New thinking for health care leaders.

HEALTH CARE LEADERS DON'T NEED TO BE TOLD that their industry is facing tremendous change. But here's something they do need to hear: they had better lead that change. As one health care leader put it: "It is not time to panic, but I wouldn't sit on my hands either."

Today, health care is facing its greatest challenges. Cost-containment pressures, managed care, mergers, state and federal reform, rapidly advancing technology, and a shift to preventive and ambulatory care are just some of the many factors that are forcing health care providers to confront an uncertain future. But one thing is certain: The institutions that have traditionally trained health professionals, delivered health care services, or paid the bills, will all be affected in profound ways.

It's human nature to recoil from perceived threats, supreme challenges, and change. But how health care leaders respond to the challenges that face their organizations will determine whether those organizations survive, thrive, or flounder.

If health care organizations are to thrive, their leaders must personally take the responsibility, and, in many cases the risk, of preparing to meet the future. In order to do this, they must engage in the process of strategic management. Let me explain why and what strategic management involves.

Good planning takes more than planning

When organizational leadership announces the need for strategic planning, the reactions often include:

* "We spent three days in a retreat two years ago writing goals and objectives and produced a 50 page plan, but it has never really been utilized."

* "We have a committee that is responsible for strategic planning and they make recommendations that are often ignored by upper management."

* "We got everyone's input through out the company and that took for ever, but the process of planning really left us with no real consensus on future strategy."

There are several reasons for these reactions. First, I believe that many leaders lack or are not proficient with the skills needed to prepare and implement a successful strategic plan. These skills include group facilitation, team development, environmental scanning, forecasting, interviewing, and organizational culture assessment. And health and hospital administrators, when asked, will admit that these skills were not included in their training programs. Secondly, many organizations have never conducted a strategic planning process. Managers will tell you that they have written departmental objectives and management plans, but they never have really taken a hard look at their strategic needs in the context of a changing environment. For them, the process of strategic planning will confront their unspoken nervousness around planning and their fears about the future.

Often, in health care organizations where strategic planning is undertaken, such planning is narrowly defined. This, in large part, is because the organizations were relatively stable and planning involved projecting current operations and strategy into the future. A consultant with special expertise may have been contracted to help with the plan development. In these cases, implementing the plan moved forward due to the compatibility of staff expertise with the refined, but mostly restated, organizational strategy.

However, it is simply not enough today to restate and refine current organizational strategy when the environment is demanding innovation and the rules of the game are rapidly changing. What are the consequences for hospital administrators and boards that still believe that catering to medical specialists and inpatient facility improvement will suffice when the future will be driven by greater needs for outpatient and primary care provider services? Developing a plan based on outdated operations or assumptions may speed the organization's decline.

Typical dialogue with a CEO 

Yet many health care leaders continue to think of strategic planning in very limited terms. My initial dialogue about strategic planning with a health care CEO often goes something like this:

CEO: We are interested in doing a strategic plan. Would you write us a proposal and include a cost for completing the plan?

Consultant: Well, I could, but I don't believe I can respond to you unless we talk in more depth about what you are trying to accomplish, how you see my role as a consultant, your role as chief executive, and how you would like the process to be structured.

CEO: We feel it is time to update our old strategic plan and maybe if I send it to you it will answer your questions.

Consultant: Was your last strategic plan accomplished?

CEO: I believe so, but it was developed several years ago with the help of a large consulting firm and it has been a while since I reviewed it.

Consultant: I will review the plan, but I will need more information. For example, will your board and medical staff be involved in the process?

CEO: Well, that's a good question. The board is not very interested in devoting the time needed for this, and they want me to write the plan. The medical staff is frustrated with all the changes, and they are angry with each other. To be honest, I am not sure what we can expect from them.

Consultant: So what do you hope to accomplish through completing a strategic plan?

CEO: I would like a document that addresses our current problems and that can get the staff back on track.

This conversation is replete with typical thinking about planning. For example, the first assumption on the CEO's part is that planning is a formula to be followed, and consultants hold the answers to their problems. In addition, it is missing a variety of activities and questions related to how to effectively develop the plan and ensure its successful implementation. The missing activities and questions are part of strategic management--an ongoing process integrating traditional strategic planning with management and organizational development techniques to produce needed change that ensures growth and viability.

