This chapter analyzes the literature that has been produced in the domain of the area of this applied project. The literature review has been segmented into number of different sections for the ease of understanding and focusing on different aspects of the literature and research that already exists within the field of this research.
2.2 Strategic Management- Theoretical Arguments
Strategic management has long been viewed as the concept and process that links an organization and its environment together. It consists of the analysis, decisions and actions an organization undertakes in order to create and sustain a competitive advantage (Snyman et al, 2004).
Within the history of strategic management research there has been an unbalance between the internal and external perspective. During the 1980’s Michael Porter, one of the most prominent strategic management researchers introduced his five forces model which focused on the external competitive. It consisted of the following:
Figure 1
Potential Entrants
Bargaining power of suppliers Threat of new entrants
Bargaining power of buyers
Bargaining power of suppliers
Suppliers Industry Competitors
Buyers
Rivalry among existing firm
Threat of substitute products or services
Substitutes
Sources: Porter (2008)
Michael Porter provided a framework that modeled an industry as being influenced by these five major external forces. The strategic business manager seeking to develop an edge over rival firms could use this model to better understand the industry context in which the firm operates (Brown, 2005).
Further in the early 1990’s the argument shifted from external to internal along with Jay Barney’s development of the resource based theory in 1991 (Brown, 2005). His resource based view of firms has emerged over the last 16 years as one of the dominant perspectives used in strategic management. It addresses the fundamental research question of strategic management, which is why do some firms persistently outperform others?
At the broadest level, two explanations about why some firms persistently outperform other firms as been developed in past literature. The first and the older of two were originally articulated by Porter (1979, 1981) which draws heavily on the structure-conduct-performance (SCP) paradigm in industrial organization economics (Sherman et al, 2007). This explanation focuses on the impact that a firm’s market power is determined by their ability to raise prices above a competitive level. If entry into industries where firms are exercising market power is restricted by various barriers, then these performance differences can persist (Woerkum et al, 2008).
The second explanation of why some firms persistently outperform other firms focuses less on industry structure and market power, and instead more on the differential ability of some firms to more effectively and efficiently respond to customer needs. This explanations draws heavily on neoclassical price theories which suggests that if it is costly for less efficient firms to copy more efficient and effective firms, then the superior performance of these latter firms can persist (Sussland, 2004).
Below is the model of Jay Barney’s resource based theory:
Figure 1
The Resources-base view over time Time
Competitive advantage phase Sustainability phase
Productive use of firm Short term is sustained over
Resources which are… Lead to competitive Which time due to resources…
-Valuable advantage -limitability
-Rare -Substitutability
-Appropriate -Mobility
Ex-ante limits to competition Ex-post limits to competition
Value Low Substitutability
Rarity . ..Sustains…. Low mobility
Low imitability
SOURCE: Sherman et al (2007)
Traditionally, the relationship between strategy formulation, strategy implementation and organizational performance has been depicted by organizations carefully specifying their mission, goals and objectives, and then thereafter engaging in a SWOT analysis to choose appropriate strategies (Platts et al, 2004). Henry Mintzberg offers the suggestion that traditional way of thinking about strategy implementations focuses only deliberate strategies. Mintzberg claims that some organizations begin implementation strategies before it is clearly articulated into a mission, goal or objective. In this case strategy implementation actually precedes strategy formulation (Platts et al, 2004).
Mintzberg calls strategies that unfold in this way as emergent strategies. Implementation of emergent strategies involves the allocation of resources even when the organization may not have explicitly chosen its strategies. Furthermore, Mintzberg argues that most organizations today make use of both deliberate and emergent strategies. Whether deliberate or emergent, a strategy has little effect on an organization’s performance until it is implemented. In order for the organization to achieve its objectives, they must not only be able to formulate but more importantly implement its strategies more effectively (Brown, 2005). The diagram below illustrates the effects of strategic formulation and implementation.
Mintzberg’s Strategic model
Intended Strategy Deliberate Strategy Realised Strategy
Unrealised Strategy Emergent Strategy
Base on Mintzberge & Walters (1985)
Sources: Mintzberg (2000)
This model allows an organization to:
• Determine how much the organization will have to change in order to implement the strategy under construction.
• Analyze the formal and informal structures of the organization
• Analyze the culture of the organization
• Selecting an appropriate approach to implementing the strategy
• Implementing the strategy and evaluating the results.
According to Johnson et al, (2008) the strategy of an organization is not only affected by environmental forces and strategic capabilities, but also by the values and expectations of those who have the power in and around the organization. Whether an organization is expansionist or more concerned with consolidation, or where the boundaries are drawn for the organization’s activities, may say much about the value and attitudes of those who influence strategy i.e stakeholders of the organization.
