MHA 626 due TODAY

2 The Strategic Planning Process

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“Cheshire Puss,” she [Alice] began . . . “Would you tell me, please, which way I ought to go from here?”

“That depends a good deal on where you want to get to,” said the Cat. —Lewis Carroll

Alice’s Adventures in Wonderland Learning Objectives

After reading this chapter, you should be able to do the following:

• Define strategic planning.

• Describe the strategic planning process and differentiate between strategic planning and strategic management.

• Identify stakeholder involvement in the development of strategic plans.

• Explain the reasons for viewing strategic planning as an ongoing process or planning cycle.

• Discuss the importance of effective strategic planning and implementation.

Section 2.1Strategic Planning Overview

Introduction This chapter presents an overview of the strategic planning process. Each step of the stra- tegic planning process discussed in this chapter is dealt with in more detail in later chapters. The intention here is to provide an introduction to the major components of the process and stress the importance of strategic planning.

Without a strategic plan, organizations can develop “organizational myopia.” Myopia is a condition of the eyes that is referred to as nearsightedness or shortsightedness because objects are seen clearly up close, but distant objects are blurred. Some organizations suffer from organizational myopia because their focus is on short-term needs and goals, and they fail to consider the long-term direction of their organization. Daily activities can consume so much time that little time and effort is given to obtain a view of the organization from a long- term perspective. This may result in an HCO being stuck in a situation that inhibits growth or results in a decline in patient population over time.

Consider the case of a hospital that was built in the early 1920s in a downtown area with a whole square block of land for expansion. As the city grew, the downtown area prospered and buildings sprang up and surrounded the hospital. With a post office on one side and a city park on the other side, the only way for the hospital to expand was to build over the parking lot, which resulted in the need to build a multistory parking garage to handle the parking of patients/family and the hospital staff. Land was available when the hospital was built but now the hospital is “boxed in” by surrounding buildings and the city park, leaving no room for growth in its present location. The hospital must stay in its present location with limited opportunity for expansion or abandon the current historical location and move to the sub- urbs where land is still available. Evidently, the hospital’s founders never envisioned growth and the consequences of not buying available land when the hospital was first built. Of course, hindsight is always 20/20, but the point is that the failure to consider growth and the long- term implications of not buying additional land for expansion has negative consequences for the organization.

The word strategic means pertaining to strategy. Strategy is derived from the Greek word strategos, which means generalship, art of the general, or, more broadly, leadership. The word strategic, when used in the context of planning, provides a perspective to planning that is long run in nature and deals with achieving specified end results. Just as military strategy has as its objective the winning of the war, so, too, strategic planning has as its goal the achievement of the organization’s vision and mission—service to the organization’s clients.

2.1 Strategic Planning Overview The strategic planning process is basically a matching process, involving an HCO’s internal resources and its external opportunities. The objective of this process is to peer through the “strategic window” and identify opportunities that the individual organization is equipped to take advantage of or respond to. Thus, the strategic planning process can be defined as a managerial process that involves matching the healthcare organization’s capabilities with its opportunities. These opportunities are identified over time and decisions revolve around

Section 2.2The Strategic Planning Process

investing or divesting resources to address these opportunities. The contexts in which these strategic decisions are made are as follows:

• The HCO’s operating environment • The HCO’s vision and mission • The HCO’s organization-wide objectives

Strategic planning is the process that ties all these elements together to facilitate strategic choices that are consistent with all three areas and then implements and evaluates these choices. The successful results of planning can be achieved through implementing an effec- tive strategic planning process. The breakdown of this process provides a complete outline of a system capable of creating true change in an HCO’s attitudes as well as in its productivity.

It is important to recognize the difference between the plan and the planning process. The plan must be something that can be held in your hand, a written product of efforts taken. If the plan is not in writing, it is simply a daydream. A written plan communicates its seriousness to decision makers and everyone else. The planning process comprises the steps needed to develop the plan; the process must have maximum input from everyone. Those who execute the plan must be involved in its construction to gain their commitment or ownership of the plan. The best way to ensure that a plan fails is to overlook both the product and the process. They are equally important.

