes,
building a diverse community as a provider of services, partnering with other organizations,
and becoming a good place to work for its almost 37,000 “teammates.”
(Ginter 167-169)
Source: University of Texas M. D. Anderson Cancer Center.
An organizational mission is a broadly defined and enduring statement of purpose that
distinguishes a health care organization from other organizations of its type and identifies the
scope of its operations in product, service, and market (competitive) terms.5 The mission
statement of the University of Texas M. D. Anderson Cancer Center in Exhibit 5–1, for
example, distinguishes the center from other health care organizations in the service area by
its relationship with the University of Texas; its emphasis on a specific disease (cancer); and
its commitment to the integration of patient care, research, education, and prevention and its
intention to accomplish these through education at the undergraduate as well as graduate
levels. M. D. Anderson employs an effective logo on its website that states it is the M. D.
Anderson Cancer Center with a bold red line through the word “cancer,” thus emphasizing its
commitment to eliminating cancer. Although mission statements are relatively enduring, they
must be flexible in light of changing conditions. The changes facing academic medicine will
continue to impose pressures on specialized centers of excellence such as M. D. Anderson
because of the substantial costs involved in integrating patient care with the teaching and
research mission and the increasing reluctance of payers to reimburse for educational costs.
Mission statements are sometimes not the true “living documents” that are capable of
encouraging high performance. Studies of mission statements confirm that the full potential
of this directional strategy is rarely achieved.6 Often mission statements appear to be
obligated to make reference to specific stakeholder groups such as patients or communities
because of institutional pressures and refer to pressing social issues because of policy
decisions within the organization.7 To be effective, service delivery and support strategies
must be designed to contribute to mission accomplishment.
One study of hospital mission statements found that almost 85 percent of the respondents had
mission statements; however, some of the executives who completed the survey did not
perceive a high level of commitment to the statement by employees or that specific actions
were influenced very much by the mission.8 Another study of state-level departments of
public health indicated that more than 90 percent had formal, written mission statements.
Despite the frequency with which formal mission statements are encountered, a great deal of
confusion exists regarding their value and the influence that these statements actually have
on behavior within organizations. This confusion is unfortunate because the mission
statement is a crucially important part of strategic goal setting. It is the superordinate goal
that stands the test of time and assists top management in navigating through periods of
turbulence and change. It is, in other words, the “stake in the ground” that provides the
anchor for strategic planning. It must be emphasized, however, that mission statements, even
at their best, can never be substitutes for well-conceived and carefully formulated strategies.9
Moreover, a sense of mission is not a guarantee of success. As illustrated in Perspective 5–1,
a nice sounding mission statement is not enough. The organization has to adhere to the
mission and regularly review it to be sure that it remains relevant in changing times. When
the mission is carefully crafted, mission fulfillment influences a variety of key psychological
states related to employee motivation (e.g., employment engagement, organizational
identification, and so on).10 It has also been suggested that “mythopoetic leaders,” who use
the mission of the organization to anchor behaviors, can be instrumental in building robust
cultures that can lead to a competitive advantage.11
Mission statements remind managers in health care organizations to ask questions of
themselves and their colleagues. It is important to ask individuals throughout the
organization the following questions as the answers radically affect how the organization
performs. These questions include:
1.
Are we not doing some things now that we should be doing? A rehabilitative
medicine center, after analyzing the environment and studying its own referral patterns,
might determine that it should enter a joint venture with a group of surgeons to provide
outpatient surgery services. The rehabilitative medicine center, located in a professional
building adjacent to an acute care hospital, had simply referred patients requiring surgery to
the hospital. However, insurance company policies and patient preferences suggested that
the majority of surgeries could be performed on an outpatient basis.
2.
Are we doing some things now that we should not be doing? The rehabilitative
medicine center, after extensive analysis, concluded that it should divest its rehabilitative
equipment business and contract with medical and sports equipment suppliers for needed
services.
3.
Are we doing some things now that we should be doing, but in a different way?
Throughout its history the rehabilitative medicine center required patients to come to the
facility for services. For many patients, particularly those with serious injuries, travel to the
facility was difficult and often impossible. Recently, the center purchased a mobile trailer
with a fully equipped diagnostic and treatment facility that can transport services to local
high schools and industrial locations.12
An organization should carefully evaluate strategic decisions with the use of its mission
statement. When new opportunities are presented it can use the three key questions to
determine whether or not the new opportunity is consistent with its essential distinctiveness.
Moreover, these three questions are important guards against mission drift, which tempts
many health care organizations to go into businesses and programs that are not in line with
their stated mission.13 As an example, Express Scripts’ mission statement (see Exhibit 5–2)
provides guidance for its strategic leaders and 13,000 employees in determining whether or
not new opportunities should be pursued. To be consistent with the mission, opportunities
need to involve services or processes that make prescription drugs safer and more affordable
to the members of the health plans. Adherence to the mission has led the company to be an
industry leader – striving for the lowest net cost to provide better health and value at the
consumer level. The company notes that its generic fill rate leads the industry.
(Ginter 169-172)
PERSPECTIVE 5–1
Do Mission Statements Matter?
Prominent displays of mission statements in the elevator, on employees’ name badges, and
business cards are not enough to ensure that the message is taken to heart. Some managers
wonder why organizations spend so much time talking about mission statements when they
are often not taken seriously. Do organizations actually plan their future based on the
mission (directional strategy) or do they simply respond to changing conditions?
Undoubtedly, some mission statements are not very good. They may sound fine and even
have been crafted by an astute consultant or public relations firm; however, if they do not
speak the language of employees and stakeholders they will not have much influence on
behavior or performance. Organizations must think seriously about the future of their
industry and their unique role in capitalizing on the opportunities created by changing
times. This distinctiveness must then be captured in the mission statement.
Mission statements sometimes suffer from the following problems:

Mission statements are written solely for their public relations value.

Mission statements describe the purpose of all the organizations in the service
category.

Mission statements may have more time invested in their crafting than in their
implementation.
Mission statements, if they are to be useful, must state the purpose of the organization and
provide a good sense of what makes the organization different and what it is devoted to
accomplish. A mission statement should help the organization focus on its uniqueness.
Writing a mission statement is important; however, living it is more important. Whatever is
incorporated into the mission statement must be credible, realistic, attainable, and assist in
differentiating the organization from all its competitors.
Sources: Greg Kitzmiller, “Do Mission Statements Matter? Reviewing the
Importance of a Mission Statement and, More Importantly, Sticking to It,”Nutraceuticals
World 6, no. 10 (October 2003), p. 22; Tracy Turner, “Mission Statement Useful, Expert
Says ‘Companies Benefit by Defining, Acting on Their Goals’,” Knight Ridder Tribune
Business News (May 13, 2007), p. 1.
(Ginter 172)
Four important characteristics of effective mission statements are:
1.
Missions are broadly defined statements of purpose. Well-formulated mission
statements are written and communicated to those involved in doing the work of the
organization. They are broad but also, in a sense, specific. The St. Jude Medical mission
makes it clear that the company’s focus is on selected medical products and technologies
but at the same time outlines a number of ways the mission can be accomplished. That is,
mission statements should be general enough to allow for innovation and expansion into
new activities when advisable, yet narrow enough to provide direction.14
2.