2.3 Current trends in this area of management
“In the half century after the Second World War, the business corporation has brilliantly proved itself as an economic organization, i.e. a creator of wealth and jobs. In the next society, the biggest challenge for the large company-especially the multinational-will be its social legitimacy; its values, its missions, its vision” (Drucker, 2007).
Early indicators suggest that the 21st century may be at least as turbulent as its predecessor. With only ten years on since the new century elapsed, businesses have continued to be buffeted by calamities on multiple fronts. These have included the bursting of the dot.com and technology media bubbles; a wave of corporate scandal that followed the collapse of Enron; September 11th 2001 attack in New York and Washington; the growing impact of China, India and Russia on the world economy and the threat of climatic change (Jaipur, 2009).
These developments in the business environment have implications for business strategy at three levels. At the most general level, volatile and unpredictability of the technological, economic and political environments have increased the importance of companies being flexible and responsive. Secondly, these developments have called for specific strategy responses from companies. For example rapid industrialization in China and IT development in India has encouraged widespread outsourcing of manufacture to China and business service to India (Jaipur, 2009). The new realities of 21th century have triggered new thinking about the nature of strategy, the responsibilities of the corporation and the role of management.
Over the longer term, the values and expectations of society may prove to be more important than the imperatives of technology in shaping firms’ strategies and the organizational systems in which they are implemented. The notion of “strategic fit” embraces not only a firm’s economic environment but its social environment as well. This means that an organization’s ability to prosper depends on its acceptability among consumers, the willingness of investors and financiers to fund it, support from government, and the willingness of its employees to apply their efforts and creativity in its service, (Kotelnikov, 2007).
According to McCoy (2007), the early years of the 21st century has seen a shift in firms strategy priorities in response to two key problems facing senior managers. First, the gains from cost cutting and corporate restructuring can pose more problems than benefits in the long term. Secondly, the unremitting quest for shareholder value has had unforeseen and undesired consequences for many companies. Rather than maximize the flow of profits on which stock market valuation is depended upon, many organizations have focused excessively on short term earnings, while others had gone further and attempted to directly manage their stock market valuations through smoothing fluctuations in reported earnings, and in some cases artificially manipulating financial statements, (Ashley et al, 2008).
The responses to these problems in terms of strategic management are in twofold. First a “back to basis” movement in which companies have to refocus their strategies on the fundamental sources of profitability, and secondly an emphasis on accessing more complex and difficult to reach sources of competitive advantage, (Ashley et al, 2008).
Trends in the Healthcare Sector
Healthcare trends and increased costs of care are greatly impacting the viability of healthcare organizations worldwide. Healthcare executives are now faced with more complicated challenges than ever before. Not only are they managing day to day operations, but they are dealing with increased quality and regulatory standards, government changes, increased patient expectation and insurance agencies, (Zucchi, 2005).
The provision of healthcare is increasingly complex, with GPs and Primary Care Trust facing significant changes in structure and operations while still trying to maintain service levels and a focus on the patient. To manage all these factors effectively, healthcare executives and needs to find a way to define their strategy and objectives, as well as developing the necessary knowledge to determine whether or not they are moving in the right direction, (Fiscal Policy Institute, 2006).
Hospitals and other healthcare related facilities, like most organizations, have been gathering enormous amounts of data for years. Unfortunately, it has become common place to collect data, ensure the regulatory and accreditation bodies get what they need, document processes that require improvements and then continue with business as usual (Fiscal Policy Institution, 2006).
Healthcare organizations such as the NHS recognize the need to merge the accepted practice of outcomes management and process management into a more comprehensive approach performance management. This takes into consideration the wide range of key performance indicators that impact the success of an organization’s strategic plan.
Problems such as errors in the delivery of health care and variation in services among region areas of concern cannot be ignored. These unresolved issues will ultimately affect the healthcare consumers. With rising costs and an aging population, it is crucial that public remains confident in the services provided by the NHS (The Clinical Services Journal, 2009).
A number of recent initiatives are underway to identify those areas of the NHS in need of quality improvement. As a result, quality standards are being raised on multiple levels and it is now more necessary for healthcare facilities to adopt this new view of performance and revise their approach to strategic management. In the UK, the Healthcare commission is an independent body, set up to promote and drive improvement in the quality of healthcare and public health (Collier et al, 2006). Key areas of focus for the Healthcare Commission are:
• assessing the process of strategic management and control, provision and quality of NHS healthcare and public services.
• Reviewing the performance of each NHS trust and award an annual performance rating.
• highlights key strategic making decisions by NHS trusts and explain the impact of the decision making in the wider context.
