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Strategic plan modelling by hospital senior administration to integrate diversity management

John J Newhouse

Department of Health Services, Saint Joseph’s University, Philadelphia, PA, USA

E-mail: [email protected]

Summary

Limited research suggests that some hospital senior administrators and chief executive officers (CEOs)

have employed a strategic planning function to achieve diversity management practices. As the hospital

industry struggles with how to integrate diversity practices to improve patient satisfaction, increase the

quality of care and enhance clinical outcomes for minority populations, understanding the planning

process involved in this endeavour becomes significant for senior hospital administrators. What is not well

understood is what this strategic planning process represents and how it is applied to integrate diversity

management. Scant research exists about the type of strategic models that hospital CEOs employ when

they wish to reposition their organizations through diversity management. This study examines the

strategic planning models used by senior administrators to integrate diversity management for an

institutional-wide agenda. A qualitative survey process was used for CEOs in the states of New York,

Pennsylvania, New Jersey and Delaware. The key research questions dealt with what type of strategic

plan approach senior administrators used for integrating diversity management and what rationale

they used to pursue this. Significant differences were reported between three types of strategic plan

modelling used by CEOs. Also, when comparing past and current practices over time, such differences

existed. The need to integrate diversity management is underscored by this study. How senior

hospital administrators apply strategic plan models and what impact these approaches have represent

the major implications that this study offers.

Introduction

The hospital industry’s diversity management agenda has been both a case of mixed success and mixed commitment. For the purposes of this study, the term diversity manage- ment refers to those leadership and management practices designed to achieve three goals: one, to increase the mino- rity populations in both the general staff and the pro- fessional workforce; two, to develop a corporate culture of valuing diversity and multiculturalism; and three, to improve minority patient satisfaction and clinical out- comes for all non-white patient populations. This diversity management agenda has not been widely embraced by hos- pital chief executive officers (CEOs) despite its significant attention and promotion. Industry leaders and professional organizations such as the American College of Healthcare Executives (ACHEs) have made the argument that improved clinical outcomes are a result of practising

diversity management. This is substantiated by over- whelming evidence, supporting the issue of improved clinical outcomes as a result of practising diversity management.1 – 7

It is clear that such strategic implementation can only happen when the CEO manages the strategic process, or as Lester Digman writes, CEOs are responsible for ‘. . . creat- ing the structure and systems so that the organization’s objectives are met effectively and efficiently and resources are allocated properly’.8

Barbara Stern, vice president of diversity for Harvard Pilgrim Health Care, applied this thinking to the health- care industry when she wrote, ‘One of the most important things to know about this issue is that the CEO owns it. Diversity is a strategic issue with direct impact on the bottom line. CEOs should pay as much attention to it as they do to every other high-level consideration in the organization’.9 Stern’s insights are voiced by others. Paul J Hensler, FACHE, administrator for the University of California – San Diego Thornton Hospital, wrote, ‘For any diversity efforts to work, you must have buy-in from your leadership. As with any major organizational initiat- ive, if the leadership does not support it and promote it in their own words and actions, it will not produce lasting change’.10 But incorporating diversity management

Dr John J Newhouse Ed.D, Assistant Professor and Chair, Department of

Health Services, Post Hall, Rm. 110, Saint Joseph’s University, 5600 City

Ave., Philadelphia, PA 19131-1395, USA.

Institutional Review Board approved for subject confidentiality and

ethical compliance.

Health Services Management Research 2010; 23: 160–165. DOI: 10.1258/hsmr.2010.010003

has remained elusive. Less than 2% of the industry’s top spots are filled by racial or ethnic minorities.2 Five years earlier Muller and Hasse11 wrote, ‘In regions that have multicultural populations and where the patient mix is more heterogeneous racioethnically than the health ser- vices workforce, health care senior managers may be less in touch with diversity issues than their own staff’. In their review of the literature in 2002, Weech- Maldonado, Dreachslin, Dansky, DeSouza and Gatto12

reported that relatively few hospitals had implemented diversity management programmes even when such insti- tutions considered diversity management an important organizational issue. This condition was reported again four years later by Haugh.13

In a previous study, this author examined two related questions: first, are senior administrators engaging in a stra- tegic planning process for diversity management. Second, is there any difference based upon hospital type for increas- ing diversity management through strategic planning.14

The results showed that about half of the CEO respondents had applied some form of strategic planning to introduce and integrate diversity management in their health-care organizations. It was also reported that a significant differ- ence existed between rural hospitals and academic medical centres in this regard, but not between community hospi- tals, regional medical centres or specialty institutions.14

What this study did not address were questions about the strategic planning process itself. This current study asks three questions: first, what type of strategic plan modelling have senior administrators used to develop diversity man- agement? Second, has this modelling changed over time from when it was first employed for diversity management to the most recent application of strategic planning? Third, what was the reported impact this process had for the organization?