While there are many different ways in which an HCO can approach the strategic planning process, a systematic approach that carries the organization through a series of integral steps helps to focus attention on a basic set of questions, which each organization must answer:

• What is our vision? This question focuses on the ultimate aim of the organization. • What will we do? This question focuses attention on the specific needs the HCO will

try to meet. • Who will we do it for? This question addresses the need for an HCO to identify the

various groups whose needs will be met. • How will we do what we want to do? Answering this question forces thinking about

the many avenues through which an HCO’s efforts may be channeled.

The strategic planning process used by an organization must force the HCO’s leadership to deal with these questions on a continuous basis. Ongoing answers to these fundamental ques- tions allow the organization to continuously adapt over time and do the work it is best suited to do.

2.2 The Strategic Planning Process Strategic planning differs from strategic management. Strategic planning is part of the overall strategic management process and results in a strategic plan. Strategic management is the process of developing and implementing a strategic plan and then evaluating the plan’s suc- cess in reaching organizational objectives. Strategic management is defined as a process that includes the following six steps:

Section 2.2The Strategic Planning Process

1. Defining an organization’s vision and mission 2. Analyzing environmental opportunities and threats and internal strengths and

weaknesses 3. Developing a set of organizational objectives 4. Crafting strategies to accomplish the objectives 5. Developing operational plans to implement the strategies 6. Setting up control and evaluation processes and procedures to align performance

with objectives

The six steps of the strategic management process are illustrated in Figure 2.1. They are important because they force the organization to consider certain questions. As each step requires the people at various organizational levels to discuss, study, and negotiate, the pro- cess as a whole fosters a planning mentality. When the first four steps are completed, the result is a strategic plan for the organization; completing all six steps represents the strategic management of the organization.

Figure 2.1: The strategic management process

Once all six steps are completed, the strategic management process should result in a strategic plan.

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Step 6 Evaluation & controlStep 5

Operational planStep 4

Strategy formulationStep 3

Objectives Step 2 External & internal analysis

Step 1 Vision & mission

Revise as needed based on evaluation of performance and changing conditions.

Step 1: Defining Vision and Mission The first, and probably the most important, consideration when developing a strategic plan is to define the vision and mission for the organization as a whole. Subsequently, in support of this umbrella mission statement, statements of mission should also be written for specific divisions or units of the organization.

Writing the statement of mission is usually a difficult process, even though it may appear sim- ple to do. Multiple, often diverse views of the HCO’s fundamental mission may exist because of the differing perspectives of the numerous constituencies that hold a stake in the performance

Section 2.2The Strategic Planning Process

of the organization. Nevertheless, as Peter Drucker, a noted management authority, empha- sized, “The best nonprofits devote a great deal of thought to defining their organization’s mis- sion” (Drucker, 1989, p. 89). Certainly this would be true of proprietary HCOs as well.

For example, an inner-city organization that defines itself as “a delivery system for the health- care of the needy” may be on the right track but will constantly face the need to explain and expand this definition. Does healthcare mean only acute inpatient care, or does it include other services, such as neighborhood clinics? If other services are added to the definition, will they involve only traditional physical care or will they address other needs, such as psycho- logical counseling or substance abuse treatment? Granted, these questions may change as the organization evolves and grows, but thinking through these issues provides a sense of vision and also avoids the pursuit of tangential activities that do not fit with what the organization wants to do or be.

The vision statement should explain what the organization aspires to be. Creating the vision statement should also be a participative process, during which organizational members try to visualize what they want the organization to become. If the participants can see where they are going and have an image of the real mission of the organization, plans will fall into place more easily. The critical implementation phase of the plan will go more smoothly as the par- ticipants buy into the process and make it their own. In most situations, ownership results in commitment.

A vision of what can be accomplished creates the spark and energy for the whole planning and management process. It is important to spend ample time defining the vision statement. The process should emphasize getting everyone involved in the dream of how things can be. Without a vision, people just work day-to-day and tend not to be as productive or as willing to go all out as they could be.

In addition, a good statement of mission not only clarifies what the HCO does, it sets boundar- ies. It defines what the organization will not do. It helps limit expectations, and that alone can make it the HCO administrator’s best friend.