• publishes information about the state of healthcare within the UK (healthcare Commission, 2009).
2.5 ROLE OF CULTURE
Marvin Bower, one of the prominent influence on management in the 20th century provided the most prominent definition of culture by describing it as “the way in which we do things around here” His meaning of this was that culture embodied behavior patterns, groups and teams, task and work undertaken, and that finally it was specific to a location (Schein, 2004).
In more recent times Charles Handy (Harrison, 2002), one of the world’s most influential organizational thinkers has to further our understanding of organizational culture, by claiming that organizations embrace four distinct cultures in form of the following:
Club Culture: This is represented metaphorically by Zeus, the strong leader who has, likes and uses power. All lines of communication lead formally or informally to the leader. These organizations display strength in the speed of their decision making, but their potential weaknesses lies in the caliber of the “one man bands” running them.
Role Culture: This is being personified as Appolo, the God of Order and Rules, represented by Greek temple. These organizations are based on the assumptions that people are rational, and that roles can be defined and have great strength in situations marked by continuity, these organizations often display weaknesses in adapting to change. In the NHS the role culture appears to be the prevailing culture.
Task Culture: This is likened to Athena, the Goddess of knowledge which is found in organizations where management is concerned with solving a series of problems. Working parties, sub-committees, task forces and study groups are formed on the ad hoc basis to deal with problems. This type of culture is seen to be an advantage when flexibility is required.
Existential Culture: This is compared to Dionysus, the God of Wine and Song. Organizations characterized by these cultures are those where the organization exists to serve the individual and where individuals are not servants of the organization. They consist of groups of professionals i.e. doctors or lawyers who do not have a boss presiding over them. These structures are becoming more common as more conventional organizations increasingly contract out to professionals and specialist whose services are used only as when required (Harrison, 2002).
For all its elusiveness, corporate culture can have a huge impact on an organization’s work environment and output. This is so much research has been made in the past in order to pinpoint exactly what makes an effective corporate culture, and how to go about changing a culture if it is not working. The culture web developed by Gerry Johnson and Kevan Scholes (1992) provides one such approach for looking at and changing an organizations culture (Johnson et al, 2008). The cultural web brings together different aspects for the analysis or organization. Below is a cultural web and that of the NHS.
The organisation as a structure
Stories
Symbols
Rituals & Routines The Paradigm
Control Systems Power Structures
Organizational Structure
The Cultural web Schein
THE NHS CULTURAL WEB
STORIES
SYMBOLS
-Cures -TEMINOLOGY
-Villains -White coasts/Uniforms
-Change agents -Big Institutions
Are fools -Retinues
-Abuse of managers Offices
-They’ say/do-
Who are ‘they’?
RITUAULS PARADIGM POWER
Routines -NHS’ good’ -professional
-Consultation -public service bodies
-ward rounds free at point of clinicians
-Patient infantilizing delivery -senior executives
-Pass the buck -clinicians ‘values -regional bodies
-Doctors knows best -politicians
CONTROLS ORGANISATION
-Performance reporting -Hierarchical
-mechanistic
-Financial reporting -Pecking order
Professional responsibility -Sub-ordination
-Tribal/Functional
Source: Adapted from Johnson and Scholes (1999, P.75)
The Paradigm: The Paradigm reflects strongly that the public’s perception in the UK of the NHS is that it is a good thing, and additionally it is a public service that is provided equally free at the point of delivery. In order words, it is medical values that are central and the view that ‘Doctors know best’. The NHS is an organization that is primarily focused on curing illnesses rather than preventing illnesses from the instance. The acute sectors within NHS are the centerpiece of its services, and overall the NHS is viewed to belong to those who require the services (Guvenuslu, 2005).
Stories
So many of the stories deriving from the NHS over the years have been concerned with technical advancement and research into finding cures for terminal illnesses. There has been stories regarding the negative influences politicians have had on the establishment in terms of trying to change the system and the heroic acts of those who have fought to defend the system in NHS.
Symbols
Symbols reflect the various institutions within the organization in terms of uniform for clinical staff, distinct symbols for clinicians, such as their staff retinues and status symbols i.e. mobile phones are dining rooms. The importance of the size and status of hospitals was reflected; especially in light of the government plans to close down poorly practiced hospitals. This will be a measure used to secure their future safety (Sambrook, 2006).
Power Structure
The power structure is fragmented between clinicians, nurses and managers. However, historically senior clinicians have been deemed to carry the most power with managers being viewed predominantly in administrative capacity. As with many organizations, it was also clear in identifying strong informal network of individuals and groups that combine around specific issues to promote or resist a particular view.
