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7.3 Organizational Change and Redesign

Organizational Design and Change

For many years, the world of business has experienced an increasing rate of change, as was predicted by Alvin Toffler (1970) nearly half a century ago. This trend has accelerated in healthcare. Toffler noted that people exhibit a natural tendency to resist change. In this section, drivers or forces that lead to change are examined first, followed by a discussion of resistance to change. Then, methods of implementing changes are described, and the impact of change on employees and managers, particularly as it relates to organizational design and healthcare, is discussed.

Drivers of Change

Two major sets of forces drive change in both profit-seeking and nonprofit organizations: internal drivers and external drivers. Each factor appears in the management of healthcare organizations.

Internal Forces

Many times, the feature that creates the greatest need for change originates from within the organization. These factors come from diverse sources, including organizational growth, a crisis, or an opportunity.

CASE Combining Assets and Activities

The community of Tampa, Florida, has a diverse population, with healthcare being provided to persons with low incomes, extremely wealthy individuals, and a strong middle class. Three well-established physicians—an obstetrician, a gynecologist, and a urology specialist—decided that they should combine their practices into a unique new organization. They believed that numerous patients would be attracted to these separate, but interrelated, medical practices.

The three physicians worked together to create a plan. They decided that each physician would have privileges, or authority to practice, in more than one organization. Beyond their individual practices, the doctors would perform surgeries and provide additional medical care in several local area hospitals. In the new practice, their days would be divided into times in which they tend to routine examinations, to patients with medical problems that are not emergencies, to making rounds at the hospital to check up on patients, and to conducting other medical care.

The new organization would be housed in a major medical building. A support staff, consisting of those who could help with patient scheduling, insurance claims, billing, and other office duties, would be combined with three full-time nursing assistants. The physicians chose one individual for the role of office manager to oversee all of the support activities.

The obstetrician also employed a clinical nurse practitioner with responsibilities that would be more medically complex than those usually associated with nursing. The obstetrician found the practitioner's help particularly useful to her practice.

The new organization intended to hire one more person to serve as a liaison to the hospitals that the physicians attended, with the goal of ensuring smooth coordination between the newly formed organization and the hospitals. The new person would be in charge of resolving any disputes or disagreements.

This new organization, which had yet to determine its name, would be a partnership. The three physicians would share authority and the direction of the medical practice. Decisions about difficult issues, such as adding a new form of care or bringing in an additional partner, would be made by majority rule, or agreement by two of the three doctors. The three physicians agreed that they should eventually grow to the point at which each had a second specialist in his or her area, which would expand the organization to six doctors. They believed the benefit of such growth would be having a person to answer calls when another specialist was unavailable. It would also potentially increase the number of specific medical procedures the unit would be able to offer to the community.

With these principles in mind, the physicians agreed it was time to design the organization.

Describe the vertical and horizontal dimensions of this organization. Describe the authority and responsibility relationships present in this organization.

Should this practice become centralized, decentralized, mechanistic, or organic in its design? Defend your answer.

Explain the importance of differentiation; integration; and managing complexity, interdependence, and boundary-spanning activities for this organization.

Draw an organization chart for this practice and explain which form of departmentalization you believe best fits the unit.

© iStockphoto/Thinkstock

Biomedical and biotechnology innovations create opportunities for growth and change in healthcare organizations.

Organizational growth creates the necessity for change. As organizations grow in size, the degree of complexity increases. Specialists are added, and the scope of the organization's influence rises. Any healthcare organization experiencing growth and success faces a need for additional short-term (working) and long-term capital. For example, new treatment programs dictate that organizational leaders must delegate authority so that managers and physicians can function effectively. Blau and Schoenherr's theory (1971) regarding the relationship between organizational size and the degree of decentralization and Chandler's (1962) analysis of the relationship between organizational strategies and organizational structure both indicate that growing organizations face the need to change how they will be managed, including the organization's structural design. These concepts clearly apply to healthcare management.

A crisis constitutes the second force that drives change in organizations. As noted by J. D. Thompson (1967), organizational leaders tend to respond to crises by altering structural arrangements, including the creation of new departments or subunits specifically assigned to cope with the crisis, such as a major outbreak of a new disease in a given geographic area. In medicine, crises also arise when patients are misdiagnosed or when medicines are brought to the market with highly negative side effects, leading to government investigations, negative publicity, and lawsuits.