Step 2: Analyzing the Environment It is vital that an HCO gauge the environment within which it operates. This should be stan- dard practice for all HCOs. The only way we can manage change is to constantly monitor the environment within which we operate. This analysis stage is where we look at the envi- ronment external to our organization for potential threats and opportunities and compare them against our internal operation for strengths and weaknesses.

For example, some downtown organizations faced the dilemma of whether to remain in the downtown area or move to the suburbs. In those instances, the HCOs found that their historic location resulted in two significant problems: lack of space to grow and changes in the socio- economic makeup of the neighborhood. The socioeconomic changes made the organizations less effective in meeting the needs of those in the neighborhood who were less able to afford healthcare services. Potential patients with greater ability to afford care had moved and now sought care closer to their new homes.

Section 2.2The Strategic Planning Process

The solution these organizations adopted was interesting. They bought land and built satel- lite facilities in growing parts of their community. Everybody won: The original neighborhood organizations could serve the needs of those who lived there, while the new organizations were built in areas where they could grow and help fund care at the inner-city facilities. This illustrates how the changing operating environment in which an HCO functions can affect the organization.

It is also important, when conducting an environmental analysis, to note new trends in healthcare that are being adopted by competitors. For example, some hospitals are beginning to open integrative medicine programs that use various forms of meditation as well as tradi- tional treatments. Of particular interest to HCOs, meditation has been shown to reduce stress, lower blood pressure, and decrease pain. The failure to integrate new treatment regimens adopted by competitors may leave an HCO in a precarious situation.

Many organizations have found it helpful to use the same analytical framework that was referred to in Chapter 1 as a SWOT analysis. SWOT is an acronym for strengths, weaknesses, opportunities, and threats. Strengths and weaknesses refer to elements internal to the orga- nization, while opportunities and threats are external to the organization. A detailed SWOT analysis helps the HCO to take a good look at the organization’s favorable and unfavorable factors with a view toward building on strengths and eliminating or minimizing weaknesses. At the same time, the HCO’s leadership must also assess external opportunities that could be pursued and threats that must be dealt with in order to survive. Table 2.1 offers one example of a SWOT analysis for an HCO.

Table 2.1: Example of a SWOT analysis for a hospital

Strengths Weaknesses

• Strong financial position • Acquisition strategy to acquire physician practices • Well-known Alzheimer’s treatment center

• Geographically “boxed in,” with little room to grow

• Aging facilities • Declining neighborhood

Opportunities Threats

• Acquisition of smaller suburban clinics • Aging population, increasing demand for services • Development of larger donor base

• Reduced reimbursements from third- party payers

• Shortages of qualified RNs and LPNs • Fewer psychiatric residents

Step 3: Establishing Objectives Often the words key results, goals, and targets are used synonymously with objectives when managers are thinking about long- and short-term objectives. Think of an archer drawing an arrow and aiming directly at a target. The bull’s-eye represents exactly where a person wants to be at a certain point in time. An organization wants all of its arrows aimed at the same target. Just as an archer who shoots arrows off in any direction is liable to hit almost anything—including the wrong target—members of an organization may become confused and disorganized if they do not know where they are going.

Objectives must be clear and concisely written statements, outlining what is to be accom- plished in key result areas within a certain time period. Wherever possible, objectives should

Section 2.2The Strategic Planning Process

be expressed in measurable terms that are consistent with the overall mission of the orga- nization. Objectives are the results desired upon completion of the period the strategic plan covers. In the absence of objectives, no sense of direction can be attained in decision making. Another basic purpose served by objectives is in the evaluation of performance. Objectives in the strategic plan become the yardsticks used to evaluate performance. As will be pointed out later, it is impossible to evaluate performance without some standard against which results can be measured. The objectives become the standards for evaluating performance because they are the statement of results desired by the planner.

Step 4: Developing Strategy After developing a set of objectives for the time period covered by the strategic plan, the methods or strategy needed to accomplish those objectives must be formulated. Strategy for- mulation is accomplished in stages.

First, alternative strategies must be developed and evaluated by management before the HCO can commit to a specific option. From these alternatives, an overall strategy can be designed. Then, operational strategies for each major service area can be developed to detail activities for accomplishing the grand strategy. In so doing, strategy becomes the link between objec- tives and results.

