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Part 3

  1. 1. PATIIIICurrentand ErnergingChallenges
  2. 2. Developing l{urnanPoterrtial The purpose of this chapter is to examine the concept of human potential and to present methodologies for creating an organiza- iional climate in which that human potential can develop. On completion of this chapter, the reader will be able to: 1. Define human Potential. 2. Discuss the power of education in terms of human potential 3. Describe three motivational factors influencing human be- havior. 4. Differentiate between human beings and humans becoming 5. Describe behavioral change within the context of development 6. Differentiate between leaders and followers. t. Match management practices with growth needs as defined by Maslow.)rlowhere in the world of nursing is it more possible to influence thegrowth and development of other nurses than in nursing administrationihe nursing administrator creates an environment in which professionalpractice can flourish or deteriorate. This chapter focuses on human po-iential as an important concept in nursing administration. Inner-directedindividuals who are highly self-motivated will produce the answers tothe problems of productivity and dissatisfaction within nursing staff.HUMAN POTENTIAL AND THE POWER OF EDUCATIONNurses today want to be recognized as professionals. They want to berecognized for their contributions to patient care, and they want theright to control their professional practice within the limits of the law.Unquestionably, these rights always involve maximizing human poten-tial. Human potential means all of ones potentialities: knowledge, tal-ents, capacities, creativity, wisdom, character, and genetic makeup l07
  3. 3. 108 cunnpxr nNl EMERGTNG cHALLEGES The acquisition of technical skill alone does not provide the necessary tasks so creativit5base for the independent thinkin-s and action essential in todays nursingpractice. Men and women har,e a great deal of unrealized potential, and siened tahelping staff discover that potentiai can be one of the most exhilarating ministratexperiences for the nursing administrator. torr,,ard tl The identification of needs for -ero.nvth, development, and utilization and thusof potential is an important part of Maslows self-actualization. This Pritcha :eacher irconcept was introduced in Chapter 4, "The Person in the Role of NursingAdministrator." The fully functioning administrator encourages the de- iundamer :nspires, rvelopment of human potential in self, peers, and subordinates. Optimal lrocess, abiopsychosocial functioning, so carefully nurtured in patients, needs also ls also toto be nurtured in oneself and ones fellow workers. Howard McClusky (1) had a passionate belief in the power of education :ential of same basito improve the condition of peoples lives and to liberate them from the and evalumeanness of intolerance and self-interest. Lifelong learning and the ful- Nursinfillment of growth needs are indeed powerful tools in enhancing humanpotential. Lifelong learning can hclp individuals become the persons nentors. roles, nurthey are best able to become. In most people, there is a large domain periencesof unexpressed and underexpressed talent that could be developed thc countthrough educative means. quently, c McClusky (l) further theorized that failure to internalize the learner administrrole as a central feature of the self is a major restraint in the adults directionachievement of his or her potential. Studying, learning, and intellectual rvill allor,radventure must become part of ones life in both work and social en-vironments. Striving to learn about employees and matching them with educa-tional and work experiences can be one of the nursing administrators MOTIVImost stimulating and rewarding challenges. Because the power of ed- !lotivatioucation lies both in learning and in teaching abilities, the administrator tivates orneeds to be a learner as well as a teacher. Satisfaction with work and Herzbergassumption of responsibility for professional behavior flourish in an en- gories: hyvironment that fosters maximizing human potential through continued The hygielearning. 1. Comp 2. SuperCHANGING BEHAVIOR 3. RelatThe role of the nursing administrator as a teacher has been largely un- 4. Workrecognized. In fact, in their efforts to stay away from educational roles, 5. Salarmany administrators may lose sight of the fact that most education oc- 6. Relatcurs in noncredit or nonformal learning environments. Achieving ones 7. Persomaximum potential involves learning new behaviors. Many adminis- 8. Relattrators spend a great deal of time teaching others how to perform as- 9. Statusigned tasks rather than delegating the responsibility for those tasks. 10. SecurHow much better it would be to teach individuals how to approach