Mission statements are enduring. The purpose, and consequently the mission, of
an organization does not change often and should be enduring. People are committed to
ideas and causes that remain relatively stable over time.
3.
Mission statements should underscore the uniqueness of the organization. Mission
statements distinguish the organization from all others of its type. The important
uniqueness for St. Jude Medical is the focus on selected medical technologies, increased
control by those who treat cardiac, neurological, and chronic pain patients.
EXHIBIT 5–3 Mission Statement of St. Jude Medical
Source: St. Jude Medical.
4.
Mission statements should identify the scope of operations in terms of service and
market. It is important for the mission statement to specify what business the organization
is in (health care) and who it believes are the primary stakeholders. Note that St. Jude
Medical is specific in its commitment to physicians that use its products.
Although missions are enduring, this should not imply that the mission will never, or
should never, change. New technologies, demographic trends, and so on might be very
good reasons to rethink the mission of an organization. For example, a number of hospitals
have incorporated the desire to be an “independent provider of health care” in their mission
statement. In today’s managed-care-oriented health care environment, that aspect of
mission may need to be revisited. In some markets, alignment with managed care
organizations might become a necessity for survival and the mission statement should not
stand in the way.
These characteristics illustrate the essential properties of well-conceived and
communicated mission statements.15 They outline worthy ideals that are always in the
process of being achieved by strategic leaders in health care institutions. The mission
provides direction. Mission statements are not easy to write, but fortunately there is general
agreement on what they should include.
Components of Mission Statements
There is no single way to develop and write mission statements. Studies of Canadian notfor-profit hospitals indicate that they emphasize a variety of factors in their mission
statements.16 To define the distinctiveness of an organization, mission statements must
highlight those things that constitute uniqueness. Some of the more important components
of a mission are discussed and illustrated with the use of mission statements from a variety
of health care institutions.17
1.
Mission statements target customers and markets. Frequently the mission
statement provides evidence of the kind of customers or patients the organization seeks to
serve and the markets where it intends to compete. The mission statement of the Little
Clinic states that it will “offer America’s most convenient and accessible delivery of
affordable non-emergency health and wellness care for the whole family.” To this end the
clinic diagnoses and treats minor illnesses for patients 18 months of age (24 months in
Kentucky) and up with certified nurse practitioners or physician assistants in its 80
locations in select Kroger, Fry’s, and King Sooper stores in Ohio, Kentucky, Tennessee,
Arizona, Georgia, and Colorado. Exhibit 5–4 provides the mission statement of St. Jude
Children’s Research Hospital. This mission statement clearly states the target patients
served by this prestigious health care organization.
2.
Mission statements indicate the principal services delivered or products provided
by the organization. A specialized health care organization might highlight the special
services it provides in its mission statement. The mission statement of Alcon illustrates a
statement built around innovative primary services designed to enhance the quality of life
by helping people see better and hopefully one day to eliminate blindness (see Exhibit 5–
5).
(Ginter 172-174)
EXHIBIT 5–6 Mission Statement of Aurora Health Care
Source: Aurora Health Care.
3.
Mission statements specify the geographical area within which the organization
intends to concentrate. This element is most frequently included when there is a local,
state, or regional aspect to the organization’s service delivery. Aurora Health System, for
example, specifically mentions that it is a Wisconsin not-for-profit health care system in
its mission statement (see Exhibit 5–6).
4.
Mission statements identify the organization’s philosophy. Frequently the mission
of an organization will include statements about unique beliefs, values, aspirations, and
priorities. Beliefs and values are often included in mission statements for health facilities
operated by religious denominations. The mission statement of Resurrection Health Care
in Exhibit 5–7 illustrates the faith-based philosophy of this health services organization.
5.
Mission statements include confirmation of the organization’s preferred selfimage. The manner in which a health care organization views itself may constitute a
uniqueness that should be included in the mission. The mission statement of Unitedhealth
Group emphasizes the organization’s desire to help people live happier lives and make
better health care decisions (see Exhibit 5–8).
EXHIBIT 5–7 Mission Statement of Resurrection Health
Care
Source: Resurrection Health Care.
EXHIBIT 5–8 Mission Statement of Unitedhealth Group
Source: UnitedHealth Group.
6.
Mission statements specify the organization’s desired public image. This image
customarily manifests itself in statements such as the organization’s desire to be a “good
citizen” or a leader in the communities where its operations are located or a similar
concern. However, organizations may have a unique approach or focus that they want to
communicate to the public. The mission statement of Universal Health Services, Inc.
clarifies the organization’s commitment to its multiple stakeholders (see Exhibit 5–9).
Not every one of the characteristics can or should be included in the mission statement.
Any particular statement will likely include one or several of these characteristics but
seldom will all of the components be included. The organization must decide which of
these, or some other characteristics, really account for its distinctiveness and emphasize
them in the mission statement. Interestingly, studies have found that higher-performing
organizations generally have more comprehensive mission statements. Moreover, it seems
that components such as organizational philosophy, self-concept, and desired public image
were particularly associated with higher-performing organizations in the sample studied.18
EXHIBIT 5–9
Services, Inc.
Mission Statement of Universal Health
Source: Universal Health Services, Inc.
Building a Mission Statement
For a mission statement to be useful there has to be a leader who begins the discussion
concerning the need to examine or re-examine the organization’s mission to clearly state its
purpose. This statement helps all employees focus their efforts on the most important
priorities. One process that has been useful in building mission statements is to convene a
group of interested employees (administrative and non-administrative) to begin the task of
developing or rethinking a mission statement. This group should be composed of
individuals who understand the issues facing the health care industry as well as the
strengths and weaknesses of the organization.
Prior to actually writing the mission statement, a series of meetings should be held to
ensure that there is a desire for a well-understood and widely communicated statement of
organizational distinctiveness. Once commitment has been established, assessments should
be made of what makes the organization successful from the perspectives of employees and
other key stakeholders. Further, consideration should be given to what these perceptions of
success would likely be in the future.
After the group has been given time to think about the organization, its distinctiveness in its
environment, and the likely future it will face, the group may meet in a planning retreat.
Often it is useful to remove the participants from the office, phones, and beepers to have
the opportunity to truly focus on the organization’s mission. To stimulate strategic thinking,
each person should be asked to reflect on the mission statement components listed in
Exhibit 5–10. Recognizing that some members may not have been previously involved in
writing a mission statement, this exhibit was developed to encourage initial thought without
introducing too much structure into the process. Group members should be asked to present
key words relative to each of the components. The key words should be recorded and
eventually used as the raw material for the mission statement. Participants are encouraged
to generate the key words through a series of fill-in-the-blank statements listed under each
mission statement component.
After discussion and fine-tuning the language, a draft of the mission statement can be
developed. The draft should be refined and rewritten by the group until there is consensus
on the wording and meaning of the mission statement. Once the group is satisfied with the
statement, it should be circulated among key individuals to gain their input and eventually
their support for the mission. Moreover, as illustrated by Perspective 5–2, the mission must
be continuously re-examined to ensure it remains relevant.
