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Strategic Audit Project

April 27, 2010

Table of Contents

I. Current Situation

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A. Current Performance

B. Strategic Posture

II. Corporate Governance

A. Board of Directors

B. Top Management

III. External Environment: Opportunities and Threats

A. Societal Environment

B. Task Environment

C. Summary of External Factors

IV. Internal Environment

A. Corporate Structure

B. Corporate Culture

C. Corporate Resources

1. Finance

2. Operations and Logistics

3. Information System

D. Summary of Internal Factors

V. Analysis of Strategic Factors

A. Situational Analysis

B. Review of Mission and Objectives

VI. Strategic Alternatives and Recommended Strategy

A. Strategic Alternatives

B. Recommended Strategy

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VII. Implementation

VIII. Evaluation and Control

IX. Appendix

A. Flow chart

X. References

Current Performance

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The corporate structure for OhioHealth is complex due to the layers of managing levels.

OhioHealth is a large organization which consists of several hospitals and home healthcare. The

organization also has affiliations with surrounding hospitals within a thirty mile radius. Profits

are increasing regardless of the economic decline. Due to the nature of the business, people

always need healthcare services, and rate of return is almost guaranteed.

Strategic Posture

Corporate strategy appears to be a continuous growth through affiliations and mergers of

hospitals. Business strategy emphasizes ‘systemness’ throughout the organization to improve

competition by creating a system wide unification of services provided. The functional strategy

includes the maximizing of productivity through unifying tests and procedures, developing

specific areas to perform the tests and procedures, and batching tests to be more effective and

cost efficient. Every strategy is consistent with each other and the organizations mission.

Patient surveys and employee performance evaluations are utilized to support the mission

internally and externally.

Policies are based on a broad guideline; however, specific standard operating procedures

are utilized for specific departments within the hospitals. All OhioHealth employees are

expected to project the broad guidelines, which are; honor, patient care and consideration, build

trusting relationships, exceed customer expectations, and add value to interactions with

customers. Externally and internally the policies are consistent. Generally, the clinical or

technical side of the organization has more patient contact, which means the ethical values are

stressed more with these employees. Recognizing the need for the unification of healthcare with

the business, OhioHealth has done a great job in incorporating their values into the everyday

work atmosphere.

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Board of Directors

OhioHealth’s Board of Directors is the executive staff members who were hired by

shareholders. The internal corporate executive staff includes: Chief Executive Officer, Sr. Vice

President and Chief Strategy Officer, Senior Vice President for Human Resources and

Organizational Development, Senior Operations Officer, OhioHealth Neighborhood Care, Senior

Vice President and Chief Communications Officer, Chief Information Officer, Executive Vice

President and Chief Financial Officer, Executive Vice President and Chief Operating Officer,

President OhioHealth Foundation and Senior Vice President, External Affairs, Senior Vice

President & General Counsel and Assistant Secretary, Chief Medical Officer, and Vice

President- Mission & Ministry (OhioHealth online, 2009). External shareholders are

unidentified board members.

Board members are actively involved in the organization. Most are highly educated and

have the skills and knowledge necessary to lead the organization. Each member of the board has

been involved with the company for years. Strategically, the board members monitor internal

and external developments which may cause changes within the facility. Board members

examine and evaluate management’s proposals and make decisions that will benefit the

company. Through the mission statements and goals of the organization, directors specify the

strategic plans given to managers.

Top Managers

Top managers are responsible for their hospitals growth, but are not responsible for the

corporation’s performance. Most top managers have been in their current positions for many

years and have been internal promotions. There are times when external candidates are hired,

but it is a rarity.

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Top managers do not interact as much as expected with lower management. Their

objective is to pass on the involvement to the Vice Presidents of each facility. Assumedly, top

managers interact more often with board members.

Social responsibility in a healthcare setting is expected. This does not mean every

decision made is ethical. Questioning ethics is normal; however, when a hospital uses words like

‘re-aligning positions’ there tends to be reasons for worry. The state of Ohio gives companies

the right to hire or fire. At this point, what they do can be considered ethical. Social

responsibility to patients falls under legal regulations. Still, social responsibility to the

environment can be an advantage in gaining a larger customer base. This can be an

environmental ethics which OhioHealth is concerned with.

OhioHealth has distinct needs where future challenges are concerned. Top managers and

executives seem to have tunnel vision. There are times when the organization’s leaders need to

re-evaluate and do not. Bureaucracy is an issue because the company is not as flexible as it

needs to be. Due to these issues, top management is not as skilled to cope with changes. In fact,

with the new healthcare changes about to occur, OhioHealth will have more difficulties in

moving towards the future.