Organizational Structures
Structures are hierarchical and mechanistic. There is a clear chain of command visible for all to see. Services are also placed in a certain pecking order, with caring services appearing low down on the list. At the informal level there is evidence of tribalism between functions and professional groups. An example of an NHS organizational structure can be viewed below (Warwick, 2007).
CEO
Medical Director Director of operation Director of strategic Deputy CEO/ Fin-
Planning & partnership ancial Director
General Manager Surgery/ General manager Clinical General Manager Medical
Deputy Director of Opera- Support service
tion
General Orthopedics Theatres Women’s &
Surgery Children’s
Pathology& Outpatients & Specialists Emerge
Pharmacy Diagnostics Medicine & Medici-
Source: D.O.H (2009) rehab ne
Control Systems
In hospitals the key measure is based upon completed clinical episodes, i.e. activity rather than results. Senior professionals exert control over staff and patronage is a key feature of professional culture.
2.6 Operational development in Healthcare
Healthcare is experiencing a global structural change in which the position and procedures for citizens, health professionals and organizations in the field will change. There are different perceptions of the speed and extent of the change, but one thing that is in agreement is that the development in technology will play a vital role in the future.
Healthcare remains as vital service provided by society and order to finance it, will require new operational models and technologies that will utilize experience and methods gained from business. Development of technology will create wellbeing in two different ways. One of these ways will bring new and better tools to healthcare and to the development of healthcare organizations (Park et al, 2008). Secondly, it will create a significant number of new enterprises, products and new services utilizing technology.
Technology alone cannot bring about operational development unless procedures are developed simultaneously. The development of technology and procedure simultaneously will enable care personnel to spend less time on routines and data management and more time on focusing on actual care. Patients are changing and the character of hospitals is changing with them. Tomorrow’s patient will be more individualistic, self-reliant and better informed than ever as a consequence of technology (park et al, 2008).
NHS staff, both in the administrative and clinical capacity are nowadays working in very intensity working environments. Their ability to improve the services they provide to consumers through further training is one of the key to operational efficiency and an important factor in attracting prospective employees (Rintala et al, 2003). Cost effectiveness, innovation and ability to adapt to new developments in the market are amongst the factors that determine the competitiveness of NHS outlets across the UK. Today, many primary care trusts and hospitals are exploring ways to create added value and differentiate themselves from others in a crowded healthcare marketplace through branding themselves in a way that expresses their commitment to a patient centric approach while attracting top personnel (NHS Professional, 2009).
The NHS Operating framework consist of a number of key priorities that the department of health expect the NHS to achieve success on. Governors find it useful to understand the national priorities and in particularly the way in which quality to provide services and financial rewards are beginning to be brought together. The seven key areas of the framework are outlined below (Department of Health, 2009).
Seven Key areas
• The national ‘must do’ priorities are expected by all primary care trusts and foundation trusts across the UK from the department of Health. This will involve ensuring that they are reaching targets and are prepared for these to be used as benchmarks for future contracts.
• Ensuring that high quality of care is available to all. This focuses on quality as being a guiding principle for the NHS.
• The operating framework makes clear to the NHS that it has a duty to innovate, continuing to manage services in the same way that they have always managed will not deliver the sought improvements.
• The CQUIN (Commissioning for Quality and Innovation) payment framework will soon be introduced. This will directly link service contracts with hospitals as well as linking payment to the quality actually achieved.
• A new system for grouping procedures for reimbursements under payments by results will also be implemented. This will mean that more complex procedures will be paid for a higher level and simpler procedures at a lower level.
• Average growth in funding to PCTs for 2009/10 has increased by 5.5 percent. This will enable PCTs to further invest in operational development across a number of different functions.
• Efficiency savings will also play a role between linking tariff with best practices in the foreseeable future. This will involve using commissioning to increase productivity opportunities by reducing pre-operative bed days. The combined effect of the constraints on tariff and the likely squeeze on Monday means that trust will have to look at ways of making efficiency savings while at the same time increasing quality (Department of Health, 2009).
2.7 Chapter Summary
The above literature review has provided an in depth look at many of the key theoretical models of strategic management and how they compare or differ from one another. In addition to this, it has also looked at the current trends within this area of management as well as specifically within the healthcare sector. This has provided the reader with a broader understanding of strategic management on a global scope and within the sector which this research study is based upon.
Since the current study will investigate the impact of strategic management on cultural development, an analysis of culture was also reviewed within this chapter. This looked at the underpinning factor which contributes to an organization’s culture and how these factors affect the chain of command within an organization.
Lastly, the author reviewed the area of operational development and the measures that have been enforced to ensure that NHS achieves the operational objectives that have been outlined by the Department of Health. This enables the reader to understand the role of a ruling body such as the Department of Health and the purpose of their existence.
This chapter analyzes the literature that has been produced in the domain of the area of this applied project. The literature review has been segmented into number of different sections for the ease of understanding and focusing on different aspects of the literature and research that already exists within the field of this research.
2.2 Strategic Management- Theoretical Arguments
Strategic management has long been viewed as the concept and process that links an organization and its environment together. It consists of the analysis, decisions and actions an organization undertakes in order to create and sustain a competitive advantage (Snyman et al, 2004).
Within the history of strategic management research there has been an unbalance between the internal and external perspective. During the 1980’s Michael Porter, one of the most prominent strategic management researchers introduced his five forces model which focused on the external competitive. It consisted of the following:
Figure 1
Potential Entrants
Bargaining power of suppliers Threat of new entrants
Bargaining power of buyers
Bargaining power of suppliers
Suppliers Industry Competitors
Buyers
Rivalry among existing firm
Threat of substitute products or services
Substitutes
Sources: Porter (2008)
Michael Porter provided a framework that modeled an industry as being influenced by these five major external forces. The strategic business manager seeking to develop an edge over rival firms could use this model to better understand the industry context in which the firm operates (Brown, 2005).
Further in the early 1990’s the argument shifted from external to internal along with Jay Barney’s development of the resource based theory in 1991 (Brown, 2005). His resource based view of firms has emerged over the last 16 years as one of the dominant perspectives used in strategic management. It addresses the fundamental research question of strategic management, which is why do some firms persistently outperform others?
At the broadest level, two explanations about why some firms persistently outperform other firms as been developed in past literature. The first and the older of two were originally articulated by Porter (1979, 1981) which draws heavily on the structure-conduct-performance (SCP) paradigm in industrial organization economics (Sherman et al, 2007). This explanation focuses on the impact that a firm’s market power is determined by their ability to raise prices above a competitive level. If entry into industries where firms are exercising market power is restricted by various barriers, then these performance differences can persist (Woerkum et al, 2008).
The second explanation of why some firms persistently outperform other firms focuses less on industry structure and market power, and instead more on the differential ability of some firms to more effectively and efficiently respond to customer needs. This explanations draws heavily on neoclassical price theories which suggests that if it is costly for less efficient firms to copy more efficient and effective firms, then the superior performance of these latter firms can persist (Sussland, 2004).
Below is the model of Jay Barney’s resource based theory:
Figure 1
The Resources-base view over time Time
Competitive advantage phase Sustainability phase
Productive use of firm Short term is sustained over
Resources which are… Lead to competitive Which time due to resources…
-Valuable advantage -limitability
-Rare -Substitutability
-Appropriate -Mobility
Ex-ante limits to competition Ex-post limits to competition
Value Low Substitutability
Rarity . ..Sustains…. Low mobility
Low imitability
SOURCE: Sherman et al (2007)
Traditionally, the relationship between strategy formulation, strategy implementation and organizational performance has been depicted by organizations carefully specifying their mission, goals and objectives, and then thereafter engaging in a SWOT analysis to choose appropriate strategies (Platts et al, 2004). Henry Mintzberg offers the suggestion that traditional way of thinking about strategy implementations focuses only deliberate strategies. Mintzberg claims that some organizations begin implementation strategies before it is clearly articulated into a mission, goal or objective. In this case strategy implementation actually precedes strategy formulation (Platts et al, 2004).
Mintzberg calls strategies that unfold in this way as emergent strategies. Implementation of emergent strategies involves the allocation of resources even when the organization may not have explicitly chosen its strategies. Furthermore, Mintzberg argues that most organizations today make use of both deliberate and emergent strategies. Whether deliberate or emergent, a strategy has little effect on an organization’s performance until it is implemented. In order for the organization to achieve its objectives, they must not only be able to formulate but more importantly implement its strategies more effectively (Brown, 2005). The diagram below illustrates the effects of strategic formulation and implementation.
Mintzberg’s Strategic model
Intended Strategy Deliberate Strategy Realised Strategy
Unrealised Strategy Emergent Strategy
Base on Mintzberge & Walters (1985)
Sources: Mintzberg (2000)
This model allows an organization to:
• Determine how much the organization will have to change in order to implement the strategy under construction.
• Analyze the formal and informal structures of the organization
• Analyze the culture of the organization
• Selecting an appropriate approach to implementing the strategy
• Implementing the strategy and evaluating the results.
According to Johnson et al, (2008) the strategy of an organization is not only affected by environmental forces and strategic capabilities, but also by the values and expectations of those who have the power in and around the organization. Whether an organization is expansionist or more concerned with consolidation, or where the boundaries are drawn for the organization’s activities, may say much about the value and attitudes of those who influence strategy i.e stakeholders of the organization.
