Summary Challenges associated with leading a $1.7 trillion industry have created a need for strong leaders at all levels in healthcare organizations.

Journal of Organizational Behavior

J. Organiz. Behav. 27, 967–982 (2006)

Published online in Wiley InterScience

(www.interscience.wiley.com) DOI: 10.1002/job.417

*Correspondence to: A Hall, Room 476, 1841

Copyright # 2006

Leadership development in healthcare: A qualitative study

ANN SCHECK McALEARNEY*

Division of Health Services Management and Policy, School of Public Health, The Ohio State University, Columbus, Ohio, U.S.A.

Summary Challenges associated with leading a $1.7 trillion industry have created a need for strong leaders at all levels in healthcare organizations. However, despite growing support for the importance of leadership development practices across industries, little is known about leadership development in healthcare organizations. An extensive qualitative study comprised of 35 expert interviews and 55 organizational case studies included 160 in-depth, semi- structured interviews and explored this issue. Across interviews, several themes emerged around leadership development challenges that were particularly salient to healthcare organ- izations. Informants described how the relative newness of leadership development practices in a majority of healthcare organizations contributes to an overall perception of haphazard practices throughout the industry. In addition, respondents noted challenges associated with developing leaders who would be representative of the patient community served, and commented on the pressure to segregate different professional groups for leadership devel- opment. Framed by these challenges, I propose a conceptual model of commitment to leadership development in healthcare organizations as influenced by three factors—strategy, culture, and structure. These, in turn, influence program design decisions and can impact organizational effectiveness. In the context of inherently complex healthcare organizations where leaders must respond to multiple stakeholders and meet performance goals across multiple dimensions of effectiveness, addressing these reported challenges and consider- ing the importance of organizational commitment to leadership development can help ensure that programs are effectively designed, delivered, and sustained. Copyright # 2006 John Wiley & Sons, Ltd.

Introduction

A sense of crisis is building about how healthcare organizations will meet their leadership needs in the

future (Institute for the Future, 2000; Mecklenburg, 2001; Schneller, 1997). Yet few healthcare

organizations have made substantial investments in developing their leaders. Although bombarded by

constant and rapid change within the $1.7 trillion industry (Smith, Cowan, Sensenig, Catlin, & Health

Accounts Team, 2005), healthcare organizations are frequently slow to adopt best practices from other

industries. Instead, the industry struggles to respond to crucial needs including reducing unnecessary

medical errors (Kohn, Corrigan, & Donaldson, 1999), increasing investments in information

nn S. McAlearney, Division of Health Services Management and Policy, The Ohio State University, Cunz Millikin Road, Columbus, OH 43210-1229, U.S.A. E-mail: [email protected]

John Wiley & Sons, Ltd.

Received 30 January 2005 Revised 30 January 2006

Accepted 29 June 2006

968 A. S. McALEARNEY

technologies (Benchmarks, 2002), and addressing the glaring inequities and disparities in both access

to care and medical treatment (Kerr, McGlynn, Adams, Keesey, & Asch, 2004; McGlynn et al., 2003;

Smedley, Institute of Medicine, Stith, & Nelson, 2002). This article addresses the gaps in leadership

development within healthcare organizations and contextual factors that hamper closing these gaps.

Certain features of healthcare organizations are clearly unique to the industry (Ramanujam &

Rousseau, 2004). Although physicians play a central role in the delivery of healthcare services, they are

rarely employed by provider organizations, and are thus typically outside the purview of traditional

human resources practices and leadership development initiatives. In addition, the professional norms

and practice standards expected of physicians and other medical professionals create demands for

continued clinical education and development that the organization must facilitate, but that are rarely

linked to the education and development priorities of the healthcare organization itself. Further, the

multiple constituencies of healthcare organizations including patients, families, insurers, and

regulators that compete to influence healthcare have varied perspectives about care delivery and its

dynamics, and these divergent views contribute to considerable complexity around definitions of

organizational effectiveness and impact for healthcare leaders to interpret.