One primary factor that generates change in healthcare organizations is the presence of a new opportunity. Medical innovations occur regularly. New diagnosis and treatment systems arise from technological innovations, research efforts by scientists and pharmaceutical companies, and the newest inventions that come as the result of biomedical and biotechnology efforts. Individual physicians, groups of doctors, hospitals, and others in the healthcare industry constantly need to adapt to the opportunities presented by groundbreaking new procedures, machines, and medicines. For example, the move from CT scans to more intricate and sophisticated MRI diagnostics led to changes in patient evaluations and treatments.

External Forces

Healthcare organizations do not function in a vacuum. External factors often influence internal activities in every type of medical practice. The external forces that create the need for change are those that originate in the organization's environment, including political, social, economic, and competitive drivers.

As described in Chapter 1 and elsewhere, numerous political forces influence healthcare, including changes in laws, court decisions, and government competition in the industry. Social trends also have an impact on healthcare. Most recently, the intersection of political and social drivers may be seen in the ways that states and the federal government view same-sex couples seeking to marry or form partnerships. Economic factors also shape individual decisions not only about seeking healthcare but also about budgets in healthcare organizations. Continuing competition also influences organizations and causes them to change in response to efforts by other groups.

In summary, internal change originates from success, failure, and opportunity. External change can be driven by all of the factors that make up the external environment. At that point, although healthcare managers can expect resistance, they still must implement changes and responses to these forces.

WEB FIELD TRIP

In an interview about governance in the ever-changing healthcare industry, Anne McGeorge (national managing partner of Grant Thornton LLP's healthcare practice) and Dr. Lawrence Prybil (professor of health services management and principal investigator of Governance in USA's Largest Nonprofit Health Systems) share their expert opinions. Visit http://www.acg.org to read their interview.

In the search field, type "Governance in a Dynamic Healthcare Environment." On the results page, click on the first entry to open the PDF file. Read page two.

According to McGeorge, why are more physicians teaming up with hospitals rather than maintaining a stand-alone practice? What drivers of change are precipitating this trend?

According to Prybil and McGeorge, what are the biggest challenges to hospitals as they integrate and coordinate with physicians? How do you think these challenges could be overcome?

Resistance to Change

People resist change for a variety of more or less logical reasons. Among the more common rationales are the following:

Self-interest

Lack of understanding

Lack of trust in management

Differing assessments of the need for change

Low tolerance for change (Kotter & Schlesinger, 1979)

Individuals resist change for reasons of self-interest when they realize that levels of power, money, prestige, job security, and personal convenience are at stake. For example, over time, a person's investment in a company escalates as pension funds accumulate and the person's allowed vacation time rises. The chance for being promoted or enjoying the benefits of seniority also grow. This person would likely resist any change that might affect these benefits or advantages. The investments would drive resistance to change as the employee seeks to maintain the status quo (Patti, 1974).

Resistance can also be based on simply not understanding why a change has become necessary, such as when an employee who does not use computers does not understand why a digital medical report would be a good idea for a physician's practice or a unit within a hospital. At other times, employees do not trust management's motives—in essence, thinking or asking, "What are they really up to when they asked for this change?"

Differing assessments of the need for change occur when employees do not view a change as necessary, as managers and employees sometimes do not see eye to eye on the nature of the issue. Those with a low tolerance for change also tend to be resistant.

Implementing Change

The major challenge that managers face when implementing change in healthcare and other circumstances involves two elements. First, the manager must identify and understand the nature of the resistance to change. Second, the manager must develop a logical, sequential program designed to overcome that resistance while implementing change. Lewin's (1951) three-step model and Kotter's (1996) eight-step plan both offer guidance in the process of overcoming resistance to change.

Lewin's Three-Step Model

According to Lewin (1951), successful change takes place when three steps occur. The first, unfreezing, requires a change agent to deal with resistance by addressing individual resistance and pressures for group conformity. The tactics displayed in Table 7.3 can provide assistance in the unfreezing process.

Table 7.3 Overcoming resistance to change
Strategy	Example
Education and communication	Explaining the necessity for change and answering questions
Participation and involvement	Engaging workers in making the change
Facilitation and support	Carefully planning the change; carrying out the plan
Negotiation and agreement	Using the bargaining approach
Manipulation and cooperation	Using the political approach
Explicit and implicit coercion	Using managerial power
Source: Adapted from John P. Kotter and Leonard A. Schlesinger (1979). Choosing strategies for change. Harvard Business Review, March–April, p. 111.

