The intent of the exercises is to provide the student with an opportunity to

The intent of the exercises is to provide the student with an opportunity to critically think about the issues and problems that confront healthcare managers. The exercises will apply practical situations to the weekly topics discussed in class. please do exercise #3 in page 24 in the uploaded file. ried ottler THIRD EDITION HUMAN RESOURCES HUMAN RESOURCES IN HEALTHC ARE Managing for Success THIRD DITION Bruce J. Fried and Myron D. Fottler, Editors Fried_titles 6/6/08 6:47 AM Page 1 THIRD EDITION HUMAN RESOURCES IN HEALTHCARE Managing for Success Fried_FM.qxd 6/11/08 4:16 PM Page ii AUPHA Editorial Board HAP Sandra Potthoff, PhD, Chair University of Minnesota Simone Cummings, PhD Washington University Sherril B. Gelmon, DrPH, FACHE Portland State University Thomas E. Getzen, PhD Temple University Barry Greene, PhD University of Iowa Richard S. Kurz, PhD St. Louis University Sarah B. Laditka, PhD University of South Carolina Tim McBride, PhD St. Louis University Stephen S. Mick, PhD Virginia Commonwealth University Michael A. Morrisey, PhD University of Alabama–Birmingham Dawn Oetjen, PhD University of Central Florida Peter C. Olden, PhD University of Scranton Lydia M. Reed AUPHA Sharon B. Schweikhart, PhD The Ohio State University Nancy H. Shanks, PhD Metropolitan State College of Denver Fried_titles 6/6/08 6:47 AM Page 2 THIRD EDITION HUMAN RESOURCES IN HEALTHCARE Managing for Success Bruce J. Fried and Myron D. Fottler, Editors Health Administration Press, Chicago Association of University Programs in Health Administration, Arlington, Virginia Fried_FM.qxd 6/11/08 4:16 PM Page iv Your board, staff, or clients may also benefit from this book’s insight. For more information on quantity discounts, contact the Health Administration Press Marketing Manager at (312) 424-9470. This publication is intended to provide accurate and authoritative information in regard to the subject matter covered. It is sold, or otherwise provided, with the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. The statements and opinions contained in this book are strictly those of the author(s) and do not represent the official positions of the American College of Healthcare Executives, of the Foundation of the American College of Healthcare Executives, or of the Association of University Programs in Health Administration. Copyright © 2008 by the Foundation of the American College of Healthcare Executives. Printed in the United States of America. All rights reserved. This book or parts thereof may not be reproduced in any form without written permission of the publisher. 12 11 10 09 08 5 4 3 2 1 Library of Congress Cataloging-in-Publication Data Human resources in healthcare: managing for success / Bruce J. Fried and Myron D. Fottler, editors.—3rd ed. p. cm. Includes bibliographical references and index. ISBN 978-1-56793-299-7 (alk. paper) 1. Health facilities—Personnel management. I. Fried, Bruce, 1952II. Fottler, Myron D. [DNLM: 1. Personnel Management—methods. WX 159 H91807 2008] RA971.35.H864 2008 362.1068’3—dc22 2008013657 The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1984. ™ Project manager: Jane Calayag; Acquisitions editor: Audrey Kaufman; Cover designer: Anne LoCascio; Composition: Putman Productions, LLC Health Administration Press A division of the Foundation of the American College of Healthcare Executives One North Franklin Street Suite 1700 Chicago, IL 60606 (312) 424-2800 Association of University Programs in Health Administration 2000 14th Street North Suite 780 Arlington, VA 22201 (703) 894-0940 Fried_FM.qxd 6/11/08 4:16 PM Page v BRIEF CONTENTS Foreword .............................................................................................. xiii William K. Atkinson, PhD Preface ................................................................................................... xv 1 Strategic Human Resources Management ......................................... 1 Myron D. Fottler, PhD 2 Healthcare Workforce Planning ...................................................... 27 Thomas C. Ricketts, III, PhD 3 Globalization and the Healthcare Workforce .................................. 47 Leah E. Masselink 4 Healthcare Professionals ................................................................. 71 Kenneth R. White, PhD, FACHE; Dolores G. Clement, DrPH, FACHE; and Kristie G. Stover, PhD 5 The Legal Environment of Human Resources Management ........... 99 Beverly L. Rubin, JD, and Bruce J. Fried, PhD 6 Workforce Diversity ..................................................................... 145 Rupert M. Evans, Sr., DHA, FACHE 7 Job Analysis and Job Design ......................................................... 163 Myron D. Fottler, PhD 8 Recruitment, Selection, and Retention ......................................... 197 Bruce J. Fried, PhD, and Michael Gates, PhD 9 Organizational Development and Training ................................... 237 Rita Quinton, SPHR 10 Performance Management ........................................................... 257 Bruce J. Fried, PhD v Fried_FM.qxd vi 6/11/08 4:16 PM Page vi Brief Contents 11 Compensation Practices, Planning, and Challenges ....................... 281 Howard L. Smith, PhD; Bruce J. Fried, PhD; Derek van Amerongen, MD; and John D. Laughlin 12 Employee Benefits ....................................................................... 319 Dolores G. Clement, DrPH, FACHE; Maria A. Curran; and Sharon L. Jahn, CEBS, CMS 13 Health Safety and Preparedness .................................................... 347 William Gentry 14 Managing with Organized Labor ................................................. 359 Donna Malvey, PhD 15 Nurse Workload, Staffing, and Measurement ................................ 393 Cheryl B. Jones, PhD, RN, and George H. Pink, PhD 16 Human Resources Budgeting and Employee Productivity ............ 433 Eileen F. Hamby, DBA 17 Creating Customer-Focused Healthcare Organizations Through Human Resources ......................................................... 451 Myron D. Fottler, PhD, and Robert C. Ford, PhD 18 Present Trends that Affect the Future of Human Resources Management and the Healthcare Workforce ................................. 479 Bruce J. Fried, PhD, and Myron D. Fottler, PhD Integrative Cases 1 Reduction in Force at Sierra Veterans Affairs Medical Center ........ 501 Sarah Huth and Sara Hofstetter 2 Management Challenges of a Customer Service Center ................ 511 Andy Garrard and Heather Grant 3 Performance Feedback Now and Then ......................................... 523 Lee Ellis, Dawn Morrow, and Adia Bradley Index ........................................................................................... 529 About the Editors ........................................................................ 537 About the Contributors ............................................................... 538 Fried_FM.qxd 6/11/08 4:16 PM Page vii DETAILED CONTENTS Foreword.............................................................................................. xiii William K. Atkinson, PhD Preface ................................................................................................... xv Strategic Human Resources Management.......................................... 1 Myron D. Fottler, PhD Learning Objectives, 1; Introduction, 1; Environmental Trends, 4; The SHRM Model, 6; Organizational Mission and Corporate Strategy, 11; Human Resources and the Joint Commission, 19; A Strategic Perspective on Human Resources, 20; Summary, 22; Discussion Questions, 23; Experiential Exercises, 24 1 2 Healthcare Workforce Planning ....................................................... 27 Thomas C. Ricketts, III, PhD Learning Objectives, 27; Introduction, 27; The History of Healthcare Workforce Planning, 29; The Rationale for Healthcare Workforce Planning, 31; Overview of Workforce Planning Methodologies, 32; Challenges and Difficulties of Workforce Planning, 37; International Perspectives, 38; Workforce Supply Metrics, 40; Summary, 40; Discussion Questions, 41; Experiential Exercise, 41 Globalization and the Healthcare Workforce ................................... 47 Leah E. Masselink Learning Objectives, 47; Introduction, 47; History and Current Trends, 48; Causes of International Migration, 50; Sending Country/Region Trends, 50; Consequences for Receiving Countries, 53; Issues for Managers, 58; The Future of International Health Workforce Migration, 64; Summary, 65; Discussion Questions, 66; Experiential Exercise, 66 3 vii Fried_FM.qxd viii 6/11/08 4:16 PM Page viii Detailed Contents 4 Healthcare Professionals.................................................................. 71 Kenneth R. White, PhD, FACHE; Dolores G. Clement, DrPH, FACHE; and Kristie G. Stover, PhD Learning Objectives, 71; Introduction, 71; Professionalization, 72; Healthcare Professionals, 74; Considerations for Human Resources Management, 86; Changing Nature of the Health Professions, 88; Summary, 94; Discussion Questions, 94; Experiential Exercise, 95 The Legal Environment of Human Resources Management ............ 99 Beverly L. Rubin, JD, and Bruce J. Fried, PhD Learning Objectives, 99; Introduction, 100; Employment Laws, 102; Employment Discrimination, 104; Equal Employment Opportunity Legislation, 106; Implementing EEO Principles, 114; Employment-atWill Principle and Its Exceptions, 128; Termination Procedures, 132; Grievance Procedures, 135; Other Employment Issues, 136; Summary, 137; Discussion Questions, 138; Experiential Exercises, 139 5 6 Workforce Diversity ...................................................................... 145 Rupert M. Evans, Sr., DHA, FACHE Learning Objectives, 145; Introduction, 145; A Definition of Diversity, 146; The Business Case for Diversity, 148; Diversity in Healthcare Leadership: Two Major Studies, 151; The Impact of Diversity on Care Delivery, 155; Components of an Effective Diversity Program, 157; Summary, 159; Discussion Questions, 159; Experiential Exercise, 160 Job Analysis and Job Design.......................................................... 163 Myron D. Fottler, PhD Learning Objectives, 163; Introduction, 163; Definitions, 164; The Job Analysis Process, 165; Job Design, 178; Specialization in Healthcare, 178; Summary, 184; Discussion Questions, 185; Experiential Exercises, 186; Appendix A, 189 7 8 Recruitment, Selection, and Retention .......................................... 197 Bruce J. Fried, PhD, and Michael Gates, PhD Learning Objectives, 197; Introduction, 197; Recruitment, 198; Selection, 210; Turnover and Retention, 224; Summary, 229; Discussion Questions, 229; Experiential Exercises, 230 9 Organizational Development and Training .................................... 237 Rita Quinton, SPHR Learning Objectives, 237; Introduction, 237; Designing Training for Sustainability, 239; Training Methods, 244; Employee Socialization, 245; Succession Planning, 247; Trends in Organizational Development and Fried_FM.qxd 6/11/08 4:16 PM Page ix Detailed Contents Training, 249; Summary, 251; Discussion Questions, 251; Experiential Exercises, 252 10 Performance Management ............................................................ 257 Bruce J. Fried, PhD Learning Objectives, 257; Introduction, 257; The Role of Performance Management, 261; The Cynicism About Performance Management, 271; Conducting Effective Performance Management Interviews, 274; Summary, 277; Discussion Questions, 277; Experiential Exercise, 278 11 Compensation Practices, Planning, and Challenges........................ 281 Howard L. Smith, PhD; Bruce J. Fried, PhD; Derek van Amerongen, MD; and John D. Laughlin Learning Objectives, 281; Introduction, 281; The Strategic Role of Compensation Policy, 283; Intrinsic Versus Extrinsic Rewards, 287; Determining the Monetary Value of Jobs, 292; Variable Compensation, 297; Special Considerations for Compensating Physicians, 303; Future Directions for Physician Compensation, 311; Summary, 314; Discussion Questions, 314; Experiential Exercises, 315 12 Employee Benefits ........................................................................ 319 Dolores G. Clement, DrPH, FACHE; Maria A. Curran; and Sharon L. Jahn, CEBS, CMS Learning Objectives, 319; Introduction, 319; Brief Historical Background, 321; Major Federal Legislation, 324; Overview of Employment Benefits, 325; Designing a Benefits Plan, 341; Summary, 344; Discussion Questions, 345; Experiential Exercise, 345 13 Health Safety and Preparedness ..................................................... 347 William Gentry Learning Objectives, 347; Introduction, 347; Hazard Analysis for a Healthy and Safe Workplace, 348; Preparedness for Workplace Disasters, 350; Safety and Preparedness Requirements, 353; Measuring Workplace Safety and Preparedness, 354; Summary, 355; Discussion Questions, 356; Experiential Exercise, 356 14 Managing with Organized Labor .................................................. 359 Donna Malvey, PhD Learning Objectives, 359; Introduction, 359; Overview of Unionization, 361; The Labor Relations Process, 362; A Review of Legislative and Judicial Rulings, 372; Developments in Organizing Healthcare Workers, 378; Management Guidelines, 383; Summary, 384; Discussion Questions, 385; Experiential Exercises, 385 ix Fried_FM.qxd x 6/11/08 4:16 PM Page x Detailed Contents 15 Nurse Workload, Staffing, and Measurement................................. 