Challenges for leadership in the healthcare industry

Complexity in the healthcare industry undoubtedly creates special challenges for leadership and

leadership development, stemming from a combination of both environmental and organizational

factors. Environmentally, healthcare organizations are faced with a myriad of regulatory influences

largely out of their control. For example, most hospitals receive a majority of their reimbursement from

public sources, including the Federally-sponsoredMedicare program and the co-sponsored Federal and

State-funded Medicaid program. Yet these provider organizations rarely have much power or influence

over reimbursement rates, and reimbursement for both hospital and physician services may be below

the actual cost of providing care. As a result, hospitals are challenged to manage fragile budgets and

often shifting reimbursement rates, while needing to deliver high-quality care regardless of payment

source or adequacy.

Organizationally, healthcare organizations are notorious for seemingly chaotic internal

coordination. Multiple hierarchies of professionals, on both the clinical and administrative sides

of the organization, generate special challenges for directing the organization and coordination of

work in healthcare. Often noted is the cultural chasm between administrators and clinicians (e.g.,

Friedson, 1972; McAlearney, Fisher, Heiser, Robbins, & Kelleher, 2005; Shortell, 1992). Even

within clinical ranks, divisions exist associated with professional distinctions such as between

physicians and nurses, pharmacists and physicians, and so forth. Such differences create

considerable challenges for leadership as organizations struggle to manage their varied employed

and contracted worker populations.

Competing organizational priorities create constant challenges for healthcare leaders charged to

direct and appropriately utilize financial and human resources to best serve patients, communities, and

other stakeholders and constituents. The needs of multiple internal and external stakeholders often

conflict. An oft-repeated phrase is the notion of ‘‘no mission, no margin,’’ reflecting the fundamental

importance of maintaining the healthcare organization’s financial viability in order to serve the needs of

patients and the community. Though goals may be clearer in for-profit hospitals or healthcare systems

in which shareholder demands mandate a focus on financials, such settings still require professional

commitments and face ethical concerns.

Managerial and organizational learning receive relatively little attention in health care

organizations. Management mistakes in healthcare are rarely acknowledged or examined as useful

sources of organizational learning (Hofmann, 2005; Hofmann & Perry, 2005; Jones, 2005; Kovner

Copyright # 2006 John Wiley & Sons, Ltd. J. Organiz. Behav. 27, 967–982 (2006)

DOI: 10.1002/job

LEADERSHIP DEVELOPMENT IN HEALTHCARE 969

& Rundall, 2006; Russell & Greenspan, 2005). For example, the failed merger between Stanford

and UCSF Medical Center could have been predicted by a review of both general and healthcare-

specific management literature, yet several years and millions of dollars later, the two systems

separated to become independent systems once again (Russell, 2000). In healthcare settings, there

is often little attention given to how to improve management practice, increasing the likelihood that

previous mistakes will be repeated.

Conceptual Background

Healthcare leadership needs

Clinical and organizational challenges combined increase the need for strong leadership at all levels of

healthcare organizations. Considerable evidence supports the notion that leaders and their actions

affect organizational results (Fuller, Paterson, Hester, & Stringer, 1996; Lowe, Kroeck, &

Sivasubramaniam, 1996; Sashkin & Rosenbach, 2001; Smith, Carson, & Alexander, 1984). In

healthcare organizations, the impact of leaders extends to the lives and well-being of patients and their

communities. Features of healthcare delivery make these effects distinct. For example, in contrast to

other customers and consumers, the vulnerability of patients and the problem of asymmetric

information in healthcare delivery choices are frequently mentioned as contributors to patients’

position as a unique category of customers (Newhouse, 2002). The typically dual role of physicians as

both consumers of healthcare resources and controllers of organizational revenues in their ability to

direct patients and prescribe care, makes leader relationships with physicians fairly atypical in

comparison with key stakeholder relationships in other industries.