Managers choose from these strategies based on the nature of the change—the greater the degree of change, the larger the number of tactics that will be employed. As an example, a hospital administrator seeking to change nursing schedules from four 10-hour shifts per week to three 12-hour shifts per week would expect to encounter some resistance. The manager should begin with an explanation of why the changes are necessary (education and communication) and might involve the nursing staff in setting up the new schedule (participation and involvement). Use of the two strategies would likely be sufficient for such a change. Conversely, the decision to close a hospital's emergency room due to cost and liability considerations would likely be met with substantial resistance from a variety of employee groups. Thus, the manager would expect to employ nearly every tactic in Table 7.3, including careful planning prior to announcing the change, bargaining with various union groups, subtle political threats to the most-resistant employees or groups, and coercion as a final resort.

Movement, the second step in Lewin's system, considers the status quo and where the company must go. Driving forces within this stage help direct behavior toward the new end through the deployment of strategies chosen from the list in Table 7.3. Restraining forces seek to maintain the status quo, or the resistance to change factors previously noted. Managers try to increase driving forces while reducing those restraining forces. Persuasion tactics are valuable allies in this stage.

The third step, called refreezing, seeks to make the change permanent. Reinforcements or rewards, such as pay raises or bonuses, positive comments on performance reviews, and consideration for promotion to higher ranks, can serve as refreezing agents. Managers that role-model the new method of operation also provide impetus to accept the new reality.

Kotter's Eight-Step Plan

A second approach to overcoming resistance and implementing organizational change, developed by John Kotter (1996), builds on Lewin's three-step model and adds detail. In this system, change involves the following:

Establishing a sense of urgency and a compelling reason to make the change

Forming a power coalition to lead the change

Creating a new vision with supporting strategies

Communicating the vision to all employees

Empowering others to act on the vision, including encouraging risk taking and creativity

Planning for and rewarding short-term "wins" that move toward the new vision

Consolidating improvements, reassessing changes, and making adjustments

Reinforcing the changes by showing the relationship of those changes to organization success

© Digital Vision/Thinkstock

Change affects both managers and nonmanagerial employees.

No matter which approach is used, managers should remember that change is often an unsettling process. They should expect individual employees to be uncomfortable for a time.

As an example, a hospital's management team might decide that the time has come to move away from "silos" of patient treatment to a more integrated, team-based approach, such as the method used at the Mayo Clinic (described in Chapter 3). In Step 1, the management team cites patient satisfaction statistics, cost factors, and medical outcome information that suggests the time has come to make a change in patient treatment. In Step 2, management assigns a task force to investigate the best methods for implementing such a dramatic change. Top managers create and communicate the vision of a more "sophisticated," "caring" and "patient-centered" approach to case management (Steps 3 and 4). Individual physicians and diagnosticians who willingly join in the process are publicized and praised, including bonuses and other rewards for successfully treated patient cases (Steps 5 and 6). Over time, the system will require adjustments and assessments (Step 7) and new statistics will need to be developed to document that the new approach has indeed achieved its objectives (Step 8).

The Impact of Change

When healthcare organizations make changes, what is the impact of change on employee roles? Changes or modifications to an organization's structure and everyday functioning can create a series of outcomes, including the following:

The number and types of decisions made at all ranks

The amount of authority held at all levels

The number of tasks performed by entry-level employees

The formality of relationships

Role clarity and role ambiguity

Perceived chances for advancement (Baack, 2012)

Decision Making

Organizational Redesign: Mercy Hospital and Medical Center

Organizational design features, including standardization, formalization, centralization, decentralization, and mechanistic or organic dimensions, exhibit a major impact on the ways in which organizational designs emerge in companies. For example, in an organization that is in the process of becoming more centralized, decisions made at the top of the hierarchy will be implemented at lower levels, turning lower-ranking supervisors into order followers. In an organization that is in the process of becoming more decentralized, on the other hand, lower-level managers will begin making more decisions, and these decisions will be less routine and more specialized.

Due to the specialized expertise required in most healthcare circumstances, it would seem logical that as an organization grows in size, it would be expected to evolve into a more decentralized and organic form. As a result, managers in various departments of hospitals or large organizations could expect to make more impactful decisions about their units, and persons of lower rank would be involved in the decision-making process.

Authority

The mechanistic/organic and centralized/decentralized aspects of design exert the greatest impact on the distribution of authority. In centralized organizations, lower-ranking managers hold reduced levels of authority. In decentralized, organic firms, delegation increases authority held at lower ranks. Thus, an organization that moves from mechanistic to organic or vice versa will experience shifts in the nature and delegation of authority.

Authority and responsibility relationships are unique in healthcare, especially in cases involving visiting physicians with privileges who are contracted to work in a hospital but who are not employed by the hospital. Authority in those situations is often transitory in terms of nurses and other attendants. At the same time, however, the nurse or medical assistant encounters a sense of obligation or responsibility that includes the patient, the physician, and the larger organization. This form of complexity makes managerial and employee roles more complicated than in other circumstances.