Literature and conceptual framework

By the mid-1990s there was strong evidence that adminis- trative policy decisions within health-care organizations were designed to support the development of the business case for valuing diversity as a corporate goal in the pursuit of organizational success.1,12,15 One surprising finding from these studies was that despite the general recognition that pursuing diversity management made sense given the demographic changes in their markets, relatively few hos- pital CEOs engaged in any planning process to achieve this. Wallace et al.1 reported that less than one-third of the CEOs in their study engaged in any planning process for implementing diversity management.

Dreachslin and Saunders16 developed a five-phase model for organizational transformation to position diver- sity leadership. Each stage consisted of performance indi- cators as measures of how completely diverse leadership was being incorporated within the health-care organiza- tion. There was a marketing strategy for applying this model that would achieve a desired position offering competitive advantages through diversity leadership. Dreachslin noted, ‘The key demographic trend driving

select health services organizations to assume the strategic position of diversity leadership is the changing racial and ethnic composition of both patients and workforce’.16

The process to do this was through long-range planning. It was this strategic process that health-care organizations used to maximize their alignment between their services and products, and the external demands of their markets. However, this research did not study the actual strategic planning process itself and how CEOs assessed the impact this process had for their organizations.

Dansky et al. reinforced the premise that Dreachslin presented four years earlier when in their study diversity management was recognized as a strategically driven process. The authors based much of their theoretical fra- mework on the work of Miles and Snow,17 which defined strategic orientation by how rapidly an organization changes its products or markets. The Miles and Snow fra- mework was critical for Dansky et al.18 since it included administrative attributes within the organization along with market forces to predict the type of alignment that would exist for an organization between its strategy and its operations. The authors concluded by stating that ‘This role of leadership in shaping diversity strategy is likely far more important than previously thought’.18

Matus19 continued this theme by asking what are the roles and responsibilities of senior hospital administrators regarding the delivery of culturally competent care. He presented a four-step strategic planning process requiring a top-down approach to achieve culturally competent care in all operational and functional areas of the organiz- ation. A necessary ingredient for Matus was the relation- ship of the external community to the health-care organization. He saw this relationship as critical for stra- tegic success with valuing diversity and converting such beliefs into culturally competent care programmes. Both of these studies linked diversity management to strategic planning.

Begun and Kaissi20 reported that minimal standardi- zation existed in how hospitals engaged in their strategic planning process. Their work showed scant commonality among health-care organizations in how they initiated this process or executed it once the decision was made to pursue it. This research supported the concept that hospital administrators engage in long-range planning for various forms of organizational focus and the means to achieve this focus through strategic goals. This was also supported by the work of Coddington and Moore,21 who examined the application of market-driven strategies in health care. Morrisey described the planning process as having three phases. The first phase is the strategic think- ing process, which focuses on the intuitive aspect of an issue or problem. The thrust of this phase is to determine how the firm’s mission and vision relate to the issue at hand. This strategic thinking should lead into the second phase, which is long-range planning. Here it is not just intuitive thinking but analytical thinking that strives to create accurate projections of a future position that addresses the issue or problem. The last phase is the tacti- cal planning phase. It is primarily based on an analytical

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approach to develop specific actions affecting the organiz- ation’s current performance.22 Hospitals are less likely to follow this planning progression than other institutions and industries. Some of the reasons for this lie in what Afred P Chandler terms as the CEO congruency for stra- tegic management. His argument is that to be effective, strategy has to fit or be congruent with at least four vari- ables as perceived by the CEO: one, this person’s philos- ophy; two, external environmental factors, forces and events that the CEO believes support it; three, it can meet specific objectives for which it is formulated; and four, the CEO believes there are sufficient internal resources to implement it or there is a way to attract these necessary resources.23

Several management and organizational theorists suggest all strategic plan modelling can be reduced to two broad categories of practice. Mintzberg24 calls these two approaches deliberate strategies and emergent strat- egies. Hax frames these two approaches as ‘schools of man- agement’ with the first approach founded on management science, economics and statistical decision theory. This could be termed the rational process. ‘Those favouring this school of management, although recognizing its inherent limitations, tend to advocate the use of formal planning systems . . .’.25 The second approach rests on be- havioural theory and supports a power-behavioural approach to strategy formulation and implementation. This practice is driven by the politics of strategic decision- making, executive bargaining and negotiation. Mintzberg refers to this as an emergent strategy process or one that happens based upon interpersonal influence and power within the organization. Progress towards strategy formu- lation is achieved incrementally. It emerges as the necess- ary political power is exercised to move this strategy forward. Although Mintzberg articulates this dual approach, he argues that a truly deliberate or planning strategy is an unlikely reality, as is a strictly emergent strat- egy. The deliberate approach would require a pattern to have been intended exactly as realized. The second would require consistency in action without any suggestion of intention. The likelihood is that most strategies possess both deliberate and emergent characteristics. It is this reality that makes Mintzberg’s model of strategic planning appropriate for diversity management. In the review of lit- erature, the work of Dansky et al.1 offered the importance of leadership in shaping diversity management. This emphasis on interpersonal influence and power to bargain and negotiate supports Mintzberg’s emergent com- ponent of strategic planning. Dreachslin and Saunders’ work discussed changing racial and ethnic composition as the principal rationale driving health-care organizations to adopt diversity leadership. This translates to a deliberate process of long-term planning with the intended conse- quence of applying diversity management within the administrative mix of services. Again, Mintzberg’s model embraces this perspective, suggesting the application of discrete decision-making and management practices to achieve strategic goals. A more complete understanding of diversity management shows it is the application of

management and leadership principles to increase aware- ness for the need for valuing diversity, increase fuller inte- gration of minorities and people of colour in all ranks of service and administration, and to increase the practice of behaviours that assure compliance with valuing diversity both for those being served and for those performing the service. To reiterate, this study investigated three questions: first, how would CEOs describe the strategic planning process they use for diversity; second, has this process changed over time; and third, how do CEOs perceive the level of impact their planning strategy has had.

Methods

All CEOs and all chief operating officers (COOs) for rural and community hospitals, regional medical centres, speci- alty hospitals, and academic/university hospitals and health systems in the states of New York, Pennsylvania, New Jersey and Delaware were targeted for this study to serve as a pilot research project for a more broad, nation- wide investigation. The identities of these individuals were obtained through the AHCEs database. The list con- tained 671 names, 83% of the list represented CEOs, with the remaining 17% a collection of COOs, chief human resource officers and other assorted senior-level administra- tors. Only CEOs and COOs were selected to be study participants based on hospital type and size. Random stra- tification was applied to CEOs and COOs of community hospitals as defined by the bed size and location regardless of their teaching orientation. All CEOs and COOs of rural hospitals, specialty hospitals and academic medical centres were included in the targeted population since the number of these institutions was considerably smaller than was the number of community hospitals identified through the ACHE database. Six hundred and eleven names made up the targeted population to receive the study’s survey instru- ment. In the second section of the survey instrument fol- lowing basic demographic information, participants were asked to describe the level of strategic planning activity their institutions experienced for diversity management over the past 10 years. Based upon these data, 168 CEOs/COOs or 27.5% of the total targeted population qualified for this investigation.

The survey instrument was designed and written over a three-month period in consultation with two other faculty members in the Department of Health Services at Saint Joseph’s University. The work of this team resulted in a four-page questionnaire that contained three sections: respondent demographic information such as administra- tive position held, hospital type and time served in the position. Section two asked general questions about stra- tegic planning activities for integrating diversity manage- ment, and the final section addressed the questions of strategic plan modelling used for integrating diversity man- agement. The instrument was piloted with 12 CEOs of hospitals and health systems in the Philadelphia metro area. No major revisions were required based upon their review and their response to the instrument.

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Health Services Management Research 2010 Volume 23 Number 4

Following this process, the instrument along with prepaid return envelopes were mailed to all 168 CEOs and COOs.

Descriptive statistics were applied for the data analysis using a one-way analysis of variance (ANOVA) to analyse the data for research question one that asked what type of strategic plan modelling have senior administrators used to integrate diversity management.

A P value of 0.05 was used to determine statistical signifi- cance. ANOVA was used for the second research question that investigated whether or not the strategic plan modelling used by CEOs and COOs had changed over time from when it was first used. Again the P value was set at 0.05. Research question three, which dealt with the reported impact this process had for the organization, also applied an ANOVA with the significance threshold of 0.05.

