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Chapter 9

Leadership and the Complex Health Organization: Strategically Managing the Organizational Environment Before It Manages You

“We need leadership on the fundamentals of eating right, exercising, and not smoking. I am interested in getting people to use the healthcare system at the right time, getting them to see the doctor early enough, before a small health problem turns serious.”

Donna Shalala,

U.S. News, “America’s Best Leaders”

Learning Objectives

Identify the strategic direction elements of the strategic plan, identify the other elements of the strategic and operational plan, describe each of these elements in summary, and outline what internal and external environmental factors influence the strategic plan.

Distinguish the levels of organizational culture and summarize the actions and behaviors a health leader would perform to proactively and positively change organizational culture.

Learning Objectives

Predict and relate how strategic planning can positively influence organizational culture, the internal environment, and how does strategy selection (competitive, adaptive, etc…) reinforce those changes to organizational culture and the internal environment.

Analyze how external and internal environmental factors influence the strategic plan and the organizational culture of a health organization.

Design a methodology to perform internal environmental scanning, monitoring and assessment and external environmental scanning, forecasting and monitoring for a hospital or group practice or public health organization or long-term care organization or stand-alone allied health practice or retail pharmacy.

Learning Objectives

Interpret the current external environmental factors in the health industry and relate the interpretation into a critical list for action for a health organization and appraise each element on the critical list for action as to where it should be addressed by the health organization (strategic plan, directional strategies, external or internal environment, organizational culture, etc…) noting that critical list items may impact more than one area of the health organization.

Leadership and the Complex Health Organization

Mission, Vision, Values, Strategies, Goals, Objectives and Action Steps

Leaders in health organizations utilize a strategic system of leadership and management.

The health leadership team most likely will utilize a strategic and operational planning process to derive an organization’s mission, vision, strategies, goals, objectives and action steps.

Leadership and the Complex Health Organization

Mission, Vision, Values, Strategies, Goals, Objectives and Action Steps

Mission, vision and values are guideposts that leaders utilize to focus the health organization’s collective energy and resources. “Mission, vision, values, and strategic goals are appropriately called directional strategies because they guide strategists when they make key organizational decisions.” A health organization’s mission is tied to its purpose. Purpose is what the organization does every day to meet the needs and demands of the external environment .

Leadership and the Complex Health Organization

Stakeholders are individuals, groups, community members (individual and collective), and companies that interact with your organization:

patients,

customers,

staff members,

suppliers, and

the community.

Stakeholders can directly and indirectly influence the success of your organization.

Leadership and the Complex Health Organization

An extension of purpose is a health organization’s mission. Mission is why your organization exists, what business it is in, who it serves and where it provides its products or services.

Vision is an aspiration of what the organization intends to become. Vision is the shared image of the future organization that places the organization in a better position to do it’s mission/fulfill its purpose.

Leadership and the Complex Health Organization

Strategies, goals and objectives are the sequential building blocks of planning to successfully achieve the mission but also to strive to achieve the vision of the health organization.

“Strategic goals are those overarching end results that the organization pursues to accomplish its mission and achieve its vision.”

Strategies follow “a decision logic of development.”

Swayne, Linda E.; Duncan, W. Jack & Ginter, Peter M. (2006). Strategic Management of Health

Care Organizations, 5th Ed., Malden, Massachusetts: Blackwell Publishing, pg. 229, Exhibit 6-3.

Leadership and the Complex Health Organization

Goals translate the broad strategies of the vision into specific statements for organizational action by focusing the organizational resources to achieve the strategy to build the vision.

Goals are broader statements, sometimes aspirations, and are hierarchically above objectives.

Leadership and the Complex Health Organization

Objectives align organizational resources to meet the stated goals.

Objectives should be measurable, assigned to a responsible person or agent or owner, have timelines for completion, and be frequently reviewed by the health organization leadership for progress and resource sufficiency.