Top-Level Leadership: A Must for Mission Development
For a mission statement to be a living document, employees must develop a sense of
ownership and commitment to the mission of the organization. For this reason, employees
should be involved in the development and communication of the mission. However, toplevel leadership must be committed if the process is to actually begin. Top-level
management must stay engaged in the mission development process but not dominate it.
Board rooms and executive suites can be places where great ideas for mission development
originate but people at all levels must be involved if commitment to the mission is to be
obtained.19
(Ginter 174-178)
Developing a mission statement is a challenging task. Frequently, attempts are made to
formulate “blue sky” statements of environmental and competitive constraints and little
more. For example, it is of little real value to state that a health care organization is devoted
to being a good citizen in the community and to paying wages and benefits comparable to
those of other organizations in the area. Realistically, the organization must be a good
citizen and, if it wants employees, its wages and benefits must be competitive.
The role of the chief executive officer in formulating the mission should not be
underestimated. Mission statement development is not a task that should be delegated to a
planning staff. The CEO, the leadership team, and other key individuals who will be
instrumental in accomplishing the mission should have input into the document.
Although the process appears to be simple, the actual work of writing a mission statement
is time consuming and complex, with many “drafts” before the final document is produced.
The strategic thinking map (Exhibit 5–10) is a useful aid to thinking about clients, services,
and domain; however, the development and communication of a well-conceived mission
statement requires use of the compass (leadership) as well. Although developing a mission
statement is not an easy task, it is a necessary one. Missions must be relevant not only to
the present but also to the future.
PERSPECTIVE 5–2
Redefining the Organization’s Purpose
Threats often create opportunities and sometimes the greater the threat, the greater the
opportunity. Some people believe that scandals, although a threat to the competitive
enterprise system, create an opportunity to carefully re-evaluate and redefine the purpose
of the organization. An important competitive advantage may be gained for those who
redefine themselves and become more responsive to the environment. Self-reform is
almost certain to effect more fundamental change than externally imposed regulations.
The agenda for self-reform consists of five important actions:
1.
Develop consensus on a revised statement of purpose and values. The terms
“profit making” and “creating shareholder value” do not reflect the reality of today’s
environment. The function of the profit-oriented concern is economic but its purpose is
social. Profit-oriented firms in health care or any other industry exist at the discretion of
society and must serve society’s needs.
2.
Clarify the true role of profit. Organizations must have profits (revenues in excess
of expenses). If they do not generate a profit, they cease to exist (over the long run).
Profit is a means, a motivator, and a measure of performance. Moreover, profit is an
important incentive for entrepreneurial action and innovation. It provides the reward for
taking the risks that are critical to success.
3.
Articulate and communicate the distinctions between the old purpose, values, and
behaviors, and the new. Once the new mission and values are crafted, they require a
cheerleader and advocate to emphasize the importance of the value shift. Strategic
leaders must use every opportunity to explain and, if necessary, defend the importance
of the culture and value shifts.
4.
Set a strong personal example. A culture balances the interests of employees,
customers, the community, and other relevant stakeholders; it also requires that leaders
embody in action, as well as in pronouncements, the qualities of the new culture.
5.
Revise the management measurement and reward system. If the purpose is
defined broadly and responsibly, measures have to be refined and utilized. The triplebottom-line approach – focusing on economic performance as well as on social and
environmental outcomes – is a step in the right direction.
George Merck, founder of the pharmaceutical giant, stated, “We try never to forget that
medicine is for people. It is not for profits. The profits follow, and we have to remember
that they have never failed to appear. The better we have remembered that, the larger they
have been.”
Source: Ian Wilson, “The Agenda for Redefining Corporate Purpose: Five Key
Executive Actions,”Strategy & Leadership 32, no. 1 (2004), pp. 21–27.
Vision: Hope for the Future
The mission is developed from the needs of all the stakeholders – groups who have a vested
interest in the success and survival of the organization. Vision, on the other hand, is an
expression of hope. It is a description of the organization when it is fulfilling its purpose.20
Vision involves creating compelling images of the future and produces a picture of what
could be and, more important, what a leader wants the future to be.21
Effective visions possess four important attributes: idealism, uniqueness, future orientation,
and imagery.22 Visions are about ideals, standards, and desired future states. The focus on
ideals encourages everyone in the organization to think about possibilities. It is dynamic and
collaborative, a process of articulating what the members of an organization want to create.23
Vision communicates what the organization could be if everyone worked diligently to realize
the potential. Health care organizations need leaders who are forward looking. Effective
visions are statements of destination that provide a compass heading to where the
organization’s leadership collectively wants to go. Finally, visions are built on images of the
future. When people are asked to describe a desirable place or thing, they almost always do
so in terms of images. Rarely do they focus on tangible outcomes. Images motivate people to
pursue the seemingly impossible.
Origins of Vision
Health care leaders acquire vision from an appreciation of the history of the organization, a
perception of the opportunities present in the environment, and an understanding of the
strategic capacity of the organization to take advantage of these opportunities. All these
factors work together to form an organization’s hope for the future.
History and Vision
An organization’s history is comprised of a variety of events and activities that affect the
development of vision. For example, the founder’s philosophy might be important. The
Mayo Clinic in Rochester, Minnesota, is an organization that is rich in history and
tradition. Children’s books tell successive generations how a destructive tornado in
Rochester one night caused the Sisters of Saint Francis to aid the elder Dr. Mayo in
caring for storm victims and encouraged his two sons, Will and Charlie, to follow in their
father’s footsteps. Mayo Clinic’s website presents the story as well in rich and passionate
terms. The result is a world-famous research, teaching, and patient care facility that
continues to thrive and expand far beyond the boundaries of Minnesota. Anyone who
hopes to succeed at the Mayo Clinic and understand its unique vision must be aware of
the founders and the past. The history of an organization is instrumental in the formation
of its image and its vision or hope for what it is capable of becoming.24
Vision and the Environment
Another important determinant of an organization’s vision is the leader’s view of the
environment. Some organizations have negative experiences with environmental forces
such as the government. Many private physicians and health care managers look at
government attempts to set rates, regulate quality, and so on as unnecessary and
unwarranted interventions in private enterprise. When this view is adopted, adversaries
are seen in the environment and the vision becomes altered accordingly.25 The vision is
compromised and lack of accomplishment is blamed on these external forces. Sometimes
the past experiences of organizations and the uncontrollable nature of environmental
forces cause managers to either over- or under-react.
The vision must bear a relevant relationship to the larger system in that it must be
sensitive to the changes taking place in the general and health care environments. As
illustrated in Perspective 5–3, future trends of health systems are key considerations in
formulating the health care strategist’s vision.
Vision and Internal Capacity
A leader’s vision is related to the perceived strengths and weaknesses of the organization.
The challenge to reconcile vision with internal capacity is illustrated by Senge’s
integrative principle of creative tension.26 Creative tension comes into play when leaders
develop a view of where they want to be in the future (vision) and tell the truth about
where they are now. The current reality is heavily determined by the organization’s
present internal capacity and how this capacity relates to its aspirations.
Organizations deal with this creative tension in different ways. If the organization has
been successful in the past, it may be aggressive about the future and raise its current
aspirations in pursuit of the vision. If it has experienced failure, limited success, or
merely has a cautious philosophy, management may choose instead to revise and reduce
the vision to bring it more in line with current reality.
