- Health care is a much regulated industry-and health organizations function in a very political environment
- Issues are resolved more slowly, and we get involved with the political structure
- Your production is your doctors, so you have to find ways to work with physicians who are independent and don't have a real sense of what the consumer wants.
In a business it's more for you. A not-for-profit institution is under so much regulation, and more uncertainty as to income, that you can't just raise your prices. It's more difficult, you don't get paid more for doing better. We've got to be more cost-conscious. Regarding disagreement on organizational objectives in large health care organizations, the board chairman of Cleveland Hospital contrasts health care with business organizations:
It's a little more difficult than in business, working together for the benefit of the hospital. Eastern Airlines has one aim, and you don't have to worry about two or three groups. There lies the seed of real problems. And health services managers have less power as managers. As a clinical chief at Washington Medical Center observes that he hospital administrator's job depends on the whims of the practicing staff, and the administrator knows that. At Washington Medical Center, the board and CEO Tim George are moving to what George terms "a more quantitative assessment [of objectives], one based on what we have projected." George has difficulty, however, in setting his own expectations regarding CEO performance:
I aggregate administrators' goal statements and include things that I think are particularly important. I found that my objectives were included in others', and I wanted to give them credit.
The four CEOs are not evaluated in terms of their contribution to organizational effectiveness, nor is "organizational effectiveness" specified. Regarding his evaluation at Wilson HMO, CEO Sam Woodrow says: “Evaluation of my performance occurs at two levels. On an ongoing basis, I will know very quickly if the board has lost confidence in me. Conversely, if the board continues to support my proposals as they have, this becomes in essence my review. I do, however, have an annual review with the chairman of the board. This tends to be very results-oriented. I am evaluated on the leadership I have provided. This is a positive experience because it is objective.”
"Results-oriented" is not determined, however, on the basis of preset, mutually agreed-upon, measurable objectives. Although expectations are not explicitly set and CEO performance is not evaluated relative to them in the organizations studied, some implicit expectations were set during the hiring process of each CEO. In two of the four organizations studied, expectations are also set implicitly during long-range planning processes among managers, trustees, and medical staff.
CEO George states that when he was first hired:
The assumption was that the hospital would run modest deficits-it always had because of the free care it provides. They hoped the financial situation would improve but not at the expense of the mission of the hospital.
The trustees appear to be telling George that they want him to improve the financial situation of the hospital but not at the expense of its mission. (Implicitly, George is not seen as playing a leadership role in changing or specifying mission.)
Similarly, Larry Martin, CEO of Van Buren Hospital, says that when he was hired: “I think the board hired me because they thought I was a good technician. I came from a nearby hospital which they thought highly of. They hoped [Van Buren] could be more like it, stronger and more stable. They got that. I spent the better part of my first two years here doing what I had learned how to do as a technician in order to improve the operation.”
Martin's trustees appear to be telling him that his job is to improve the financial situation of the hospital so that it can be more like a neighboring hospital. (There is no mention of Martin's playing a leadership role with regard to mission or program, and Martin seems to have agreed to this, at least initially with regard to a recent long-range planning process, George explains how the clinical chiefs shared with each other, for the first time in any formal way, their departmental objectives (presumably they developed and adapted these objectives relative to how they thought other chiefs were going to perceive them):
The chiefs' objectives weren't out of line; they just didn't know the objectives of their colleagues. That's one of the things we have attempted to change by developing institutional objectives. We bring all the departments together and summarize plans and objectives for each other... It was last done five years ago. We're updating plans now and will bring the chiefs together again.
This assembling of departmental objectives that are not related to a common financial framework is foreign to most large business firms.
The vice-president of medical affairs at Cleveland Hospital responds about a recent long-range planning process there:
We're ending a three-year plan and starting a new one. We have a retreat, invite experts to talk with us, and develop a modus operandi. Our last retreat was 18 months ago. The new plan (we brought in consultants) will have to do with capturing market share. How do we survive, cut costs, and provide quality care?
The vice-president uses the new business language of "market share" without specifying how or what agreement is reached with regard to how market share can be increased-and this in a hospital where many physicians who affect market share are not controlled by management and some even compete with the hospital in the provision of care.
Regarding the setting of organizational objectives, CEO Ted Grover of Cleveland Hospital speaks of satisfying the clear objectives of a corporate mandate is to provide accessible, high-quality human services to all persons, with public health programs and medical education as significant institutional responsibilities. But how does the board or the medical staff at Cleveland Hospital know, for example, what are expected or acceptable levels of achievement regarding the provision of high-quality services? Or to what extent public health and medical education objectives are being met with regard to prenatal care, for example?
There are good reasons why neither organizational objectives nor CEO contribution to their attainment is being set in these large health care organizations. Among these reasons are (1) the lack of pressure to set objectives and (2) the cost, in conflict and time, of attempting to set them. I believe that it will be increasingly difficult, however, for large health care organizations to retain or gain market share in the future without setting expectations regarding organizational and CEO performance. Specifying organizational objectives is necessary for making and implementing decisions regarding scope of services at particular levels of cost and quality and for validating the CEO's role in making and implementing these decisions. Such specification is in the CEO's interest as well: it caps his or her risk by determining mutually and in advance what the objectives should be and what level of attainment can be expected under changing circumstances over which the CEO has little or no control. If the CEO attains the objectives, it is validation of his or her expected job performance, if not cause for raises in salary and bonuses.