  4. 4. DEVELOPING HUMAN POTENTIAL 109 tasks so that they can grow and develop while unleashing their own.ecessary creativity in resolving problems that contribute to the need for the as-i nursing signed tasks. Understanding the logic and rationale behind various ad-Ltial, and ministrative strategies encourages the learner to have positive feelingsilarating toward the ongoing project; as a result, the learner is less likely to resent and thus negatively influence change..ilization Pritchard (2) suggests that the individual who has been a successfulion. This teacher in nursing can also be successful in administration. The same Nursing fundamental principles apply to both areas. Administrative leadershiprs the de- inspires, encourages innovations, assists the nurse in the self-actualizingOptimal process, and promotes and facilitates excellent nursing practice. To teacheeds also is also to inspire, to encourage creative effort, and to foster the full po- tential of the individual. Both teaching and administration require the:ducation same basic principles for implementation: planning, organizing, leading, from the and evaluating.d the ful- Nursing administrators may perceive themselves as preceptors org human mentors. These roles are in essence teaching-learning roles. Within these) persons roles, nursing administrators can open new doors to the intellectual ex-: domain periences that favor creativity and productivity. Staff nurses throughouteveloped the country have become increasingly critical of administration. Fre- quently, one criticizes and belittles what one does not understand. Onee learner administrative imperative is to plan to change behavior in the desiredre adults direction while recognizing the need to maximize staff potential thattellectual will allow everyone to move forward together.;ocial en-lh educa- MOTIVATIONistratorsuer of ed- Motivation is an internal force that incites a person to action; what mo-inistrator tivates one person will not necessarily excite another. According towork and Herzbergs (3) research, rewards can be listed under two broad cate- in an en- gories: hygienes, or extrinsic factors, and motivators, or intrinsic factors.:ontinued The hygienes include: 1. Company policy and administration. 2. Supervision. 3. Relationships with supervision. 4. Work conditions. rgely un-nal rclles, 5. Salary.:ation oc- 6. Relationship with peers.ing ones 7. Personal life. adminis- 8. Relationships with subordinates.rform as- 9. Status.rse tasks. 10. Security.epproach
  5. 5. 110 CURRENT AND EMERGING CH-{L LErl9The motivators include: -n a cerl act willl. Achievement. formanr2. Recognition. ,, ariable3. Work itself. is deterr merit in4. Responsibility. iion tha5. Advancement. linkage6. Growth. rhe effor Expec If managers want to develop a highly motivated staff, says Herzberg, rors. Th,they should focus on the true initiators of action: the motivators, or can beintrinsic factors. These intrinsic factors are in keeping with the human :lersona need theory of Abraham Maslow (4), which postulates that humans have considerthe need to gror.v and develop beyond basic coping needs. A satisfied s]stemsneed does not motivate. If all basic and safety needs are met, one can one cho<move on to meeting belonging needs and so on up the ladder. Self-ac- administualization needs are never fully mct, and by definition, self-actualization Decisis a self-perpetuating, ongoing, and never finished process. tivator. The work of David McClelland (5) must also be recognized as an im- as inforrportant landmark in the field of motivation. He states that, to one degree people ror another, there are three basic human needs in all individuals: overstin compete Achievement: the need to excel, to achieve in relation to a set of stan- The skil dards, to strive, to succeed erstimu Power: the need to make others behave in a way they would not have Overs behaved othcrwise projects Affiliation: the desire for friendly and close relationship changcs same tir The nursing administrator needs to rccognize which needs are dom- guilty iIinant in employees. In order to determine which needs are present, sev- Undereral approaches may be used. One tool is a questionnaire that incor- or of ri1porates questions about employee bcnefits, clinical career ladders, and fortablepromotion opportunities. Anothcr approach could be part of the annual of heavobjective-setting process. Employees could be asked to write objectives Iation brelated to goals they wanl to achicve in the coming year. Some of these ample,lobjectives should be directed toward the employees professional growth, in orderfor example, completing a B.S.N. in order to be eligible for promotion. Havir While some individuals are motivaled by the need to excrcise power, at a balothers arc motivated by the need to achieve. The nursing administrators the amcchallenge is to find avenues for these needs to be met. There is also a accomp.strong need in slaff nurses for affiliation. Some observers suggest this tools asmotivation as the major reason why many more young women then Anotfmen enler nursing. classic r Expectancy theory suggests that the strength of a tendency to action classic <