393 Cheryl B. Jones, PhD, RN, and George H. Pink, PhD Learning Objectives, 393; Introduction, 393; Types of Nursing Personnel, 394; Definitions and Measurement, 396; Measurement of Nurse Staffing, 401; Key Issues in Managing Nurse Staffing and Workload, 406; Future Directions and Challenges, 417; Summary, 419; Discussion Questions, 420; Experiential Exercises, 420; Appendix B, 428 16 Human Resources Budgeting and Employee Productivity ............. 433 Eileen F. Hamby, DBA Learning Objectives, 433; Introduction, 433; Linking Budgeting with Human Resources Management, 434; Linking Human Resources Budgeting to Employee Productivity, 439; Other HR Practices Related to the Labor Budget, 442; Using Labor Budget Metrics for Measurement, 445; Mergers, Acquisitions, and Strategic Alliances, 447; Summary, 447; Discussion Questions, 448; Experiential Exercises, 448 17 Creating Customer-Focused Healthcare Organizations Through Human Resources .......................................................... 451 Myron D. Fottler, PhD, and Robert C. Ford, PhD Learning Objectives, 451; Introduction, 451; An Emerging Customer Focus, 453; The New Paradigm, 459; Summary, 473; Discussion Questions, 474; Experiential Exercises, 474 18 Present Trends that Affect the Future of Human Resources Management and the Healthcare Workforce .................................. 479 Bruce J. Fried, PhD, and Myron D. Fottler, PhD Learning Objectives, 479; Introduction, 479; Ten Healthcare Trends, 479; SHRM’s Survey Results, 485; Six Overall Challenges in Human Resources Management, 488; Summary, 497; Discussion Questions, 497; Experiential Exercise, 498 Integrative Cases Reduction in Force at Sierra Veterans Affairs Medical Center......... 501 Sarah Huth and Sara Hofstetter Background, 501; The RIF Order, 501; Process and Implementation, 504; Unexpected News, 507; The Outcome, 508; Discussion Questions, 508 1 2 Management Challenges of a Customer Service Center ................. 511 Andy Garrard and Heather Grant Background, 511; Imaging Customer Service Center, 511; The Situation, 513; Initial ICSC Assessment, 515; Process Review, 517; Fried_FM.qxd 6/11/08 4:16 PM Page xi Detailed Contents Personnel Review, 519; Information Technology Review, 521; The Ultimatum, 521; Discussion Questions, 522 Performance Feedback Now and Then .......................................... 523 Lee Ellis, Dawn Morrow, and Adia Bradley Introduction, 523; Background, 523; Current Situation, 525; Ms. Kopalski’s Performance, 527; Discussion Questions, 528 3 Index................................................................................................... 529 About the Editors ............................................................................... 537 About the Contributors ...................................................................... 538 xi Fried_FM.qxd 6/11/08 4:16 PM Page xii Fried_FM.qxd 6/11/08 4:16 PM Page xiii FOREWORD H uman resources management is one of the most dynamic and rewarding responsibilities in healthcare delivery. Because a healthcare organization cannot exist without the people who provide care, both directly and indirectly, recruitment and retention of staff are critical. A healthcare organization can only be as competent and quality-focused as its employees, physicians, leaders, and volunteers. To ensure the delivery of safe patient care, recruitment and retention of a highly skilled and qualified workforce are essential and must be a top priority. Today’s healthcare organizations face many challenges, including significant shortages of physicians; nurses; respiratory therapists; radiologic, cardiovascular, and medical technologists; physical and occupational therapists; physician assistants; and nurse practitioners. Making recruitment particularly imperative is the fact that the population is aging and will be leaving the workforce in large numbers; consequently, more healthcare services will be demanded in the years ahead. Never before has it been so important for healthcare leaders and managers to understand employee satisfiers. “Workforce development” is a relatively new term that refers to the continuing education and training of employees for current, new, and/or changing jobs. Such a program also aims to recruit and prepare students for the jobs of the future. Healthcare organizations that do not have a strong, committed workforce development program and/or a partnership with local high schools, colleges, and universities will find themselves grossly understaffed in the coming years. In addition, healthcare organizations must help the educational institutions in their communities to solve problems such as limited classroom capacity, inability to fill instructor vacancies, aging instructors, and long waiting lists of qualified students for allied health and nursing programs. For the first time ever, people from four different generations are working together. Traditionalists, baby boomers, generation Xers, and millennials have differing work needs and expectations, challenging those who manage them to find appropriate ways to motivate, satisfy, reward, and recognize each group. The core values of one generation are also different from the other, so no longer will a one-size-fits-all approach to employee programs suffice. One theme that is common among members of these generations is the pursuit of xiii Fried_FM.qxd xiv 6/11/08 4:16 PM Page xiv Foreword work–life balance. No longer are employees interested in devoting their lives to their jobs. Time for friends, family, and self has become a significant worker value, making flexible work scheduling a must in contemporary organizations. Workforce diversity and inclusion is another area of great challenge. There is fierce competition for talent with diverse backgrounds, and putting together a workforce that is diverse in culture, knowledge, perspective, and style is not easy. Many advances toward greater inclusion have been made, but major distances still need to be covered before the healthcare workforce can truly reflect the U.S. society as a whole. Competitive compensation and benefit programs are especially essential in this tight labor market. Of even greater importance is ensuring that these programs motivate or provide an incentive to employees to achieve optimal performance. Performance management systems must be designed to clearly articulate expectations and to appropriately reward performance. A recent addition to human resources challenges is disaster preparedness, and nowhere is this more important than in a healthcare organization. In the midst of a disaster, healthcare providers must be able to continue, and even expand, operations and services for their communities. At the same time, they must recognize and respond to the personal needs of their own staff, many of whom will be required to work during catastrophic events. Successful healthcare organizations are ready, willing, and able to respond when unforeseen circumstances occur, and they will occur. Healthcare organizations have tremendous opportunities to recruit, retain, develop, and coach their workforce when reimbursement and other financial pressures are high. That is the time to be strategic and to make solid cost–benefit human resources decisions that support the organization’s financial goals as well as the long-term ability to staff with highly qualified individuals. Although getting caught up in day-to-day problem solving is easy, quick fixes cannot address long-term issues. Human resources management and strategic planning should mirror the strategic priorities and goals of the organization. Positive outcomes in human resources metrics are essential to financial health, patient satisfaction, and the ability to achieve goals each year. This book provides a comprehensive discussion of these and other topics related to strategic human resources management. Whether you work in human resources specifically or management in general, you must understand and appreciate the connection between a positive workforce culture and outstanding patient care delivery. Human resources issues are complex, and the answers are not simple. Therefore, human resources thinking, planning, and execution must be strategic. William K. Atkinson, PhD, president and chief executive officer, WakeMed Health & Hospitals, Raleigh, North Carolina Fried_FM.qxd 6/11/08 4:16 PM Page xv PREFACE C hange has become a staple of the healthcare system. It is omnipresent in our discussions about healthcare: A Google search for “healthcare change” yields more than 17 million results. In the previous edition of this book, we made the observation that healthcare has undergone major transformations as a result of advances in technology, availability of information, and new forms of organizations and financing mechanisms. To this list we add the emerging impact of globalization not just on healthcare but also on the healthcare workforce, greater awareness of natural and man-made threats, and increased recognition of possible severe labor shortages because of the aging of the population and aging of the healthcare workforce. An oft-repeated maxim is that “change creates opportunity.” In the present healthcare environment, change inspires feelings of uncertainty. However, it does offer opportunities for honest people who seek solutions to healthcare problems, some of which have little precedent in terms of type or scope. This environment also creates opportunities for opportunists who, like snake-oil salesmen of days past, tempt us with quick fixes. Some of these fixes are merely repackaged and relabeled old strategies that are marketed effectively to a public desperate for new answers. Many of these fixes have little or no empirical support, but they are strongly promoted by “heroes of management.” Simply turn your attention to the business section of any bookstore to see the array of fixes for sale. Pfeffer and Sutton’s (2006) book, Hard Facts, Dangerous Half-Truths, and Total Nonsense, provides an enlightening and amusing picture of the frivolous, trendy nature of the management book market. Even the titles of these books read like fads, even contradictory: Love Is the Killer App: How to Win Business and Influence Friends and Business Is Combat: A Fighter Pilot’s Guide to Winning in Modern Business Warfare. With a few exceptions, the half-life of this genre of management “literature” is overall short but sufficiently long for its authors and publishers to reap a handsome profit and for business followers to jump on the next “revolutionary” method. xv Fried_FM.qxd xvi 6/11/08 4:16 PM Page xvi Preface This new edition of Human Resources in Healthcare takes the approach supported by Pfeffer and Sutton and by responsible leaders in the healthcare industry who advocate the use of evidence in management and clinical work. In a recent JAMA article, Shortell, Rundall, and Hsu make an eloquent case for linking evidence-based medicine (EBM) and evidence-based management (EBMgt) to improve quality of care: Until both components are in place—identifying the best content (i.e., EBM) and applying it within effective organizational contexts (i.e., EBMgt)—consistent, sustainable improvement in the quality of care received by US residents is unlikely to occur (Shortell, Rundall, and Hsu 2007, 673). Evidence-based management practices do not always have the shelf appeal of popular business methods contained in books sold at mall shops. However, such practices are robust and long-standing, owing to the fact that they have empirical support, have led to a sustained record of success, and have been designated as best practices. This edition, like the last two editions, is filled with concepts and strategies that have, over the years, been repeatedly tested and refined by practicing leaders and managers in actual organizations. A word about the general concept of management is in order, however. The success of management practices is considerably less certain than, for example, the well-proven effectiveness of the measles vaccine. After all, clinical trials are hard to come by in management. What works in management and human resources management often depends on a myriad of factors, codified in organizational contingency theories. This fact does not make our management theories, research findings, and practices invalid, however. In medicine, we know that patients with the same disease respond very differently to the same medication, but we do not yet fully understand why that is the case and we cannot yet personalize medications to the unique characteristics of the individual. The same idea applies to management. In light of this, our humble advice is for managers at all organizational levels to be aware of the unique contingent factors that may have an impact on the effectiveness of any recommended practice or strategy. We accept the fact that many people in our impatient society will be less than satisfied with strategies that do not work in every circumstance, every time. But then again, those people are more likely to purchase books at their local mall. While we hope that this book imparts evidence-based knowledge, we also realize that having this knowledge alone does not guarantee that even the most studious reader will become an effective manager. We certainly would not expect someone who only carefully read and absorbed medical textbooks, but who never actually performed the procedures and obtained feedback, to perform any type of surgery, let alone a successful one. The point is that effectiveness takes a