Leadership and the Complex Health Organization

Action steps (or action plans) are created to produce a step by step or task level implementation sequence for each objective.

Each task in the action steps (or plan) has a responsible person(s) or owner, a time range for accomplishment and may have a measureable variable as well. Action step owners ‘report’ to the objective owner who ‘reports’ to the goal owner who ultimately reports to the leadership team at the strategy level.

Leadership and the Complex Health Organization

Mission, vision, values, strategies, goals, objectives and action steps are essential components of the strategic system of leadership and management.

Health leaders utilize the strategic system’s tools, such as planning (strategic and operational), to transform, guide and develop organizational culture to focus the collective energy and resources of the health organization to effectively, efficiently and efficaciously serve its purpose.

Leadership and the Complex Health Organization

“Strategy-making processes are organizational-level phenomena involving key decisions made on behalf of the entire organization.”

Dess, Gregory G. & Lumpkin, G. T. (2005). “Emerging Issues in Strategy Process Research,” The Blackwell Handbook of Strategic Management, Hitt, Michael A.; Freeman, R. Edward; & Harrison, Jeffrey S. (Eds.) Malden, Massachusetts: Blackwell Publishing, pg. 3.

Understanding the Internal Environment

Internal scanning, monitoring and assessment of the health organization are vital leadership activities; effective leaders are effective internal organization scanners, monitors and assessors.

The most important elements of understanding the internal health organization’s environment focus on systems such as the human resources management system, supply chain system, technological system, information system and culture and sub-cultures. The salient theme is one of integrated synergy among all the health organization’s systems.

Leadership and the Complex Health Organization

Specific areas of scanning, monitoring and assessing for the health leader are:

1) competitive advantage and the unique or distinctive competencies the organization possesses (centers of excellence for example);

2) strengths and weaknesses of the organization;

3) functional strategies for implementation of strategies that are supported by goals, objectives and action steps;

4) operational effectiveness, efficiency and efficacy; and

5) organizational culture (is the culture aligned with the organization’s direction?).

Leadership and the Complex Health Organization

Institutional

Institutional organizations and environments highlight the importance of social, political, and psychological aspects of organizational dynamics.

The institutional view, in essence, is an assessment of the organization’s situation as compared against a health leader’s pre-determined standard or benchmark or expectations as compared against competitors.

http://bizcovering.com/business/strategic-analysis-of-internal-environment-of-a-business-organization/, retrieved May 21, 2009.

Leadership and the Complex Health Organization

Institutional

Institutional organizations focus on the reproduction of organizational activities and routines in response to external pressures, expectations of professionals in the industry, and collective norms of the institutional environment.

Most often health organizations are a hybrid of institutional and technical environments.

Leadership and the Complex Health Organization

Resource Dependent

The resource dependent organization desires to maintain autonomy and remain relatively independent of their environment.

One of the basic propositions of the resource dependent organization is that leaders must be aware that the most efficient or effective organizations do not always survive. Not surprisingly, organizations with the most power survive.

Leadership and the Complex Health Organization

Resource Dependent

Power is defined as the ability to secure and maintain the most stable and most respected networks of resource chains.

In the resource dependent environment, the organization requires resources to gain and maintain power and therefore must (sometimes reluctantly) interact with the environment.

Pfeffer J. and Salancik, G. 1978. The external control of organizations: A resource dependence perspective, Harper Row Publishers.

Leadership and the Complex Health Organization

Contingent

Contingent organizations are more flexible and rely less on rigid policies and practices. These organizations utilize more loosely established internal best practices. This organization will be loosely coupled.

Within this type or organization, a leader’s success is based on a unique amalgam of internal and external factors. Organizational and environmental factors are contingent on each other.

Leadership and the Complex Health Organization

Contingent

The leadership approach is always based on the organization's current situation.

The underlying assumptions of contingent organizations are based on the premise that organizational structures are open and are not organizationally egalitarian, there is no one best way to organize and any one way of organizing is not equally effective in another organization.