  6. 6. DEVELOPING HUMAN POTENTIAL 111 in a certain way is dependent on the strength of an expectation that an act will be followed by an attractive outcome (6,7). Attractiveness, per- formance-reward linkage, and effort-performing linkage are the key variables in this approach to developing human potential. Attractiveness is determined by what one would like to have, such as a promotion or merit increase. Performance-reward Iinkage is the individuals percep- tion that certain actions will lead to a desired reward. Effort-performing linkage is the perception that a desired reward, such as a raise, is worth the effort to achieve. Expectancy theory also presupposes the importance of intrinsic fac-{erzberg, tors. The theory holds that workers attempt to complete jobs they know/ators, or can be accomplished and expend energy on those that will result inre human personal benefit. However, in the world of nursing, employees may notrans have consider many activities, such as care plans and patient classification satisfied systems, to be meaningful activities; thus, the question arises as to how, one can one chooses meaningful activities that also meet the goals of the nursing. Self-ac- administrator to provide excellent nursing care.ralization Decis theory (S) highlights the concept of competence as a strong mo- tivator. Elaborating on Herzbergs work, Deci describes intrinsic motivesas an im- as informing those activities for which there is no apparent reward. Mostne degree people will actively look for stimulation in their work. When there isals: overstimulation, the individual withdraws and seeks another area of competence. Understimulation results in less than minimal competency.:t of stan- The skillful administrator seeks an environment balanced between ov- erstimulation and understimulation.not have Overstimulation can result from the occurrence of numerous clinical projects and changes at one time. Because staff need time to incorporate changes into their functioning, three or four changes attempted at the same time may result in very little lasting change. Also, staff may feel are dom- guilty if they neglect their usual tasks for innovative endeavors.senl, sev- Understimulation can be the result of an environment of no changesrat incor- or of rigidity. At times, staff require a period of time to become com-ders, and fortable with changes, but this must not continue idenfitely. A situationre annual of heavy work loads and understaffing can also result in understimu-rbjectives lation because staff are forced to give up the challenging tasks-for ex-e of these ample, patient teaching, patient care conferences, and committee work-rl growth, in order to meet minimal patient needs.omotion. Having staff involved in setting objectives can contribute to arrivingse power, at a balanced environment. However, staff may tend to overestimateristrators the amount of work and underestimate the amount of time required to is also a accomplish objectives. Trial and elTor are sometimes important learning;ges1 this tools as a group of staff struggle to put a new clinical concept into place.nen then Another useful concept in developing human potential is found in the classic work in operant conditioning conducted by B.F. Skinner (9). Theto action classic operant conditioning process is portrayed as:
  7. 7. tt2 CURRENT AND EMERGING CHALLENGES Stimulus -------) response --------) consequences -------J future response human brto stimulation of Carl R, of these iSkinners theory focuses on four variables: positive reinforcement, ex- It is thattinction, punishment, and avoidance learning. This theory provides rather thiguidelines for rewarding desirable behavior and for punishment as a career planegative reinforcer designed to stop negative behavior. The principles not simplof reinforcement theory can be used to modify behavior in a desired Contintdirection. For example, consider the case of a nursing administrator recogniticwho wants to have the staff conduct group patient teaching sessions but is an impnone of the staff has enough confidence to volunteer. In such a situation, mains intstaff could be reinforced for learning and practicing skills that would rvas almolead to conducting group sessions. an enorrn Worker motivation appears to be a key factor influencing productivity studies hrand quality of employee performance. Gordon (10) takes issue with mo- rvith adv:tivation theorists who stress the responsibility of leaders and managers vision, mto motivate followers or subordinates. Gordon maintains that people timed teshave their own motives. The responsibility of the nursing administrator pation inis to provide a motivating environment in which people can carry on tinue to Ithe work of the organization. A motivating environment is one that pro- somethinvides opportunities for personnel to (1) express and satisfy their own Develoymotives and (2) contribute to the achievement of organizational goals. a perspe( A nonmotivating environment produces disillusionment, job dissat- developnisfaction, and role conflict. Role theory is structured on the observable hood, offfact that there are prescribed relationships and activities for specified for stagnroles; for example, a traffic police officer is expected to direct traffic, (17) has cand a secretary is expected to type the bosss letters. There is little scribingagreement in our society as to the expectations for the role of a nurse. scriptionAn ambiguous role, coupled with an abundance of