Managing organizational improvement in a resource-challenged environment - Management Issues

Healthcare Financial Management, July, 2002 by Jim Summers, Michael Nowicki

Over the years, healthcare managers have implemented a variety of major organizational-improvement techniques, including total quality management/continuous quality improvement (TQM/CQI), zero-based budgeting, management by objectives, reengineering, and, most recently six sigma. (a) Some of these techniques still exist, while others are memories. All were meant to improve organizational effectiveness or efficiency.

Considerable effort is required to train employees to use organizational-improvement techniques. Some employers routinely build training into employees' schedules and count training as productive time. Motorola, for example, requires managers to receive 40 hours of training per year. In other organizations, productivity may decline during the time employees are being trained. For any organizational-improvement method to work, managers need to plan carefully for the time and resources needed for training and for maintaining productivity.

Since cost-containment pressures surfaced in the 1970s, the healthcare industry has been challenged by diminishing resources. Healthcare managers continually make difficult decisions about allocating limited resources. Adding to the burden is the push for excellence in medical technology, clinical skills, and managerial and leadership talent.

A lack of training, or a lack of effective planning for training, may be why so many organizational-improvement programs have failed. The American Society for Training and Development reported that the average training expenditure per employee in 1997 was $649 (1.8 percent of payroll) for all companies and $1,966 (4.4 percent of payroll) for innovative and successful companies. Healthcare organizations ranked near the bottom with an average training expenditure per employee of $345 (1.2 percent of payroll). (b) That the healthcare industry is below the average is particularly shocking considering the amount of training employees need just to stay abreast of job-related technology and license certification. If most of these job-related training expenses are coyereci by the 1.2 percent of payroll, not much is left for the training needed to effect organizational change.

Process Improvement

Training and education constitute most of the resource allocations for massive change efforts such as TQM/CQI, a well-known and long-lived organizational transformation methodology According to Deming, one of the primary founders of TQM/CQI, the most innovative and profitable companies can be expected to take five years to make the transformation to statistical thinking and process modification, while other companies could take up to 10 years. (c) Changing an organization's culture is a slow process, during which the organization requires additional resources to accomplish the research and the education needed.

Organizations need to recognize that change management requires considerable money and time. If employees receive only a one-time exposure to the new ideas or new methods, the result will be that employees who have not mastered the necessary skills will become stressed and burned out because of the increased expectations, and the work processes may deteriorate instead of improve.

Yet rarely does staff training provide for similar standards. Few healthcare employers provide a full week's worth of instruction on a single topic in a four-month period, including homework and testing of competence. Furthermore, rarely, if ever, does anyone fail a continuing education program. Not only should organizations provide the time needed for the training, but also participants should be required to provide evidence of some mastery of the material or techniques to which they were exposed.

Implementing process improvement requires careful planning, In a college-level course covering management-improvement topics such as TQM/CQI and six sigma, for example, students at the junior and senior levels typically receive about 35 hours of classroom education during a four-month semester and expend considerable effort outside of class participating in tests, projects, and papers to achieve a minimal level of mastery. This level of exposure produces graduates who have a reasonable set of skills to use on the job.

TQM/CQI and six sigma require understanding and use of basic statistical concepts. Everyone in the organization should learn these concepts during the improvement effort. Many healthcare workers do not have a college education, so helping them understand the statistical concepts behind process variation, its analysis, and methods to reduce variation will require considerable effort.

What Healthcare Financial Managers Can Do

Healthcare financial managers are well positioned to help their organizations undertake major organizational improvement owing to their position in the organization, their understanding of financial realities, and their understanding of basic quantitative techniques. To assist in the achievement of major organizational improvement, financial managers should undertake the following steps: