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Case Study
Leadership for Health Professionals: Theory, Skills, and Applications
Third Edition
Gerald R. Ledlow
The CEO of our two-hospital system wanted to build a third hospital within our market. The health system was financially
sound, so there was never a question as to whether we could afford to pay for a new hospital. However, this market already
had eight other hospitals, so it was questionable whether an additional new hospital was needed. I was not in favor of building
this third hospital. However, the CEO insisted, and she proceeded to develop plans to build this new hospital. She brought
in nationally known consultants and coached them to find a way to justify building a new hospital.
At a very important board of trustees meeting, the system CEO and the outside consultants presented their case for building a third hospital that included data I knew was incorrect. At the end of this 3-hour presentation, one of the leading board
members, who knew me well and trusted me, asked for my frank opinion. He asked me whether the information they had
presented was correct and whether I recommended that the board approve this new hospital. Well, my whole career flashed
before my eyes as I considered my response. All the board member wanted was a yes or a no. If I said yes, the new hospital
would go forward, and I eventually would become president of the entire system. If I said no, then my tenure with this system
would probably come to an end. This was a big decision for me, and I had a lot to lose. My family and I had a very comfortable
house on the ocean, and my children were happily attending private schools.
I replied to the board member that no, the consultants’ information was not correct, primarily because they misunderstood (or misrepresented) the soon-to-be-implemented prospective payment system (PPS). The consultants tried to justify
building a new hospital by arguing that, under PPS, the length of stays in all our hospitals would increase, and currently
there wasn’t enough bed capacity in this market area to handle the increased volume. However, that information was
absolutely incorrect. Anybody who understood the PPS knew that the length of stays were going to decrease, and that our
hospital’s occupancy would decrease, which is exactly what eventually happened. Before PPS, we were running at about 93%
occupancy. After PPS, our occupancy decreased to about 57%. Therefore, my statement to the board was absolutely correct.
When I told that board member “No, this information is not correct, and we do not need a new hospital,” the whole board
meeting blew up. They went absolutely bananas, and voted not to build this new hospital. After the board meeting, the
system president brought me aside and wanted to know what I was doing. And I replied, “I wasn’t going to lie to the board.
If you want to lie to the board, that’s up to you.” I knew that my future there, particularly the prospect of becoming system
president, was over from that meeting. Within 18 months I had left that system and taken over the presidency of another
system. Two years later, the board member who had asked my opinion at this board meeting died in a plane crash. After his
death, the system CEO again proposed building a third hospital. This time, the board approved, and they actually built that
hospital. It was a major mistake. The hospital was not really needed, and the debt became a big drag on the balance sheet.
Fortunately, I went on with my career and became president of another system, where I was very happy. That was probably
the most explosive board meeting I’ve ever been a factor in a major decision, and I’ve had some very interesting ones.
Content Link:
Ledlow & Stephens, Leadership for Health Professionals: Theory, Skills, and Applications, 3rd Edition, Jones & Bartlett Learning,
Chapter 9: Leadership and the Complex Health Organization
Chapter 10: Ethics in Health Leadership
Chapter 12: Understanding the Executive Roles of Health Leadership
Copyright © 2018 by Jones & Bartlett Learning, LLC, an Ascend Learning Company
2 ? Case Study
D1. Case Study Questions
1. If you were the COO, how would you have handled the question from the board member about whether the new hospital was justified?
2. How would you have dealt with the system president who was lying to the board and was about to change your career
3. Would you have said yes to the board member’s question of whether the hospital was justified in order to protect your
career and your family?
Copyright © 2018 by Jones & Bartlett Learning, LLC, an Ascend Learning Company
Chapter 9
Leadership and the
Complex Health
Strategically Managing
the Organizational
Environment Before It
Manages You
“We need leadership on the fundamentals of eating
right, exercising, and not smoking. I am interested
in getting people to use the healthcare system at the
right time, getting them to see the doctor early
enough, before a small health problem turns
Donna Shalala,
U.S. News and World Report,
“America’s Best Leaders” (2005)
Learning Objectives
• Identify the strategic direction elements of the
strategic plan, identify the other elements of the
strategic and operational plan, describe each of
these elements in summary, and outline which
internal and external environmental factors
influence the strategic plan.
• Distinguish the levels of organizational culture
and summarize the actions and behaviors a health
leader would perform to proactively and
positively change organizational culture.
Learning Objectives, cont.
• Predict and relate how strategic planning can positively
influence organizational culture (and the internal
environment); describe how strategy selection (competitive,
adaptive, etc.) reinforces those changes to organizational
culture and the internal environment.
• Analyze how external and internal environmental factors
influence the strategic plan and the organizational culture of
a health organization.
• Design a methodology to perform internal environmental
scanning, monitoring, and assessment and external
environmental scanning, forecasting, and monitoring for a
hospital or group practice, public health organization, longterm care organization, or stand-alone allied health practice
or retail pharmacy.
Learning Objectives, cont.