considerable amount of learning, practice, and time. Being an expert manager means getting to the point where book Fried_FM.qxd 6/11/08 4:16 PM Page xvii Preface knowledge becomes intuitive and decisions are guided by this intuition. It is no wonder that the archetype of the wise old man or woman can be found across cultures. Having said this, we encourage readers to supplement the empirical strategies and tools presented in this book with competency-building activities. Book Overview We have substantially revised the content of this book in our continuing efforts to impart, and keep up with, the knowledge base required to be competent in healthcare human resources management. This edition includes three new chapters: • Chapter 3 • Chapter 9 • Chapter 12 In addition, the book contains three extensive cases that emphasize that human resources management goes beyond its own function and extends to other aspects of the organization. Without exception, all other chapters have been expanded, updated, and improved. The new authors and coauthors in this edition not only further enrich the content but also add to the healthy mix of educators and practitioners who contributed to this book. Chapters Chapter 1, by Myron Fottler, explores strategic human resources management. For many years, the human resources function was synonymous with handling “personnel” and had a reputation for being passive and at times obstructionist in its relationship with internal customers. This chapter presents a progressive approach to human resources management that links human resources practices with organizational mission, strategies, and goals. Chapter 2, by Tom Ricketts, offers an overview of human resources planning from a societal or national perspective. The chapter provides the reader with an appreciation of the regional, national, and global context of human resources planning and management. Chapter 3, by Leah Masselink, discusses the increasing global mobility of healthcare professionals and its effects on the workforce and healthcare quality in this country and abroad. The chapter helps the reader consider the logistical and ethical challenges of this issue. Chapter 4, by Kenneth White, Dolores Clement, and Kristie Stover, takes the reader through the world of various healthcare professions. This chapter lays out the functions, educational preparation, licensure requirements, xvii Fried_FM.qxd xviii 6/11/08 4:16 PM Page xviii Preface changing roles, and management implications of those who directly provide and those who support the delivery of healthcare. Chapter 5, by Beverly Rubin and Bruce Fried, is a guide in the vast legal environment surrounding healthcare human resources. Among other topics, the chapter addresses employee rights, discipline and privacy, sexual harassment, and equal employment opportunity. Chapter 6, by Rupert Evans, focuses on the subject of societal and workforce diversity. This chapter gives a much-needed clarification on the meaning and application of diversity in healthcare organizations, pointing out that the term involves considerably more than a person’s race and ethnicity. Chapter 7, by Myron Fottler, brings us into, perhaps, the most critical foundational concept in human resources management: job analysis. The chapter explains the processes of and useful approaches to conducting a job analysis, creating job descriptions, and writing job specifications. Fottler contends that the deliberate structuring of work can lead to improved individual, group, and organizational performance. Chapter 8, by Bruce Fried and Michael Gates, deals with recruitment, selection, and retention. In this edition, the chapter expands its coverage of retention, presenting recent evidence on the effectiveness of alternative retention strategies and discussing the costs of turnover. Chapter 9, by Rita Quinton, offers useful, practical advice on designing and evaluating employee-training activities. The chapter is a comprehensive treatment of the many aspects of developing a training program that works. Chapter 10, by Bruce Fried, describes a variety of approaches for managing employee performance, including providing feedback and building strategies for improvement. Fried emphasizes that for performance management to be effective, it needs to be viewed as positive rather than punitive and likely requires a change in organizational mind-set. Chapter 11, by Howard Smith, Bruce Fried, Derek van Amerongen, and John Laughlin, is a comprehensive treatment of the issue of compensation, including balancing internal equity and external competitiveness and the conflicts that can arise within different compensation models. Chapter 12, by Dolores Clement, Maria Curran, and Sharon Jahn, attends to a critical topic that was sorely missing in earlier editions: employee benefits. In this chapter, the authors dissect the aspects of employee benefits, including the history, current practices and challenges, budgetary implications, and benefits administration. Chapter 13, by William Gentry, explores the issues of health and safety in the healthcare workplace. This chapter has been expanded to include disaster preparedness and disaster management. Chapter 14, by Donna Malvey, covers labor relations and unionization. The chapter presents new information, including recent rulings that Fried_FM.qxd 6/11/08 4:16 PM Page xix Preface have direct relevance to healthcare. Malvey notes that the healthcare field and the public sector remain the two major targets for unionization in the United States. Chapter 15, by Cheryl Jones and George Pink, is a broad discussion of nurse workload and measurement. The chapter addresses topics such as patient classification systems, evidence on the relationship between nurse workload and the quality of care, and nurse workload and nurse shortages. New exercises are included as well to stimulate thinking and discussion. Chapter 16, by Eileen Hamby, concentrates on human resources budgeting and employee productivity. This chapter is particularly relevant today given the increased attention to using metrics in human resources management. Elements of a labor budget are described, and the controversial question of outsourcing is broken down and analyzed. Chapter 17, by Myron Fottler and Robert Ford, emphasizes customer focus and the role of human resources in creating and maintaining a customerfocused organization. The chapter defines practical strategies to more closely align human resources systems with a customer-focused vision. Chapter 18, by Bruce Fried and Myron Fottler, examines current and future societal and healthcare trends that have (and will have) implications for the healthcare workforce and human resources management. The authors posit that, in the face of challenges, human resources managers will need not only to play an active role as a strategic partner to the organization but also to be inquisitive, creative, and communicative about how human resources can best respond to these issues. Cases This edition also includes three integrative cases. Taking the perspective that human resources management is not confined to the “human resources silo,” these cases challenge the reader to consider the larger environment of the organization when addressing human resources issues. Based on real situations, these cases analyze three different levels: the organization, the department, and the individual. Case 1, by Sarah Huth and Sara Hofstetter, surrounds a downsizing effort at a VA facility and raises important questions about the many pitfalls of organizational reorganization. Case 2, by Andy Garrard and Heather Grant, discusses a radiology department’s struggle with its customer service role. The case involves the complex interplay among organizational trust, process improvement, organizational conflict, and technological change. Case 3, by Lee Ellis, Dawn Morrow, and Adia Bradley, addresses the complex process of performance feedback and the difficult human issues that arise in providing feedback to employees. xix Fried_FM.qxd xx 6/11/08 4:16 PM Page xx Preface Acknowledgments Bruce Fried First and foremost, I thank all of the authors who contributed to this book. All of them willingly and generously shared their knowledge and time. Thanks to staff at Health Administration Press—to Audrey Kaufman for humanely keeping us on schedule, and to Jane Calayag for her thoughtful and very helpful editing. I always appreciate the leadership of Peggy Leatt and Laurel Files in the Department of Health Policy and Administration at UNC. Together, Peggy and Laurel sustain a culture that encourages and nurtures innovation while challenging us always to look at the evidence. I thank my children—Noah, Shoshana, and Aaron—who allow me to live vicariously through their growth. I also thank my parents, who have always supported my efforts, even when they are not quite certain how exactly I spend my time. Of course, I extend my gratitude to my wife, Nancy, who consistently provides me with tremendous emotional and intellectual support whether I think I need it or not. Myron Fottler Thanks to Megan McLendon, a student assistant and MHA student at the University of Central Florida. Her assistance and patience with typing various versions of my chapters, facilitating communications with editorial colleagues and other authors, and finding appropriate and relevant materials for updating chapters were invaluable and very much appreciated. My gratitude also goes to my wife, Carol, for her support on this and other projects over the years. Finally, I thank Aaron Liberman, chair of the Department of Health Administration and Informatics at the University of Central Florida, for his support of this project. Bruce J. Fried, PhD University of North Carolina at Chapel Hill Myron D. Fottler, PhD University of Central Florida References Pfeffer, J., and R. I. Sutton. 2006. Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management. Boston: Harvard Business School Press. Shortell, S. M., T. G. Rundall, and J. Hsu. 2007. “Improving Patient Care by Linking Evidence-Based Medicine and Evidence-Based Management.” JAMA 298 (6): 673–76. Fried_CH01.qxd 6/11/08 4:07 PM Page 1 CHAPTER STRATEGIC HUMAN RESOURCES MANAGEMENT 1 Myron D. Fottler, PhD Learning Objectives After completing this chapter, the reader should be able to • define strategic human resources management, • outline key human resources functions, • discuss the significance of human resources management to present and future healthcare executives, and • describe the organizational and human resources systems that affect organizational outcomes. Introduction Like most other service industries, the healthcare industry is very labor intensive. One reason for healthcare’s reliance on an extensive workforce is that it is not possible to produce a “service” and then store it for later consumption. In healthcare, the production of the service that is purchased and the consumption of that service occur simultaneously. Thus, the interaction between healthcare consumers and healthcare providers is an integral part of the delivery of health services. Given the dependence on healthcare professionals to deliver service, the possibility of heterogeneity of service quality must be recognized within an employee (as skills and competencies change over time) and among employees (as different individuals or representatives of various professions provide a service). The intensive use of labor for service delivery and the possibility of variability in professional practice require that the attention of leaders in the industry be directed toward managing the performance of the persons involved in the delivery of services. The effective management of people requires that healthcare executives understand the factors that influence the performance of individuals employed in their organizations. These factors include not only the traditional human resources management (HRM) activities (i.e., recruitment 1 Fried_CH01.qxd 2 6/11/08 4:07 PM Page 2 Human Resources in Healthcare and selection, training and development, appraisal, compensation, and employee relations) but also the environmental and other organizational aspects that impinge on human resources (HR) activities. Strategic human resources management (SHRM) refers to the comprehensive set of managerial activities and tasks related to developing and maintaining a qualified workforce. This workforce, in turn, contributes to organizational effectiveness, as defined by the organization’s strategic goals. SHRM occurs in a complex and dynamic milieu of forces within the organizational context. A significant trend that started within the last decade is for HR managers to adopt a strategic perspective of their job and to recognize critical linkages between organizational strategy and HR strategies (Fottler et al. 1990; Greer 2001). This book explains and illustrates the methods and practices for increasing the probability that competent personnel will be available to provide the services delivered by the organization and that these employees will appropriately perform the necessary tasks. Implementing these methods and practices means that requirements for positions must be determined, qualified persons must be recruited and selected, employees must be trained and developed to meet future organizational needs, and adequate rewards must be provided to attract and retain top performers. All of these functions must be managed within the legal constraints imposed by society (i.e., legislation, regulation, and