diverse job descrip- opmentations, compounds the problem and interferes with the maximum de- McClusklvelopment of potential. Biology Todays mobile, intelligent, aggressive, and talented nurses need not repreleaders who can help them identify personai and professional goals. They out in eineed administrators with enthusiasm, sensitivity, and creativity in pa- time is pttient care and nursing administration; administrators who understand ciety, carthe difficulties involved in simultaneously pleasing patients, physicians, for both rand administrators. The nurse leader with such qualities seeks to create mendousan environment in which professional nurses are motivated to practice full use oat their highest level (11). Many r ministral part-tim<DEVELOPMENTAL PSYCHOLOGY AND HUMANS staff. A skBECOMING a compol rience. PDevelopmental stages occur over the life span. The concept of deveioping, create aras opposed to that of aging, implies a human becoming rather than a signmenl
  8. 8. DEVELOPING HUMAN POTENTIAL 1 13response human being. The essence of this distinction is captured in the words of Carl Rogers (12): "I should like to point out one final characteristic of these individuals as they strive to discover and become themselves.ment, ex- It is that the individual seems to become more content to be a process provides rather than a product." Career development is a lifelong process, andnent as a career planning programs are based on the concept of humans becoming,principles not simply being. a desired Continued learning is the cornerstone of career development, and the,inistrator recognition of staff members learning abilities and educational interestsssions but is an important part of administration. The potential for learning re- situation, mains intact over the life span (13). Until the mid-1960s, however, itrat would was almost universally assumed that adults past their twenties suffered an enormous loss of intelligence and learning ability (14). More recentoductivity studies have shown that the basic ability to learn changes little, if any,: with mo- with advancing age. Changes in physical status, reaction time, hearing, managers vision, motivation, and speed of performance affect performance onrat people timed tests (15). Retention of the ability to learn favors active partici-rinistrator pation in a climate of positive motivation in which individuals can con-r carry on tinue to pursue the enchancement of their skills and to seek to become: that pro- something better than theY are.their own Developmental theories are useful in providing the administrator with,nal goals. a perspective on adult learning capabilities. Ericksons (16) theory ofob dissat- development, although predominantly confined to the years of child-rbservable hood, offers the potential for generativity and integrity, rather than" specified for stagnation and despair, in the last two stages of life. Robert Peck:ct traffic, (17) has developed a remarkable picture of the second half of life in de-:e is little scribing middle and old age as productive years. This now famous de-rf a nurse. scription has stood the test of time, as it has been utilized by other devel-b descrip- opmental psychologists, including Bernice Neugarten and Howardimum de- McClusky. Biology may influence the determination of societal roles, but it should rses need not repress the development of human potential. Work may be carried,oals. They out in either a meaningless or meaningful way. A meaningful use ofrzity in pa- time is possible only within the context of a meaningful life. In our so-nderstand ciety, career reentry for women may still occur after the age of 40 and,rhysicians, for both men and women, career change may occur at 50. This has tre-s to create mendous implications for the nursing administrator who seeks to makeo practice lull use of a nursing resource in a creative way. Many options are available in nursing, and the creative nursing ad- ministrator takes advantage of the various combinations of full-time, part-time, or intermittent employment patterns currentlv available for staff. A skills inventory completed at the time of employment can provide a composite picture of an employees educational life and rvork expe- rience. Periodic review of utilization of skills with the employee can,eveloping, create an environment for reward and creative planning for future as-rer than a signment (18).