2.3 Current trends in this area of management
“In the half century after the Second World War, the business corporation has brilliantly proved itself as an economic organization, i.e. a creator of wealth and jobs. In the next society, the biggest challenge for the large company-especially the multinational-will be its social legitimacy; its values, its missions, its vision” (Drucker, 2007).
Early indicators suggest that the 21st century may be at least as turbulent as its predecessor. With only ten years on since the new century elapsed, businesses have continued to be buffeted by calamities on multiple fronts. These have included the bursting of the dot.com and technology media bubbles; a wave of corporate scandal that followed the collapse of Enron; September 11th 2001 attack in New York and Washington; the growing impact of China, India and Russia on the world economy and the threat of climatic change (Jaipur, 2009).
These developments in the business environment have implications for business strategy at three levels. At the most general level, volatile and unpredictability of the technological, economic and political environments have increased the importance of companies being flexible and responsive. Secondly, these developments have called for specific strategy responses from companies. For example rapid industrialization in China and IT development in India has encouraged widespread outsourcing of manufacture to China and business service to India (Jaipur, 2009). The new realities of 21th century have triggered new thinking about the nature of strategy, the responsibilities of the corporation and the role of management.
Over the longer term, the values and expectations of society may prove to be more important than the imperatives of technology in shaping firms’ strategies and the organizational systems in which they are implemented. The notion of “strategic fit” embraces not only a firm’s economic environment but its social environment as well. This means that an organization’s ability to prosper depends on its acceptability among consumers, the willingness of investors and financiers to fund it, support from government, and the willingness of its employees to apply their efforts and creativity in its service, (Kotelnikov, 2007).
According to McCoy (2007), the early years of the 21st century has seen a shift in firms strategy priorities in response to two key problems facing senior managers. First, the gains from cost cutting and corporate restructuring can pose more problems than benefits in the long term. Secondly, the unremitting quest for shareholder value has had unforeseen and undesired consequences for many companies. Rather than maximize the flow of profits on which stock market valuation is depended upon, many organizations have focused excessively on short term earnings, while others had gone further and attempted to directly manage their stock market valuations through smoothing fluctuations in reported earnings, and in some cases artificially manipulating financial statements, (Ashley et al, 2008).
The responses to these problems in terms of strategic management are in twofold. First a “back to basis” movement in which companies have to refocus their strategies on the fundamental sources of profitability, and secondly an emphasis on accessing more complex and difficult to reach sources of competitive advantage, (Ashley et al, 2008).
Trends in the Healthcare Sector
Healthcare trends and increased costs of care are greatly impacting the viability of healthcare organizations worldwide. Healthcare executives are now faced with more complicated challenges than ever before. Not only are they managing day to day operations, but they are dealing with increased quality and regulatory standards, government changes, increased patient expectation and insurance agencies, (Zucchi, 2005).
The provision of healthcare is increasingly complex, with GPs and Primary Care Trust facing significant changes in structure and operations while still trying to maintain service levels and a focus on the patient. To manage all these factors effectively, healthcare executives and needs to find a way to define their strategy and objectives, as well as developing the necessary knowledge to determine whether or not they are moving in the right direction, (Fiscal Policy Institute, 2006).
Hospitals and other healthcare related facilities, like most organizations, have been gathering enormous amounts of data for years. Unfortunately, it has become common place to collect data, ensure the regulatory and accreditation bodies get what they need, document processes that require improvements and then continue with business as usual (Fiscal Policy Institution, 2006).
Healthcare organizations such as the NHS recognize the need to merge the accepted practice of outcomes management and process management into a more comprehensive approach performance management. This takes into consideration the wide range of key performance indicators that impact the success of an organization’s strategic plan.
Problems such as errors in the delivery of health care and variation in services among region areas of concern cannot be ignored. These unresolved issues will ultimately affect the healthcare consumers. With rising costs and an aging population, it is crucial that public remains confident in the services provided by the NHS (The Clinical Services Journal, 2009).
A number of recent initiatives are underway to identify those areas of the NHS in need of quality improvement. As a result, quality standards are being raised on multiple levels and it is now more necessary for healthcare facilities to adopt this new view of performance and revise their approach to strategic management. In the UK, the Healthcare commission is an independent body, set up to promote and drive improvement in the quality of healthcare and public health (Collier et al, 2006). Key areas of focus for the Healthcare Commission are:
• assessing the process of strategic management and control, provision and quality of NHS healthcare and public services.
• Reviewing the performance of each NHS trust and award an annual performance rating.
• highlights key strategic making decisions by NHS trusts and explain the impact of the decision making in the wider context.
