Refer to your work for?Corporate Strategic Goals?and?Service Area Competitor Analysis. You will now write a paper (recommended minimum of 6 pages) in which you: Develop directional stra

6

Chapter 5 Directional Strategies

Why Directional Strategies Are Important

As suggested by James Brian Quinn, strategic decisions set the overall direc- tion for an organization and shape its goals as well as its products and services, markets, and service delivery and support activities. The broadest strategic decisions are the directional strategies – vision, mission, values, and strategic goals – because they provide general limits for all subsequent organizational decisions. The directional strategies essentially document strategic thinking concerning “who we are, what we want to be, how we are going to behave, and what we want to achieve.”

“Strategic decisions are those that determine the overall direction of an enterprise and its ultimate viability in light of the predictable, the unpredictable, and the unknowable changes that may occur in its most important surrounding environments. They ultimately shape the true goals of the enterprise.”

—JAMes BriAn Quinn, sTrATegy AuThor AnD DArTMouTh professor

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-14 00:02:52.

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164 Strategic management of HealtH care organizationS

Directional strategies are profoundly important; they initially set all other activities in motion. The directional strategies create the first signs of momentum for the organization. They rest solidly on a close examination of the reasonably predictable changes that the strategic thinking activities (awareness, anticipation, analysis, and interpretation) have synthesized concerning the organization’s environment (external environmental analysis) and itself (internal analysis). in addition, to a considerable extent, the directional strategies must be able to weather the unpredictable and unknowable changes that will inevitably occur to guide subsequent organizational decisions. Vision, mission, and values are relatively enduring, whereas strategic goals may be short or long term, and will naturally evolve as some are accomplished and others are modified in a changing environment.

A change in the directional strategies is usually evolutionary rather than revo- lutionary. Therefore, directional strategies should be re-examined and modified over time, allowing an organization to remain nimble enough to maneuver in its changing environments. Transforming an organization’s identity and what it does is never an easy task. re-invention can be traumatic for the organization, but sometimes necessary for survival.

Because the directional strategies are relatively enduring, they must take an organization through good times and bad, and are difficult to change en masse; therefore, strategic managers must carefully create the organization’s directional strategies.

use concepts in this chapter to craft exciting and enduring directional strategies!

learning objectives

After completing the chapter you will be able to: 1. Discuss how external environmental analysis, service area analysis, and internal

analysis provide the context for developing the directional strategies. 2. Describe the roles of and relationships among mission, vision, values, and

strategic goals. 3. Develop a mission statement incorporating the important characteristics and

components of organizational missions. 4. Compose an organizational vision statement using the relevant characteristics

and components of organizational visions. 5. Develop a values statement based on established characteristics and components

of organizational values. 6. Use service category critical success factors to imbue strategic goals. 7. Develop a set of strategic goals that contribute to the mission, move the

organization toward the realization of its vision, and are consistent with the organization’s values.

8. Discuss the important issues in the governance of health care organizations and the role of boards of directors in creating and maintaining policy-making direction.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-14 00:02:52.

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Chapter 5 DireCtional StrategieS 165

Strategic Management Competency After completing this chapter you will be able to develop directional strategies for a health care organization.

Directional Strategies

Mission, vision, values, and strategic goals are appropriately called directional strategies because they guide strategists when they make key organizational decisions. The mission captures the organization’s distinctive purpose or reason for being – it is a broadly defined and enduring statement of purpose that dis- tinguishes one organization from other organizations of its type and identifies the scope of its operations in product, service, and market (competitive) terms. The vision creates a mental image of what leaders want the organization to achieve. it is an expression of hope for a desired future state – a description of what leaders want the organization to accomplish when it is fulfilling its mission. Values are the fundamental or guiding principles that are held dear by members of the organi- zation and shape the organization’s culture. These are principles the managers and employees will not compromise while they are in the process of achieving the mission and pursuing the vision and strategic goals. Strategic goals are bench- marks or end results related to critical success factors; consequently, the goals should provide more specific direction that accomplishes the mission and vision. unfortunately, there is rarely a clear distinction among the concepts and terms actually used in these statements – especially in the mission, vision, and value statements. studies of actual statements reveal that even when the statements are clearly labeled there is a wide variety of terms used to express the ideas contained in them.1 from an analysis of 100 firms in the Fortune 500, it was suggested that many mission statements are written at an educational level above what would be effective to communicate to all stakeholders.2

The Process for Establishing Directional Strategies

exhibit 5–1 provides an overview of the process for establishing the directional strategies. The exhibit demonstrates the sequence and the need to understand the broadest external analysis to the more narrow internal analysis followed by the narrower still service area competitor analysis. only after a thorough understand- ing of the situation the organization faces are the directional strategies formulated.