Further, researchers and authors have recently emphasized that great leadership must be

transformational, requiring leaders to be able to empower and motivate their workforce, define and

articulate a vision, build and foster trust and relationships, adhere to accepted values and standards, and

inspire their followers to accept change and meet organizational goals on multiple levels (Bass, 1985;

Bennis, 1989; Bono & Judge, 2003; Burns, 1978; Gardner, 1990; House, 1977; House & Shamir, 1993;

Kouzes & Posner, 1993, 1995). Yet a sense of how to best develop these great, transformational leaders

is far from established, especially in healthcare organizations.

Leadership development practices

Leadership development practices are defined as educational processes designed to improve the

leadership capabilities of individuals. These practices are rooted in the traditions of management training

programs designed to improve both individual managerial skills and job performance (Burke & Day,

1986), and can have important effects on both organizational climate (Moxnes & Eilertsen, 1991) and

organizational culture (Schein, 1985). Practices in leadership development are a variant of management

development practices which are defined as interventions that are intended to enhance effectiveness or

improve organizational culture by facilitating managers’ learning (Gray & Snell, 1985).

Conger and Benjamin (1999) outline four general approaches to leadership development that include

developing the individual leader, socializing company vision and values, strategic leadership

initiatives, and action learning (Conger & Benjamin, 1999). Within organizations, leadership

development practices commonly include activities such as 360-degree feedback, skill-based training,

job assignments, developmental relationships (e.g., mentoring, coaching), and action learning (McCall,

Lombardo, & Morrison, 1998; McCauley, Moxley, & VanVelson, 1998; Revans, 1980). Although

considerable variability exists across organizations and industries with respect to the balance and

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970 A. S. McALEARNEY

content of leadership development programs, program designs are generally consistent with the four

basic frameworks outlined above. This consistency presents opportunities to explore program

development challenges and decisions in a particular set of organizations, such as healthcare

organizations, rather than focus on program features and details.

Leadership development in healthcare

Anecdotal evidence suggests the healthcare industry lags behind other industries with respect to

leadership development practices and other human resources functions, but these issues have not been

systematically investigated. This exploratory study is designed to improve our understanding of

leadership development practices in healthcare organizations by asking experts and organizational

representatives to describe their views of leadership development in healthcare, and to propose future

directions for healthcare leadership development.

Organizational Context

External Environment

The $1.7 trillion U.S. healthcare industry is both extensive and competitive, with nearly 5,000 hospitals

and 700,000 physicians nationwide. Most markets are dominated by not-for-profit hospitals and health

systems, yet these healthcare organizations are subject to strong pressure to adhere to rigorous business

principles in order to remain viable and realize their organizational missions.

Industry Factors

Several features of the healthcare industry are clearly unique. For instance, while physicians are rarely

employed by hospitals or health systems, they play a central role in directing and utilizing

organizational resources, creating challenges for organizational leaders. Similarly, external influences

from third parties including insurance companies, employers, and government payers drive strategic

organizational priorities around issues such as cost containment and quality improvement.

Organizational Factors

Inside healthcare organizations, internal coordination is often reportedly poor, leading to avoidable,

expensive, and often devastating medical and managerial mistakes. The cultural chasm between

administrators and clinicians contributes to a sense of chaos, with workers often identifying more

with their professional peers than with the organization. Further, human resources functions in

healthcare organizations have historically been limited in scope, and rarely valued for any strategic

role in contributing to organizational success.

Current Problems Faced

Enhanced focus on strategic priorities in healthcare has increased organizations’ attention to the

need to develop and improve their human resources capabilities. Yet, despite evidence from other

industries about the roles and opportunities for leadership development in organizations, our

understanding of leadership development practices in healthcare organizations was limited.

Time

This study was conducted in 2003 and 2004, during a period of rapid change in the healthcare

industry. Intensifying demands for new information technologies in clinical practice, error

reduction in medicine, and new capabilities among healthcare knowledge workers increased

pressure to better prepare leaders at all levels in healthcare organizations.