• Interpret the current external environmental
factors in the health industry; translate your
interpretation into a critical list for action for a
health organization and appraise each element on
the critical list for action as to where it should be
addressed by the health organization (strategic
plan, directional strategies, external/internal
environment, organizational culture, etc.) noting
that critical list items may impact more than one
area of the health organization.
Mission, Vision, Values, Strategies,
Goals, Objectives, and Action Steps
• Leaders in health organizations utilize a strategic
system of leadership and management.
• The health leadership team most likely will utilize
a strategic and operational planning process to
derive an organization’s mission, vision,
strategies, goals, objectives, and action steps.
Mission, Vision, Values, Strategies, Goals,
Objectives, and Action Steps, cont.
• Mission, vision, and values are guideposts that leaders
utilize to focus the health organization’s collective energy
and resources.
• “Mission, vision, values, and strategic goals are
appropriately called directional strategies because they
guide strategists when they make key organizational
– Swayne, L. E., Duncan, W. J., & Ginter, P. M. (2006). Strategic
Management of Health Care Organizations (5th ed.). Malden,
MA: Blackwell; p. 187.
• A health organization’s mission is tied to its purpose.
– Purpose is what the organization does every day to meet the
needs and demands of the external environment.
• Stakeholders are individuals, groups, community
members (individual and collective), and
companies that interact with your organization:
Staff members
The community
• Stakeholders can directly and indirectly influence
the success of your organization.
Purpose and Vision
• An extension of purpose is a health organization’s
– Mission is why your organization exists, what business
it is in, who it serves, and where it provides its
products or services.
• Vision is an aspiration of what the organization
intends to become.
– Vision is the shared image of the future organization
that places the organization in a better position to do
its mission/fulfill its purpose.
Strategies, Goals, and Objectives
• Strategies, goals, and objectives are the sequential
building blocks of planning to successfully
achieve the mission, but also to strive to achieve
the vision of the health organization.
• “Strategic goals are those over-arching end results
that the organization pursues to accomplish its
mission and achieve its vision.”
– Swayne, L. E., Duncan, W. J., & Ginter, P. M. (2006). Strategic
Management of Health Care Organizations (5th ed.). Malden,
MA: Blackwell; p. 187.
• Strategies follow “a decision logic of

• Goals translate the broad strategies of
the vision into specific statements for
organizational action by focusing the
organizational resources to achieve the
strategy to build the vision.
– Goals are broader statements, sometimes
aspirations, and are hierarchically above
• Objectives align organizational resources to
meet the stated goals.
– Objectives should be measurable, assigned to
a responsible person or agent or owner, have
timelines for completion, and be frequently
reviewed by the health organization leadership
for progress and resource sufficiency.
Action Steps
• Action steps (or action plans) are created to
produce a step-by-step or task-level
implementation sequence for each objective.
– Each task in the action steps (or plan) has a
responsible person(s) or owner, a time range for
accomplishment, and may have a measureable
variable as well.
– Action step owners “report” to the objective owner
who “reports” to the goal owner, who ultimately
reports to the leadership team at the strategy level.
Mission, Vision, Values, Strategies, Goals,
Objectives, and Action Steps, cont.
• Mission, vision, values, strategies, goals,
objectives, and action steps are essential
components of the strategic system of leadership
and management.
• Health leaders utilize the strategic system’s tools,
such as planning (strategic and operational), to
transform, guide, and develop organizational
culture to focus the collective energy and
resources of the health organization to effectively,
efficiently, and efficaciously serve its purpose.
Mission, Vision, Values, Strategies, Goals,
Objectives, and Action Steps, cont.
• “Strategy-making processes are
organizational-level phenomena involving key
decisions made on behalf of the entire
– Dess, G. G. & Lumpkin, G. T. (2005). Emerging issues in strategy
process research. In M. A. Hitt, R. E. Freeman, & J. S. Harrison (Eds.),
The Blackwell Handbook of Strategic Management. Malden, MA:
Blackwell; p. 3.
Understanding the Internal Environment
• Internal scanning, monitoring, and assessment of
the health organization are vital leadership
activities; effective leaders are effective internal
organization scanners, monitors, and assessors.
– Most important elements of understanding the internal
health organization’s environment should focus on
systems such as human resources management system,
supply chain system, technological system,
information system, and culture and subcultures.
– The salient theme is one of integrated synergy among
all the health organization’s systems.
Scanning, Monitoring, and Assessing
• Specific areas of scanning, monitoring, and
assessing for the health leader are:
1. Competitive advantage and the unique or distinctive
competencies the organization possesses (centers of
excellence for example)
2. Strengths and weaknesses of the organization
3. Functional strategies for implementation of strategies
that are supported by goals, objectives, and action
4. Operational effectiveness, efficiency, and efficacy
5. Organizational culture (Is the culture aligned with
the organization’s direction?)
Institutional Factors
• Institutional organizations and environments
highlight the importance of social, political, and
psychological aspects of organizational dynamics.
• The institutional view, in essence, is an
assessment of the organization’s situation as
compared against a health leader’s predetermined
standard or benchmark or expectations as
compared with competitors.
Van Wijngaarden, J. D. H., Scholten, G. R. M., & Van Wijk, K. P. (2012).