Step 1: Review Results of Situational Analysis in Chapter 2 guidelines for a situational analysis were developed and it was noted that an understanding of the external environment is essential for organizations to answer the question, “What should we be doing?” The “rules of success” are written outside the organization and these rules must be clearly understood before an effort is made to develop the mission, vision, values, and strategic goals

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-14 00:02:52.

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166 Strategic management of HealtH care organizationS

of the organization. A critical aspect of the external environment is the nature of the competitors in the organization’s market space (Chapter 3, service Area Competitor Analysis).

The more organizational leaders know about the strengths and weaknesses of competitors, the more likely they will be able to position the organization to establish or maintain its ability to compete effectively (its competitive advantage) as covered in Chapter 4. A complete review of the organization’s situation with regard to external and internal factors is necessary before beginning the process of formulating the directional strategies.

Step 2: Develop a Statement of Mission Chester Barnard, in his seminal book, The Functions of the Executive, stated that only three things are needed to have an organization: (1) communication, (2) a willingness to serve, and (3) a common purpose. The inculcation of the “belief in the real existence of a common purpose” is, according to Barnard, “the essential executive function.”3 purpose, among other things, helps managers make sense of the environment. When the purpose of an organization is clearly understood, the

EXHIBIT 5–1 The Process for the Development of Directional Strategies

Step 1 – Review Results of Situational Analysis – External Analysis, Service Area Competitor Analysis, and Internal Analysis

Step 2 – Develop a Statement of Mission

Step 3 – Develop a Statement of Vision

Step 4 – Develop a Statement of Values as Guiding Principles

Step 5 – Develop Strategic Goals

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-14 00:02:52.

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Chapter 5 DireCtional StrategieS 167

ESSEnTIAlS foR A STRATEgIC THInkER 5–1

What is the long-term care industry?

The long-term care industry is comprised of organizations that provide rehabilitative, restora- tive, or ongoing skilled nursing care to patients who require assistance with daily living. A variety of facilities dedicated to the intensity of care required have developed over time. The “old folks home” may now be a memory care facility, a skilled nursing facility, a rehab facility, and so on. The following list represents the main types (listed in ascending order by intensity of care).1

Independent lIvIng

Adult communities usually impose age restric- tions, offer social activities, and provide increased security. Generally, these facilities do not offer medical services but may facilitate access to care by providing convenient transportation, sched- uled visits from contract providers, and so on. Typically, residents are age 75 or younger.

Congregate Care faCIlItIes (CCfs)

These facilities provide social activities, security, and non-health related services such as meals,

housekeeping, and transportation for shopping and health care appointments. The target age population is 75–82 years.

assIsted lIvIng faCIlItIes (alfs)

Although there is no uniformly accepted defi- nition of ALFs, the U.S. Department of Health and Human Services defines ALFs as residences that provide either routine general protective oversight or assistance with activities necessary for independent living to mentally or physically limited persons. These facilities generally pro- vide care for individuals between the ages of 70 to 90+ years.

skIlled nursIng faCIlItIes (snfs)

The statutory definition of a skilled nursing facility as provided in the Social Security Act is an insti- tution (or a distinct part of an institution) that is engaged in providing skilled nursing care and related services for residents who require medical or nursing care, or rehab services (for the rehabili- tation of injured, disabled, or sick persons), and is

complexity of the environment can be reduced; leaders are able to analyze their situation in light of the goals the organization wishes to achieve. Thus the com- plex environment is no longer a “mere mess of things.” As a statement of purpose, the mission plays an important role in focusing strategists’ attention on relevant aspects of the environment.

for example, if the Ceo of a long-term care facility attempts to consider all the turbulence in the organization’s environment, it will be overwhelming. Can anyone effectively track all of the changes taking place in biotechnology, cultural values, demographics, and politics? however, if the Ceo focuses on only those aspects of the environment that relate to the mission of the long-term care organi- zation, the task becomes more manageable. essentials for a strategic Thinker 5–1, “What is the Long-Term Care industry?” provides an overview of this expanding industry.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-14 00:02:52.

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168 Strategic management of HealtH care organizationS

The common purpose (mission) to which Barnard referred is the reason that organizations exist. some organizations exist to make money for the owners; some are founded to provide health care to indigent patients; others are started to deliver health services as conveniently as possible, or to provide care to individu- als who belong to the same managed care plan.