court decisions). This chapter emphasizes that HR functions are performed within the context of the overall activities of the organization. These functions are influenced or constrained by the environment, the organizational mission and strategies that are being pursued, and the systems indigenous to the institution. Why study SHRM? How does this topic relate to the career interests or aspirations of present or future healthcare executives? Staffing the organization, designing jobs, building teams, developing employee skills, identifying approaches to improve performance and customer service, and rewarding employee success are as relevant to line managers as they are to HR managers. A successful healthcare executive needs to understand human behavior, work with employees effectively, and be knowledgeable about numerous systems and practices available to put together a skilled and motivated workforce. The executive also has to be aware of economic, technological, social, and legal issues that facilitate or constrain efforts to attain strategic objectives. Healthcare executives do not want to hire the wrong person, to experience high turnover, to manage unmotivated employees, to be taken to court for discrimination actions, to be cited for unsafe practices, to have poorly trained staff undermine patient satisfaction, or to commit unfair labor practices. Despite their best efforts, executives often fail at HRM because they hire Fried_CH01.qxd 6/11/08 4:07 PM Page 3 Chapter 1: Strategic Human Resources Management the wrong people or they do not motivate or develop their staff. The material in this book can help executives avoid mistakes and achieve great results with their workforce. Healthcare organizations can gain a competitive advantage over competitors by effectively managing their human resources. This competitive advantage may include cost leadership (i.e., being a low-cost provider) and product differentiation (i.e., having high levels of service quality). A 1994 study examined the HRM practices and productivity levels of 968 organizations across 35 industries (Huselid 1994). The effectiveness of each organization’s HRM practices was rated based on the presence of such benefits as incentive plans, employee grievance systems, formal performance appraisal systems, and employee participation in decision making. The study found that organizations with high HRM effectiveness ratings clearly outperformed those with low HRM rankings. A similar study of 293 publicly held companies reported that productivity was highly correlated with effective HRM practices (Huselid, Jackson, and Schuler 1997). Based on “extensive reading of both popular and academic literature, talking with numerous executives in a variety of industries, and an application of common sense,” Jeffrey Pfeffer (1998) identifies in his book, The Human Equation, the seven HRM practices that enhance an organization’s competitive advantage. These practices seem to be present in organizations that are effective in managing their human resources, and they occur repeatedly in studies of high performing organizations. In addition, these themes are interrelated and mutually reinforcing; it is difficult to achieve positive results by implementing just one practice on its own. See Figure 1.1 for a list of the seven HRM themes relevant to healthcare. While these HR practices generally have a positive impact on organizational performance, their relative effectiveness may also vary depending on their alignment (or lack thereof) with each other and with the organizational mission, values, culture, strategies, goals, and objectives (Ford et al. 2006). The bad news about achieving competitive advantage through the workforce is that it inevitably takes time to accomplish (Pfeffer 1998). The good news is that, once achieved, this type of competitive advantage is likely to be more enduring and more difficult for competitors to duplicate. Measurement is a crucial component for implementing the seven HR practices listed in Figure 1.1. Failure to evaluate the impact of HR practices dooms these practices to second-class status, neglect, and potential breakdown. Feedback from such measurement is essential in further development of or changes to practices as well as in monitoring how each practice is achieving its intended purpose. Most of these HR practices are described in more detail throughout the book. Although the evidence presented in the literature shows that effective 3 Fried_CH01.qxd 4 6/11/08 4:07 PM Page 4 Human Resources in Healthcare FIGURE 1.1 Seven HRM Practices for Effective Healthcare Organizations 1. 2. 3. 4. 5. 6. 7. Provide employment security. Employees can be fired if they do not perform, but they should not be put on the street quickly because of economic downturns or strategic errors by senior management over which employees have no control. An example that Pfeffer frequently cites is Southwest Airlines, which sees job security as a vital tool for building employee partnership and argues that short-term layoffs would “put our best assets, our people, in the arms of the competition.” Use different criteria to select personnel. Companies should screen for cultural fit and attitude, among other things, rather than just for skills that new employees can easily acquire through training. Use self-managed teams and decentralization as basic elements of organizational design. Pfeffer is particularly keen on the way teams can substitute peer-based control of work for hierarchical control, thereby allowing for the elimination of management layers. Offer high compensation contingent on organizational performance. High pay can produce economic success, as illustrated by the story of Pathmark. This large grocery store chain in the eastern United States had three months to turn the company around or go bust. The new boss increased the salaries of his store managers by 40 percent to 50 percent, enabling managers to concentrate on improving performance rather than complain about their pay. Train extensively. Pfeffer notes that this activity “begs for some sort of return-oninvestment calculations” but concludes that such analyses are difficult, if not impossible, to carry out. Successful companies that emphasize training do so almost as a matter of faith. Reduce status distinctions and barriers. These include dress, language, office arrangements, parking, and wage differentials. Share financial and performance information. The chief executive officer of Whole Foods Market has said that a high-trust organization “can’t have secrets.” His company shares salary information with every employee who is interested. SOURCE: Pfeffer (1998) HRM practices can strongly enhance an organization’s competitive advantage, it fails to indicate why these practices have such an influence. In this chapter, we describe a model—the SHRM—that attempts to explain this phenomenon. First, however, a discussion of environmental trends is in order. Environmental Trends Among the major environmental trends that affect healthcare institutions are changing financing arrangements, emergence of new competitors, advent of new technology, low or declining inpatient occupancy rates, changes in physician– organization relationships, transformation of the demography and increase in Fried_CH01.qxd 6/11/08 4:07 PM Page 5 Chapter 1: Strategic Human Resources Management diversity of the workforce, shortage of capital, increasing market penetration by managed care, heightened pressures to contain costs, and greater expectations of patients. The results of these trends have been increased competition, the need for higher levels of performance, and concern for institutional survival. Many healthcare organizations are closing facilities; undergoing corporate reorganization; instituting staffing freezes and/or reductions in workforce; allowing greater flexibility in work scheduling; providing services despite fewer resources; restructuring and/or redesigning jobs; outsourcing many functions; and developing leaner management structures, with fewer levels and wider spans of control. Organizations are pursuing various major competitive strategies to respond to the current turbulent healthcare environment, including offering low-cost health services, providing superior patient service through highquality technical capability and customer service, specializing in key clinical areas (e.g., becoming centers of excellence), and diversifying within or outside healthcare (Coddington and Moore 1987). In addition, organizations are entering into strategic alliances (Kaluzny, Zuckerman, and Ricketts 1995) and restructuring their organizations in various ways. Regardless of which strategies are being pursued, all healthcare organizations are experiencing a decrease in staffing levels in many traditional service areas and an increase in staffing in new ventures, specialized clinical areas, and related support services (Wilson 1986). Staffing profiles in healthcare today are characterized by a limited number of highly skilled and well-compensated professionals. Healthcare organizations are no longer “employers of last resort” for the unskilled. At the same time, however, most organizations are experiencing shortages of various nursing and allied health personnel. The development of appropriate responses to the ever-changing healthcare environment has received so much attention that HRM planning is now well accepted in healthcare organizations. However, implementation of such plans has often been problematic. The process often ends with the development of goals and objectives and does not include strategies or methods of implementation and ways to monitor results. Implementation appears to be the major difficulty in the overall management process (Porter 1980). A major reason for this lack of implementation has been failure of healthcare executives to assess and manage the various external, interface, and internal stakeholders whose cooperation and support are necessary to successfully implement any business strategy (i.e., corporate, business, or functional) (Blair and Fottler 1990). A stakeholder is any individual or group with a “stake” in the organization. External stakeholders include patients and their families, public and private regulatory agencies, and third-party payers. Interface stakeholders are those who operate on the “interface” of the organization 5 Fried_CH01.qxd 6 6/11/08 4:07 PM Page 6 Human Resources in Healthcare in both the internal and external environments; these stakeholders may include members of the medical staff who have admitting privileges or who are board members at several institutions. Internal stakeholders are those who operate within the organization, such as managers, professionals, and nonprofessional employees. Involving supportive stakeholders, such as employees and HR managers, is crucial to the success of any HRM plan. If HR executives are not actively involved, then employee planning, recruitment, selection, development, appraisal, and compensation necessary for successful plan implementation are not likely to occur. McManis (1987, 19) notes that “[w]hile many hospitals have elegant and elaborate strategic plans, they often do not have supporting human resource strategies to ensure that the overall corporate plan can be implemented. But strategies don’t fail, people do.” Despite this fact, the healthcare industry as a whole spends less than one-half the amount that other industries are spending on human resources management (Hospitals 1989). The SHRM Model A strategic approach to human resources management includes the following (Fottler et al. 1990): • • • • Assessing the organization’s environment and mission Formulating the organization’s business strategy Identifying HR requirements based on the business strategy Comparing the current HR inventory—in terms of numbers, characteristics, and practices—with future strategic requirements • Developing an HR strategy based on the differences between the current inventory and future requirements • Implementing the appropriate HR practices to reinforce the business strategy and to attain competitive advantage Figure 1.2 provides some examples of possible linkages between strategic decisions and HRM practices. SHRM has not been given as high a priority in healthcare as it has received in many other industries. This neglect is particularly surprising in a labor-intensive industry that requires the right people in the right jobs at the right times and that often undergoes shortages in various occupations (Cerne 1988). In addition, the literature in the field offers fairly strong evidence that organizations that use more progressive HR approaches achieve significantly better financial results than comparable, although less progressive, organizations do (Gomez-Mejia 1988; Huselid 1994; Huselid, Jackson, and Schuler 1997; Kravetz 1988). Fried_CH01.qxd 6/11/08 4:07 PM Page 7 Chapter 1: Strategic Human Resources Management Strategic Decision Implications on HR Practices Pursue low-cost competitive strategy Provide lower compensation Negotiate give-backs in labor relations Provide training to improve efficiency Pursue service-quality differentiation competitive strategy Provide high compensation Recruit top-quality candidates Evaluate performance on the basis of patient satisfaction Provide training in guest relations Pursue growth through acquisition Adjust compensation Select candidates from acquired organization Outplace redundant workers Provide training to new employees Pursue growth through development of new markets Promote existing employees on the basis of an objective performance-appraisal system Purchase new technology Provide training in using and maintaining the technology Offer new service/product line Recruit and select physicians and other personnel Increase productivity and cost effectiveness through process improvement Encourage work teams to be innovative Take risks Assume a long-term perspective Figure 1.3 illustrates some strategic HR trends that affect job analysis and planning, staffing, training and development, performance appraisal, compensation, employee rights and discipline, and employee and labor relations. These trends are discussed in more detail in later chapters in this book. The bottom line of Figure 1.3 is that organizations are moving to higher levels of flexibility, collaboration, decentralization, and team orientation. This transformation is driven by the environmental changes and the organizational responses to those changes discussed earlier. 