Tasks

Division of labor directly affects the number of tasks performed at lower and entry levels. In mechanistic and bureaucratic organizations, division of labor directs managers to create routine, repeated tasks for first-line employees. As a healthcare organization moves to a more organic form of structure, however, individual employees will find their jobs to be less routine, with more tasks. When transitioning from one form to another, healthcare administrators will need to adapt to directing activities.

Formality of Relationships

Standardization, formalization, centralization, and mechanistic dimensions rely more on formal relationships between employees, especially between those of differing rank. A change toward greater decentralization and a more organic structure will lead to increased interactions between ranks and a likely decline in formality between employees and with supervisors. At the same time, however, a physician who is not employed by the organization may continue to expect more formal interactions, insisting on being referred to as "Doctor" and maintaining a distance from those employed by the hospital.

Role Clarity and Ambiguity

Role clarity occurs when an employee has a clear understanding of his or her job and responsibilities. Increased role clarity can be associated with reduced levels of stress and greater satisfaction with the job, as the employee has an unambiguous sense of direction. Standardization, formalization, centralization, bureaucracy, and a mechanistic design all contribute to increased role clarity. Role ambiguity rises in other circumstances and designs, such as in companies with more organic or decentralized forms of organizational structure. Many healthcare providers that function in groups and teams create higher levels of role ambiguity as part of those arrangements.

Perceived Chances for Advancement

Organizational hierarchies with greater numbers of levels (vertical) and lower spans of control (horizontal) offer the best possibility of receiving a promotion. More openings are likely to occur, and less competition from members of the same department will be present. In essence, a mechanistic organizational hierarchy creates increased perceptions that a person may obtain a promotion.

In summary, changes in structure affect both managers and nonmanagerial employees. The natures of jobs will be altered, as will relationships between managers and subordinates. In essence, a dynamic organization should anticipate changes in plans, operations, organizational structure, jobs, and managerial activities.

CASE A Virtual Change

The influence of technology on medicine has been profound throughout the ages. In the past century, methods of diagnosis, the understanding of disease, and the remedies available to help patients have all changed dramatically. Currently, the medical community stands poised to achieve an even greater and more profound impact on various illnesses due to evolving technologies in a variety of areas.

The emergency care department of Mount Hope hospital recently adopted a new technology designed to boost its efficiencies and effectiveness in treating patients. The emergence of digital technologies now makes it possible to transmit photos of those being treated, along with a variety of diagnostics, including blood pressure, heart rate, respiratory rates, and other vital information. These new technologies make first responders the eyes and ears of the emergency unit.

Some employees in the unit, however, have expressed concerns that too much authority has accrued to emergency medical technicians (EMTs) and other first responders. They worry that these individuals will try to evolve from transmitting information to offering on-the-scene diagnoses and that such individuals are not trained to perform these activities. Others worry that all of the diagnostic programs can slow the time of moving the patient from the scene of an accident or a person's home to the hospital. Such delays are often associated with increased deaths and other medical complications.

The hospital's top management team has also proposed a second innovation: To speed the process of obtaining X-rays and other diagnoses, they propose equipping ambulances with mobile X-ray devices that can send images to specialists assigned to read them, with many of these specialists located in India. The managers at Mount Hope argue that in the middle of the night, it is daytime on the other side of the world. Thus, it would be less expensive and more efficient to have these images read from far away, facilitated by improvements in satellite transmission devices, the Internet, and other methods of sending digital information.

The physicians, nurses, and other medical specialists at Mount Hope have raised strong objections to this second proposal. Their arguments range from concerns about the level of skill of diagnostic technicians not trained in the United States to worries about the technology breaking down at exactly the wrong time. What would happen, for example, if the hospital were damaged by a major storm or tornado, and no satellite images were possible?

A meeting has been scheduled between top management and members of the emergency care unit. An outside medical specialist has been employed to mediate the meeting. Both sides are equally tense about the potential outcome.

What factors are driving the resistance to change in this scenario? Is the resistance justified?

Who is the boundary spanner in this case? How should that person conduct his or her job?

What strategy for overcoming resistance to change should Mount Hope's top management have employed before all of the current objections? Would the strategy have decreased or prevented the resistance? Why or why not?

What impact will the implementation of these new changes have on managers in the emergency room? What impact will it have on all other employees?