In the healthcare industry, several factors need to be considered in strategy development. First, as HCOs expand their services (e.g., hospitals purchasing physician practices and nurs- ing homes), it may be difficult to know where one particular healthcare institution ends and another one begins. Additionally, as pointed out in Chapter 1, the healthcare industry is in an unpredictable environment, which makes applying traditional forecasting techniques dif- ficult. This rapidly changing environment also makes it difficult to properly interpret mar- ket signals. Finally, rapid change shortens the planning cycle. HCOs that fail to constantly develop their strategy will likely find themselves unable to effectively compete (Reeves & Deimler, 2011).

A firm’s organizational scope involves the product and services the organization will offer, the geographic location in which the firm operates, and the extent to which the firm is verti- cally integrated (Collis & Rukstad, 2008). For healthcare, these dimensions are necessarily interrelated. Many HCOs are engaged in acquisition and merger activities that are expand- ing their offerings. For example, Edward Hospital & Health Services in suburban Chicago has been aggressively expanding through the acquisition of both primary care and specialist phy- sician practices (Forbes Insights, 2013). It is important for the HCO to carefully consider the scope of its operations in formulating its strategy.

Step 5: Creating Operational Plans After the first four steps of the strategic management process have been taken and a strategy has been developed to meet objectives and goals, it is time to develop operational or action plans. The operational plan stage is the action or doing stage. Here, an organization hires, fires, builds, advertises, and so forth. How many times has a group of people planned some- thing, gotten enthusiastic—and nothing happened? This is usually because they did not com- plete an operational plan to implement their strategy.

Section 2.2The Strategic Planning Process

Operational plans need to be developed for use in all of the areas that support the overall strategy. These areas include service delivery operations, information systems, finance, mar- keting, and human resources. Each of the more detailed operational plans is designed to spell out what needs to happen, in a given area, to implement the strategic plan.

Supporting the operational plans are the individual plans of all members of the organiza- tion. When planning is carried from the top to the lowest level in the organization, everyone becomes involved in negotiating and setting performance objectives that support the organi- zation’s objectives. Then, individuals begin to develop their own action plans, which serve to accomplish the performance objectives. Finally, performance appraisals, which must be done on an individual basis, use those performance objectives as the basis of appraisal and reward.

A key factor in successfully implementing operational plans is the ability to adapt to rapid change. This requires a constant monitoring of the environment for signals of change from consumers, providers, vendors, technology, and governmental agencies. With information available in real time to everyone, the proper interpretation of signs of change takes on increased importance. Organizational structure is also an important factor in the implemen- tation of operational plans. As new information is received, the organization needs the capa- bility to respond quickly, bypassing bureaucratic hierarchies.

Step 6: Implementing Evaluation and Control Measures The failure to establish procedures to appraise and control the strategic plan can lead to less than optimal performance. A plan is not complete until the controls are identified and the procedures for recording and transmitting control information to the administrators of the plan are established. Many organizations fail to understand the importance of establishing procedures to appraise and control the planning process. Control should be a natural follow- through in developing a plan.

Planning and control should be integral processes. The strategic planning process results in a strategic plan. This plan is implemented (activities are performed in the manner described in the plan), and results are produced. These results may be reflected in services rendered, financial sponsorship, volunteer participation, and image enhancement.

Information on these and other key result areas can be used by HCO executives when compar- ing the results with original objectives to evaluate performance. This performance evaluation identifies the areas where decisions must be made to adjust activities, people, or finances. The actual decision making controls the plan by altering it to accomplish stated objectives, and a new cycle begins.

Individual performance appraisal is a vital part of this step. Rewards or reprimands must be related to the personal achievement or lack of achievement of agreed-upon objectives. This creates a work environment where people know what to do and rewards are tied to performance.

Section 2.3The Role of Stakeholders in Strategic Plan Development

2.3 The Role of Stakeholders in Strategic Plan Development

One basic issue HCOs must face in developing the strategic plan is who should be involved in the process. Ideally, all of the organization’s stakeholders are involved, to some extent in the strategic planning process. Stakeholder may be defined as “persons or groups that have, or claim, ownership, rights, or interests in a corporation [HCO] and its activities, past, pres- ent, or future. Such claimed rights or interests are the result of transactions with, or actions taken by, the corporation [HCO], and may be legal or moral, individual or collective” (Clark- son, 1995, p. 106).