Societal Environment

Healthcare organizations, such as OhioHealth, are facing more environmental forces than

ever. The healthcare reform which is taking place, due to the Obama Administration, is forcing

healthcare facilities to anticipate the outcome and prepare for changes. Flexibility in healthcare

organizations will become more important. This is the major external environmental issue facing

all healthcare organizations currently.

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Economically, the USA is in a crisis. Although this may be considered a threat, it will

become an opportunity as the economy recovers. Ethically, the business part of OhioHealth’s

organization must work toward increasing profits for shareholders. Yet ethics in the professional

area is focused on the patient’s rights and healthcare recovery regardless of payment for the

services. These are opposing views, but must be combined to create a unified healthcare facility.

Technology is an opportunity to increase testing volumes, while giving cost efficiency

and accuracy in testing. Technological advances can be a threat when a competing facility is

able to obtain the advancements and the other is not. Ethically, the better the treatment, the

better OhioHealth can improve the health of every patient.

OhioHealth’s organization upholds the legal guidelines. The political aspect is a

considerable threat to the running of healthcare institutes. Procedures and policies must follow

the guidelines set forth by government agencies. Looking at the future, if an organization can

make quick changes once the healthcare reform takes effect, it can be considered advantageous

by giving the company an edge over other facilities. Government agencies work to keep the

ethics in healthcare organizations.

The ‘baby boom’ of the 50’s means a larger number of middle aged Americans (Hunger

& Wheelen, 2007, p.35). Looking at the future, this is an opportunity for OhioHealth’s

organization to increase profits due to the number of elderly patients, which will need more

health care. On the opposite side, there will be an increased need for healthcare professionals

with a great possibility of not having enough people to fill the positions.

Task Environment

Several forces are involved in industry competition. As Michael Porter said, competitor

intensity is what the corporation is concerned with (Hunger & Wheelen, 2007, p.39). The

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strength of the forces will determine if they are a high risk or low risk for the organization. When

all the risks are combined, the healthcare organization can determine what the long-term profits

can become (Hunger & Wheelen, 2007, p. 39). By knowing what threats restrict the profits,

OhioHealth can create strategies to lead to them.

The economy is the immediate key factor which is affecting the healthcare organization.

Indigent patients have increased due to inability to pay for healthcare services. There is a loss of

jobs which mean loss of healthcare insurance. People are not as willing to get treated. Future

threats are coming in the form of healthcare reform. Uncertainty of what the reform will entail is

difficult to foresee.

Opportunities will come from the recovery of the economy. When people are able to

obtain healthcare insurance from jobs, there will be an increase in preventive maintenance.

Patients will want to get regular check-ups and take care of chronic conditions.

Summary of external factors

OhioHealth competes with OSU hospital, and MT Carmel. The laboratories it competes

with are Mayo Clinic, Lab Corp, and Quest Diagnostics. The opportunities reside within the

types of testing performed, the specialists, quality physicians and personnel, and the type of

treatments given. OhioHealth’s quality is favorable. If OhioHealth wants to compete with the

larger national laboratories, they must obtain the analyzers necessary to perform the tests which

are usually sent to the reference labs.

Within the threats category, the major factor is the strong reference lab presence.

Competing with these companies can be difficult because Lab Corp and Quest Diagnostics are

well known and established. Technological advances are ever increasing in the health field. The

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costs of these up and coming analyzers are too expensive for most healthcare facilities. The only

way OhioHealth can compete is by growing further to become a national organization.

The future of the company depends upon: expanding, working on marketing to exploit

their resources, increasing trends through contracts with affiliate hospitals and medical groups,

and strengthening its public relations by looking at the economy to determine pricing. These

areas will be important to the company’s ability to compete.

Corporate Structure

Currently at OhioHealth, the decision making within the technical departments are done

primarily by the managers. However, since APExS is attempting to create ‘systemness’ or unity

throughout the organization, a model will soon be implemented to make sure all of the hospitals’

technical departments do the same testing, use the same equipment, and that staffing is

appropriate for size. On the business side, the presidents of each hospital work to maintain the

organizations mission and goals. The major decisions are made by the board of directors, which

are then transferred onto the presidents. I would consider OhioHealth to be a divisional structure

which has many related industries within the healthcare field (Hunger & Wheelen, 2007, p. 61).