7.3 Organizational Change and Redesign

Organizational Design and Change

For many years, the world of business has experienced an increasing rate of change, as was predicted by Alvin Toffler (1970) nearly half a century ago. This trend has accelerated in healthcare. Toffler noted that people exhibit a natural tendency to resist change. In this section, drivers or forces that lead to change are examined first, followed by a discussion of resistance to change. Then, methods of implementing changes are described, and the impact of change on employees and managers, particularly as it relates to organizational design and healthcare, is discussed.

Drivers of Change

Two major sets of forces drive change in both profit-seeking and nonprofit organizations: internal drivers and external drivers. Each factor appears in the management of healthcare organizations.

Internal Forces

Many times, the feature that creates the greatest need for change originates from within the organization. These factors come from diverse sources, including organizational growth, a crisis, or an opportunity.

CASE Combining Assets and Activities

The community of Tampa, Florida, has a diverse population, with healthcare being provided to persons with low incomes, extremely wealthy individuals, and a strong middle class. Three well-established physicians—an obstetrician, a gynecologist, and a urology specialist—decided that they should combine their practices into a unique new organization. They believed that numerous patients would be attracted to these separate, but interrelated, medical practices.

The three physicians worked together to create a plan. They decided that each physician would have privileges, or authority to practice, in more than one organization. Beyond their individual practices, the doctors would perform surgeries and provide additional medical care in several local area hospitals. In the new practice, their days would be divided into times in which they tend to routine examinations, to patients with medical problems that are not emergencies, to making rounds at the hospital to check up on patients, and to conducting other medical care.

The new organization would be housed in a major medical building. A support staff, consisting of those who could help with patient scheduling, insurance claims, billing, and other office duties, would be combined with three full-time nursing assistants. The physicians chose one individual for the role of office manager to oversee all of the support activities.

The obstetrician also employed a clinical nurse practitioner with responsibilities that would be more medically complex than those usually associated with nursing. The obstetrician found the practitioner's help particularly useful to her practice.

The new organization intended to hire one more person to serve as a liaison to the hospitals that the physicians attended, with the goal of ensuring smooth coordination between the newly formed organization and the hospitals. The new person would be in charge of resolving any disputes or disagreements.

This new organization, which had yet to determine its name, would be a partnership. The three physicians would share authority and the direction of the medical practice. Decisions about difficult issues, such as adding a new form of care or bringing in an additional partner, would be made by majority rule, or agreement by two of the three doctors. The three physicians agreed that they should eventually grow to the point at which each had a second specialist in his or her area, which would expand the organization to six doctors. They believed the benefit of such growth would be having a person to answer calls when another specialist was unavailable. It would also potentially increase the number of specific medical procedures the unit would be able to offer to the community.

With these principles in mind, the physicians agreed it was time to design the organization.

1. Describe the vertical and horizontal dimensions of this organization. Describe the authority and responsibility relationships present in this organization.

2. Should this practice become centralized, decentralized, mechanistic, or organic in its design? Defend your answer.

3. Explain the importance of differentiation; integration; and managing complexity, interdependence, and boundary-spanning activities for this organization.

4. Draw an organization chart for this practice and explain which form of departmentalization you believe best fits the unit.

© iStockphoto/Thinkstock

Biomedical and biotechnology innovations create opportunities for growth and change in healthcare organizations.

Organizational growth creates the necessity for change. As organizations grow in size, the degree of complexity increases. Specialists are added, and the scope of the organization's influence rises. Any healthcare organization experiencing growth and success faces a need for additional short-term (working) and long-term capital. For example, new treatment programs dictate that organizational leaders must delegate authority so that managers and physicians can function effectively. Blau and Schoenherr's theory (1971) regarding the relationship between organizational size and the degree of decentralization and Chandler's (1962) analysis of the relationship between organizational strategies and organizational structure both indicate that growing organizations face the need to change how they will be managed, including the organization's structural design. These concepts clearly apply to healthcare management.

A crisis constitutes the second force that drives change in organizations. As noted by J. D. Thompson (1967), organizational leaders tend to respond to crises by altering structural arrangements, including the creation of new departments or subunits specifically assigned to cope with the crisis, such as a major outbreak of a new disease in a given geographic area. In medicine, crises also arise when patients are misdiagnosed or when medicines are brought to the market with highly negative side effects, leading to government investigations, negative publicity, and lawsuits.