7 FIGURE 1.2 Implications of Strategic Decisions on HR Practices Fried_CH01.qxd 8 6/11/08 4:07 PM Page 8 Human Resources in Healthcare FIGURE 1.3 Strategic Human Resources Trends Old HR Practices Current HR Practices Job Analysis/Planning Explicit job descriptions Detailed HR planning Detailed controls Efficiency Broad job classes Loose work planning Flexibility Innovation Staffing Supervisors make hiring decisions Emphasis on candidate’s technical qualifications Layoffs Letting laid-off workers fend for themselves Team makes hiring decisions Emphasis on “fit” of applicant within the culture Voluntary incentives to retire Providing continued support to terminated employees Training and Development Individual training Job-specific training “Buy” skills by hiring experienced workers Organization responsible for career development Team-based training Generic training emphasizing flexibility “Make” skills by training less-skilled workers Employee responsible for career development Performance Appraisal Uniform appraisal procedures Control-oriented appraisals Supervisor inputs only Customized appraisals Developmental appraisals Appraisals with multiple inputs Compensation Seniority Centralized pay decisions Fixed fringe benefits Employee Rights and Discipline Emphasis on employer protection Informal ethical standards Emphasis on discipline to reduce mistakes Employee and Labor Relations Top-down communication Adversarial approach Preventive labor relations Performance-based pay Decentralized pay decisions Flexible fringe benefits (i.e., cafeteria approach) Emphasis on employee protection Explicit ethical codes and enforcement procedures Emphasis on prevention to reduce mistakes Bottom-up communication and feedback Collaboration approach Employee freedom of choice Fried_CH01.qxd 6/11/08 4:07 PM Page 9 Chapter 1: Strategic Human Resources Management The SHRM Process As illustrated in Figure 1.4, a healthcare organization is made up of systems that require constant interaction within the environment. To remain viable, an organization must adapt its strategic planning and thinking to extend to external changes. The internal components of the organization are affected by these changes, so the organization’s plans may necessitate modifications in terms of the internal systems and HR process systems. There must be harmony among these systems. The characteristics, performance levels, and amount of coherence in operating practices among these systems influence the outcomes achieved in terms of organizational and employee-level measures of performance. HR goals, objectives, process systems, culture, technology, and workforce must be aligned with each other (i.e., internal alignment) and with various levels of organizational strategies (i.e., external alignment) (Ford et al. 2006). Internal and External Environmental Assessment Environmental assessment is a crucial element of SHRM. As a result of changes in the legal/regulatory climate, economic conditions, and labor-market realities, healthcare organizations face constantly changing opportunities and threats. These opportunities and threats make particular services or markets more or less attractive in the organization’s perspective. Among the trends currently affecting the healthcare environment are increasing diversity of the workforce, aging of the workforce, labor shortages, changing worker values and attitudes, and advances in technology. Healthcare executives have responded to these external environmental pressures through various internal, structural changes, including developing network structures, joining healthcare systems, participating in mergers and acquisitions, forming work teams, implementing continuous quality improvement, allowing telecommuting, employee leasing, outsourcing, using more temporary or contingent workers, and globalization. Healthcare executives need to assess not only their organizational strengths and weaknesses but also their internal systems; human resources’ skills, knowledge, and abilities; and portfolio of service markets. Management of human resources involves paying attention to the effect of environmental and internal components on the HR process. Because of the critical role of healthcare professionals in delivering services, managers should develop HR policies and practices that are closely related to, influenced by, and supportive of the strategic goals and plans of their organization. Organizations, either explicitly or implicitly, pursue a strategy in their operations. Deciding on a strategy means determining the products or services that will be created and the markets to which the chosen services will be offered. Once the selection is made, the methods to be used to compete in the 9 Fried_CH01.qxd 10 6/11/08 4:07 PM Page 10 Human Resources in Healthcare FIGURE 1.4 SHRM Model Internal Assessments • Strengths • Weaknesses • Portfolio of service markets • Human resources’ skills, knowledge, and abilities • Internal systems Organizational Mission • Purpose • Mission • Business unit HR Strategy Formulation • HR goals and objectives • HR process systems — HR planning — Job analysis and job design — Recruitment/ retention — Selection/placement — Training/ development — Performance appraisal — Compensation — Labor relations • Organizational design/culture • Technology/ information systems • Workforce HR Strategy Implementation • Management of external and interface stakeholders • Management of external stakeholders • HR practices/ tactics to implement (i.e., adequate staffing) Organizational Strategy Formulation • Corporate • Business • Functional Environmental Assessment • Opportunities • Threats • Services/markets • Technological trends • Legal/regulatory climate • Economic conditions • Labor markets Formulation of Other Functional Strategies • Accounting/finance • Marketing • Operations management Implementation of other functional strategies HR Outcomes • High levels of competence • High levels of motivation • Positive work-related attitudes • Low employee turnover • Organizational commitment • High levels of satisfaction Organizational Outcomes • Competitive advantage • Financial performance • Legal compliance • Attainment of strategic goals • Satisfaction of key stakeholders Fried_CH01.qxd 6/11/08 4:07 PM Page 11 Chapter 1: Strategic Human Resources Management chosen market must be identified. The methods adopted are based on internal resources available, or potentially available, for use by managers. As shown in Figure 1.4, strategies should consider environmental conditions and organizational capabilities. To be in a position to take advantage of opportunities that are anticipated to occur, as well as to parry potential threats from changed conditions or competitor initiatives, managers must have detailed knowledge of the current and future operating environment. Cognizance of internal strengths and weaknesses allows managers to develop plans based on an accurate assessment of the organization’s ability to perform in the marketplace at the desired level. SHRM does not occur in a vacuum; rather, it occurs in a complex and dynamic constellation of forces in the organizational context. One significant trend has been for HR managers to adopt a strategic perspective and to recognize the critical links between human resources and organizational goals. As seen in Figure 1.4, the SHRM process starts with the identification of the organization’s purpose, mission, and business unit, as defined by the board of directors and the senior management team. The process ends with the HR function serving as a strategic partner to the operating departments. Under this new view of human resources management, the HR manager’s job is to help operating managers achieve their strategic goals by serving as the expert in all employment-related activities and issues. When HR is viewed as a strategic partner, talking about the single best way to do anything makes no sense. Instead, the organization must adopt HR practices that are consistent with its strategic mission, goals, and objectives. In addition, all healthcare executives are HR managers. Proper management of employees entails having effective supervisors and line managers throughout the organization. Organizational Mission and Corporate Strategy An organization’s purpose is its basic reason for existence. The purpose of a hospital may be to deliver high-quality clinical care to the population in a given service area. An organization’s mission, created by its board and senior managers, specifies how the organization intends to manage itself to most effectively fulfill its purpose. The mission statement often provides subtle clues on the importance the organization places on its human resources. The purpose and mission affect HR practices in obvious ways. A nursing home, for example, must employ nursing personnel, nurse aides, and food service workers to meet the needs of its patients. The first step in formulating a corporate and business strategy is doing a SWOT (strengths, weaknesses, opportunities, and threats) analysis. The managers then attempt to use the organization’s strengths to capitalize on 11 Fried_CH01.qxd 12 6/11/08 4:07 PM Page 12 Human Resources in Healthcare environmental opportunities and to cope with environmental threats. Human resources play a fundamental role in SWOT analysis because the nature and type of people who work within an organization and the organization’s ability to attract new talent represent significant strengths and weaknesses. Most organizations formulate strategy at three basic levels: the corporate level, the business level, and various functional levels. Corporate strategy is a set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and markets. Business strategy is a set of strategic alternatives that an organization chooses from to most effectively compete in a particular industry or market. Functional strategies consider how the organization will manage each of its major functions (i.e., marketing, finance, and human resources). A key challenge for HR managers when the organization is using a corporate growth strategy is recruiting and training large numbers of qualified employees, who are needed to provide services in added operations. New-hire training programs may also be needed to orient and update the skills of incoming employees. In Figure 1.4, the two-way arrows connecting “Organizational Strategy Formulation” and “HR Strategy Formulation” indicate that the impact of the HR function should be considered in the initial development of organizational strategy. When HR is a true strategic partner, all organizational parties consult with and support one another. HR Strategy Formulation and Implementation Once the organization’s corporate and business strategies have been determined, managers can then develop an HR strategy. This strategy commonly includes a staffing strategy (planning, recruitment, selection, placement), a developmental strategy (performance management, training, development, career planning), and a compensation strategy (salary structure, employee incentives). A staffing strategy refers to a set of activities used by the organization to determine its future HR needs, recruit qualified applicants with an interest in the organization, and select the best of those applicants as new employees. This strategy should be undertaken only after a careful and systematic development of the corporate and business strategies so that staffing activities mesh with other strategic elements of the organization. For example, if retrenchment is part of the business strategy, the staffing strategy will focus on determining which employees to retain and what process to use in termination. A developmental strategy helps the organization enhance the quality of its human resources. This strategy must also be consistent with the corporate and business strategies. For example, if the organization wishes to follow a strategy of differentiating itself from competitors through customer focus and service quality, then it will need to invest heavily in training its employees to provide the highest-quality service and to ensure that performance manage- Fried_CH01.qxd 6/11/08 4:07 PM Page 13 Chapter 1: Strategic Human Resources Management ment focuses on measuring, recognizing, and rewarding performance—all of which lead to high levels of service quality. Alternatively, if the business strategy is to be a leader in providing low-cost services, the