Mission: A Statement of Distinctiveness in the hierarchy of goals (end results and organizational plans to accomplish them), the mission captures the organization’s distinctive character. Although a well-conceived mission is gen- eral, it is more concrete than vision. An organizational mission is an attempt to capture the essence of the organizational purpose and commit it to writing. stryker Corporation, an international leader in the development of medical technologies, has a mission statement that is simple and to the point – “Together with our customers, we are driven to make healthcare better.”4 emphasis is placed on the interactions with customers, physicians, researchers, and so on, in the development of innovative products and services. This simple statement is used to coordinate the actions of thousands of employees in more than 100 countries.

An organizational mission is a broadly defined and enduring statement of purpose that distinguishes a health care organization from other organizations of its type and identifies the scope of its operations in product, service, and mar- ket (competitive) terms.5 The mission statement of the university of Texas MD Anderson Cancer Center in exhibit 5–2, for example, distinguishes the center from other health care organizations in the service area by its relationship with the university of Texas; its emphasis on a specific disease (cancer); its commit- ment to the integration of patient care, research, education, and prevention; and its intention to accomplish these through education at the undergraduate as well as graduate levels.

not primarily for the care and treatment of mental diseases. Nursing facilities offer the most intense level of long-term care for individuals requiring around the clock care; they generally have transfer agreements with one or more hospitals.

Medicaid is the primary payer of long-term care services. Over 60 percent of the patients in nursing homes as well as almost 20 per- cent of residents in assisted living facilities,2 are Medicaid recipients. Medicare recipients, by comparison, return to their home after a relatively short stay of 36½ days for purposes of rehabilitation.

The future of the long-term care industry appears very promising because of the aging

of the population and advances in medical science that have prolonged human life. As the population ages, the demand for rehabilitative services, assisted living services, and treatment of chronic conditions increases.

referenCes

1. These definitions taken from: Long Term Care

Education. (www.ltce.com/learn/skilledcare.

php).

2. Payment for services information is from:

www.ahcancal.org/advocacy/

StateLongTermPostAcute/Pages/default.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-14 00:02:52.

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Chapter 5 DireCtional StrategieS 169

MD Anderson developed an effective logo that states that MD Anderson Cancer Center is dedicated to “Making Cancer history” with a bold red line through the word “cancer”. With cancer “wiped” out, MD Anderson is definitely making history. since 1990 when U.S. News & World Report began a ranking of hospitals, MD Anderson has been ranked first or second, and has received the top ranking nine times in the past ten years.

Although mission statements are relatively enduring, they must be flexible in light of changing conditions. The changes facing academic medicine will continue to impose pressures on specialized centers of excellence such as MD Anderson because of the substantial costs involved in integrating patient care with the teach- ing and research mission and the increasing reluctance of payers to reimburse for educational costs. essentials for a strategic Thinker 5–2, “What Are Academic Medical Centers?” highlights the nature and some challenges facing academic medical centers. Despite the challenges, MD Anderson has retained its mission statement for a number of years and has remained focused on its distinctiveness in a rapidly changing environment.

EXHIBIT 5–2 Mission Statement of the University of Texas MD Anderson Cancer Center

The mission of the University of Texas MD Anderson Cancer Center is to eliminate cancer in Texas, the nation and the world through outstanding integrated programs in patient care, research, education and prevention, and through education for undergraduate and graduate students, trainees, professionals, employees, and the public.

Source: University of Texas MD Anderson Cancer Center.

ESSEnTIAlS foR A STRATEgIC THInkER 5–2

What are academic medical centers?

According to the Association of American Medical Colleges (AAMC), an academic medical center (AMC) is a “university-based hospital or health system that is organizationally or admin- istratively integrated with a medical school.” Despite the Association’s singular definition, AMCs are diverse and complex – no two are alike. They differ in organizational, operational, financial, and governance structures. At their core, AMCs typically include a medical school, a teaching hospital, and faculty who teach medi- cal students and specialty trainees as well as provide clinical care for patients. The current

trend is toward greater alignment among these three components, yet no single corporate struc- ture is considered ideal. Of the approximately 140 allopathic medical schools, only 25 percent are fully integrated such as the University of Michigan Health System where the medical school, hospital, and faculty practice fall under one corporate structure. On the other end of the spectrum, fewer than 10 percent operate as separate entities, similar to George Washington University. In between are multiple examples of “corporate” alignment between school and hos- pital (University of Virginia), school and faculty

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-14 00:02:52.

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170 Strategic management of HealtH care organizationS

(Columbia University Medical Center), and hos- pital and faculty (Vanderbilt University Medical Center). Where an AMC falls along this alignment continuum is a product of its institutional history, culture, and financial interrelationships.

Not only do AMCs provide patients and their communities with health care services ranging from everyday needs to the most specialized care, in addition, they:

● Offer unique care and services not available anywhere else in their market.

● Teach the next generation of health

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