  9. 9. 114 CURRENT AND EMERGING CHALLENGESDEVELOPING LEADERS AND FOLLOWERS provide tl the nursiAn important part of leadership is the ability to identify potential leaders. strategiesThe willingness to nurture a potential leader at the risk of developing for coachcompetition for ones own role is the mark of outstanding leadership. develop nThe nurturance of followers of institutional goals is one of the major It mustchallenges in organizations, for it is easier to set up personal friendships highly perand loyalties. Identifying potential leaders based on personal friendships lies in theis a pitfall that nursing administrators should avoid. Since friendship to life an<tends to blind one to a friends faults, it is difficult for the nursing ad- career derministrator to objectively evaluate the performance of a friend. psycholop Nurses skilled in clinical practice or education are often moved into career intadministrative positions without the benefit of administrative prepa- cess theyration. Programs designed to develop administrators require integration Kleinkrwith institutional performance improvement. To improve organizational opment Pperformance, it is necessary to develop the institution or the institutional tunites founit. The development of individual administrators is an important part interestinof the overall schcma. cludes nu Nelson and Schaefer (19) argue that the development of individual responsihadministrators and institutional development are highly interdependent direct thttasks requiring an approach that integrates the needs of both the in- self-knoltstitution and the individual. Such an approach involves the setting ofinstitutional goals by top management, followed by the development ofparticipating administrators to move toward those goals. Translated tonursing, programs designed to improve the administrative capabilityof clinical directors and head nurses do not improve the performanceof the nursing department unless they are planned to integrate with UNDERSnursing dcpartment goals. Values The nursing administrator can encourage self-development efforts by Needs Skills andestablishing, with the employee, individual performance objectives and Previous cperiodic performance evaluation. The administrators attention to his lnterperso Decision-ror her own self-development further encourages such behavior in others.A positive climate for developing leadership can emerge from rcquiringadministrators to assume the responsibility for the growth and devel-opment of their stalf and assigning individuals to administrative re- UNDERSTANIsponsibilities appropriate for their experience and interests. Thc activeinvolvement of the supervisor is balanced with the encouragement of [;; Educatior I lFrnanctalself-evaluation and personal goal setting. I Proiected The concept of supervision as a professional growth-producing process I Employmis not new, but, except in public health nursing, it is not widely practiced Iin the nursing field. The supervisory process requires that each staff FIGUREmember receive one-to-one guidance much more often than once a year and J.O.for performance evaluation. The nursing administrator sets the cxample Septembfor this process through conferencing on a regular basis with each em- Americarployee who reports directly to him or her. The conferences, of coursc, with perr
  10. 10. DEVELOPING HUMAN POTENTIAL 115 provide the opportunity for exchange of information, but they also give the nursing administrator timc to review objectives, perlormance,I leaders. strategies, and problcms with cach key person. This time is also used veloping for coaching the cmployee so that he or she can gain new skills and rdership. develop new approaches to old problems. re major It must bc recognized that each individuals capacity to dcvelop is aendships highly personalized process and that the best tool for self-development endships lies in the ability to accurately assess developmental necds in relationiendship to life and carcer goals. Thorne, Fee, and Carter (20) suggest that idealrsing ad- career dcvelopment should match job requircments with the individualsd. psychological makeup, educational background, experiential skills, andrved into career interests. Figure 9.1 portrays the individual career planning pro-/e prepa- cess they propose.tegration Kleinknecht and Hefferin (21) also propose a model for career devel-rizational opment programs that can help nursing administrators identify oppor-titutional tunites for restructuring nurses work experiences to make them moretant part interesting and challenging. Figure 9.2 portrays that model, which in- cludes nursing administrator, professional nurse, and career counselorrdividual responsibilities. The program focuses on assisting nurses to develop andependent direct their or,vn careers as well as on guiding them toward attainingh the in- self-knowledge of:;etting ofpment of LIFE MANAGEMENTrslated to Mid-life transitionsapability, Management style in organization.ormance Leisure, retirement-ate with Financial management UNDERSTANDING SELF Separation, divorce, death Marriage, family, parenting Values Alcohol and drug abuse:fforts b1 Needs Selfunderstanding, interpersonal communication, and intimacytives and Skills and abilities Health Previous career historyon to his lnterpersonal style Stress Decision-making style Sexualityin others. Handicaps-equirin-erd devel-ative re- - DERSTANDING ENVIRONMENT TAKING ACTIONhe active i Career job options Self-development lntegrated Work experienceement of Educational options knowledge of Education trinancial considerations self and Additional training )rojected skill needs environment for Job enrichmentg proccss Employment opportun ties decision making Job-keeping skillspracticed -Jobseeking skillsach stallce a |eat- FIGTRE 9.1 Indrriclu:il r:.rrcl nlanninS procL-ss. (From L-1. Thorn, F.X. Fee, erampl.- :- J.O. Carter dcr.lc,p:t.:: , ,-.;,lut a:ir e apprr-rach. .1c:a-gclrettl Rcllett, S::tJnbe-r l9Sl p -19 . 1-:l :. 1 1rn.ire:srin Publrcaiions Dir ision,:ach ei::- r:i--iirinD lana=:rnren: .:,- -:. -:: ;.,. ,-,ri. lr :-:ch:. r->r11 !d. Reprinredi C r)U].:- . . . a- :1. Il!-;-I]ll!:]1,