One primary factor that generates change in healthcare organizations is the presence of a new opportunity. Medical innovations occur regularly. New diagnosis and treatment systems arise from technological innovations, research efforts by scientists and pharmaceutical companies, and the newest inventions that come as the result of biomedical and biotechnology efforts. Individual physicians, groups of doctors, hospitals, and others in the healthcare industry constantly need to adapt to the opportunities presented by groundbreaking new procedures, machines, and medicines. For example, the move from CT scans to more intricate and sophisticated MRI diagnostics led to changes in patient evaluations and treatments.

External Forces

Healthcare organizations do not function in a vacuum. External factors often influence internal activities in every type of medical practice. The external forces that create the need for change are those that originate in the organization's environment, including political, social, economic, and competitive drivers.

As described in Chapter 1 and elsewhere, numerous political forces influence healthcare, including changes in laws, court decisions, and government competition in the industry. Social trends also have an impact on healthcare. Most recently, the intersection of political and social drivers may be seen in the ways that states and the federal government view same-sex couples seeking to marry or form partnerships. Economic factors also shape individual decisions not only about seeking healthcare but also about budgets in healthcare organizations. Continuing competition also influences organizations and causes them to change in response to efforts by other groups.

In summary, internal change originates from success, failure, and opportunity. External change can be driven by all of the factors that make up the external environment. At that point, although healthcare managers can expect resistance, they still must implement changes and responses to these forces.

WEB FIELD TRIP

In an interview about governance in the ever-changing healthcare industry, Anne McGeorge (national managing partner of Grant Thornton LLP's healthcare practice) and Dr. Lawrence Prybil (professor of health services management and principal investigator of Governance in USA's Largest Nonprofit Health Systems) share their expert opinions. Visit http://www.acg.org to read their interview.

In the search field, type "Governance in a Dynamic Healthcare Environment." On the results page, click on the first entry to open the PDF file. Read page two.

· According to McGeorge, why are more physicians teaming up with hospitals rather than maintaining a stand-alone practice? What drivers of change are precipitating this trend?

· According to Prybil and McGeorge, what are the biggest challenges to hospitals as they integrate and coordinate with physicians? How do you think these challenges could be overcome?

Resistance to Change

People resist change for a variety of more or less logical reasons. Among the more common rationales are the following:

· Self-interest

· Lack of understanding

· Lack of trust in management

· Differing assessments of the need for change

· Low tolerance for change (Kotter & Schlesinger, 1979)

Individuals resist change for reasons of self-interest when they realize that levels of power, money, prestige, job security, and personal convenience are at stake. For example, over time, a person's investment in a company escalates as pension funds accumulate and the person's allowed vacation time rises. The chance for being promoted or enjoying the benefits of seniority also grow. This person would likely resist any change that might affect these benefits or advantages. The investments would drive resistance to change as the employee seeks to maintain the status quo (Patti, 1974).

Resistance can also be based on simply not understanding why a change has become necessary, such as when an employee who does not use computers does not understand why a digital medical report would be a good idea for a physician's practice or a unit within a hospital. At other times, employees do not trust management's motives—in essence, thinking or asking, "What are they really up to when they asked for this change?"

Differing assessments of the need for change occur when employees do not view a change as necessary, as managers and employees sometimes do not see eye to eye on the nature of the issue. Those with a low tolerance for change also tend to be resistant.

Implementing Change

The major challenge that managers face when implementing change in healthcare and other circumstances involves two elements. First, the manager must identify and understand the nature of the resistance to change. Second, the manager must develop a logical, sequential program designed to overcome that resistance while implementing change. Lewin's (1951) three-step model and Kotter's (1996) eight-step plan both offer guidance in the process of overcoming resistance to change.

Lewin's Three-Step Model

According to Lewin (1951), successful change takes place when three steps occur. The first, unfreezing, requires a change agent to deal with resistance by addressing individual resistance and pressures for group conformity. The tactics displayed in Table 7.3 can provide assistance in the unfreezing process.

Table 7.3 Overcoming resistance to change
Strategy	Example
Education and communication	Explaining the necessity for change and answering questions
Participation and involvement	Engaging workers in making the change
Facilitation and support	Carefully planning the change; carrying out the plan
Negotiation and agreement	Using the bargaining approach
Manipulation and cooperation	Using the political approach
Explicit and implicit coercion	Using managerial power
Source: Adapted from John P. Kotter and Leonard A. Schlesinger (1979). Choosing strategies for change. Harvard Business Review, March–April, p. 111.