Leaders have visions; organizations gain and lose competitive advantage based on how
the vision fits the environment and the strategic capability of the organization to
capitalize on opportunities. However, developing a vision is “messy work,” and for this
reason it is necessary to examine more closely what organizational vision actually
means.27
Health Care Strategists as Pathfinders
The job of building a vision for an organization is frequently referred to as pathfinding.28
When the leader of a health care organization functions as a pathfinder, the focus is on the
long run. The goal of the pathfinder is to provide a vision, find the paths the organization
should pursue, and provide a clearly marked trail for those who will follow. As Senge
notes, pathfinders have an ability to create a natural energy for changing reality by “holding
a picture of what might be that is more important to people than what is.”29
(Ginter 178-181)
PERSPECTIVE 5–3 If You Want to Be a Visionary, Be
Sensitive to Trends
Formulating a vision requires one to be sensitive to trends. However, predicting the
future of health care is a risky business. Some major trends or changes predicted by
health care experts contacted by Hospitals & Health Networks are listed below. These
experts envision a health care future with larger, more integrated systems, more patientcentered care, new relationships between hospitals and physicians, and a shift of many
inpatient procedures to outpatient or home settings.
Financing the future. Paying for technological and procedural improvements will not be
cheap. But the investments will be worth the cost. The impact of potentially high-value
technologies on operating costs, staffing capacity, physician relations, infrastructure and
support requirements, and quality and safety will far outstrip the cost of capital
investments.
Fewer, larger, better systems. Larger organizations will likely be able to cope better with
future demands because of their resource base. Smaller systems are likely to find it more
difficult to attract needed capital. Larger organizations with stronger balance sheets will
be preferred by lenders and investors. Moreover, these larger systems could do a better
job of overhauling the currently fragmented delivery system.
Hospital–physician relationships. Reimbursement trends, technological changes, and
physician entrepreneurship are causing changes in hospital–physician relationships and
could even pose competitive threats to hospitals. A specific challenge is the extent to
which physicians set up large practices independent of hospitals and duplicate services
offered in the hospital. Some experts see physician competition for outpatient services as
a bigger threat than the creation of specialty hospitals.
Patient-centered. Health care organizations are paying more attention to the needs of
patients and their families, especially the elderly. This segment of the population is
becoming ever more important as the first of America’s baby boomers are reaching
retirement age. There are approximately 78 million baby boomers.
Cost and collaboration. According to the Centers for Medicare and Medicaid Services,
the cost of health insurance will increase about 6.4 percent annually for the next decade.
Cost containment will continue to be at the top of the list for politicians and policy
makers. Pressure from baby boomers, continuation of the cost squeeze, and increased
numbers of uninsured seem certain to be part of the health care future.
What does all this have to do with vision? Visions need to take into account the reality of
the health care environment and its evolution. Regardless of the type of health care
organization, leaders should formulate their vision based on a likely health care future.
Source: Dave Carpenter, “Visions of Health Care’s Future: Bigger, More PatientFocused Systems?”Hospitals & Health Networks 81, no. 5 (May 2007), pp. S4–S7.
Strategic leaders are the key to establishing a vision for an organization. A vision-led
organization is guided by a philosophy to which leaders are committed but has not yet
become obvious in the daily life of the organization. The vision-led approach hopes for
higher levels of performance that are inspiring although they cannot yet be achieved.30 A
primary role of management under this approach is to clarify goals and priorities and to
ensure that they are understood and accepted by employees.31 Individuals become engaged
in the organization when they see a clear line of sight between vision, performance
objectives, and personal contributions to the purpose of the organization.32
The role of the strategic leader, however, is more than pathfinding. As Barnard noted,
because executives are responsible for inculcating the purpose into every employee, the
leader must also be the keeper of the vision – a cheerleader who holds on to the vision even
when others lose hope. Employees want to believe that what they are doing is important,
and nothing convinces employees of the importance of their jobs more than a leader who
keeps the inspirational vision before them (especially when things are not going well).
Strategic leadership has traditionally focused on top management, particularly the CEO.
This individual is considered the person most responsible for scanning and influencing the
environment, developing adaptive strategies, and managing key constituencies.33
Unfortunately, the exclusive focus on the CEO’s role in strategic leadership has implied
that middle management has little or no involvement in determining the strategic direction
of the organization. Admittedly, the primary responsibility of middle management is
strategy implementation; however, certain strategic directions require middle-management
involvement. The increasing importance of quality as a strategic goal and middle
management’s role in keeping this goal before all employees is a good example.34 Quality
has become an important value to which employees at all levels can be committed; middle
managers are in the best position to encourage and reinforce this commitment.
Another important area in which middle management should be involved is in the
redefinition of organizational vision. Grand strategies and futuristic visions are important
for health care organizations. If the vision is to become meaningful to nurses, pharmacists,
medical laboratory technicians, and others, middle and first-line managers must take the
lead in helping to redefine the organizational vision in terms that are meaningful to
departments and work groups. Finally, with regard to building involvement and
commitment to service and quality, middle managers are in the best position to appeal to
the social and economic motives important to health care employees.
Characteristics of Effective Vision
If vision is based on hope, it is – in reality – a snapshot of the future that the health care
leader desires to create. It has been said that for an organizational vision to be successful it
must be clear, coherent, consistent, have communicative power, and be flexible.35
A clear vision is simple. Basic directions and commitments should be the driving forces of
a vision, not complex analysis beyond the understanding of most employees.36 A vision is
coherent when it “fits” with other statements, including the mission and values. It is
consistent when it is reflected in decision-making behavior throughout the organization.37
A vision “communicates” when it is shared and people believe in the importance of
cooperation in creating the future that managers, employees, and other stakeholders desire.
Finally, to be meaningful, a vision must be flexible. The future, by definition, is uncertain.
Therefore, an effective vision must remain open to change as the picture of the future
changes and as the strategic capabilities of the organization evolve over time.
According to Tom Peters, to effectively outline the future and facilitate the pursuit of
organizational and individual excellence, visions should possess certain characteristics:
1.
Visions should be inspiring, not merely quantitative goals to be achieved in the
next performance evaluation period. In fact, visions are rarely stated in quantitative
terms. They are, however, nothing less than revolutionary in character and in terms of
their potential impact on behavior. The vision of Tenet Healthcare, for example, states the
lofty vision to “redefine health care delivery.” It also speaks to the passion of Tenet’s
people and partners (Exhibit 5–11).
2.
Visions should be clear, challenging, and about excellence. There must be no
doubt in the manager’s mind about the importance of the vision. If the “keeper of the
vision” has doubts, those who follow will have even more. The vision statement of
Princeton HealthCare System provides a great deal of “specifics” in its guidance for
executive decision makers. It makes it clear the Princeton HealthCare is an integrated
system that is dedicated not only to responding to the lifelong needs of residents;
however, providing leadership in anticipating these needs (see Exhibit 5–12).
3.
Visions must make sense in the relevant community, be flexible, and stand the
test of time. If the vision is pragmatically irrelevant, it will not inspire high performance.
4.