From direct observation, OhioHealth’s organization attempts to compete with the

reference laboratories. The organization wants to be completely self-sufficient by attempting to

cut out the send out testing and perform them on their own. By doing this, the other hospitals

that would normally send out specific tests to Mayo Clinic or Quest Diagnostics, are now

sending these tests to Riverside Methodist Hospital to perform. The organization is creating its

own centralized reference lab and creating satellite labs in the hospitals. This is a type of

marketing mix which will give the organization a competitive advantage (Hunger & Wheelen,

2007, p.64).

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Corporate Culture

OhioHealth’s corporate culture has been changing as the company continues to rapidly

grow. The CEO has changed from a man who based his position on the importance of a hospital

having a healthy heart, to a man who is geared toward increasing profits. Changes in missions

and values, has caused many employees to feel the organization has two specific ideals; one for

the business, cut throat world; and one for the technical personnel who have patient contact.

Issues come in the form of integration of the rapidly increasing number of affiliates and hospitals

within the organization.

I have witnessed a complete lack of cost effective foresight and ethics. This is definitely

not a good guide for appropriate behavior within the organization. A riff between the two sides

has become a chasm of disrespect for management and administration. I foresee a breakdown in

the organization.

Hunger and Wheelen have stated the influential powers of managers are based on their

behavior. If this type of behavior continues, OhioHealth’s strategic directions are going to

continue to shift, and not for the better. A bridge needs to be built between the employee and

management/administration before the issues become irreversible. This culture is not consistent

with objectives, strategies or policies.

OhioHealth attempts to bring diversity into the organization, but it is not reaching

employees. There are diverse or multicultural groups of people. As a strategy, it is lacking

because not all managers are able to handle the differences in ethnic cultures and backgrounds.

Unity can only exist if managers and administration are taught to become part of the solution, not

part of the problem.

Finance

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OhioHealth’s financial strategies and policies are not clearly stated. The objectives are

implied through the rapid growth with acquiring hospitals and affiliates; to increase profits. The

programs within the organization are to unify and integrate the hospitals to obtain maximum

efficiency for cost effectiveness. The mission is to create a facility where physicians want to

work and people want to be treated (OhioHealth online, 2009). Externally, OhioHealth appears

to be meeting their objectives. Internally, it appears as though the company is so focused on the

rapid growth, that the corporate group acquired tunnel vision and is missing some of the internal

issues. However, their mission and goals are centered on; compassion, honoring the value of

every human, and working towards the patients better health (OhioHealth online, 2009).

OhioHealth has earned awards at Doctor’s Hospital and Riverside Methodist for achieving

excellence in patient safety and satisfaction, operating efficiency, and financial performance

(OhioHealth online, 2009).

The Columbus health system, OhioHealth, has been praised for its strategic growth and

the strength of its balance sheet (Columbus Business First, 2007). However, by July of 2009, it

was expected that OhioHealth would experience more debt (Columbus Business First, 2007).

The trends show that up to January of 2009, there was a steady increase in the strength of

OhioHealth’s balance sheet (News by Quote Media, 2009). The organization is still performing

to standards. The analysis supports the strategic decisions. Because of the increasing strength of

the balance sheet, OhioHealth has a competitive balance when compared to other hospitals in the

area. Financially, the performance of OhioHealth is excellent as compared to other hospitals.

Human Resources Management

OhioHealth does not have the duties of HRM clearly stated. Human Resources work to

find potential candidates for positions within the hospital. This works in conjunction with the

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organizations strategies. Through opinion surveys, HR is able to detect unhappy employees and

work towards rectifying the situation. Generally, HR backs management and administration. In

the past HR was used to help the employee by fixing conditions and finding issues, but it has

been more structured around the policies, priorities and mission of the company. Externally and

internally, it appears to be performing their jobs efficiently.

Turnover is a constant threat. The laboratory is always working short handed due to the

technologists performing 80 percent of the blood draws instead of performing the testing. HR

needs to post the job accurately so the turnover does not happen as much. The job should be

posted as a technologist who is able to perform phlebotomy daily as a primary job in the

description. If not changed to an accurate job description, the future trend will be more

turnovers. This does not give the company a competitive advantage, nor is it supporting the

mission. Financially, HR is in opposition to the cost efficiency of the company.

Throughout OhioHealth, the HR department is more organized and works towards the

organizations goals. Yet, when one hospital’s HR department is causing problems, the entire

organization will suffer. Compared to other organizations, I believe HR is performing the same.