Let me contrast how strategic management works when compared to typical strategic planning.

1. Strategic management is directed by top leadership while strategic planning is often delegated to staff or consultants.

One reason for the ineffectiveness of strategic planning is that people at the top of organizations, the ones responsible for implementing the changes those plans call for, don't have enough at stake in the plan. They didn't help develop it and they weren't committed to it.

Strategic planning is often considered just a technical process delegated to a deputy, a committee, a director of strategic planning, or a consultant. Although a plan can produce important results, it cannot plot a new course for the organization without the commitment and active participation of the leadership. If the process is a blueprint for change, instead of a refinement of existing systems, health care leaders must realize its importance to the organization for which they are ultimately responsible.

Strategic management involves a process of thinking through a "vision" of what sort of organization you want and asking extremely difficult questions. Bert Nanus in his book Visionary Leadership says "vision is composed of one part foresight, one part insight, plenty of imagination and judgment and often a healthy dose of chutzpa. It occurs to a well-informed open mind, a mind prepared by a lifetime of learning and experience, one sharply attuned to emerging trends and developments in the world outside the organization." (1)

The organization must commit resources for a substantial period of time toward fulfilling its vision. Staff members can help and should be involved with this, but they cannot replace leadership's commitment. Consultants can help in a variety of ways, including educating staff, designing and facilitating the strategic management process, and providing technical information and expertise. However, only the board, CEO and senior managers can make the critical strategic decisions.

2. Strategic management is an ongoing process, while strategic planning is a shorter term task with a beginning and an end.

The most consistent failure of strategic planning is that once a plan is done, no activity occurs until the next plan is needed. The truth is, that if the strategic management process is compelling in identifying the need for change, the real work must begin immediately--at the outset of the planning process. Executives must realize that the plan itself will not produce easy answers, nor create immediate results.

In addition, the work will need to continue based on many variables that are constantly changing. Appropriate management structures and functions will need to be established to monitor and fine-tune the plan and to monitor the changing environment.

Often overlooked is the inevitable tension that will exist between ongoing operational issues and new strategic directions. Failure to build a connection between the two and to develop a process to manage these conflicts can derail the implementation of the strategic plan.

One example of viewing strategic management as an ongoing process is a large federal agency, which, after completing a strategic plan through a year of meetings, weekend retreats, and much frustration, proclaimed "'Voila'--let's print it and distribute it widely. We are finally done and have agreed on our strategic directions." The director of the agency, who wanted some real change, was not satisfied with this approach, yet neither was she clear about how to move forward with her senior management team.

A series of management tasks were identified through which she could manage the resulting strategic plan, including the budget process, structural changes (both formal and informal), assigning responsibility for strategy implementation, timing, and publicity of established strategic directions.

Through each of these management tasks, she signaled to her senior staff that reverting to the status quo was not acceptable. In the budget process, for example, she scheduled a meeting at which senior managers had to justify their programs and spending levels in relation to the newly established strategic directions. This step never had been undertaken after prior planning efforts, and it allowed important questions to be raised and changes to begin.

People within the organization view strategic management as a process for change rather than as a product.

Traditionally, the so-called "strategic plan document" has been the symbol of the strategic planning's success. It is often beautifully bound with many pages of documentation. It is usually widely distributed within the organization, with the assumption that once read, it will provide clarity and purpose for those responsible for its implementation. The problem with this approach is that the document itself has very little impact on its reader.

Strategic management, on the other hand, pays attention to both the "content" of the strategic plan document, as well as the "process" of its development and implementation. It recognizes that "managing" the strategic planning process is at least as important as the resulting plan.

For example, experience with small rural hospitals underscores that careful thinking about who will attend an initial strategic planning weekend retreat is critical to the effort's success. Each hospital is different. In some cases all medical staff should be asked to attend; in others, this would spell disaster. Sometimes separate retreats are needed that allow the board and hospital management staff and the medical staff to meet independently to deal with a variety of underlying issues and problems that must first be dealt with before meaningful planning and change can occur.