The contingent view utilizes a scenario based methodology.

Leadership and the Complex Health Organization

Understanding the External Environment

Understanding the external environment focuses on scanning, monitoring, forecasting and assessing the macro and micro forces of the external environment.

Scanning involves identifying the subtle to dramatic signals of macro and micro forces change.

Monitoring focuses on deriving meaning from a pattern of observations from scanning macro and micro forces.

Leadership and the Complex Health Organization

Forecasting is the active development of projections and likely scenarios based on patterns indicated from monitoring.

Assessing is prioritizing and quantifying the impact of changes in the macro and micro forces external environment and considering scenario forecasts in that valuation.

Macro-Environmental Forces

Health Care Environmental Forces [Micro-Environmental Forces]

SWOT Analysis

Leadership and the Complex Health Organization

The PHEP program guidelines provide the basis for assessment of capabilities and functions for public health preparedness.

The HPP program guidelines provide the basis for assessment of capabilities and functions for healthcare delivery organizations/hospitals. Both of these programs are funded and managed separately but now require alignment and integration to provide a better ‘picture’ of preparedness.

Leadership and the Complex Health Organization

Horizontal

Horizontal organizations are organizations that have cooperative relationships, affiliations or ownership rights with multiple outside agents and actors.

Horizontal organizations seek to maintain a level of homeostasis with all elements internal and external to the establishment.

Leadership and the Complex Health Organization

Vertical

The horizontal organization is in stark contrast to the vertical organization.

The vertical organization builds a monument unto itself and seeks to minimize reliance on any and all outside stakeholders and actors.

In the true sense of organizational dynamics there are actually few true vertical organizations. As a result, when we speak of vertical organizations, we refer to organizations that attempt to control the environment first rather than living in the environment and becoming a participatory member within the community.

Leadership and the Complex Health Organization

Dynamic

Dynamic organizations are those that do not fit either a vertical or horizontal organization. However, there is a tendency for many dynamic organizations to fit into the open and horizontal architecture

Different possibilities in the environmental characteristics constantly require the creation of new and different ways of positioning the organization for success.

Leadership and the Complex Health Organization

Organizational Culture

From a broad perspective, health leaders assess the external and internal environments of the organization, determine what organizational culture will best meet the needs of the external environment, then design, develop, implement, and refine the organizational culture.

From this "big picture" view, leadership seems simple, yet accomplishing the task of organizational alignment with the external environment requires a focused, clear appealing vision that is well communicated and leadership and management team actions consistent with that vision.

Leadership and the Complex Health Organization

Organizational Culture

From this standpoint, leaders must be knowledgeable and competent about organizational dynamics, culture, communication, assessment and analysis, and change management.

All of these areas are important, yet culture is the fabric that weaves all of these components together.

Leadership and the Complex Health Organization

To begin moving an organizational culture toward change, the health leader should:

Model the behavior you expect yourself;

Communicate expectations and train other leaders, managers and staff;

Revise structures and reporting relationships;

Conduct team based planning and policy development;

Use primary and secondary mechanisms (discussed later in this chapter)

Leadership and the Complex Health Organization

To begin moving an organizational culture toward change, the health leader should:

Be consistent and communicate often to the organization; and

Continue to scan, monitor and assess the internal health organization environment while you scan, monitor, forecast and assess the external environment.

Leadership and the Complex Health Organization

Defining Organizational Culture

Organizational culture is a complex construct that incorporates many concepts and multitudes of variables. Organizational culture consists of a large set of largely ignored or invisible assumptions that deal with how group members interpret both their external relationships (external environment) and their internal relationships with each other. Culture is an outcome of group learning. As people solve problems together successfully, a condition for culture formation exists.