Visions must be stable, but constantly challenged and changed when necessary.
The vision statement of Hebrew Health Care illustrates the manner in which a vision can
be formulated so as to provide focus but remain broad enough to allow for changing
conditions and developments (see Exhibit 5–13). Future advances in health care can
easily be accommodated with only minor changes in the vision statement.
(Ginter 181-184)
5.
Visions are beacons and controls when everything else seems up for grabs. A
vision is important to provide interested people with a sense of direction. A wellformulated vision statement guides decision making because it provides inspiration for
success in the future. More than three-quarters of a century ago, the founders of the
Cleveland Clinic Foundation set out to develop an institution where diverse specialists
would be able to think and act as a unit. This can only be realized when everyone
understands the vision and accepts the legitimacy of the direction it offers.
6.
Visions empower employees (the organization’s own people) first and then the
clients, patients, or others to be served. Because visions are about inspiration and
excellence, it is critical to recognize that employees are the ones who must be inspired
first. Employees must ultimately be inspired to achieve excellence. Many health care
organizations make a mistake by devoting resources to pre-service promotion programs
designed to enhance potential patients’ image of the organization only to disappoint them
when they arrive and are greeted by the same lack of service they experienced before the
advertising campaign. The vision statement of Optima Healthcare Insurance Services is
simple and to the point. It states that our vision is “To make a positive difference in
health care.” With proper orientation this simple vision statement can convey to
employees the importance of making a positive difference individually if the organization
is to achieve its vision of making a positive difference in health care.
7.
Visions prepare for the future while honoring the past. Although vision is the
hope an organization has for the future, it is important to always acknowledge and honor
a history of distinction and service. The University of Texas M. D. Anderson Cancer
Center acknowledges its commitment to making history using a play on words: “We shall
be the premier cancer center in the world, based on the excellence of our people, our
research-driven patient care, and our science. We are ‘Making Cancer History.’” Not only
is Anderson making history through its continued commitment to cancer research, but, as
noted earlier, the center also expects to eliminate cancer. This is an example of an
ambitious and industry-changing vision.
8.
Visions come alive in details, not in broad generalities. The accomplishment of
the vision eventually has to lead to tangible results, whether in health care, business,
government, or education. Although visions are futuristic and based on hope, they require
strategic leaders who can articulate the vision and translate it into terms that everyone in
the organization understands and accepts. Details should be provided in words that
relevant parties understand.38
In the past decade more and more attention has been given to written vision statements.
Vision statements are difficult to write because they require insights into the future.
However, there are some useful aids that can assist managers in thinking about their vision
and the direction they desire for the future. Exhibit 5–14 provides a strategic thinking map
to assist in developing a vision statement and provides a series of questions that are a useful
aid in thinking about the vision statement. Planning retreats can be used as effective forums
for gaining insights into the thinking of organization stakeholders regarding their hopes for
the future.
(Ginter 184-186)
A Cautionary Note: The Problem of Newness
Strategic leaders are one of the most important elements in the strategically managed
organization. Visionary leaders provide their greatest service by making the organization
flexible and able to enter new markets, disengage from old ones, and experiment with new
ideas. By entering into a new market first, organizations may achieve first-mover
advantages. Pioneering organizations seek first-mover advantages. A reputation for
pioneering can be generated and market position can be more easily established when there
are no, or only a few, competitors. Sometimes it is expensive (monetarily and emotionally)
for clients and patients to switch to other providers once loyalty and mutual trust have been
developed.
However, visionary change, when directed toward early entry into markets, has its
disadvantages. This has been referred to as the liability of newness.39 Innovators often
experience pioneering costs. Pioneers make mistakes that others learn from and eventually
correct. First movers face greater uncertainty because the demand for the service has not
been proven. Patient and client needs may change and, particularly when large
technological investments are required, the first mover may be left with expensive
equipment and little demand. Therefore, it is important that the demand for visionary
management be tempered with realistic knowledge of the market, consumers, and other
factors that will affect the organization. The rewards often go to the first mover, but the
risks are greater.
Research confirms some of the dangers of being the first mover. Studies of companies that
were first in their markets exclude those firms that failed by focusing only on those that
survived, prospered, and eventually dominated their markets.40
Arguably, market pioneers rarely endure as market leaders. Market leadership has less to
do with an organization’s entry into the market and more to do with will and vision.
Enduring leaders seem to have inspiring visions and the will to realize the vision. These
enduring leaders are persistent in the pursuit of their vision, innovative, committed
financially to the vision, and know how to leverage their assets.
Values as Guiding Principles
Values are the fundamental principles that organizations and people stand for – along with
the mission and vision, they shape organizational culture. Most often, discussions of
organizational values relate to ethical behavior and socially responsible decision making.
Ethical and social responsibility values are extremely important, not just to a single hospital,
HMO, or long-term care facility, but to all citizens. There are, however, other values that
may be specific to an organization and characterize its members’ behavior in the past or the
behavior to which members collectively aspire. For example, total quality management or
continuous improvement is a value, as is entrepreneurial spirit, teamwork, innovation, and so
on.41 It is important that managers, employees, and key stakeholders understand the values
that are expected in an organization. It is also important, as Perspective 5–4 makes clear, that
values be more than slick public relations statements. “Talking the talk” is insufficient,
“walking the walk” is what matters when it comes to values.
PERSPECTIVE 5–4
Organizational Values Statements
Ethics and values are fundamental aspects of the culture of health care organizations.
Ethically driven organizations have a shared mission and vision and strong core values in
their culture. Health care organizations are extremely complex and it is impossible to
provide policies and guidelines to direct all clinical and administrative behaviors. An
organization’s core values can set the standards of conduct that are considered important.
Unfortunately, the importance of mission, vision, and values receives less attention from
most leaders than other topics such as strategy, operations, and structure.
Effective values statements clarify how the organization will conduct its activities to
achieve its mission and vision. Values statements frequently reflect common morality, and
emphasize respect, integrity, trust, caring, and excellence. These statements represent the
core principles within the organization’s culture. All staff should be aware of, accept, and
integrate the organization’s values into their decision making and behavior. Values
statements are particularly useful when an organization faces trade-offs among goals such
as profits or quality. The organization’s values will drive the choice.
Although some organizations develop and live by effective values statements, in other
organizations the statement is carefully crafted and adopted, yet set aside and generally
ignored. The worst statements are those that clearly conflict with the organization’s
practices and behaviors. These statements undermine staff morale, breed cynicism, and
sometimes lead to the acceptance of unethical practices.
Similar to other documents, values statements should be reviewed regularly to ensure they
are effectively assimilated into the organization’s day-to-day activities. The object of the
review is not to change or modify the statement, but to ensure an in-depth assessment of the
organization’s values. The most effective reviews are undertaken by work groups of
individuals within the organization. Participation in the review process not only ensures
appropriate guidelines for behavior but also involves individuals in better understanding
and thereby encouraging ownership of the values.
In the same way, top leadership must own and participate in the values review process. The
values statement should be a living document that is frequently referred to and referenced.
The educational aspect of the review is more than merely handing out copies of the core
values. Individuals at all levels should foster discussion of the values and illustrate how
they apply to behaviors and decisions throughout the organization.