Findings

The first research question asked how CEOs and COOs would define the type of strategic planning process they use for implementing diversity management. It was necess- ary to first address to what degree there were any significant differences for this research question based on hospital size and type. A two-way chi-square analysis was performed since proportional differences were being measured. Table 1 indicates there was no significant difference for this function between rural, academic and specialty institutions. There was significance at the 0.05 level for community hospitals.

An ANOVA was used to complete the investigation for research question one. This showed there was signifi- cant statistical difference for community hospitals with the type of strategic plan modelling senior hospital admin- istrators reported using for integrating diversity manage- ment in their organizations. The greatest significance occurred between the combination approach using elements of the deliberate/planned practice with elements of the emergent practice. The significance was at the 0.001 level. Although senior administrators apply all three stra- tegic plan models for their current work in instituting diversity management, the combined approach achieved this level of significant difference. CEOs and COOs in rural, academic and specialty hospitals showed no signifi- cant differences in how they define the strategic planning process they used. For senior administrators in community hospitals, this definition is most significant in terms of descriptions that portrayed using a combined approach to strategic planning for diversity management (Table 2).

The second research question investigated whether or not there had been a change over time in how senior hospital administrators defined the types of strategic plan

modelling used for implementing diversity management. The specific survey question asked whether the current strategic plan approach was different than what had been used the last time this type of process was being applied by the organization to deal with diversity management. As with current practices, there were significant differences between the three practices for community hospital CEOs/COOs. Table 2 presents this analysis.

The level of difference was slightly less for the past practices (Table 3), but remained significant. In terms of rural, academic and specialty hospital senior administra- tors, there were no significant differences between strategic plan approaches.

The final research question dealt with the perceived level of impact CEOs/COOs reported for the type of stra- tegic planning approach they used to implement diversity management within their organizations. Senior adminis- trators were asked to make this assessment regardless of which strategic plan approach they employed. There were six levels of response: little to no demonstrative impact; some modest impact, considerably below expectations; fair impact, acceptable but could be better; considerable impact, close to or meeting expectations; significant impact beyond expectations; and too soon to tell.

Table 1 Strategic plan models by hospital type – community, rural, academic and specialty

Analysis Community Rural Academic Specialty

Chi-square 16.113 0.700 1.750 0.000

Table 2 Strategic plan models for integrating diversity management – current practices

Sum of squares DF

Mean square F Sig.

Deliberate/planned Emergent 5.003 1 5.003 8.024 0.006 Combination 31.268 1 31.268 48.567 0.000

Emergent Deliberate/

planned

5.575 1 5.575 8.024 0.006

Combination 25.601 1 25.601 35.952 0.000 Combination Deliberate/

planned 23.347 1 23.347 48.567 0.000

Emergent 17.153 1 17.153 35.952 0.000

Table 3 Strategic plan models for integrating diversity

management – past practices

Sum of

squares DF

Mean

square F Sig.

Deliberate/planned Emergent 1.221 2 0.610 4.067 0.022

Combination 7.518 2 3.759 22.910 0.000 Emergent Deliberate/

planned 1.598 1 1.598 7.600 0.007

Combination 6.392 1 6.392 36.351 0.000

Combination Deliberate/

planned

4.165 1 4.165 36.351 0.000

Emergent 6.461 1 6.461 43.279 0.000

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There was no statistical significance with the highest impact level ‘significant beyond expectations’ with any of the other impact categories. The category of fair impact was significant with four other categories. This was fol- lowed by the ‘too soon to tell’ category that was statistically significant with three other impact categories. The cate- gories of ‘little to no demonstrative impact’ and ‘consider- able impact, close to or meeting expectations’ was only statistically significant with two other impact ratings. ‘Some modest impact, considerably below expectations’ was only statistically significant with the ‘fair’ impact category (Table 4).

Discussion

The practice of using strategic planning for diversity man- agement implementation is less frequent than what would be expected given the importance of diversity manage- ment in the hospital industry. This is disappointing

given the major emphasis diversity management has received from such organizations as the American Hospital Association and the AHCEs. This study only tar- geted four mid-Atlantic states to investigate this practice and found that within a population of slightly over 600 CEOs and COOs, a little more than one-quarter of these senior administrators actually used some form of strategic planning to implement their diversity management agenda. The major limitation of this study is the fact that it did not target a larger regional area within the USA nor did it target the entire country.