  11. 11. 116__ CURRENTAND EMERGING CHALLENGES MEETI] POTEN Nothing ,4;N I career l as burno inson (22 action / / plan / ptan / expendit / ----/z;/ manasement I structure l oRGANlzATloN / I , Mutual aclion olannins, career / counseling I ___/ INDIVIDUAL situation much m< create a trator w. statrsrl"c stress an In this / ,"..onn", examplei I needs | /- by Masl< assessment / / losophy ,/ / Manage < | ,i"ll goals of also incl r mentor IFIGURE 9.2 A dynamic career development program. (From M.K Kleinknecht, view, guand E.A. Hefferin. Assisting nurses toward professional growth: a career de- nition arvefoprnenr mcrdel. Tlrc Joumal of Nursing Adntittistration. July/August 1982, 11,p. 32. Reprinted with permission.) for devel. Personal values, interests, and goals related to life and career planning.. Endeavors and accomplishments related to life and work history. SUMMI Life and work decision-making skills Personal and professional growth needs and potentials. By takin Career concerns and objectives. (p. 34) an envir, maximiz Nursing career development programs serve a dual purpose: to help account The wormeet specific needs of the organization and the individual nurse and toprovide the potential for expanding the reservoir of talent and motivation oreticalwithin the nursing division (21). and sub< The followers of today will be the leaders of tomorrow. Setting thepace for the growth and development of the staff involves presentingan image of excitement and enthusiasm for excellence in the nursing STUDYdepartment. Technology changes daily, but the need for nurses to developand grow within a physically exhausting environment presents a major 1. Definchallenge to the nursing administrator. The nursing administrator has 2. Discuthe responsibility to provide leadership in creating a climate in whichnurses can practice at their highest level of expertise while continuing 3. Discuto develop as individual professional practitioners. The nursing admin- new tistrator alone cannot create this climate but has the knowledge and skills 4. List tlto lead the nursing division to this end and d
  12. 12. DEVELOPING HUMAN POTENTIAL II7 MEETING NEEDS AND MAXIMIZING HUMAN POTENTIAL Nothing mars the maximum development of human potential as much as burnout of either the nursing administrator or staff members. Lev- inson (22) describes the special kind of exhaustion that can follow the of intense energy with few visible results. People in such "*p.rrjit.r.e angry, helpless, trapped, and depleted The experience is situations feel much more intense and devastating than ordinary stress. In seeking to create a professional practice climate, the successful nursing adminis- trator will seek to prevent burnout in self and staff by alleviating job stress and dissatisfiction in the early stages whenever possible. In this regard, Stubbs and Parker (23) have developed work setting examples u.rd -u1ugement practices to meet human needs as developed by Maslow. Their methodology translates to nursing as a caring phi-) losophy on the part of administration. It includes caring about the career gouls of staff and about how those goals mesh with the organization. It also includes caring about professional development opportunities, mentor relationships, and a creative environment that provides for re-einknecht, view, guidance, reinforcement, and rewards for work as well as recog-career de-t 1982, 11, nition and advancement. This philosophy can well serve as the guide for developing a motivating nursing environmentlanning.Lstory. SUMMARY By taking a human approach, the nursing administrator can create an environment in which the development of human potential can be maximized. In order to do this, the administrator must take intoe: to help account the dilference between human beings and humans becoming.se and to The work of Abraham Maslow and Howard Mclusky provides a the-rotivation oretical basis for the development of human potential in self, peers, and subordinates.:tting theresentinge nursing STUDY QUESTIONSo developsa major 1. Deline human potential and discuss its relationship to education.rator has in which 2. Discuss the role of the nursing administrator as teacher and learner.rntinuing 3. Discuss how achieving ones maximum potential involves learningrg admin- new behaviors.and skills 4. List the hygienes (extrinsic factors) and motivators (intrinsic factors) and discuss how they are utilized in your operating environment.