Table 2.2 lists possible stakeholders and their interests.

Table 2.2: Examples of stakeholders and the impact of an HCO on different stakeholder groups

Stakeholder Impact of HCO on this stakeholder group

Employees Compensation, job security, and benefits

Medical/professional staff Compensation and quality of care, training

Patients Quality, availability, and cost of care

Boards of trustees Business continuance and potential liability

Investors Transparency in communications and protection of earning potential

Volunteers Value of the charity for volunteers’ time

Vendors Assurance of long-term relationships

Governmental subdivisions Ability to handle emergencies and potential disasters

Professional associations Accreditation

In order to include stakeholders in the strategic planning process, it is important for the HCO to know its stakeholders and its impact on each separate stakeholder group. This is done through a stakeholder analysis that identifies the stakeholder groups, the relationship of the stakeholder groups to the organization, and the concerns that both the HCO and the stake- holder groups have about their relationship. Stakeholder analysis is accomplished through interviews, focus groups, and surveys. Information gained through this analysis can be used as input for the strategic plan.

Often, such a stakeholder analysis will reveal that not all stakeholders are equal. Normally, the analysis identifies two broad groups: primary stakeholders and secondary stake- holders. Primary stakeholders are those people and organizations essential for the HCO’s survival (employees, medical staff, patients, third-party payers, and so forth). Secondary stakeholders have a less essential relationship with the HCO but are important nonetheless. Examples include professional associations, the media, and community groups (Reeves & Deimler, 2011).

Section 2.3The Role of Stakeholders in Strategic Plan Development

Stakeholder input does not mean consensus on what the organization’s strategy should be. The board of trustees and senior management each have the legal and moral obligation to determine how the organization is managed. A question that must be answered is whether this process can be completed with the current staff or if an outside consultant is needed to lead the organization through the process. Hiring a consultant to lead the process has the advantage of bringing in both a “fresh pair of eyes” to help evaluate the organization’s cur- rent situation and the expertise and experience of working with other HCOs in strategic plan development. If the consultant leads the process and gains the confidence and participation of all the stakeholders, then this can be a successful approach to moving through the process. Care should be taken by the HCO administration, however, to ensure that the consultant is leading the process and not using a cookie-cutter approach—that is, trying to make a plan developed for another HCO fit the current client’s needs.

Consultants help the strategic planning process in the following ways:

• Prepare the organization for the planning process through education or retreats. • Give an objective assessment of the organization’s strengths, weaknesses, threats,

opportunities and, in some cases, capabilities. • Steer the organization through the process. • Keep the planning process moving and on track.

A consultant cannot substitute for the staff ’s unique knowledge of the organization and its vision and mission. The consultant should not take on the role of the planner but serve instead as a facilitator.

If the current leadership of the HCO has the skills to lead the strategic planning process, then several potential roles and sets of responsibilities may be assigned to various stakeholders. The board of trustees then directs the process. Descriptions of the contributions made by various stakeholders to the strategic planning process follow.

Board Members According to Don L. Arnwine (2002), former chair of the board of trustees, Baylor Univer- sity Medical Center at Dallas, boards of trustees for HCOs have three primary purposes. One is to establish policies, which is a purpose crucial to the subsequent roles. Effective poli- cies delineate the tasks and responsibilities of the board, management, and the medical/ professional staff.

The second purpose of the board is to develop the HCO’s mission and vision, and to partici- pate in and direct the strategic planning process. Often, the board assigns the details of the plan to management, but retains oversight.

The third purpose of the board is to monitor management’s implementation of the HCO’s mis- sion, vision, and strategic plan. Arnwine (2002) does note that oversight is not the same as management. While the board is legally responsible for everything that happens in the HCO, its job is governance and not management (Clarkson, 1995).

The board of directors of a for-profit HCO has the same three primary purposes, but often those board members are shareholders, and they have the additional responsibility for the

Section 2.3The Role of Stakeholders in Strategic Plan Development

organization’s profitability. Most of the boards of directors of for-profit HCOs have the respon- sibility for hiring and firing the chief executive officer (CEO) and reporting to the sharehold- ers regarding the direction, management, and profitability of the organization.

Strategic Planning Committee A strategic planning committee may be set up by the board of trustees to guide the process and be assigned some or all of the following responsibilities:

• Organizing the planning process • Confirming that all staff and employees have input and are included in the process • Scheduling and conducting meetings • Focusing the planning process • Ensuring that all stakeholders’ values are reflected in the plan • Developing a draft of the strategic plan • Presenting the plan to the board/administration for approval

The committee members must represent all of the key operational areas of the organization and have sufficient time to devote to these tasks. A timeline should be established for the completion of each task, with the chairman of the committee having the authority to hold members accountable for their individual tasks during the process.

Chief Executive Officer/Chief Operating Officer Either the organization’s CEO or chief operating officer (COO) may take the lead in the pro- cess as a strategist, organizer, tactician, and facilitator. The CEO/COO is responsible for carry- ing out the strategic plan after it is approved by the board. Each of the four roles involved in the process requires a specific set of knowledge and skills. These role functions are described as follows:

• Strategist—The strategist can see the big picture of the organization in terms of how the organization fits into the local, regional, and national healthcare industry; the nature of the competitive environment; and the services needed to position the organization for the long-term.

• Organizer—The organizer determines key functions of the organization and how the functions should be related to each other, and ensures that capable people are head- ing up those functions.

• Tactician—The tactician is the details person who knows the specific tactics required to implement a strategy and the processes needed to carry out tactical, day- to-day operations.

• Facilitator—The facilitator moves the organization forward by communicating what is to be done, by whom, when, how, and with what resources.

One person may not have the knowledge and skills to perform all of these roles; therefore, a team-building approach should be used to ensure that all of these leadership skills are rep- resented on the team. If the team members know their roles and how their roles relate to the strategic plan, the team will operate smoothly as a unit to carry out tasks.

Section 2.3The Role of Stakeholders in Strategic Plan Development

Medical Staff Involvement of the medical staff in strategic planning is essential to ensure that the strategic plan is developed and implemented fully. As small business owners, physicians are concerned with the overall strategic plan of the HCO. This involvement can take several forms. Repre- sentatives of the medical staff should serve on the strategic planning committee. The medical staff may have its own planning responsibilities and, upon completion of those responsibili- ties, can report the results to the strategic planning committee.

Members of the medical staff are important to the planning process for several reasons. They are a group of stakeholders who supply services to the HCO, and they are customers of ser- vices provided by the HCO. Additionally, they know the HCO’s strengths and weaknesses, and they have information about competitors and how patients view the organization. Further, the medical staff and the hospital have a symbiotic relationship, as illustrated in Table 2.3. Thus, it is critical that the medical staff be included in the strategic planning process at the highest levels.

Table 2.3: Relationships among HCOs and medical staff

What does the HCO want? What do physicians want?

Admissions and referrals Admission privileges

Quality patient care Clinical quality

Quality oversight Clinical support

Clinical supervision Technology and equipment

Department Heads Organization department heads make an extremely valuable contribution to the strategic planning process, and their perspectives must be included in the plan. Their operational planning serves a major role in the process of developing objectives and implementing the approved plan. Department heads are the people that must be relied on to coordinate their department’s operations with the organizational strategic plan. Each department’s operation must support the strategic plan and the department head is charged with that responsibil- ity. The department heads are the “boots on the ground” that know what their department is capable of doing and the specific needs for personnel and other resources to carry out the department’s specific function. For example, the imaging department in a hospital or clinic must coordinate staffing, equipment, and scheduling to ensure that patient records are up-to- date and in the hands of those who are treating the patient.

Patients and Community The role of patients and members of the community in the strategic planning process is another critical element in the strategic planning process. These stakeholders provide infor- mation for the organization’s analysis of its internal and external environments and the devel- opment of its vision and mission statements. Participation by these groups during the process

Section 2.4Strategic Planning as an Ongoing Process

can be accomplished through focus groups, surveys, and inclusion on planning committees. Many HCOs have set up processes that allow patients and members of the community to pro- vide input. Patient surveys have become a vehicle to obtain needed input on awareness, use, and satisfaction with rendered services. The inclusion of patients and members of the com- munity on the board or planning committee provides an outside perspective that is invalu- able to the HCO.