Leadership and the Complex Health Organization

Defining Organizational Culture

Edgar Schein, defines culture as a pattern of basic assumptions that are invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and integration; these assumptions have worked well enough to be considered valid and, therefore has to be taught to new members as the correct way to perceive, think, and feel in relation to their problems, challenges, and opportunities.

Leadership and the Complex Health Organization

Organizational Culture Levels

Level 1. Artifacts and Creations: these are most visible and include the organization’s constructed social and physical environment. This level includes technology, art, visible and audible behavior patterns (visible but often not decipherable) such as written and spoken language, overt behaviors, and how members demonstrate status;

Leadership and the Complex Health Organization

Organizational Culture Levels

Level 2. Values: These are testable in the physical environment; testable only by social consensus (such as taking care of patients). Central values that provide the day-to-day operating principles by which the members of the culture guide their behavior. As values are taken for granted, they gradually become beliefs and drop out of consciousness, just as habits become unconscious and automatic; and

Leadership and the Complex Health Organization

Organizational Culture Levels

Level 3. Basic Underlying Assumptions: These include relationship to the environment; nature of reality, time and space; nature of human nature; nature of human activity; nature of human relationships (taken for granted, invisible, preconscious) the implicit assumptions that tell group members how to perceive, think about, and feel about things. These assumptions are taken for granted; members would find behavior based on any other premise inconceivable.

Leadership and the Complex Health Organization

Organizational Culture Typologies

Interpersonal Interaction Model: This typology categorizes organizational cultures into one of four types:

Power Culture - strong leaders are needed to distribute resources. Leaders are firm, but fair and generous to loyal followers. If the organization is badly led there is rule by fear, abuse of power for personal gain, and political intrigue;

Leadership and the Complex Health Organization

Achievement Culture – results are rewarded, not unproductive efforts. Work teams are self-directed. Rules and structure serve the system, but not as an end by themselves. A possible downside is sustaining energy and enthusiasm over time;

Support Culture – employee’s are valued as people, as well as a workers. Employee harmony is important. The weakness is a possible internal commitment without an external task focus; and

Leadership and the Complex Health Organization

Role Culture - rule of law with clear responsibilities and reward systems are clear with tight coupling. This type provides stability, justice, and efficiency. The weakness is impersonal operating procedures and a stifling of creativity and innovation.

Leadership and the Complex Health Organization

Societal Expression Cultures

There are different types of culture just like there are different types of personality. Sonnenfeld identified the following four types of cultures:

Academy Culture - Employees are highly skilled and tend to stay in the organization, while working their way up the ranks. The organization provides a stable environment for employees to develop and exercise their skills. Examples are universities, hospitals, large corporations, etc…;

Leadership and the Complex Health Organization

Societal Expression Cultures

Baseball Team Culture - Employees are "free agents" who have highly prized skills. They are in high demand and can rather easily get jobs elsewhere. This type of culture exists in fast-paced, high-risk organizations, such as investment banking, advertising, etc…;

Leadership and the Complex Health Organization

Societal Expression Cultures

Club Culture - The most important requirement for employees in this culture is to fit into the group. Usually employees start at the bottom and stay with the organization. The organization promotes from within and highly values seniority. Examples are the military, some law firms, etc...;

Leadership and the Complex Health Organization

Societal Expression Cultures

Fortress Culture - Employees don't know if they'll be laid off or not. These organizations often undergo massive reorganization. There are many opportunities for those with timely, specialized skills. Examples are savings and loans, large car companies, etc….

http://www.managementhelp.org/org_thry/culture/culture.htm, retrieved September 14, 2007.

Leadership and the Complex Health Organization

Defining Leadership from an Organizational Culture Context

The unique and important function of leadership, contrasted with management or administration, is the conceptualization, creation and management of organizational culture. Culture is a learned and evolved system of knowledge, behavior, attitudes, beliefs, values, and norms that is shared by a group of people.