4. People come to understand strategic management's connection to other aspects of the organization, whereas strategic planning often remains separate.

Because strategic management is about organizational change, it is not possible to isolate it from other aspects of leadership. For example, many organizations think that despite the clues for change uncovered during a strategic planning process, things will happen without addressing those issues within the budget.

Strategic management realizes that allocating funds away from old programs and activities to new ideas and ways of thinking is a powerful force for change. There is no better way to gain momentum for the changes required by the strategic plan than to make public its impact on the organization's budget. This is also a clear indicator of priorities and commitment.

For example, many organizations will undertake a total quality or reengineering effort as a result of their strategic planning efforts, yet provide minimal or no funding. However, one successful managed care system recognized the need to completely reengineer its customer service functions by committing $1,000,000 to hardware and software to support a total restructuring of internal service departments. The message was clear, especially to the marketing staff, that the strategy was designed to balance member acquisition with retention through superior service. Making the marketing staff part of the new service team and devising a system of splitting bonuses with those who had not previously had this opportunity drove the point home.

Therefore, strategic management is connected to three key organizational and leadership functions:

1. Management Control--Allocating resources that are necessary to implement agreed-upon strategy.

2. Operational Control--Managing activities and tasks through people.

3. Organizational Development--Creating the needed conditions, culture, structures, and processes for the changes agreed upon in the strategic plan to be successfully carried out.

It is conceivable that the strategic management process will validate current directions, programs, and products, while at the same time uncover internal organizational development issues that must be addressed.

5. Strategic management includes addressing human resource and resistance issues that could block the plan's implementation.

It is inevitable that strategic planning will create anxiety about what changes will be needed, but usually does not address this anxiety. Some people love the thought of large-scale change, but most people prefer to hold onto what they believe in and to what they find comfortable.

Central to the strategic management process is dealing with people's anxieties and concerns during the plan's formulation and implementation. If this doesn't happen, you can be assured that as the plan moves toward implementation, these anxieties and fears will be acted out as resistance and, perhaps, sabotage.

A variety of change management techniques can assist people in understanding the need for change and provide a process for moving beyond initial resistance. Few leaders think of connecting strategic planning to change management techniques. Those who do are well along in their understanding of strategic management.

It is also possible for the strategic management process to force the issue of staff "fit" with the organization's new mission, vision, and values. This may result in people moving on or being forced out to make room for more compatible thinking.

When the strategic plan is completed, I suggest that the organization's new vision and strategic directions be considered as a revised job description for senior staff. This generally receives a puzzled look and always generates a remark like: "How can we do all this new stuff, when we have all the current programs and responsibilities to manage?" The short answer is that maybe they need to stop doing all the old stuff. Strategic management encourages dialogue about how to manage the old programs and strategy, while making room for the new.

It is important for this dialogue to be a major part of all senior managers' discussions and formal meetings if the new organization's vision is to be realized. Yet I have rarely seen an organization's annual review include a question that asks senior managers: "How has your thinking and behavior changed during the last year in relation to our new vision and strategy?"

Strategic leadership is needed to manage a good plan

Strategic management is not contemplative "naval-gazing" or a group-developed list of goals and objectives. It is hard, high pressure work and it is difficult to quantify. It involves a process of re-education, challenging old beliefs and developing new relationships and ways to conduct the organization's business.

Conducting a strategic management process involves a set of skills with which not all managers and leaders are competent or comfortable. In addition, a clear understanding of strategic management may be missing. Without this understood, the effort may never get off the ground or may result in another planning attempt that leaves the organization frustrated.

Because of its difficulty and its challenges to the organization, many leaders shy away from undertaking a strategic management process and revert to just completing a "typical strategic plan."

Health care executives must view themselves as strategic leaders to be effective. When they are, they take responsibility for identifying the organization's future challenges and threats and designing and managing approaches to successfully meet them.

Reference

(1.) Nanus, Burt. Visionary Leadership. San Francisco, CA: Jossey-Bass, 1992.

Vic Cocowitch, MPH, is an organizational development specialist in Chapel Hill, North Carolina. He can be reached at 919/942-1125 or via fax at 919/933-5259.