The community is not only a source of informational input for planning but also a source of volunteers and referrals. Some community organizations specialize in certain types of health issues, such as a Lions Club’s focus on the vision screening of children, and bring together healthcare providers with those in need.

Vendors Vendors may also be involved in the strategic planning process. This is particularly true with the increasing necessity for technology, the electronic health records (EHRs) mandate, and the sophisticated diagnostic equipment needed by most modern HCOs. Additionally, many hospitals have adopted just-in-time inventory, even for surgical supplies. These programs require close working relationships with vendors. A just-in-time inventory system allows the HCO to keep lower inventories of supplies. These supplies arrive “just in time” before cur- rent inventories are depleted. This system requires the HCO to forecast the need for specific types of supplies and to coordinate vendor delivery schedules with desired levels of inven- tory. Communication with vendors on a constant basis is needed to ensure that a system is operating correctly and that information flows on changes in needs or the development of new products and services are incorporated into operating procedures.

2.4 Strategic Planning as an Ongoing Process Strategic planning is not simply an event to be repeated once every three to five years. The word process can be defined as a series of actions or operations leading to an end. Here, we wish to emphasize the ongoing action of the planning process, which is sometimes referred to as the planning cycle. The actions are the activities in which the HCO engages to accomplish objectives and fulfill its mission. In today’s dynamic environments, these activities must con- tinually evolve.

There are several important reasons for viewing strategic planning as a process. The first reason is the idea that a process can be studied and improved. An HCO just getting involved in strategic planning will need to review the whole process on an annual basis, not only to account for changing environmental forces but to improve or refine the plan. Mission state- ments, objectives, strategies, and appraisal techniques can be fine-tuned over time as the planners gain more experience and as new and better information becomes available.

A second reason for viewing strategic planning as a process is that a change in any component of the process will affect most or all of the other components. For example, a change in mis- sion or objective will lead to new analysis, strategies, and evaluations. Thus, major changes that affect the organization must lead to a reevaluation of all the elements of the plan.

Summary & Resources

Finally, and perhaps most important, involvement in the strategic planning process can become the vehicle through which the whole organization mobilizes its energies to accom- plish its mission. If all members of the organization can participate in the process in some way, an atmosphere can be created within the organization that implies that doing the right things and doing things right is everyone’s job. Participation instills ownership. It is not my plan or their plan but our plan that becomes important, and everyone will want to contribute to make it happen.

2.5 Strategy Implementation and Evaluation While the primary focus of this textbook is on the strategic planning process, which results in the development of a strategic plan, some aspects of the implementation and evaluation of the planning process will be addressed. The strategic plan becomes the blueprint for carrying out the many activities in which an HCO is involved. Many other issues, beyond the scope of this textbook, determine the effectiveness of an organization. Those issues essentially revolve around implementing the strategic plan through (a) staffing and training personnel and other constituents, (b) developing organizational relationships among staff and constituents, (c) achieving commitment, (d) developing a positive organizational culture, (e) integrating lead- ership styles, and (f ) using personnel evaluation and reward systems.

Both effective planning and implementation are needed to create an effective organization. The strategic plan concentrates on doing the right things while implementation concentrates on doing things right. Doing the right things, and doing things right, are both elements of an effective and efficient organization. Doing the right things means that an organization’s strat- egies are moving the organization toward accomplishing its objectives while doing things right means that an organization is operating efficiently and meeting constituents’ needs.

Summary & Resources

Chapter Summary This chapter has presented an overview of the strategic planning process, in which a series of thought-provoking questions must be answered. The process is a set of integral steps that carries the planners through a sequence, which involves both providing answers to those questions and continually rethinking and reevaluating the answers as the organization and its environment change.

Key Points 1. The word strategic, when used in the context of planning, provides a perspective to

planning that is long run in nature and deals with achieving specified end results. Just as military strategy has as its objective the winning of the war, so, too, strategic planning has as its goal the achievement of your organization’s vision and mission— service to your clients. Strategic decisions must be differentiated from tactical deci- sions. Strategic decisions outline the overall game plan or approach, while tactical

Summary & Resources

decisions involve implementing various activities that are needed to carry out the larger strategy.