developmental strategy may focus on training to enhance productivity to keep overall costs low. A compensation strategy must also complement the organization’s other strategies. For example, if the organization is pursuing a strategy of related diversification, its compensation strategy must be geared toward rewarding employees whose skills allow them to move from the original business to related businesses (e.g., inpatient care to home health care). The organization may choose to pay a premium to highly talented individuals who have skills that are relevant to one of its new businesses. When formulating and implementing an HR strategy and the basic HR components discussed earlier, managers must account for other key parts of the organization, such as organizational design, corporate culture, technology, and the workforce (Bamberger and Fiegelbaum 1996). Organizational design refers to the framework of jobs, positions, groups of positions, and reporting relationships among positions. Most healthcare organizations use a functional design whereby members of a specific occupation or role are grouped into functional departments such as OB-GYN, surgery, and emergency services. Management roles are also divided into functional areas such as marketing, finance, and human resources. The top of the organizational chart is likely to reflect positions such as chief executive officer (CEO) and vice presidents of marketing, finance, and human resources. To operate efficiently, and allow for seamless service, an organization with a functional design requires considerable coordination across its various departments. Many healthcare organizations have been moving toward a flat organizational structure or horizontal corporation. Such an organization is created by eliminating levels of management, reducing bureaucracy, using wide spans of control, and relying heavily on teamwork and coordination to get work accomplished. These horizontal corporations are designed to be highly flexible, adaptable, streamlined, and empowered. The HR function in such organizations is typically diffused throughout the system so that operating managers take on more of the responsibility for HR activities and the HR staff play a consultative role. Corporate culture refers to the set of values that help members of that culture understand what they stand for, how they do things, and what they consider important. Because culture is the foundation of the organization’s internal environment, it plays a major role in shaping the management of human resources, determining how well organizational members will function together and how well the organization will be able to achieve its goals. There is no ideal culture for all organizations, but a strong and well-articulated culture enables employees to know what the organization stands for, what it values, and how to behave. A number of forces shape an organization’s culture, 13 Fried_CH01.qxd 14 6/11/08 4:07 PM Page 14 Human Resources in Healthcare including the founder or founders, institutional affiliations, shared experiences, symbols, stories, slogans, heroes, and ceremonies. Managers must recognize the importance of culture and take appropriate care to transmit that culture to others in the organization. Culture can be transmitted through orientation, training, consistent behavior (i.e., walking the talk), corporate history, and telling and retelling of stories. Culture may facilitate the work of either HR managers or line managers. If the organization has a strong, well-understood, and attractive culture, recruiting and retaining qualified employees become easier. If the culture is perceived as weak or unattractive, recruitment and retention become problematic. Likewise, the HR function can reinforce an existing culture by selecting new employees who have values that are consistent with that culture. Technology also plays a role in the formulation and implementation of an HR strategy. The HR activities of healthcare organizations are quite different from those in the manufacturing industry. In healthcare, different criteria for hiring and methods of training are used. In addition, healthcare organizations typically emphasize educational credentials. Many aspects of technology play a role in HR in all healthcare settings. For example, automation of certain routine functions may reduce demand for certain HR activities but may increase it for others. Computers and robotics are important technological elements that affect HRM, and rapid changes in technology affect employee selection, training, compensation, and other areas. Appropriately designed management information systems provide data to support planning and management decision making. HR information is a crucial element of such a system, as such information can be used for both planning and operational purposes. For example, strategic planning efforts may require data on the number of professionals in various positions who will be available to fill future needs. Internal planning may require HR data in categories such as productivity trends, employee skills, work demands, and employee turnover rates. The use of an intranet (an internal internet that is available to all members of an organization) can improve service to all employees, help the HR department, and reduce many routine administrative costs (Gray 1997). Finally, workforce composition and trends also affect HR strategy formulation and implementation. The American workforce has become increasingly diverse in numerous ways. It has seen growth in the number of older employees, women, Latinos, Asians, African Americans, foreign born, the disabled, single parents, gays, lesbians, and people with special dietary preferences. Previously, most employers observed a fairly predictable employee pattern: People entered the workforce at a young age, maintained stable employment for many years, and retired at the usual age—on or around age 65. This pattern has changed and continues to evolve as a result of demographic factors, improved health, and the abolition of mandatory retirement. Fried_CH01.qxd 6/11/08 4:07 PM Page 15 Chapter 1: Strategic Human Resources Management As mentioned earlier, the successful implementation of an HR strategy generally requires identifying and managing key stakeholders (Blair and Fottler 1990, 1998). The HR strategy, as all other strategies, can only be implemented through people; therefore, such implementation requires motivational and communication processes, goal setting, and leadership. Specific practices or tactics are also necessary to implement the HR strategy. For example, if a healthcare organization’s business strategy is to differentiate itself from competitors through its high-level focus on meeting customer (patient) needs, then the organization may formulate an HR strategy to provide all employees with training in guest relations. However, that training strategy alone will not accomplish the business objective. Methods for implementation also need to be decided; for example, should the training be provided in-house or externally through programs such as those run by the Disney Institute? How will each employee’s success in applying the principles learned be measured and rewarded? The answers to such questions provide the specific tactics needed to implement the HR strategy associated with the business goal of differentiation through customer service. Obviously, the organization will also develop and implement other functional strategies in accounting/finance, marketing, operations management, and other areas. Positive or negative organizational outcomes are determined by how well all of these functional strategies are formulated, aligned, and implemented. HR Outcomes and Performance The outcomes achieved by a healthcare organization depend on its environment, its mission, its strategies, its HR process systems, its internal systems and the consistency with which the operating practices are followed across these systems, and its capability to execute all of the above factors. The appropriate methods for organizing and relating these factors are determined by the outcomes desired by managers and other major stakeholders, and numerous methods exist for conceptualizing organizational performance and outcomes (Cameron and Whetten 1983; Goodman and Pennings and Associates 1977). For this discussion, the specific outcomes are HR outcomes and organizational outcomes (see the two bottom boxes in Figure 1.4). Numerous HR outcomes are associated with HR practices. An organization should provide its workforce with job security, meaningful work, safe conditions of employment, equitable financial compensation, and a satisfactory quality of work life. Organizations will not be able to attract and retain the number, type, and quality of professionals required to deliver quality health services if the internal work environment is unsuitable. In addition, employees are a valuable stakeholder group whose concerns are important because of the complexity of the service they provide. Job satisfaction (Starkweather and Steinbacher 1998), commitment to the organization (Porter et al. 1974), motivation (Fottler et al. 2006), levels of job stress (DeFrank and 15 Fried_CH01.qxd 16 6/11/08 4:07 PM Page 16 Human Resources in Healthcare Ivancevich 1998), and other constructs can be used as measures of employee attitude and psychological condition. Measuring the HR Function HR metrics are measures of HR outcomes and performance. Part of HR’s role as a strategic business partner is to measure the effectiveness of the HR function as a whole as well as the various HR tasks. Today, HR is under some scrutiny, as management and other areas of the organization inquire how various HR activities contribute to performance outcomes (HR Focus 2005a). Specifically, the questions often focus on the return on investment (ROI) of HR activities. Human capital metrics have been developed to determine how HR activities contribute to the organization’s bottom line (HR Focus 2005b). Some employers now gather data on the ROI of various recruitment sources, such as print advertising, Internet advertising, college recruitment, internal transfers, and career fairs (Garvey 2005). Other employers track productivity using cost metrics, such as the time to fill positions, the percentage of diverse candidates hired, interview-to-offer ratios, offer-to-acceptance ratios, hiring manager satisfaction, new-hire satisfaction, cost per hire, headcount ratios, turnover costs, financial benefits of employee retention, and the ROI of training (Garvey 2005; Schneider 2006). Such metrics relate to specific HR activities, but there is also a need to measure the overall contribution of the HR function to organizational performance and outcomes (Lawler, Levenson, and Boudreau 2004). The HR Scorecard is one method to measure this contribution. This tool is basically a modified version of the balanced scorecard (BSC), which is a measurement and control system that looks at a mix of quantitative and qualitative factors to evaluate organizational performance (Kaplan and Norton 1996). The “balance” reflects the need for short-term and long-term objectives, financial and nonfinancial metrics, lagging and leading indicators, and internal and external performance perspectives. A book entitled The Workforce Scorecard extends research on the BSC to maximize workforce potential (Huselid, Becker, and Beatty 2005). The authors show that traditional financial performance measures are “lagging” performance indicators, which can be predicted by the way organizations manage their human resources. HR practices are the “leading” indicators, predicting subsequent financial performance. The Mayo Clinic has developed its own HR balanced scorecard that allows the HR function to become more involved in the organization’s strategic planning (Fottler, Erickson, and Rivers 2006). Based on the assumption “what gets measured gets managed,” Mayo’s HR balanced scorecard measures and monitors a large number of input and output HR indicators that are aligned with the organization’s mission and strategic goals. This HR scorecard measures financial (i.e., staff retention savings), customer (i.e., employee Fried_CH01.qxd 6/11/08 4:07 PM Page 17 Chapter 1: Strategic Human Resources Management retention, patient satisfaction), internal (i.e., time to fill positions), and learning (i.e., staff satisfaction, perceived training participation) areas. Organizational Outcomes and Performance For long-term survival, a healthcare organization must have a balanced, exchange relationship with the environment. This equitable relationship must exist because it is mutually beneficial to the organization and to the environment with which it interacts. A number of outcome measures can be used to determine how well the organization is performing in the marketplace and is producing a service that will be valued by consumers, such as growth, profitability, ROI, competitive advantage, legal compliance, strategic objectives attainment, and key stakeholder satisfaction. The latter may include such indexes as patient satisfaction, cost per patient day, and community perception. The mission and objectives of the organization are reflected in the outcomes that are stressed by management and in the strategies, general tactics, and HR practices that are chosen. Management makes decisions that, combined with the level of fit achieved among the internal systems, determine the outcomes the institution can achieve. For