Strategic analysis for health care organizations: The suitability of the SWOT
analysis. The International Journal of Health Planning and Management,
27(1), 34–49.
Institutional Factors, cont.
• Institutional organizations focus on the
reproduction of organizational activities and
routines in response to external pressures,
expectations of professionals in the industry,
and collective norms of the institutional
• Most often health organizations are a hybrid of
institutional and technical environments.
Resource-Dependent Organizations
• The resource-dependent organization desires to
maintain autonomy and remain relatively
independent of its environment.
• One of the basic propositions of the resourcedependent organization is that leaders must be
aware that the most efficient or effective
organizations do not always survive. Not
surprisingly, organizations with the most
power survive.
Resource-Dependent Organizations, cont.
• Power is defined as the ability to secure and
maintain the most stable and most respected
networks of resource chains.
• In the resource-dependent environment, the
organization requires resources to gain and
maintain power and therefore must (sometimes
reluctantly) interact with the environment.
– Pfeffer J., & Salancik, G. (1978). The External Control of
Organizations: A Resource Dependence Perspective. New
York: Harper and Row.
Contingent Organizations
• Contingent organizations are more flexible and
rely less on rigid policies and practices.
– These organizations utilize more loosely established
internal best practices.
– This organization will be loosely coupled.
• Within this type or organization, a leader’s
success is based on a unique amalgam of internal
and external factors.
– Organizational and environmental factors are
contingent on each other.
Contingent Organizations, cont.
• The leadership approach is always based on the
organization’s current situation.
• The underlying assumptions of contingent
organizations are based on the premise that
organizational structures are open and are not
organizationally egalitarian.
– There is no one best way to organize, and any one
way of organizing is not equally effective in another
• The contingent view utilizes a scenario-based

Understanding the External Environment
• Understanding the external environment
focuses on scanning, monitoring, forecasting,
and assessing the macro and micro forces of
the external environment.
– Scanning involves identifying the subtle to
dramatic signals of macro and micro forces
– Monitoring focuses on deriving meaning from a
pattern of observations from scanning macro and
micro forces.
Understanding External Environment, cont.
– Forecasting is the active development of projections and
likely scenarios based on patterns indicated from
– Assessing is prioritizing and quantifying the impact of
changes in the macro and micro forces’ external
environment, considering scenario forecasts in that
• Categories to give leaders structure through which
to scan, monitor, forecast, and assess a dynamic
health industry:
– Macro-environmental forces
– Health care environmental [micro-environmental] forces
– SWOT analysis

Program Guidelines
• PHEP program guidelines provide the basis for
assessment of capabilities and functions for public
health preparedness.
• HPP program guidelines provide the basis for
assessment of capabilities and functions for
healthcare delivery organizations/hospitals.
Both of these programs are funded and managed
separately but now require alignment and
integration to provide a better “picture” of
Horizontal Factors
• Horizontal organizations are organizations that
have cooperative relationships, affiliations, or
ownership rights with multiple outside agents
and actors.
• Horizontal organizations seek to maintain a
level of homeostasis with all elements internal
and external to the establishment.
Vertical Factors
• The horizontal organization is in stark contrast to
the vertical organization.
• The vertical organization builds a monument unto
itself and seeks to minimize reliance on any and
all outside stakeholders and actors.
– In the true sense of organizational dynamics there are
actually few true vertical organizations. As a result,
when we speak of vertical organizations, we refer to
organizations that attempt to control the environment
first rather than living in the environment and
becoming a participatory member within the
Dynamic Factors
• Dynamic organizations are those that do not
qualify as either vertical or horizontal
organizations. However, there is a tendency for
many dynamic organizations to fit into the
open and horizontal architecture.
• Different possibilities in the environmental
characteristics constantly require the creation
of new and different ways of positioning the
organization for success.
Organizational Culture
• From a broad perspective, health leaders assess
the external and internal environments of the
organization, determine what organizational
culture will best meet the needs of the external
environment, then design, develop, implement,
and refine the organizational culture.
• From this “big picture” view, leadership seems
simple, yet accomplishing the task of
organizational alignment with the external
environment requires a focused, clear appealing
vision that is well communicated and leadership
and management team actions consistent with that
Organizational Culture, cont.
• From this standpoint, leaders must be
knowledgeable and competent about
organizational dynamics, culture,
communication, assessment and analysis,
and change management.
– All of these areas are important, yet culture is the
fabric that weaves all of these components
Organizational Culture, cont.
• To begin moving an organizational culture
toward change, the health leader should:
– Model the behavior you expect yourself.
– Communicate expectations and train other leaders,
managers and staff.
– Revise structures and reporting relationships.
– Conduct team-based planning and policy
– Use primary and secondary mechanisms
(discussed later in this chapter).
Organizational Culture, cont.
• To begin moving an organizational culture
toward change, the health leader should (cont.):
– Be consistent and communicate often to the
– Continue to scan, monitor, and assess the internal
health organization environment while you scan,
monitor, forecast, and assess the external
Organizational Culture, cont.
• Defining organizational culture
– Organizational culture is a complex construct that
incorporates …
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