Research questions one and two asked about the specific strategic plan modelling used by those organiza- tions that did engage in this practice. Due to the small sample size of the rural, academic and specialty hospitals that qualified for this investigation, no significant differ- ence was found between any of the three strategic plan approaches. This is not surprising given the low n in each of these groups. For community hospital CEOs/ COOs, there was significant difference between the three approaches with the mix of deliberate and emergent strategic planning reaching that threshold level. This is a critical piece of information since it suggests that these senior administrators practice this approach and have done so over the past number of years as was discovered in answering the second research question. When asked about their perceived level of impact for the strategic plan approach used for diversity management, these CEOs/COOs reported modest results. ‘Fair impact’ or ‘too soon to tell’ were the significantly different selections. This study did not investigate why these respondents assessed their strategic planning process this way. It would be valuable to pursue this inquiry in future research. But such findings raise interesting assumptions: one, senior administrators may not be applying their approach to strategic planning for diversity management in ways that offer maximum results; two, successful implementation for diversity management goes beyond strategic planning even if that planning is conducted in ways deemed effective by ‘best practice’ models; and three, it is really a long process to achieve fully integrated diversity management and the assessments of ‘fair impact’ or ‘too soon to tell’ represent positive reporting but for incomplete processes and practices.

The results of the first and second research questions are important for understanding this entire issue of how senior hospital administrators apply strategic plan models to their agendas for integrating diversity management in their organizations. The fact that all three strategic approaches were significantly different in their application shows that CEOs use an array of approaches. This study did not address why these different practices were used, but it did provide irrefutable evidence that senior hospital administrators use a variety of approaches in their attempts to integrate diversity management. It is not surprising that the greatest significance occurred with the combination approach in which elements of the deliberate/planned process and that of the emergent process were combined in ways that most suited the particular hospital or health

Table 4 Level of impact for the hospital/health system with integrating diversity management through a strategic plan

approach – current application

Sum of squares DF

Mean square F Sig.

Little impact Modest impact 0.267 1 0.267 2.258 0.137

Fair impact 2.550 1 2.550 4.851 0.031 Considerable impact 0.318 1 0.318 2.507 0.117 Significant impact 0.002 1 0.002 0.175 0.677

Too soon to tell 0.715 1 0.715 4.212 0.043 Modest impact Little impact 0.267 1 0.267 2.558 0.137

Fair impact 2.304 1 2.304 4.356 0.040 Considerable impact 0.257 1 0.267 2.558 0.137

Significant impact 0.002 1 0.002 0.158 0.692 Too soon to tell 0.646 1 0.646 3.785 0.055 Fair impact Little impact 0.867 2 0.433 3.575 0.033 Modest impact 0.728 2 0.364 3.201 0.046

Considerable impact 0.867 2 0.433 3.575 0.033 Significant impact 0.006 2 0.003 0.236 0.790 Too soon to tell 1.950 2 0.975 6.256 0.003

Considerable impact Little impact 0.318 1 0.318 2.507 0.117

Modest impact 0.267 1 0.267 2.258 0.137 Fair impact 2.550 1 2.550 4.851 0.031 Significant impact 0.002 1 0.002 0.175 0.677

Too soon to tell 0.715 1 0.715 4.212 0.043 Significant impact Little impact 0.023 1 0.023 0.175 0.677

Modest impact 0.019 1 0.019 0.158 0.692 Fair impact 0.183 1 0.183 0.329 0.568

Considerable impact 0.023 1 0.023 0.175 0.677 Too soon to tell 0.051 1 0.051 0.288 0.593 Too soon to tell Little impact 0.523 1 0.523 4.212 0.043 Modest impact 0.439 1 0.439 3.785 0.055

Fair impact 4.195 1 4.195 8.315 0.005 Considerable impact 0.523 1 0.523 4.212 0.043 Significant impact 0.004 1 0.004 0.268 0.593

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system. It was beyond the scope of this study, but it is not difficult to imagine that it was employed where the planned strategic model would have the most value. When the need for more immediate action was present, the emergent strategic approach was applied.

A valuable finding was the results between current and past practices for using some form of strategic plan model- ling to integrate diversity management. Although both past and current practices proved to be significant in terms of the types of models being employed, it was the current practices that showed the greater degree of signifi- cance. One interpretation of this finding is that there is more intense need for diversity management in hospitals and health systems today than in the past. Senior adminis- trators and CEOs are paying a bit more attention to this reality and applying these three strategic plan models in ways they believe will generate the desired results.

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