Diversity in multiculturalism is an important part of OhioHealth. There are many

cultures represented within the organization, and the company prides itself on the diversity.

Information Systems

IS supports the organization of information throughout OhioHealth. By providing an

easily accessible computer program, everyone is able to complete their tasks with accuracy and

make decisions quickly. The objectives and strategies are not clearly stated, but implied through

the performance of programs created and utilized. These systems are consistent internally and

externally within the organization. Currently, the IS department is working towards creating a

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unified system which will be used in all of the hospitals within OhioHealth. As the program

progresses, the organization will see an increase in managements ease in making decisions.

Within the near future, the organization will be well equipped to perform their duties will

accuracy and precision. Competitively, this will be an advantage.

The IS manager is expected to keep the databases clear of viruses and protected.

OhioHealth holds the IS manager accountable for any glitches in the system and expects quick

and efficient restorations of computer problems. Without these personnel, the company would

not be able to strategically perform. The IS department the central nervous system of the

organization.

Summary of Internal Factors

OhioHealth’s strengths are in their resources. Excellent physicians and quality technical

personnel help build OhioHealth into major competitor. Employee skills and their compassion

are the keys to a successful service oriented business. Financial management personnel are on

top of the issues and are able to keep the organization floating above water. Without the

strengths of these people operating the company, the organization would be struggling to

survive.

Weaknesses come from those few managers who are not exhibiting the values the

company wants. There are some issues that fall through the cracks, and if the employee’s

become even more upset over management, there is potential for the organization to lose quality

technical people. HR needs to be more active in evaluating the performance of management to

strengthen the company’s internal values and goals. Another weakness comes in the form of

upper management/administration’s inability to see obvious problems because of tunnel vision.

OhioHealth needs a ‘secret shopper’ to pick out these weaknesses so there is a chance to fix the

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issues and create a well-balanced organization. A healthy organization is flexible enough to

accept constructive criticism.

Situational Analysis

OhioHealth’s greatest strength is their ability to give quality services, and their qualified

and professional physicians and technical personnel. Exploiting these resources will be

advantageous to the organization. Quality can increase profits and aid the company in expanding

in the future, which is an opportunity. Strategically, opportunity resides within a specialty

hospital for women’s care. Currently, Columbus does not have a women’s hospital which treats

newborns while promoting the health of women. This idea would assist OhioHealth in

establishing their newly built Dublin Hospital. Creating this specialty hospital will give the

public what they need, while moving the company into the future. This will then turn into one of

their strengths.

Review of Mission and Objectives

OhioHealth, just as any hospital, has a mission to improve the health of every patient who

comes to the facility for treatment (OhioHealth online, 2009). Objectives are to give quality

treatments while earning enough revenue to retain professional personnel and increase growth.

The mission and objectives are appropriate with key strategic factors; yet, they may also cause

problems. Realistically, a hospital is unable to improve every patient’s health, and due to the

rapid growth, it will cause a strain in revenue during these economic times. I believe the hospital

needs to change the mission to be more realistic by saying, ‘The mission of the hospital is to

create an environment for optimum health benefits of the patient’. This creates a broader view

which is more realistic. It does not give patients faulty beliefs that the hospital is able to improve

every patient’s health.

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Objectives of the hospital should be centered on the patient, and not on the physicians or

the board members (King, 2009). When OhioHealth is able to utilize funds in creating an

atmosphere which is more conducive to patient health, the organization will necessitate a change

to a futuristic objective. Patients are not able to get all of their questions answered quick enough

to make informed decisions where their health is concerned. Nurses and doctors are too busy to

give the time required, which means a new system needs developed. After this happens, the

effects of the change will be an increase in the reputation of the hospital, and therefore, it will

meet its original objective of increasing revenue.

Strategically, OhioHealth is behind because they only consider the present and future

growth potential. It does not have a long lasting plan in place to earn the revenue required. The

organization should review future trends and make changes to fit in with them. Effects of their

tunnel vision will be detrimental to the organization. Effects of the change are increasing

revenue and better patient care. This is a winning result.

Strategic Alternatives

OhioHealth needs to revise their objectives. Although the current objectives have

enabled the organization to expand into a larger corporation, OhioHealth has out-grown their

current objectives and needs to re-evaluate their stage of development. Simply put,

implementing current strategies, which have been used for the past ten years, are out-dated. The

corporate structure needs to be replaced with a person who is able to keep the organization in the

growth stage. Currently, the organization is walking the line between growth and decline, while

skipping the maturity stage. The company grew too fast without considering organizational

structure. Traditional structures within the organization are not flexible enough to create a new

strategy (Hunger & Wheelen, 2007, p.130).