  13. 13. 118 CURRENT AND EMERGING CHALLENGES5. Discuss the importance of performance-reward linkage and effort- 21 Kleinl performing linkage in expectancy theory. Be sure to include the im- growtl July/A portance of staff opinion in the performance of individual operations. 22. Levinr Discuss how to identify and develop a potential leader, with attention 1981, to a career development plan. 23. stubbr EconoREFERENCES 1 McClusky, H.Y. Education for aging: the scope of the field and perspectives for the future, in Grabowski, S.W., and Mason, W.D., eds., Edttcation for the Aging. Syracuse, N.Y.: ERIC Clearinghouse, 1974. 2. Pritchard, R.E. A philosophy of teaching applied to administration. The Jountal of Nursing Administration, September 1975, 5(7),3840. 3. Herzberg, F., Mausner, 8., and Snyderman, B.The Motivation to Work. New York: Wiley, 1959. 4. Maslow, A.H.Toward aPsychology of Being. New York: Van Nostrand,1962. 5. McClelland David. The Achieving Society. New York: Van Nostrand, 196l . 6. Vroom, Y.H.Work and Motivatiort. New York: Wiley, 1964. 7. Robbins, S. P. The Administratire Process,2d ed., Englewood Cliffs, N.J.: Prentice-Hall, 1980. 8. Deci, E.L. Intrinsic Motivation New York: Plenum, 1975. 9. Skinner, B.F. Science and Human Behavior. New York: Macmillan, 1953.10. Gordon, G.K. Motivating staff: a look at assumptions . The Journal of Nursing Adminis tration, Novemb er 1982, I 2(l 1), 27 -28.1 1. Nyberg, J. The role of the nursing administrator in practice. Nursing Admin- istration Quarteily, Summer 1982, 6(4), 67*73.12. Rogers, C. Freedom to Leant. Columbus, Ohio: Charles E. Merrill, 1969.13. Arenberg, D.L. and Robertson, E.A. The older individual as a learner, in Grabowski, S.M., and Mason, W.D., eds., Education for the Agizg. Syracuse, N.Y.: ERIC Clearinghouse, 197 4.14. Thorndike, E.L., Bergman, E.O., Tilton, J.W., and Woodward, E. Aduh Learning. New York: Macmillan, 1928.15. Zahn, I.C. Differences between adults and youth affecting learning. Adult Education, Winter 1967 , 17, 67-77 .16. Erikson, E. Childhood and Society. New York: Norton, 1963.17. Peck, R.C. Psychological developments in the second half of life," in Newgarten, 8.L., ed., Middle Age and Aging. Chicago: University of Chicago Press,1968.18. Smith, M.M. Career development in nursing: an individual and professional responsibility. Nursing Outlook, February 1982, 30(2), 128-131.19. Nelson, G.M. and Schaefer, M.J. An integrated approach to developing ad- ministrators and organizations. Jounnl of Nursing Administratiorz, Febr"uary 1980, 1o(2),3742.20. Thorn, LM., Fee, F.X., and Carter, J.A. Career development: a collaborative approach. Management Review, September 1982, 7 1 (9), 27 -28 , 28-41 .
  14. 14. DEVELOPING HUMAN POTENTIAL II9d effort- 21 Kleinknecht, M.K. and Hefferin, E.A. Assisting nurses toward professional growth: a career development model. The Joumal of Nursing Administratiort,: the im- July/August 1982, l2(7 and 8), 30 36.:ations. 22. Levinson, H. When executives burn out. HarvardBusiness Review, May/Junerttention r98t, s9(3),73-81. 23. Stubbs, I.R. and Parker, E.R. Motivating for management effectiveness.legal Economics, September/October 1979, 5(5), 38-40.spectiveson for the.tion. The/orft. Newnd,1962.rd,1961.iffs, N.J.:n,1953.f NursingqAdmin-,1969.:arner, inSyracuse,, E. Adulting. AdtltI life," inrf Chicag<rofessionaloping ad- February.aborative-41.
  15. 15. budgetin10 understa mate. The pr fosteredManagtng Firscal demonst an essen involved Dollan nancial c to budgeAgnes M. Buback and Nancy V. Moran sional se nursing r charges. tivities o to quant The purpose of this chapter is to present fiscal management con- It is clr cepts in relationship to nursing administration. Emphasis is on and poli health care reimbursement issues, selected principles of managing into one fiscal resources, tools of fiscal management, and types of budget ment ski techniques. On completion of this chapter, the reader will be able delivery to: financial l. Describe selected reimbursement issues and relate them to isting rer nursing administration. tinued dr 2. Describe the concept of financial management 3. Identify the key concepts of accounting and budgeting. 4. Differentiate types of budgets and selected budgeting tech- REIMB niques. 5. Discuss the pervasiveness of the budget as a management tool The curr and its impact on clinical nursing practices. care envi 6. Relate the budgeting process to the nursing process. in manal health cr strategieWhy should nursing service administrators become involved in budg-eting and financial mangement? In the recent past, these functions werewillingly and gladly relegated to financial officers or hospital admin- Growthistrators who prepared, monitored, and evaluated the nursing budget In 1963,and assumed total responsibility for the broad area of financial man- tional pragement. increase< Fortunately, nursing service adminstrators saw the error of having economynonnursing personnel assume critical financial functions. Nursing itures wrbudgets usually make up the largest proportion of a hospitals operating creased lbudget. Thus, because money is power, it has become incumbent upon (1). Mostthe nurse adminstrator to acquire a fairly sophisticated level of skill in icaid-Me120