• publishes information about the state of healthcare within the UK (healthcare Commission, 2009).
2.5 ROLE OF CULTURE
Marvin Bower, one of the prominent influence on management in the 20th century provided the most prominent definition of culture by describing it as “the way in which we do things around here” His meaning of this was that culture embodied behavior patterns, groups and teams, task and work undertaken, and that finally it was specific to a location (Schein, 2004).
In more recent times Charles Handy (Harrison, 2002), one of the world’s most influential organizational thinkers has to further our understanding of organizational culture, by claiming that organizations embrace four distinct cultures in form of the following:
Club Culture: This is represented metaphorically by Zeus, the strong leader who has, likes and uses power. All lines of communication lead formally or informally to the leader. These organizations display strength in the speed of their decision making, but their potential weaknesses lies in the caliber of the “one man bands” running them.
Role Culture: This is being personified as Appolo, the God of Order and Rules, represented by Greek temple. These organizations are based on the assumptions that people are rational, and that roles can be defined and have great strength in situations marked by continuity, these organizations often display weaknesses in adapting to change. In the NHS the role culture appears to be the prevailing culture.
Task Culture: This is likened to Athena, the Goddess of knowledge which is found in organizations where management is concerned with solving a series of problems. Working parties, sub-committees, task forces and study groups are formed on the ad hoc basis to deal with problems. This type of culture is seen to be an advantage when flexibility is required.
Existential Culture: This is compared to Dionysus, the God of Wine and Song. Organizations characterized by these cultures are those where the organization exists to serve the individual and where individuals are not servants of the organization. They consist of groups of professionals i.e. doctors or lawyers who do not have a boss presiding over them. These structures are becoming more common as more conventional organizations increasingly contract out to professionals and specialist whose services are used only as when required (Harrison, 2002).
For all its elusiveness, corporate culture can have a huge impact on an organization’s work environment and output. This is so much research has been made in the past in order to pinpoint exactly what makes an effective corporate culture, and how to go about changing a culture if it is not working. The culture web developed by Gerry Johnson and Kevan Scholes (1992) provides one such approach for looking at and changing an organizations culture (Johnson et al, 2008). The cultural web brings together different aspects for the analysis or organization. Below is a cultural web and that of the NHS.
The organisation as a structure
Stories
Symbols
Rituals & Routines The Paradigm
Control Systems Power Structures
Organizational Structure
The Cultural web Schein
THE NHS CULTURAL WEB
STORIES
SYMBOLS
-Cures -TEMINOLOGY
-Villains -White coasts/Uniforms
-Change agents -Big Institutions
Are fools -Retinues
-Abuse of managers Offices
-They’ say/do-
Who are ‘they’?
RITUAULS PARADIGM POWER
Routines -NHS’ good’ -professional
-Consultation -public service bodies
-ward rounds free at point of clinicians
-Patient infantilizing delivery -senior executives
-Pass the buck -clinicians ‘values -regional bodies
-Doctors knows best -politicians
CONTROLS ORGANISATION
-Performance reporting -Hierarchical
-mechanistic
-Financial reporting -Pecking order
Professional responsibility -Sub-ordination
-Tribal/Functional
Source: Adapted from Johnson and Scholes (1999, P.75)
The Paradigm: The Paradigm reflects strongly that the public’s perception in the UK of the NHS is that it is a good thing, and additionally it is a public service that is provided equally free at the point of delivery. In order words, it is medical values that are central and the view that ‘Doctors know best’. The NHS is an organization that is primarily focused on curing illnesses rather than preventing illnesses from the instance. The acute sectors within NHS are the centerpiece of its services, and overall the NHS is viewed to belong to those who require the services (Guvenuslu, 2005).
Stories
So many of the stories deriving from the NHS over the years have been concerned with technical advancement and research into finding cures for terminal illnesses. There has been stories regarding the negative influences politicians have had on the establishment in terms of trying to change the system and the heroic acts of those who have fought to defend the system in NHS.
Symbols
Symbols reflect the various institutions within the organization in terms of uniform for clinical staff, distinct symbols for clinicians, such as their staff retinues and status symbols i.e. mobile phones are dining rooms. The importance of the size and status of hospitals was reflected; especially in light of the government plans to close down poorly practiced hospitals. This will be a measure used to secure their future safety (Sambrook, 2006).
Power Structure
The power structure is fragmented between clinicians, nurses and managers. However, historically senior clinicians have been deemed to carry the most power with managers being viewed predominantly in administrative capacity. As with many organizations, it was also clear in identifying strong informal network of individuals and groups that combine around specific issues to promote or resist a particular view.