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A major feasible strategy would be to restructure the management into a matrix instead of

the traditional structure they currently have. The ‘good ole boy’ mentality has to be replaced

with personnel who have the credentials and experience. Bureaucracy within the organization is

keeping the organization from being open and flexible enough to change with the stages (Hunger

& Wheelen, 2007 p.3). Corporate scenarios can be created, but with the tunnel vision and

bureaucracy, the organization is unable to view the changes necessary to maintain strength.

Developing strategic flexibility is what needs to be incorporated, but the company will not be

able to shift to a more dominant strategy until key administrators are replaced. A new CEO

would be a triggering event to stimulate a new strategy (Hunger & Wheelen, 2007, p.5).

OhioHealth’s administrators seem to fear change or any deviation from current plans.

Recommended Strategy

OhioHealth’s short-term functional strategy would be to begin restructuring the

organization through hiring new administrators and changing its focus from profits to customer

service. The organization has begun to restructure through the use of the APExS system to

create a consistent program which will be utilized in every hospital. This is a short-term goal to

locate problems in unifying the entire organization. The policies being developed should be

based on unifying all services, procedures and policies to keep the organization under one

specific system and not many different systems. Currently, OhioHealth is implementing their

program decently, but it could go bad if not watched consistently and carefully. OhioHealth is

teetering on the edge of growth and decline while bypassing the maturity stage. It is a precarious

situation. The organization has the potential to survive and continue to grow with the proper

structure.

Programs

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OhioHealth would benefit from utilizing a combination of the Management By

Objectives (MBO) and the Total Quality Management philosophy. TQM focuses on consistent

improvement and customer satisfaction which is what the future of healthcare is focused on

(Hunger & Wheelen, 2007, p 148). MBO uses functional objectives, corporate objectives and

created strategies to lining plans and performance (Hunger & Wheelen, 2007, p. 147). Because

OhioHealth has too much bureaucracy, the MBO benefit of reducing internal politics will be a

major benefit (Hunger & Wheelen, 2007, p. 148).

Budgets

Both programs can be utilized with minimal financial backing. TQM teams can be

created by asking associates to participate in the program. Training personnel can be part of the

orientation to the organization and can be done within a few days. Continuing education through

yearly reviews will keep the information fresh in employee’s minds. There would be a minimal

cost involved in creating the interactive program, but the benefits would out-weigh the cost.

Budgets can be easily agreed upon, and the time for implementation can be minimized by

utilizing employee orientation programs.

Procedures

Since everything is centered on patient care, Standard operating procedures (SOP) should

entail customer service and satisfaction first and foremost. Asking the patient if they have any

questions, what else could be done to make their stay easier or happier, and giving internet

websites to aid them in any questions they may have after leaving the facility, would be a quality

service. Every procedure should include discussing what is about to be done to the patient to

alleviate fears and concerns. Patients need to understand, which means asking them if they have

questions about it.

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Information Systems

Currently, OhioHealth’s information systems are not linked or created to be one system

wide program. As OhioHealth continues to work towards systemness, the information systems

will continue to change and develop. Stronger computer systems are necessary to provide

feedback. The systems within the organizations are able to implement programs and

performance evaluations, although not as well as it could be. Presently, the systems are able to

show strategic factors. When the organization is able to completely integrate all of the hospitals,

a unified system will be implemented.

Control Measures

OhioHealth uses incident reports, risk management, and corrective actions for the use of

controlling the behavior of employees. In moderation this can be a great tool to ensure quality

performance. There are managers, although, who tend to take the incident reports to such an

extent which creates animosity, anxiety, and hostility, and make employees feel they are being

attacked or micromanaged. Some OhioHealth managers are unable to interpret and understand

guidelines of proper control and rewards. To become more consistent, the organization needs to

have a training program set up to teach managers what constitutes as control. OhioHealth has

Power of One rewards used to thank those employees who have gone above the call of duty or

give exceptional care. This system is abused when managers do not understand what constitutes

a reward.

Appendix

Organizational Chart- Top managers at each healthcare facility in the OhioHealth Organization answer to the Board of Directors. Under top managers is the pyramid hierarchy of V.P.’s, then lower level management and employees.

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References

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