Leadership and the Complex Health Organization

Defining Leadership from an Organizational Culture Context

“Leaders go beyond a narrow focus on power and control in periods of organizational change. They create commitment and energy among stakeholders to make the change work. They create a sense of direction, then nurture and support others who can make the new organization a success.”

Health leaders led people and manage resources within a framework of organizational culture.

Leadership and the Complex Health Organization

Changing and Adapting Organizational Culture

Primary Embedding Mechanisms

Health leaders have a set of powerful tools, behaviors, and mechanisms to develop, refine, maintain or change organizational culture. These are:

What leaders pay attention to, measure, and control;

Leader reactions to critical incidents and organizational crises;

Leadership and the Complex Health Organization

Deliberate role modeling, teaching, and coaching by leaders;

Criteria for allocation of rewards and status; and

Criteria for recruitment, selection, promotion, retirement, and excommunication.

Leadership and the Complex Health Organization

Secondary Reinforcement Mechanisms

The Secondary Articulation and Reinforcement Mechanisms reinforce the primary embedding mechanisms. The following are of the most importance:

The organization’s design and structure;

Organizational systems and procedures;

Design of physical space, facades, and buildings;

Stories, legends, myths, and parables about important events and people; and

Formal statements of organizational philosophy, creeds, and charters.

Leadership and the Complex Health Organization

Secondary Reinforcement Mechanisms

Schein calls these "secondary" because they work only if they are consistent with the primary mechanisms.

Leadership and the Complex Health Organization

Discussion Questions

What are the strategic direction elements of the strategic plan, what are the other elements of the strategic and operational plan, and what are the different challenges a health leader faces in institutional, resource dependent and contingent environments? What strategies might you suggest the leader could implement for successful outcomes?

Discuss the levels of organizational culture and summarize the actions and behaviors a health leader would perform to proactively and positively change organizational culture.

Discussion Questions

Can you predict and relate how strategic planning can positively influence organizational culture, the internal environment, and how does strategy selection (competitive, adaptive, etc…) reinforce those changes to organizational culture and the internal environment? How?

Discussion Questions

Can you analyze how external and internal environmental factors influence the strategic plan and the organizational culture of a health organization highlighting the basic differences between vertical and horizontal external environments as compared to internal institutional, resource dependent and contingent environments? What are the strategies a health leader operating in these environments might be able to leverage to ensure success?

Discussion Questions

Discuss a methodology to perform internal environmental scanning, monitoring and assessment and external environmental scanning, forecasting and monitoring for a hospital or group practice or public health organization or long-term care organization or stand-alone allied health practice or retail pharmacy.

Discussion Questions

Explain how you would interpret the current external environmental factors in the health industry and relate the interpretation into a critical list for action for a health organization. How could you appraise each element on the critical list for action as to where it should be addressed by the health organization (strategic plan, directional strategies, external or internal environment, organizational culture, etc…) noting that critical list items may impact more than one area of the health organization?

Exercises

Identify the different challenges a health leader faces in institutional, resource dependent and contingent environments? What strategies should a health leader implement for successful outcomes? Write this answer in one to two pages (1 – 2).

Summarize the levels of organizational culture and estimate the actions and behaviors a health leader would perform to proactively and positively change organizational culture in one to one and a half (1 – 1 ½) pages.

Exercises

Analyze how external and internal environmental factors influence the strategic plan and the organizational culture of a health organization highlighting the basic differences between vertical and horizontal external environments as compared to internal institutional, resource dependent and contingent environments? What are the strategies a health leader operating in these environments might be able to leverage to ensure success? Provide your answer in two to three (2 – 3) pages.

Exercises

Evaluate and interpret the current external environmental factors in the health industry and relate the interpretation into a critical list for action for a health organization. How could you appraise each element on the critical list for action as to where it should be addressed by the health organization (strategic plan, directional strategies, external or internal environment, organizational culture, etc…) noting that critical list items may impact more than one area of the health organization?

Exercises