Source: William A. Nelson and Paul B. Gardent, “Organizational Values
Statements,” Healthcare Executive 26, no. 2 (2011), pp. 56–59.
(Ginter 186-188)
Core values, beliefs, and philosophy seem to be clear during the early stages of an
organization’s development but become less clear as the organization matures.42 Therefore,
statements such as Universal Health Services’ perpetuate important values such as service
excellence, continuous improvement, employee development, ethical and fair treatment,
teamwork, and service innovation. Its statement of values (principles) makes explicit how the
organization intends to conduct its business (see Exhibit 5–15).
Exhibit 5–16 illustrates American Dental Partners’ (a provider of services to multidisciplinary
dental practices) well-developed and articulated set of organizational values. These values
focus on what the organization believes are its key responsibilities to people, communities,
shareholders, and so on. Throughout the values statement are references to ideals such as
honesty, respect, dignity, and excellence. Anyone reading this set of guiding principles can
understand the motivational force such a statement of values might have on employees and
the comfort it might provide consumers.
(Ginter 188)
EXHIBIT 5–17
Company
Core Values of Becton, Dickinson, and
Source: Becton, Dickinson, and Company.
Not all statements of values or guiding principles are as elaborate as that of American Dental
Partners, however, they need to be as well conceived. Values statements can be useful in
clarifying to employees the specific behavioral norms that are expected of them as members
of the organization. This clarification is effectively accomplished in the values of Becton,
Dickinson, and Company, a medical technology company serving health care institutions, life
science researchers, clinical laboratories, and the general public with offices in more than 50
countries. This statement of core values focuses specifically on how organizational members
are expected to behave and conduct the company’s business (see Exhibit 5–17).
Mission, vision, and value statements are tools for “becoming better at what we do.” The
usefulness of any of these statements is through the ownership taken by employees and their
observed actions by stakeholders. Framed mission, vision, values, and slogans are merely
exercises – and futile ones at that – if they are not made real by commitment and action.43
The point is to motivate and guide all employees, managerial and non-managerial; provide
high-quality care and respond to external as well as internal customers; to distinguish the
organization from others in the perceptions of key stakeholders; and to let everyone know the
organization stands for something important.
Values and beliefs are directional strategies that provide the focus and parameters for
strategic goals. In addition, directional strategies provide a means of determining the
essentials that must be accomplished if the organization is to be effective. To be most
effective, the values statement for an organization should capture the guiding principles by
which the staff is expected to function while achieving the organization’s mission.44
From Mission, Vision, and Values to Strategic Goals
Once strategic leaders are confident that the mission, vision, and values are well formulated,
understood, communicated, and expressed in writing, they are able to focus on the activities
that will make the most progress toward accomplishing the mission and moving the
organization toward a realization of its vision – strategic goals. Well-written mission
statements are the beginning point for strategic goal setting. Goal setting should be focused
on those areas that are critical to mission accomplishment. Steven Hillestad and Eric
Berkowitz recommend the following questions when attempting to ensure that mission
statements and strategic goals are consistent:
1.
Does the mission of the organization reflect a broad enough orientation and
provide flexibility to make required changes?
2.
Did all important constituencies have an opportunity to provide input or comment
on the mission?
3.
Did the organization work through possible alternative operations scenarios to see
how the mission might be applied?
4.
Does the mission provide for the formulation of a set of goals that are specific
enough to give guidance to the organization yet broad enough to provide for the necessary
flexibility?45
Critical success factors provide the foundation for strategic goal setting. The strategic goals,
in turn, become the anchors for objectives and action plans.
Critical Success Factors for the Service Category
Critical success factors are those things that organizations must accomplish if they are to
achieve high performance.46 Critical success factors for the service category, as the term
implies, are similar for all members of a strategic group; however, the factors may vary
from one service category to another and one strategic group to another.47 The critical
factors for success in a medical practice are not the same as the critical success factors in
acute care hospitals.
As an example, Alex. Brown & Sons, Inc., an investment research service, indicated that
there are five critical success factors for providers of health care services: (1) ability to
serve a market; (2) strong information systems; (3) low-cost structure; (4) ability to
replicate its services in other geographical markets; and (5) ability to accept near-term
risks. The critical success factors for the service category provide an important bridge
between external and internal environmental analysis.48 Strategic leaders must continually
ask themselves whether the mission, vision, and values of the organization are compatible
with the critical success factors. Once compatibility is ensured, leaders must identify a
relatively small number of activities that are absolutely essential to accomplish the mission
and build momentum to realize the vision.
EXHIBIT 5–18 Critical Success Factors Related to a Service
Category
Additional detail is provided on the requirements for health care organizations competing
in a given service category (as identified by Alex. Brown & Sons, Inc.) in Exhibit 5–18.
The application of the critical success factors relative to individual organizations is briefly
noted in the second column. Strategic leaders need to ensure that they address the factors
that lead to success in the service category.
Strategic Goals
Strategic goals should relate to critical success factor activities, providing more specific
direction in accomplishing the mission and vision. At the same time, strategic goals should
be broad enough to allow considerable discretion for managers to formulate their objectives
for individual units.49 The most appropriate strategic goals possess the following
characteristics:
1.
Strategic goals should relate specifically to activities that are critical to
accomplish the mission. Strategic goals that focus on activities that are not mission
critical have the potential to divert leadership attention and employee energy.
2.
Strategic goals should be the link between critical success factors and strategic
momentum (carrying out unit objectives).
(Ginter 189-192)
3.
Integration of technology. To optimize the provision of dental care and service
through the integration of technology.
4.
Continuous growth. To progressively increase the market share and geographic
presence of each affiliate.
5.
Financial performance. To achieve attractive returns on capital, which will allow
continuous reinvestment.
6.
Quality of worklife. To foster a work environment that is rewarding and
motivating to team members.
7.
Quality care and service. To ensure the provision of high-quality, high-value
dental care and service.
American Dental Partners has maintained its strategic focus through its goals.
Governing Boards and Directional Strategies
The discussion of directional strategies has emphasized the importance of the involvement
and participation of as many people as practical. The governing board is an important group
that should be involved in the development of the strategic direction of the health care
organization. The board members should be regularly informed about the strategic goals and
the progress being made toward their accomplishment. Governing boards have taken on
particular importance in the past several years as ethical issues have escalated. Health care
has not been exempt, as evidenced by major corporate scandals involving companies such as
HEALTHSOUTH and the stock option scandal at United Health Care. Increasingly, the
question of the role and responsibility of governing boards is discussed in health care
management.