Organizational Structures
Structures are hierarchical and mechanistic. There is a clear chain of command visible for all to see. Services are also placed in a certain pecking order, with caring services appearing low down on the list. At the informal level there is evidence of tribalism between functions and professional groups. An example of an NHS organizational structure can be viewed below (Warwick, 2007).
CEO
Medical Director Director of operation Director of strategic Deputy CEO/ Fin-
Planning & partnership ancial Director
General Manager Surgery/ General manager Clinical General Manager Medical
Deputy Director of Opera- Support service
tion
General Orthopedics Theatres Women’s &
Surgery Children’s
Pathology& Outpatients & Specialists Emerge
Pharmacy Diagnostics Medicine & Medici-
Source: D.O.H (2009) rehab ne
Control Systems
In hospitals the key measure is based upon completed clinical episodes, i.e. activity rather than results. Senior professionals exert control over staff and patronage is a key feature of professional culture.
2.6 Operational development in Healthcare
Healthcare is experiencing a global structural change in which the position and procedures for citizens, health professionals and organizations in the field will change. There are different perceptions of the speed and extent of the change, but one thing that is in agreement is that the development in technology will play a vital role in the future.
Healthcare remains as vital service provided by society and order to finance it, will require new operational models and technologies that will utilize experience and methods gained from business. Development of technology will create wellbeing in two different ways. One of these ways will bring new and better tools to healthcare and to the development of healthcare organizations (Park et al, 2008). Secondly, it will create a significant number of new enterprises, products and new services utilizing technology.
Technology alone cannot bring about operational development unless procedures are developed simultaneously. The development of technology and procedure simultaneously will enable care personnel to spend less time on routines and data management and more time on focusing on actual care. Patients are changing and the character of hospitals is changing with them. Tomorrow’s patient will be more individualistic, self-reliant and better informed than ever as a consequence of technology (park et al, 2008).
NHS staff, both in the administrative and clinical capacity are nowadays working in very intensity working environments. Their ability to improve the services they provide to consumers through further training is one of the key to operational efficiency and an important factor in attracting prospective employees (Rintala et al, 2003). Cost effectiveness, innovation and ability to adapt to new developments in the market are amongst the factors that determine the competitiveness of NHS outlets across the UK. Today, many primary care trusts and hospitals are exploring ways to create added value and differentiate themselves from others in a crowded healthcare marketplace through branding themselves in a way that expresses their commitment to a patient centric approach while attracting top personnel (NHS Professional, 2009).
The NHS Operating framework consist of a number of key priorities that the department of health expect the NHS to achieve success on. Governors find it useful to understand the national priorities and in particularly the way in which quality to provide services and financial rewards are beginning to be brought together. The seven key areas of the framework are outlined below (Department of Health, 2009).
Seven Key areas
• The national ‘must do’ priorities are expected by all primary care trusts and foundation trusts across the UK from the department of Health. This will involve ensuring that they are reaching targets and are prepared for these to be used as benchmarks for future contracts.
• Ensuring that high quality of care is available to all. This focuses on quality as being a guiding principle for the NHS.
• The operating framework makes clear to the NHS that it has a duty to innovate, continuing to manage services in the same way that they have always managed will not deliver the sought improvements.
• The CQUIN (Commissioning for Quality and Innovation) payment framework will soon be introduced. This will directly link service contracts with hospitals as well as linking payment to the quality actually achieved.
• A new system for grouping procedures for reimbursements under payments by results will also be implemented. This will mean that more complex procedures will be paid for a higher level and simpler procedures at a lower level.
• Average growth in funding to PCTs for 2009/10 has increased by 5.5 percent. This will enable PCTs to further invest in operational development across a number of different functions.
• Efficiency savings will also play a role between linking tariff with best practices in the foreseeable future. This will involve using commissioning to increase productivity opportunities by reducing pre-operative bed days. The combined effect of the constraints on tariff and the likely squeeze on Monday means that trust will have to look at ways of making efficiency savings while at the same time increasing quality (Department of Health, 2009).
2.7 Chapter Summary
The above literature review has provided an in depth look at many of the key theoretical models of strategic management and how they compare or differ from one another. In addition to this, it has also looked at the current trends within this area of management as well as specifically within the healthcare sector. This has provided the reader with a broader understanding of strategic management on a global scope and within the sector which this research study is based upon.
Since the current study will investigate the impact of strategic management on cultural development, an analysis of culture was also reviewed within this chapter. This looked at the underpinning factor which contributes to an organization’s culture and how these factors affect the chain of command within an organization.
Lastly, the author reviewed the area of operational development and the measures that have been enforced to ensure that NHS achieves the operational objectives that have been outlined by the Department of Health. This enables the reader to understand the role of a ruling body such as the Department of Health and the purpose of their existence.
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