Managers choose from these strategies based on the nature of the change—the greater the degree of change, the larger the number of tactics that will be employed. As an example, a hospital administrator seeking to change nursing schedules from four 10-hour shifts per week to three 12-hour shifts per week would expect to encounter some resistance. The manager should begin with an explanation of why the changes are necessary (education and communication) and might involve the nursing staff in setting up the new schedule (participation and involvement). Use of the two strategies would likely be sufficient for such a change. Conversely, the decision to close a hospital's emergency room due to cost and liability considerations would likely be met with substantial resistance from a variety of employee groups. Thus, the manager would expect to employ nearly every tactic in Table 7.3, including careful planning prior to announcing the change, bargaining with various union groups, subtle political threats to the most-resistant employees or groups, and coercion as a final resort.

Movement, the second step in Lewin's system, considers the status quo and where the company must go. Driving forces within this stage help direct behavior toward the new end through the deployment of strategies chosen from the list in Table 7.3. Restraining forces seek to maintain the status quo, or the resistance to change factors previously noted. Managers try to increase driving forces while reducing those restraining forces. Persuasion tactics are valuable allies in this stage.

The third step, called refreezing, seeks to make the change permanent. Reinforcements or rewards, such as pay raises or bonuses, positive comments on performance reviews, and consideration for promotion to higher ranks, can serve as refreezing agents. Managers that role-model the new method of operation also provide impetus to accept the new reality.

Kotter's Eight-Step Plan

A second approach to overcoming resistance and implementing organizational change, developed by John Kotter (1996), builds on Lewin's three-step model and adds detail. In this system, change involves the following:

1. Establishing a sense of urgency and a compelling reason to make the change

2. Forming a power coalition to lead the change

3. Creating a new vision with supporting strategies

4. Communicating the vision to all employees

5. Empowering others to act on the vision, including encouraging risk taking and creativity

6. Planning for and rewarding short-term "wins" that move toward the new vision

7. Consolidating improvements, reassessing changes, and making adjustments

8. Reinforcing the changes by showing the relationship of those changes to organization success

© Digital Vision/Thinkstock

Change affects both managers and nonmanagerial employees.

No matter which approach is used, managers should remember that change is often an unsettling process. They should expect individual employees to be uncomfortable for a time.

As an example, a hospital's management team might decide that the time has come to move away from "silos" of patient treatment to a more integrated, team-based approach, such as the method used at the Mayo Clinic (described in Chapter 3 ). In Step 1, the management team cites patient satisfaction statistics, cost factors, and medical outcome information that suggests the time has come to make a change in patient treatment. In Step 2, management assigns a task force to investigate the best methods for implementing such a dramatic change. Top managers create and communicate the vision of a more "sophisticated," "caring" and "patient-centered" approach to case management (Steps 3 and 4). Individual physicians and diagnosticians who willingly join in the process are publicized and praised, including bonuses and other rewards for successfully treated patient cases (Steps 5 and 6). Over time, the system will require adjustments and assessments (Step 7) and new statistics will need to be developed to document that the new approach has indeed achieved its objectives (Step 8).

The Impact of Change

When healthcare organizations make changes, what is the impact of change on employee roles? Changes or modifications to an organization's structure and everyday functioning can create a series of outcomes, including the following:

· The number and types of decisions made at all ranks

· The amount of authority held at all levels

· The number of tasks performed by entry-level employees

· The formality of relationships

· Role clarity and role ambiguity

· Perceived chances for advancement (Baack, 2012)

Decision Making

Organizational Redesign: Mercy Hospital and Medical Center

Organizational design features, including standardization, formalization, centralization, decentralization, and mechanistic or organic dimensions, exhibit a major impact on the ways in which organizational designs emerge in companies. For example, in an organization that is in the process of becoming more centralized, decisions made at the top of the hierarchy will be implemented at lower levels, turning lower-ranking supervisors into order followers. In an organization that is in the process of becoming more decentralized, on the other hand, lower-level managers will begin making more decisions, and these decisions will be less routine and more specialized.

Due to the specialized expertise required in most healthcare circumstances, it would seem logical that as an organization grows in size, it would be expected to evolve into a more decentralized and organic form. As a result, managers in various departments of hospitals or large organizations could expect to make more impactful decisions about their units, and persons of lower rank would be involved in the decision-making process.

Authority

The mechanistic/organic and centralized/decentralized aspects of design exert the greatest impact on the distribution of authority. In centralized organizations, lower-ranking managers hold reduced levels of authority. In decentralized, organic firms, delegation increases authority held at lower ranks. Thus, an organization that moves from mechanistic to organic or vice versa will experience shifts in the nature and delegation of authority.