example, almost all healthcare organizations need to earn some profit for continued viability. However, some organizations refrain from initiating new ventures that may be highly profitable if the ventures do not fit their overall mission of providing quality services needed by a defined population group. Conversely, some organizations may start some services that are acknowledged to be break-even propositions at best because those services are viewed as critical to their mission and the needs of their target market. The concerns of such an organization are reflected not only in the choice of services it offers but also in the HR approaches it uses and the outcome measures it views as important. This organization likely places more emphasis on assessment criteria for employee performance and nursing unit operations that stress the provision of quality care than on criteria concerned with efficient use of supplies and the maintenance of staffing ratios. This selection of priorities does not mean that the organization is ignoring efficiency of operations; it just signals that the organization places greater weight on the former criteria. The outcome measures used to judge the institution should reflect its priorities. Another institution may place greater emphasis on economic return, profitability, and efficiency of operations. Quality of care is also important to that organization, but the driving force for becoming a low-cost provider causes the organization to make decisions that reflect its business strategy; therefore, it stresses maintenance or reduction of staffing levels and strictly prohibits overtime. Its recruitment and selection criteria stress identification and selection of employees who will meet minimum job requirements and expectations and, possibly, will accept lower pay levels. In an organization that 17 Fried_CH01.qxd 18 6/11/08 4:07 PM Page 18 Human Resources in Healthcare strives to be efficient, less energy may be spent on “social maintenance” activities designed to meet employee needs and to keep them from leaving or unionizing. The outcomes in this situation will reflect, at least in the short run, higher economic return and lower measures of quality of work life. Regardless of their specific outcome objectives, most healthcare organizations seek competitive advantage over similar institutions. The ultimate goal of the HR function should be to develop a distinctive brand so that employees, potential employees, and the general public view that particular organization as the “choice” rather than as the “last resort.” The HR Brand In HR, branding refers to the organization’s corporate image or culture (Johnson and Roberts 2006). Because organizations are constantly competing for the best talent, developing an attractive HR brand is extremely important. A brand embodies the values and standards that guide employee behavior. It indicates the purpose of the organization, the types of people it hires, and the results it recognizes and rewards (Barker 2005). If an organization can convey that it is a great place to work for, it can attract the “right” people (HR Focus 2005c). Being acknowledged by an external source is a good way to create a recognized HR brand. Inclusion on national, published “best” lists, such as the following, helps an organization build a base of followers and enhances its recruitment and retention programs: • • • • Fortune’s 100 Best Companies to Work For Working Mothers’s 100 Best Companies for Working Mothers Computerworld’s Best Places to Work in IT Robert Levering and Milton Moskowitz’s 100 Best Companies to Work for in America Being selected for Fortune’s 100 Best Companies list is so desirable that some organizations try to change their culture, philosophy, and brand just to be included (Phillips 2005). Cardinal Health in Dublin, Ohio, ranks 19th on Fortune’s list and is a major provider of healthcare products, services, and technologies (Schoeff 2006). Corporate leaders at Cardinal recently decided that the organization’s competitive advantage lies with its people. As a result, the organization is concentrating its HR efforts on more strategic issues and outsourcing more administrative functions. Among its strategic activities are identifying and developing talent and more closely linking HR activities to strategic objectives. Cardinal’s management believes that these changes will enable HR to become a strategic player and will greatly increase the organization’s global HR capability. The immediate goal of building a strong HR brand is to attract and retain the best employees. However, the ultimate goal is to enhance the organization’s outcomes and performance—that is, to achieve competitive advantage. Fried_CH01.qxd 6/11/08 4:07 PM Page 19 Chapter 1: Strategic Human Resources Management Human Resources and the Joint Commission The Joint Commission initiated a pilot project to assess the relationship between adequate staffing and clinical outcomes (Lovern 2001). The project was led by a 20-member national task force composed of hospital leaders, clinicians, and technical experts, among others (Joint Commission 2002). The task force submitted its recommendations, which became a standard—Standard HR 1.30—that was implemented in January 2004. This standard requires healthcare organizations to assess their staffing effectiveness by continually screening for issues that can potentially arise as a result of inadequate staffing. Staffing effectiveness is defined as the number, competency, and skill mix of staff related to the provision of needed care, treatment, and services. The Joint Commission’s focus is on the link between HR strategy implementation (i.e., adequate staffing) and organizational outcomes (i.e., clinical outcomes)—see these two boxes in Figure 1.4. Under Standard HR 1.30, a healthcare facility selects a minimum of four screening indicators—two for clinical/service and two for human resources. The idea behind using two sets of indicators is to understand their relationship with one another; it also emphasizes that no indicator, in and of itself, can directly demonstrate staffing effectiveness. An example of a clinical/ service screening indicator is an adverse drug event, and examples of HR screening indicators are overtime and staff vacancy rates. Staffing inefficiencies may be revealed by examining multiple screening indicators related to patient outcomes. A facility has to choose at least one indicator for each clinical/service and HR category from the Joint Commission’s list, and additional screening indicators can be selected based on the facility’s unique characteristics, specialties, and services. This selection also defines the expected impact that the absence of direct and indirect caregivers may have on patient outcomes. The data collected on these indicators are analyzed to identify potential staffingeffectiveness issues when performance varies from expected targets—that is, ranges of performance are evaluated, external comparisons are made, and improvement goals are assessed. The data are analyzed over time against the screening indicators to identify trends, patterns, or the stability of a process. At least once a year, managers report to the senior management team regarding the aggregation and analysis of data related to staffing effectiveness and regarding any actions taken to improve staffing. HR screening indicators include the following: • Overtime • Staff vacancy rates • Staff turnover rates 19 Fried_CH01.qxd 20 6/11/08 4:07 PM Page 20 Human Resources in Healthcare • • • • • Understaffing, as compared to the facility’s staffing plan Nursing hours per patient day Staff injuries on the job On-call per diem use Sick time Clinical/service screening indicators include the following: • Patient readmission rates • Patient infection rates • Patient clinical outcomes by diagnostic category The healthcare organization is expected to drill down to determine the causes of variation when data vary from expectation. The organization then undertakes steps leading to appropriate actions that are likely to remedy identified problems. For example, analysis of the data may indicate the need for evaluation of the organization’s staffing practices. If so, the organization takes specific actions to improve its performance. Examples of strategies that may be used to address identified staffing issues include the following: • • • • • • • Staff recruitment Education/training Service curtailment Increased technology support Reorganization of work flow Provision of additional ancillary or support staff Adjustment of skill base A Strategic Perspective on Human Resources Managers at all levels are becoming increasingly aware that critical sources of competitive advantage include appropriate systems for attracting, motivating, and managing the organization’s human resources. Adopting a strategic view of human resources involves considering employees as human “assets” and developing appropriate policies and programs to increase the value of these assets to the organization and the marketplace. Effective organizations realize that their employees have value, much as the organization’s physical and capital assets have value. Viewing human resources from an investment perspective, rather than as variable costs of production, allows the organization to determine how to best invest in its people. This leads to a dilemma. An organization that does not invest in its employees may be less attractive to both current and prospective employees, which causes inefficiency and weakens the organization’s competitive position. However, an organization that does invest in its people Fried_CH01.qxd 6/11/08 4:07 PM Page 21 Chapter 1: Strategic Human Resources Management needs to ensure that these investments are not lost. Consequently, an organization needs to develop strategies to ensure that its employees stay on long enough so that it can realize an acceptable return on its investment in employee skills and knowledge. Not all organizations realize that human assets can be strategically managed from an investment perspective. Management may or may not have an appreciation of the value of its human assets relative to its other assets such as brand names, distribution channels, real estate, and facilities and equipment. Organizations may be characterized as human-resources oriented or not based on their answers to the following: • Does the organization see its people as central to its mission and strategy? • Do the organization’s mission statement and strategy objectives mention or espouse the value of human assets? • Does the organization’s management philosophy encourage the development of any strategy that prevents the depreciation of its human assets, or does the organization view its human assets as a cost to be minimized? Often, an HR investment perspective is not adopted because it involves making a longer-term commitment to employees. Because employees can leave and most organizations are infused with short-term measures of performance, investments in human assets are often ignored. Organizations that are performing well may feel no need to change their HR strategies. Those that are not doing as well usually need a quick fix to turn things around and therefore ignore longer-term investments in people. However, although investment in human resources does not yield immediate results, it yields positive outcomes that are likely to last longer and are more difficult to duplicate by competitors. Who Performs HR Tasks? The person or unit that performs HR tasks has changed drastically in recent years. Today, the typical HR department does not exist, and no particular unit or individual is charged with performing HR tasks (HR Focus 2005b). Internal restructuring has often resulted in a shift as to who carries out HR tasks, but it has not eliminated those functions identified in Figure 1.4. In fact, in some healthcare organizations, the HR department continues to perform the majority of HR functions. However, questions are now being raised such as, Can some HR tasks be performed more efficiently by line managers or by outside vendors? Can some HR tasks be centralized or eliminated altogether? Can technology perform HR tasks that were once previously done by HR staff? (Rison and Tower 2005). Over time, the number of HR staff has declined, and continues to decline, as others have begun to assume responsibility for certain HR functions 21 Fried_CH01.qxd 22 6/11/08 4:07 PM Page 22 Human Resources in Healthcare (HR Magazine 2005). Outsourcing, shared service centers, and line managers now assist in performing many HR functions and activities. While most organizations are expected to outsource more HR tasks in the future, the strategic components of HR will likely remain within the organization itself (Pomeroy 2005; HR Focus 2006a). HR managers will continue to be involved with strategic HR matters and other key functions, including performance management and compensation management (Davolt 2006; Pomeroy 2005). The shift toward strategic HR is beginning to permit the HR function to shed its administrative image and to focus on more mission-oriented activities, as noted earlier (HR Focus 2006b). This shift also means that all healthcare executives need to become skilled managers of their human resources. More HR professionals are assuming a strategic perspective when it comes to managing HR-related issues (HR Focus 2005d; Meisinger 2005). As they do so, they are continually upgrading and enhancing their