Copyright # 2006 John Wiley & Sons, Ltd. J. Organiz. Behav. 27, 967–982 (2006)

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LEADERSHIP DEVELOPMENT IN HEALTHCARE 971

Methods

Study design

I conducted 35 key informant interviews with individuals considered experts in healthcare leadership

on the basis of their national reputation, and studied 55 organizations reported to provide healthcare

leadership development training either in-house or as a vendor to healthcare provider organizations.

The combination of expert interviews and organizational case studies included a total of 160 interviews

conducted between September 2003 and December 2004. Table 1 shows the characteristics of study

participants across expert interviews and case studies.

I used standard, semi-structured interview guides including open-ended questions to both frame the

interviews and permit probing for additional information (Miles & Huberman, 1994) in the expert

interviews and case studies. The original interview guides were pilot tested with healthcare leaders and

provider organizations in the local area.

This qualitative design (Maxwell, 1996) enabled me to meet the objectives of my research,

permitting exploration of the different issues that emerged around the topic of leadership development

in healthcare. A qualitative approach was appropriate for this study because of the exploratory nature

of my research, and because I suspected that experts’ and organizations’ perspectives about leadership

development were multidimensional, making them difficult to examine quantitatively (Miles &

Huberman, 1994). In addition, my use of qualitative methods enabled me to explore both experiences

and predictions of experts and organizational representatives, and provided rich information about the

multiple facets of leadership development challenges in healthcare (Crabtree & Miller, 1999; Miles &

Huberman, 1994). No potential informant contacted refused to participate in the study. All participants

were assured that their voluntary participation would remain anonymous.

Expert interviews

Expert key informants were purposely selected based on their reputation in the healthcare industry

using a snowball sampling technique. The original sample of key informants was generated by the

industry and academic members of the national Center for Health Management Research (Seattle,

WA), and the sample was extended by study informants who were asked to suggest additional experts

Table 1. Study participants

Description Number (%)

Experts interviewed Association leaders 15 (43%) University faculty 12 (34%) Industry consultants 8 (23%) Total 35

Organizational case studies Healthcare provider organizations 43 (78%) Leadership development program vendors 12 (22%) Total 55

Organizational case study Executive-level Informant 39 (31%) informants Director-level Informant 51 (41%)

Manager-level Informant 23 (18%) Program participant 12 (10%) Total 125

Total key informants 160

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for the study interviews. Experts had a variety of current and former affiliations, including with

healthcare industry associations, universities, consulting organizations, and provider organizations.

Data saturation was judged to be reached when informants’ suggestions about key informants were

repetitive, and when no new insights were emerging from the ongoing data analysis (Morse, 2000).

Interviews were conducted both in-person and telephonically, using rigorous ethnographic interview

techniques (Spradley, 1979). Interviews lasted 45–90 minutes, with an average duration of 1 hour,

consistent with the methods suggested for in-depth interviews (McCracken, 1988). Experts were asked to

describe their own healthcare leadership and leadership development experiences, and to comment on both

the current status of and program development opportunities for leadership development in healthcare.

Organizational case studies

Similar to expert informants, organizations were purposely sampled based on their reported experience

and reputation with leadership development in healthcare. The original sample was again produced by

the members of the Center for Health Management Research, and extended based upon conversations

with experts and other organizational informants. Fifty-five organizations were studied between

September 2003 and December 2004. Five organizations were studied in person in order to efficiently

complete multiple key informant interviews, while the remaining organizations were studied using

numerous telephone interviews. One hundred twenty-five interviews were held as part of the

organizational case studies. These case studies (Yin, 1984) consisted of interviews with key informants,

in addition to collection and study of documents associated with the leadership development programs,

and a review of publicly available program information accessible through formal publication or the

Internet. Interviews lasted 30–90 minutes, with an average of 45 minutes for each interview.