Historically, three modes of governance have been applied to boards of directors. The first is
the fiduciary responsibility mode or stewardship of assets; the second is the strategic mode
which involves collaboration with management to develop a vision for the future; and the
third is the generative mode where the board engages in shared creative thinking to make
sense of data available to decision makers. More recently, the idea of the progressive board
has been added. Here the focus is on contributions of individual members to a cohesive and
comprehensive whole. The board is viewed as engaging in lively debate, discussion of
important issues, and learning from one another.50
In the strategic mode, boards of directors or boards of trustees are responsible for making
policies – providing general guidelines under which the organization will operate. Therefore,
boards are important in formulating the mission, vision, and value statements of the
organization (see Perspective 5–5). Board members are not likely to be directly involved in
the process although, in some cases, members do participate. More likely, board members are
interviewed during the formulation of the mission, vision, and values and their input is
incorporated into the statements. The board should be informed about the statements and
involved in the strategic thinking that results in their formulation; therefore, the selection and
composition of board members is a critical strategic decision.51
Health Care Performance and the Usual Suspects
Much of the discussion regarding governing boards has related to issues that have been
referred to as the “usual suspects.”52 Primary attention has been given to questioning how
these usual suspects influence the financial performance of an organization. Some usual
suspects are the number of outsiders on the board, shareholdings of board members, board
size, and CEO duality (CEO simultaneously functioning as the chief executive and board
chair).53 An issue of particular interest has been board size. A comparative study of board
composition by the executive search firm Spencer Stuart looked at the boards of the S&P
500. The results were reported in the Harvard Business Review. The authors noted that
today boards of these leading corporations are smaller in size and composed of older
members, and are more independent compared with 1987. Board independence has been
particularly influenced by the Sarbanes–Oxley Act.54
Generally two different types of governing boards – philanthropic governing boards (those
that are service oriented and concerned primarily with fundraising) and corporate
governing boards (those that are more involved in strategic planning as well as policy
making). Philanthropic boards are larger and more diverse to gain as much community
representation as possible. The inclusion of different types of stakeholders is important and
requires that board members be selected from among business leaders, physicians, local
politicians, consumers of health care services, and so on. The corporate board is smaller
and composed of individuals who possess expertise that will aid the organization in
accomplishing its strategic goals.55 Membership diversity is important, but less so than the
actual skills or expertise possessed by the members.
(Ginter 192-194)
PERSPECTIVE 5–5
Board’s Role in Strategy
Boards of trustees and executive teams share greater responsibility in building more
robust and adaptive strategies that support strategic planning and decision making. Health
care as an industry is affected by many changes that are of direct relevance to governing
boards. The contemporary agenda embraces a more focused board mindset for guiding
growth, improving performance, and leading change.
A strategic agenda is a narrative that provides the context for purpose, vision, and
mission. It creates a process for developing a culture that reflects the organization’s
values and beliefs. Moreover, it provides a protocol for the ongoing direction, integration,
and execution of the system’s priorities.
The board’s role is that of a navigator that organization into focus with regard to shortand long-term realities of the marketplace. Strategic leadership brings together three
elements that boards govern and executives manage. These are:
1.
Strategic direction – provides focus for the organization as it makes strategic
choices. Strategic direction provides the platform for short- and long-term planning and
decision making. It represents the ideas that shape an organization’s values.
2.
Strategic integration – involves matching programs and resources with processes
and priorities and is instrumental in “making things happen.” Health care delivery
presents a number of integration challenges such as quality, cost management, care
coordination, and so on.
3.
Strategy execution – links specific actions with outcomes and adapts to external
conditions. Strategy execution connects the dots between board and executive team
intentions and the capacity to provide outstanding patient care.
The strategic agenda encourages deeper thinking about key issues and problems and
provides a bridge among assumptions, options, and preferences. Boards need to have a
major role in strategic direction because it sets the focus for all major decisions. In
addition, boards must be confident that the executive leadership has the ability, assets,
and urgency to effectively manage strategic integration. Finally, boards must leave
leaders free to manage while ensuring their support and engagement.
The ultimate goal of the strategic agenda is to drive economic and strategic value for a
system. Strategic value is the composite of the system’s reputation, operating
competence, innovative capacity, and key resources. Boards have an “appetite” for
strategy and oversight of the strategy is one of the board’s primary responsibilities.
Involving the board in strategic direction, integration, and execution is a fundamental
challenge of executive leadership.
Source: Daniel Wolf, “The Board’s Role in Strategy,” Trustee 64, no. 10 (2011),
pp. 21–23.
The current trend in health care organizations is toward the corporate board. To a great
extent, the trend is the result of the increasingly competitive environment facing health care
organizations and the need for expertise in dealing with the complexities of the economic
environment.56 However, it should be noted that virtually no research confirms any positive
relationship between the size and nature of board membership and organizational financial
performance.57
Research findings on boards of directors suggest that when profound or radical
organizational change confronts a health care organization, the corporate board is more
likely to propose effective, positive responses. Philanthropic boards, on the other hand, are
more likely to be associated with either no change or negative responses to profound
change.58 Boards of directors in health care organizations undergoing corporate
restructuring (defined as the segmentation of the organization’s assets and functions into
separate corporations to reflect specific profit, regulatory, or market objectives) tend to
become less philanthropic and more corporate, not only in composition but also in the way
they operate.59
Other research provides additional information about various types of governing boards in
health care organizations. When compared with boards of directors of successful hightechnology firms, for example, governing boards in a sample of multihospital health care
systems were almost twice as large (11 to 15 members).60 In fact, boards are frequently too
large to be effective aids in decision making, and where the goal is stakeholder
representation, board members often know so little about health care that CEOs are forced
to spend a great deal of their time informing and educating lay members.
Another study examined the issue of outside directors in large investor-owned health care
organizations. Four major subsamples were examined, including hospitals, elder care
organizations, HMOs, and alternative care facilities such as psychiatric clinics and
ambulatory care centers.61 This study found that, in general, governing boards of health
care organizations were composed of more members from outside, rather than inside, the
organization. Outside representatives were primarily physicians, financial professionals,
attorneys, and academics. The inclusion of physicians was found to be particularly
significant in terms of bottom-line performance. The presence of physicians on governing
boards enhanced the support of the medical community, improving the organization’s
market share and quality.
The evidence to date is underwhelming with regard to the usual topics of board
independence (percentage of outside members), board size, CEO duality, and so on.62
Although it is dangerous to generalize, some inferences can be drawn from the research on
governing boards in health care organizations. In not-for-profit health care organizations,
governing boards are more in line with the philanthropic model. They are generally large
(in fact, too large to be effective aids in strategic decision making), do not compensate
members, select members primarily as stakeholder representatives, and do not hold the
CEO formally accountable for performance. In this case, the primary motivation for board
membership is service and recognition. When health care organizations are profit oriented,
their boards take on more corporate characteristics. They tend to be smaller, compensate
members for service, select members for specific expertise, involve the CEO as a voting
member, make him or her formally accountable to the board, and require the participation
of board members in strategic decision making. From the perspective of the individual
board member, the motivation to be on the hospital’s board may be to provide a valuable
service to the community, but board membership may be a source of income as well.
Primarily because of corporate scandals of recent years and the passage of the Public
Company Accounting Reform and Investor Protection Act of 2002 (Public Law 107-240),
also known as the Sarbanes–Oxley Act, board of director research has been reignited.63
This law, which applies to publicly traded corporations, dramatically impacts the fiduciary
responsibility of chief executive officers and boards of directors. Some states have
considered enacting similar legislation that would apply to not-for-profit organizations.
Board Process: Missing Link?
The lack of consistent association between factors such as board size, independence, CEO
duality, member expertise, and organizational performance on financial measures has
encouraged researchers to look at different variables. Of particular interest is the board
process – the means by which boards of directors undertake their work.64
Interviews with experienced board members indicate that several behaviors lead to more
effective boards:
1.