2. There is a difference between strategic planning and strategic management. Stra- tegic planning is part of the overall strategic management process and results in a strategic plan. Strategic management is the process of developing and implementing a strategic plan and then evaluating the plan’s success in reaching organizational objectives.

3. The strategic planning process is basically a matching process involving an HCO’s internal resources and its external opportunities. The objective of this process is to peer through the “strategic window” and identify opportunities that the individual organization is equipped to take advantage of or respond to. Thus, the strategic planning process can be defined as a managerial process that involves matching the healthcare organization’s capabilities with its opportunities. Strategic management is the process of developing and implementing a strategic plan and then evaluating the plan’s success in reaching organizational objectives.

4. A stakeholder has been defined as “persons or groups that have, or claim, owner- ship, rights, or interests in a corporation [HCO] and its activities, past, present, or future. Such claimed rights or interests are the result of transactions with, or actions taken by, the corporation [HCO], and may be legal or moral, individual or collective” (Clarkson, 1995, p. 106). Ideally, all of the organization’s stakeholders are involved, at least to some extent, in the strategic planning process.

5. Strategic planning is not simply an event to be repeated once every three to five years. The word process can be defined as a series of actions or operations leading to an end. Here, we wish to emphasize the ongoing action-aspect of the planning process, which is sometimes referred to as the planning cycle. The actions are the activities in which the HCO engages to accomplish objectives and fulfill its mission. In today’s dynamic environments, these activities must continually evolve.

Key Terms just-in-time inventory Allows the HCO to keep lower inventories of supplies. These supplies arrive “just in time” before current inventories are depleted.

mission An organization’s mission state- ment explains what the organization will do, for whom they will do it, and with what technologies.

objectives Key results the organization wants to accomplish within a given time period.

operational plan The “action” or “doing” stage during which an organization imple- ments its plan and hires, fires, builds, adver- tises, and so forth to create the activities needed to accomplish the strategic plan.

opportunities External gaps in what customers want or need and what is being offered to meet those needs.

organizational myopia Focusing on the short term and failing to consider the long- term direction of the organization.

organizational scope Involves the prod- ucts and services the organization will offer, the geographic location in which the firm operates, and the extent to which the firm is vertically integrated.

primary stakeholders People and organi- zations essential for the HCO’s survival, such as employees, medical staff, patients, third- party payers, and so forth.

Summary & Resources

secondary stakeholders Stakeholders that have a less essential relationship with the HCO but are nonetheless important. Exam- ples include professional associations, the media, and community groups.

stakeholder A person or group that has or claims ownership, rights, or interests in a corporation, such as an HCO, and its past, present, or future activities.

stakeholder analysis The process of identifying stakeholders; determining the relationship of the stakeholders to the HCO; incorporating the stakeholders’ wants or needs; and establishing how these wants or needs can be met.

strategic planning process A planning process that an organization uses to develop a strategic plan for its long-term direction.

strengths The capabilities of an organi- zation that give it a strong position in the environment.

SWOT An acronym for strengths, weak- nesses, opportunities, and threats, which provide a framework for organizational analysis.

threats External changes and challenges that an HCO must deal with to accomplish its objectives.

vision An organization’s vision statement explains what the organization aspires to be in the long run.

weaknesses Areas where the organiza- tion needs to improve/change to remain competitive.

Critical Thinking Questions 1. How would the strategic planning process differ between a large, multiunit hospital

and a medical clinic with three doctors? 2. Does the failure of a strategic plan to accomplish its stated objectives indicate that it

was a poorly conceived plan? 3. How does an HCO administration ensure that operational plans support the overall

strategic plan?

Web Resources The American Hospital Association’s policy research reports identify trends in healthcare that need to be addressed by hospitals when conducting their strategic plans. Current policy research reports can be referenced at http://www.aha.org/research/policy/2013.shtml and http://www.aha.org/research/policy/2014.shtml.

One problem involving stakeholders is that conflict often exists between the different stake- holder groups. That is, different stakeholders may have competing claims on the organiza- tion’s resources. Major stakeholders and some of their conflicts are explained at the Duke University Medical Center website at http://patientsafetyed.duhs.duke.edu/module_a/ - introduction/stakeholders.html.