Organizations studied included both healthcare provider organizations with internal leadership

development activities and external organizations which provide leadership development programs to

individuals and institutions in the health services industry. Internal case study organizations consisted

of 43 healthcare systems and individual hospitals which had reportedly designed and implemented

healthcare leadership development programs, and respondents included executives, directors,

managers, and program participants. Twelve external case study organizations included both

healthcare associations and other vendors of healthcare leadership development programs, with

respondents including individuals leading the organizations and those developing and delivering

healthcare leadership development programs.

Questions addressed the structure and format of leadership development program activities,

including approaches to identifying and targeting individuals and groups for leadership development

opportunities. Similar to the expert interviews, an open-ended list of questions was used, including

questions probing for more information.

Analyses

Amajority of the interviews were audiotaped and professionally transcribed, with extensive field notes

used in the small number of cases (3) where taping was infeasible. This process yielded 160 transcripts

and over 1,000 single-spaced pages for analysis.

My analyses used the constant comparative method of qualitative data analysis (Glaser & Strauss, 1967),

and common techniques to code the data (Constas, 1992; Miles & Huberman, 1994). Using a grounded

theory approach (Glaser & Strauss, 1967; Strauss &Corbin, 1998), I read transcripts and discussed findings

with my research associates and professional colleagues as the study progressed. This iterative process

enabled me to explore new themes that emerged in subsequent interviews and case studies.

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I applied a combination of deductive and inductive methods in my analyses. Prior to coding the data,

I produced ideas about the themes I expected to find, and then closely read the transcripts to inductively

advance code development. This coding process permitted me to organize the data into categories of

findings, and allowed me to identify broad themes that emerged from the data (Miles & Huberman,

1994). I use the term ‘‘theme’’ to identify a cohesive category of responses, found across experts and/or

across organizations, that aggregates patterns observed in the data. In addition, throughout the study,

periodic discussions with professional colleagues and my research associates and an ongoing review of

the literature helped me to validate, compare, and extend my findings, where appropriate (Glaser &

Strauss, 1967). I used the qualitative data analysis software Atlas.ti (version 4.2) (Scientific Software

Development, 1998) to support these analyses.

Results

First, six distinct themes emerged from the data concerning the specific leadership development

challenges for healthcare organizations. Each of the themes was discussed across informants,

supporting the validity of these findings. A summary of these leadership development challenges is

presented in Table 2, and below I discuss each theme in greater detail. Second, I propose a conceptual

model for organizational commitment to leadership development in healthcare organizations. I present

this model and three propositions in the following pages. Verbatim quotations have been selected that

are representative of the data.

Table 2. Challenge themes in healthcare leadership development

Challenge Representative comments

Theme 1: Industry lag: The healthcare industry is very behind

‘‘We’re 15 years behind’’ ‘‘I don’t think we are doing very well at all.’’

Theme 2: Representativeness: Need to make organization representative of community and patient population

‘‘Hospital leadership should be a reflection of the demographics of the community that the hospital serves.’’

Theme 3: Professional conflicts: Pressure to segregate different professional groups for leadership development

‘‘I do think it divides the organization and so I don’t know that that’s a good thing to have your managers divided.’’

Theme 4: Time constraints: Challenge of freeing time for program participation

‘‘That’s an hour or two. . .that’s being spent away from patient care in a learning environment.’’

Theme 5: Technical hurdles: Challenges of the organization’s technical capabilities

‘‘If I don’t have a sound card then what’s the use of getting a teleconference or a videoconference? Because then I can’t even hear it.’’

Theme 6: Financial constraints: Challenges associated with budgets, organization type

‘‘It’s something that’s the first thing that people cut in a tight budget situation.’’

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974 A. S. McALEARNEY

Challenges of leadership development in healthcare

Theme 1: Industry Lag—The healthcare industry is very behind.

Across informants, many respondents noted that ‘‘healthcare organizations are 10–15 years behind

other industries in the area of leadership development.’’ This characterization of the industry as a whole

was consistent, and perhaps reflective of the trouble and delays healthcare organizations have had

translating other industry practices (e.g., quality improvement techniques) into their own

environments. As one respondent explained:

‘‘I think they’re learning what industry learned 15 years ago

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