professional capabilities (Khatri 2006). This means that they must be given a seat at the board of director’s table to help the chief officers, senior management, and board members make appropriate decisions concerning HR matters (HR Focus 2004; Fottler et al. 2006). The three critical HR issues to which an HR professional can lend expertise and therefore help organizational governance include selecting the incoming CEO, tying the CEO’s compensation to performance, and identifying and developing optimum business and HR strategies (Kenney 2005). In addition, the HR professional can also contribute to leveraging HR’s role in major change strategies (e.g., mergers and acquisitions), developing and implementing HR metrics that are aligned with business strategies, and helping line managers achieve their unit goals (Pinola 2002). In a study of HR leaders in more than 1,000 organizations, 67 percent of the respondents reported that they belonged to the executive team in their organization (HR Focus 2003). Similarly, a 2006 survey of 427 HR professionals revealed that of the respondents who oversaw the HR department, 63 percent directly reported to the CEO or president (HR Focus 2006c). Moreover, the same survey found that more than half of the respondents worked for an organization that had an established strategic HR plan, and most of the respondents worked directly with senior management in developing organizational strategies. Of course, these data are not necessarily representative of the healthcare industry. If such data were available for the healthcare industry, the results may indicate somewhat lower levels of HR function influence. Summary In healthcare, the intensive reliance on professionals to deliver high-quality services requires organizations and their leaders to focus attention on the strategic management of their human resources and to be aware of the factors Fried_CH01.qxd 6/11/08 4:07 PM Page 23 Chapter 1: Strategic Human Resources Management 23 that influence the performance of all their employees. To assist healthcare executives in understanding this dynamic, this chapter presents a model that explains the interrelationship among corporate strategy, selected organizationaldesign features, HRM activities, employee outcomes, and organizational outcomes. The outcomes achieved by the organization are influenced by numerous HR and non-HR factors. The mission determines the direction that is being taken by the organization and the goals it desires to achieve. The amount of integration or alignment of mission, strategy, HR functions, behavioral components, and non-HR strategies defines the level of achievement that is possible. Healthcare organizations are increasingly striving to impress a distinctive HR brand image upon employees, potential employees, and the general public. They are doing this by modifying their cultures and working hard to be included on various national lists of “best companies.” Successful branding results in competitive advantage in both labor and service markets. Organizations are also increasing the volume and quality of HR metrics they collect and use in an effort to better align their HR strategies with their business strategies. Finally, the locus of HRM is shifting, as strategic functions are retained by HR professionals within the organization while administrative tasks are outsourced elsewhere or delegated to line managers. Discussion Questions 1. Distinguish among corporate, business, and functional strategies. How does each strategy relate to human resources management? Why? 2. How may an organization’s human resources be viewed as either a strength or a weakness when doing a SWOT analysis? What could be done to strengthen human resources in the event that it is seen as a weakness? 3. List factors under the control of healthcare managers that contribute to the decrease in the number of people applying to health professions schools. Describe the steps that healthcare organizations can take to improve this situation. 4. What are the organizational advantages of integrating strategic management and human resources management? What are the steps involved in such an integration? 5. One healthcare organization is pursuing a business strategy of differentiating its service product through providing excellent customer service. What HR metrics do you recommend to reinforce this business strategy? Why? 6. In what sense are all healthcare executives human resources managers? How can executives best prepare to perform well in this HR function? Fried_CH01.qxd 24 6/11/08 4:07 PM Page 24 Human Resources in Healthcare Experiential Exercises Before class, obtain the annual report of any healthcare organization of your choice. Review the material presented and the language used. Write a one-page memo that assesses that organization’s philosophy regarding its human resources. In class, form a group of four or five students. As a group, compare the similarities and differences among the organizations that each group member investigated. Discuss the following: • How can you differentiate those organizations that merely “talk the talk” from those that also “walk the walk”? • What factors influence how an organization perceives its human resources? • How do “better” organizations perceive their human resources? • What did you learn from this exercise? Before class, review the seven HR practices developed by Jeffrey Pfeffer and shown in Figure 1.1. Consider how your current/most recent employer follows any three of these seven practices. Write a 1–2 page summary that lists the three practices you selected and their compatibilities (or incompatibilities) with your employer’s HRM practices. In class, form a group of four or five stu- dents and share your perceptions. Discuss the following: Each year, Fortune magazine publishes a list of “The Best Companies to Work For in America.” Editors of the magazine base their selection on an extensive review of the HR practices of many organizations as well as on surveys of those organizations’ current and former employees. Use the Internet to identify three healthcare organizations on the latest Fortune “best companies” list. Next, visit the websites of these organizations, and review the posted information from the perspective of a prospective job applicant. Then, as a potential employee, answer the following: • What information on the websites most interested you, and why? • Which organization’s website scored best with you, and why? Exercise 1 Exercise 2 Exercise 3 • What similarities and differences arise among the practices in your organization and those in your group members’ employers? • Which of the seven practices seem to be least followed by these organizations, and why? Based on the information posted on these websites, what are the implications for you as a future healthcare executive who will be planning and implementing HRM practices? What information will you include on your organization’s website that will attract and retain employees? Fried_CH01.qxd 6/11/08 4:07 PM Page 25 Chapter 1: Strategic Human Resources Management References Bamberger, P., and A. Fiegelbaum. 1996. “The Role of Strategic Reference Points in Explaining the Nature and Consequences of Human Resource Strategy.” Academy of Management Review 21 (4): 926–58. Barker, J. 2005. “How to Pick the Best People (and Keep Them).” Potentials 38 (4): 33–36. Blair, J. D., and M. D. Fottler. 1990. Challenges in Healthcare Management: Strategic Perspectives for Managing Key Stakeholders. San Francisco: Jossey-Bass. ———. 1998. Strategic Leadership for Medical Groups. San Francisco: Jossey-Bass. Cameron, K. S., and D. A. Whetten. 1983. Organizational Effectiveness: A Comparison of Multiple Models. New York: Academic Press. Cerne, F. 1988. “CEO Builds Employee Morale to Improve Finances.” Hospitals 62 (11): 100. Coddington, D. C., and K. D. Moore. 1987. Market-Driven Strategies in Healthcare. San Francisco: Jossey-Bass. Davolt, S. 2006. “The Half-Truth of Total HRO.” Employee Benefit News 20 (6): 26–27. DeFrank, R. S., and J. M. Ivancevich. 1998. “Stress on the Job.” Academy of Management Executives 12 (3): 55–65. Ford, R. C., S. A. Sivo, M. D. Fottler, D. Dickson, K. Bradley, and L. Johnson. 2006. “Aligning Internal Organizational Factors with a Service Excellence Mission: An Exploratory Investigation in Healthcare.” Health Care Management Review 31 (4): 259–69. Fottler, M. D., J. D. Blair, R. L. Phillips, and C. A. Duran. 1990. “Achieving Competitive Advantage Through Strategic Human Resource Management.” Hospital & Health Services Administration 35 (3): 341–63. Fottler, M. D., S. J. O’Connor, T. D’Aunno, and M. Gilmartin. 2006. “Motivating People.” In Healthcare Management, 5th Edition, edited by S. M. Shortell and A. D. Kaluzny, 78–124. Albany, NY: Delmar. Fottler, M. D., E. Erickson, and P. A. Rivers. 2006. “Bringing Human Resources to the Table: Utilization of an HR Balanced Score Card at Mayo Clinic.” Healthcare Management Review 31 (1): 64–72. Garvey, C. 2005. “New Generation Hiring Metrics.” HR Magazine 50 (4): 70–76. Gomez-Mejia, L. R. 1988. “The Role of Human Resources Strategy in Expert Performance.” Strategic Management Journal 9: 493–505. Goodman, P. S., and J. M. Pennings and Associates. 1977. New Perspectives on Organizational Effectiveness. San Francisco: Jossey-Bass. Gray, F. 1997. “How to Become Intranet Savvy.” HR Magazine (4): 66–71. Greer, C. R. 2001. Strategic Human Resource Management. Upper Saddle River, NJ: Prentice-Hall. Hospitals. 1989. “Human Resources.” Hospitals 63: 46–47. HR Focus. 2003. “Survey Supports Link Between HR Strategies and Profitability.” HR Focus 83 (12): 8. ———. 2004. “What Lies Ahead for HR?” HR Focus 81 (10): 1–15. ———. 2005a. “Getting Real and Specific with Measurement.” HR Focus 82 (1): 11–13. ———. 2005b. “SHRM Predicts the Human Capital Metrics of the Future.” HR Focus 82 (8): 7–10. ———. 2005c. “HR Brand Building in Today’s Market.” HR Focus 82 (2): 1–15. ———. 2005d. “HR’s Growing Role in M&A.” HR Focus 82 (8): 1–15. ———. 2006a. “HR Technology Is Fueling Profits, Cost Savings and Strategy.” HR Focus 84 (1): 7–10. ———. 2006b. “HR Departments Struggle to Move Up from Administrative to Strategic Status.” HR Focus 83 (3): 8. 25 Fried_CH01.qxd 26 6/11/08 4:07 PM Page 26 Human Resources in Healthcare ———. 2006c. “How Strategic Is HR Now, the Latest Research Shows Progress.” HR Focus 83 (12): 3–5. HR Magazine. 2005. “Advice to HR: Simplify and Save.” HR Magazine 50 (9): 18. Huselid, M. A. 1994. “Documenting HR’s Effect on Company Performance.” HR Magazine 39 (1): 79–85. Huselid, M. A., S. E. Jackson, and R. S. Schuler. 1997. “Technical and Strategic Human Resources Management Effectiveness as Determinants of Firm Performance.” Academy of Management Journal 40 (1): 171–88. Huselid, M. A., B. E. Becker, and R. W. Beatty. 2005. The Workforce Scorecard. Boston: Harvard Business School Press. Johnson, M., and P. Roberts. 2006. “Rules of Attraction.” Marketing Health Services 26 (1): 38–40. Joint Commission. 2002. “Healthcare at the Crossroads: Strategies for Addressing the Evolving Nursing Crisis.” [Online publication; accessed 7/12/05.] www.jcaho.org/ about+us/public+policy+initatives/health+care+at+the+crossroads.pdf. Kaluzny, A., H. Zuckerman, and T. Ricketts. 1995. Partners for the Dance: Forming Strategic Alliances in Healthcare. Chicago: Health Administration Press. Kaplan, R. S., and D. P. Norton. 1996. The Balanced Scorecard. Boston: Harvard Business School Press. Kenney, R. 2005. “The Boardroom Role of Human Resources.” Corporate Board 26 (1): 12–16. Khatri, N. 2006. “Building HR Capability in HR Organizations.” Healthcare Management Review 31 (1): 45–54. Kravetz, D. J. 1988. The Human Resources Revolution: Implementing Progressive Management Practices for Bottom Line Success. San Francisco: Jossey-Bass. Lawler, E. E., A. Levenson, and J. W. Boudreau. 2004. “HR Metrics and Analytics: Use and Impact.” Human Resources Planning 27 (1): 27–35. Lovern, E. 2001. “JCAHO to Study Staffing Issues.” Modern Healthcare 31 (3): 6–8. McManis, G. L. 1987. “Managing Competitively: The Human Factor.” Healthcare Executive 2 (6): 18–23. Meisinger, S. 2005. “Fast Company: Do They Really Hate HR?” HR Magazine 50 (9): 12. Pfeffer, J. 1998. The Human Equation: Building Profits by Putting People First. Boston: Harvard Business School Press Phillips, J. J. 2005. “The Value of Human Capital: What Logic and Intuition Are Telling Us.” Chief Learning Officer 4 (8): 50–52. Pinola, R. 2002. “What CFOs Want from HR.” HR Focus 79 (9): 1. Pomeroy, A. 2005. “Outsourcing, One Step at a Time.” HR Magazine 50 (6): 12. Porter, L. W., R. M. Steers, R. T. Mowday, and P. V. Boulian. 1974. “Organizational Commitment, Job Satisfaction, and Turnover Among Psychiatric Technicians.” Journal of Applied Psychology 59: 603–9. Porter, M. E. 1980. Competitive Strategy. New York: The Free Press. Rison, R. P., and J. Tower. 2005. “How to Reduce the Cost of HR and Continue to Provide Value.” Human Resource Planning 28 (1): 14–19. Schneider, C. 2006. “The New Human Capital Metrics.” CFO 22 (2): 22–27. Schoeff, M. 2006. “Cardinal Health HR to Take a More Strategic Role.” Workforce Management (2): 7–8. Starkweather, R. A., and C. L. Steinbacher. 1998. “Job Satisfaction Affects the Bottom Line.” HR Magazine (9): 110–12. Wilson, T. B. 1986. A Guide to Strategic Human Resource Planning for the Healthcare Industry. Chicago: American Society for Healthcare Human Resource Administration, American Hospital Association.