Engage in constructive conflicts (especially with the CEO). It is important that
board members hold and debate diverse views among themselves and with the CEO. An
overabundance of insiders on a board may diminish the presence of constructive conflict
since debate with the CEO amounts to debate with the boss.
2.
Avoid destructive conflict. Personal friction and tension in the boardroom should
be minimized. There must be a clear distinction between constructive debate and
destructive conflict.
3.
Work together as a team. The most important component of board process is
teamwork and is the primary characteristic of the progressive board. The development of
strong team norms, however, is hard to accomplish because board members are busy and
spend little time together. Given the often limited time available, maximizing board
member interaction is critical.
4.
Know the appropriate level of strategic involvement. Board members should limit
their involvement to major strategic decisions. They should be very careful not to become
too involved in the day-to-day management of the organization.
5.
Address decisions comprehensively. Board members should consciously attempt
to address issues with sufficient depth to make sound decisions. Too often, time demands
and conflicting priorities tempt boards to deal superficially with important issues.
Effective boards find the time needed for important strategic decisions.65
The work of boards of directors is extremely important. Boards are created to ensure that
strategic leaders have additional expertise available to them for making policy decisions
that provide direction to the organization. The effectiveness of the board is a key factor in
the effectiveness of the organization.
(Ginter 194-197)
Decisions to change an organization’s mission, vision, values, and goals are complex and
involve many variables. To manage strategic momentum, questions should be asked that
concern the fundamental activities and direction of the organization. Exhibit 5–19 provides
guidance through several questions that will aid managers in their strategic thinking
concerning the appropriateness of the organization’s directional strategies. Perhaps the best
approach for managing the directional strategies is to place the vision for the future, the
existing mission statement, statement of values, and the organization’s goals next to the
questions in Exhibit 5–19 and ask the board of directors/trustees and the strategic
management team to freely discuss and reach a consensus on each question. This process will
either validate the existing mission, vision, values, and goals or indicate that there should be
changes to maintain strategic momentum. This process invites clarification, understanding,
and reinforcement of exactly “what this organization is all about” or “what this organization
should be about.”
EXHIBIT 5–19 Managing Strategic Momentum – Evaluating
Directional Strategies
Lessons for Health Care Managers
Directional strategies allow leaders to state what they believe the organization should be
doing and make explicit how they intend to conduct their business. Every attempt should be
made to develop and communicate well-conceived and written statements of the
organization’s mission, vision, values, and strategic goals.
Directional strategies are the superordinate goals or outcomes that health care organizations
plan to accomplish. Strategic leaders should recognize that strategic planning is a logical
process. The progression of directional strategies illustrates the importance of the logic.
The mission of the organization drives decision making because it is the organization’s
reason for existing. The vision provides hope for the future and values tell everyone –
employees, stakeholders, patients, and so on – how the organization will operate. The
strategic goals more specifically state what the leaders believe is required to achieve the
mission.
A mission alone is not enough. The mission, as a statement of purpose that distinguishes
the organization from all others of its type, such as the care given to patients, physical
location of the facility, the unusual commitment of physicians to research as well as to
healing, or any other factor that is important in the minds of those served, is only the first
step. The mission may motivate a few physicians and department managers, but real
motivation comes from visionary leadership.
The vision is a hope that says what key stakeholders think the organization should look like
and be like when the mission is being achieved. Values, as guiding principles, can be
powerful motivating forces, as well.
Even a well-developed and communicated mission is likely to leave the health care
strategist with far too many areas of responsibility, resulting in an impossible task. For this
reason, critical success factors for the service category must be identified and strategic
goals must be set to accomplish the mission. Strategic goals help to make the strategist’s
job feasible and help focus strategists on those tasks that really make a difference with
respect to organizational success.
Management research shows that the existence of goals can be extremely motivating.
Clearly stated and communicated strategic goals provide a sense of direction – they specify
what leaders are expected to accomplish and remove anxiety from those who want to
succeed. Formulating mission, vision, values, and strategic goals and identifying critical
success factors are often “messy” and unappreciated. In the end, however, setting
directional strategies is a major responsibility for all strategic leaders.
Engaging as many groups as practical in the process of developing directional strategies is
important. The board of directors should be involved in the thinking that ultimately results
in the mission, vision, and value statements. In addition, board members should be
regularly informed about the strategic goals of the organization and the progress being
made in their accomplishment. Most importantly, the board should engage in a process that
contributes to organizational effectiveness. Research confirms that merely electing or
selecting a board of directors/trustees comprising an appropriate percentage of outsiders, of
individuals with the appropriate expertise, and small enough to be manageable, will not
ensure its effectiveness. The board must also be willing to engage in constructive conflict,
minimize destructive interpersonal tensions, avoid micromanagement, and devote the time
required to make important strategic decisions. Chapter 6 addresses strategy formulation
and the strategic alternatives available to health care organizations.
Health Care Manager’s Bookshelf
Chester I. Barnard, The Functions of the Executive (Cambridge, MA: Harvard
University Press, 1938)
Some people might think that the discussion of directional strategies is something new.
Actually, there is a rich history of concern for the purpose and mission of organizations
that dates at least to 1938. Chester Barnard in The Functions of the Executive (1938)
made no less than 45 references to the topic of purpose in this classic work and “set the
stage” for much of our modern thinking on the subject.1
Barnard’s most cited reference concerning purpose has to do with the essence of
organizations themselves. He contends that an organization exists when there are people
who communicate with one another and are willing to contribute action to accomplish a
common purpose (p. 83). He concludes that the three essential components of
organization are communication, willingness to serve, and purpose.
At a practical level the most important role of the purpose, objective, or aim relates to the
nature of cooperative systems or complex organizations made up of specialized parts.2
Complex organizations necessarily specialize to accomplish their purpose.3 The primary
function of the purpose is to coordinate the efforts of individuals and functional units so
that the purpose of the “whole” or the general purpose [mission] may be accomplished
(p. 136). When the purpose of the cooperative system is attained, the organization is
effective. When the purpose is not attained, the organization is ineffective. Thus, Barnard
gave us one of our earliest definitions of effectiveness as goal accomplishment (p. 43).
Organizations progress toward the accomplishment of their missions by redefining the
general purpose into purposes for specialized units such as medicine, nursing, pharmacy,
and so on (in the case of a hospital). The purpose is the unifying element of formal
organizations and provides an ends–means chain (p. 137) (discussed in Chapter 6).
Barnard provides an exceptionally interesting observation by pointing out that it is not
“essential” for the specialized units to understand completely the general purpose of the
complex or corporate-level organization.4 Each unit must, however, understand and
accept its own purpose as derived from the general purpose. The more complete the
understanding of the general purpose, the more likely the unit will enthusiastically pursue
the organization’s mission. When a specialized unit believes the whole organization
depends on the achievement of its unit’s purpose, the “intensity of its actions will
ordinarily be increased” (p. 138).
(Ginter 197-200)
Ginter, Peter M. The Strategic Management of Health Care Organizations, 7th Edition. John
Wiley & Sons UK, 2013-03-11. VitalBook file.

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