Authority and responsibility relationships are unique in healthcare, especially in cases involving visiting physicians with privileges who are contracted to work in a hospital but who are not employed by the hospital. Authority in those situations is often transitory in terms of nurses and other attendants. At the same time, however, the nurse or medical assistant encounters a sense of obligation or responsibility that includes the patient, the physician, and the larger organization. This form of complexity makes managerial and employee roles more complicated than in other circumstances.

Tasks

Division of labor directly affects the number of tasks performed at lower and entry levels. In mechanistic and bureaucratic organizations, division of labor directs managers to create routine, repeated tasks for first-line employees. As a healthcare organization moves to a more organic form of structure, however, individual employees will find their jobs to be less routine, with more tasks. When transitioning from one form to another, healthcare administrators will need to adapt to directing activities.

Formality of Relationships

Standardization, formalization, centralization, and mechanistic dimensions rely more on formal relationships between employees, especially between those of differing rank. A change toward greater decentralization and a more organic structure will lead to increased interactions between ranks and a likely decline in formality between employees and with supervisors. At the same time, however, a physician who is not employed by the organization may continue to expect more formal interactions, insisting on being referred to as "Doctor" and maintaining a distance from those employed by the hospital.

Role Clarity and Ambiguity

Role clarity occurs when an employee has a clear understanding of his or her job and responsibilities. Increased role clarity can be associated with reduced levels of stress and greater satisfaction with the job, as the employee has an unambiguous sense of direction. Standardization, formalization, centralization, bureaucracy, and a mechanistic design all contribute to increased role clarity. Role ambiguity rises in other circumstances and designs, such as in companies with more organic or decentralized forms of organizational structure. Many healthcare providers that function in groups and teams create higher levels of role ambiguity as part of those arrangements.

Perceived Chances for Advancement

Organizational hierarchies with greater numbers of levels (vertical) and lower spans of control (horizontal) offer the best possibility of receiving a promotion. More openings are likely to occur, and less competition from members of the same department will be present. In essence, a mechanistic organizational hierarchy creates increased perceptions that a person may obtain a promotion.

In summary, changes in structure affect both managers and nonmanagerial employees. The natures of jobs will be altered, as will relationships between managers and subordinates. In essence, a dynamic organization should anticipate changes in plans, operations, organizational structure, jobs, and managerial activities.

CASE A Virtual Change

The influence of technology on medicine has been profound throughout the ages. In the past century, methods of diagnosis, the understanding of disease, and the remedies available to help patients have all changed dramatically. Currently, the medical community stands poised to achieve an even greater and more profound impact on various illnesses due to evolving technologies in a variety of areas.

The emergency care department of Mount Hope hospital recently adopted a new technology designed to boost its efficiencies and effectiveness in treating patients. The emergence of digital technologies now makes it possible to transmit photos of those being treated, along with a variety of diagnostics, including blood pressure, heart rate, respiratory rates, and other vital information. These new technologies make first responders the eyes and ears of the emergency unit.

Some employees in the unit, however, have expressed concerns that too much authority has accrued to emergency medical technicians (EMTs) and other first responders. They worry that these individuals will try to evolve from transmitting information to offering on-the-scene diagnoses and that such individuals are not trained to perform these activities. Others worry that all of the diagnostic programs can slow the time of moving the patient from the scene of an accident or a person's home to the hospital. Such delays are often associated with increased deaths and other medical complications.

The hospital's top management team has also proposed a second innovation: To speed the process of obtaining X-rays and other diagnoses, they propose equipping ambulances with mobile X-ray devices that can send images to specialists assigned to read them, with many of these specialists located in India. The managers at Mount Hope argue that in the middle of the night, it is daytime on the other side of the world. Thus, it would be less expensive and more efficient to have these images read from far away, facilitated by improvements in satellite transmission devices, the Internet, and other methods of sending digital information.

The physicians, nurses, and other medical specialists at Mount Hope have raised strong objections to this second proposal. Their arguments range from concerns about the level of skill of diagnostic technicians not trained in the United States to worries about the technology breaking down at exactly the wrong time. What would happen, for example, if the hospital were damaged by a major storm or tornado, and no satellite images were possible?

A meeting has been scheduled between top management and members of the emergency care unit. An outside medical specialist has been employed to mediate the meeting. Both sides are equally tense about the potential outcome.

1. What factors are driving the resistance to change in this scenario? Is the resistance justified?

2. Who is the boundary spanner in this case? How should that person conduct his or her job?

3. What strategy for overcoming resistance to change should Mount Hope's top management have employed before all of the current objections? Would the strategy have decreased or prevented the resistance? Why or why not?

4. What impact will the implementation of these new changes have on managers in the emergency room? What impact will it have on all other employees?