  16. 16. ,1,ANAC]Nq-ET$Q4LSEEoIJB9ES UL budgeting and financial management, as well as an awareness and understanding of the evcr-changing health care reimbursement cli- mate. The precarious nature of the health care reimbursement climate has fostered increasing fiscal conservatism in most hospitals. As a result, demonstrating the value of nursing services in terms of cost has become an essential activity in which all nursing adminstrators must become involved. Dollars do influence clinical nursing practice. During the current fi- nancial crisis facing many hospitals, nursing budgets remain vulnerable to budget cuts. Nursing services commonly are not isolated as profes- sional services, and neither is reimbursement for them. Charges for nursing care remain relatively hidden in room rates or other grouped charges. In addition, costing out and justifying nursing services are ac- tivities only recently being undertaken by nursing leaders in an effort to quantify and qualify nursing.nt con- It is clear that through a variety of environmental, social, economic,sison and political changes, the role of the nurse administrator is evolvingnaging into one that requires a high level of budgeting and financial manage-budget ment skill. Such skill, if properly applied, may ultimately enhance thebe able delivery of nursing care through judicious maintenance of human and financial resources, vigilant monitoring to most effectively utilize ex-hem to isting resources, and aggressive pursuit of resources to ensure the con- tinued development of clinical nursing practice.F5g tech- REIMBURSEMENT ISSUES:nt tool The current reimbursement climate has a profound effect on the health care environment. Therefore, it is important for nursing adminstrators, in managing nursing services, to be knowledgeable about the history of health care expenditures and reimbursement trends and to develop strategies for coping with the financial uncertainties of the future. in budg-ions werell admin- Growth of Health Care Expendituresrg budget In 1963, health care expenditures made up 5.6 percent of the gross na-cial man- tional product (GNP). Between 1965 and 1973, health care expenditures increased at an annual rate of l0 percent, while the remainder of theof having economy grew at a rate of 6 to 7 percent. In1979, health care expend- Nursing itures were $212.2 billion, or 9 percent of the GNP. This proportion in-cperating creased to 10.5 percent of the GNP in 1982, or a total of $322.4 billion)ent upon (1). Most of this growth is attributable to the impact of the 1966 Med-of skill in icaid-Medicare legislation.
  17. 17. 122 CURRENT AND EMERGING CHALLENGES is the aclRetrospective Reimbursement up to wi1Retrospective, cost-based, reimbursement was the methodology em- Clearlyployed by most third-party payers prior to 1983. After services were experiencprovided, hospitals r.rere paid on the basis of expenses incurred. Clearly, unprofitithis system did little to provide inccntives for controlling unnecessary control scosts. Due to the significance of health care cost increases, governmental What zregulation became the strategy for cost control in the 1970s. enue los: Public Law 92-603 was enacte d in 197 3 in an attempt by the govern- ficiency,ment to impose regulations on Medicare providers. This legislation in- strategycluded institutional budget and financial planning requirements and insuranctmechanisms for accountability. desirable activitie:Prospective Reimbursement ImplicaThe current approach to reimbursement is the prospective approach.That is, hospitals are reimbursed a flat, illness-specific amount deter- Althougtmined before services are rendered. Clearly, this method offers incentives averageto avoid unnecessary services and extended hospital stays. this reas The concept of prospective reimbursement was introduced into the tificatiorMedicare program via the Tax Equity and Fiscal Responsibility Act of many nu1982 (TEFRA). This act may be the most significant piece of legislation ultimateaffecting health care to date. It was expected to generate a savings of quantify92.6 billion between 1984 and 1987 through a complex set of formulas One prbased on diagnosis-related groups, or DRGs (2). acuity, r.r care cal( nursingDiagnosis-Related Groups These nt identifyResearchers at Yale University have developed 467 DRGs, 356 of which This liare to be used to determine a hospitals case-mix adjustment. These as it is tlgroups are based on the assumption that patients can be homogeneously the reimgrouped into various clinical categories that require similar use of re- their kn<sources. Considerations in the classification process include principle order todiagnosis or procedure, presence or absence of surgical procedures, age Severeof the patient, and presence and complexity of complications or co- from themorbidities. maintair The DRG system works as follows. After assignment to DRG categories, Since hea case-weighted cost per Medicare discharge is calculated to determine continutthe maximum amount of Medicare reimbursement. Hospital target rates nurse w(are then calculated and increased by an inflation factor. If the hospitals advocaticost per case exceeds its designated target rate, Medicare pays the target be accorrate. Some percentage of the excess cost is reimbursed only if the case sional nris approved as an outlier, but the actual cost is not recovered. Nursir However, an incentive is built into this program if the hospitals actual pro[essi<cost per case is below its target rate. In this event, Medicare payment
  18. 18. MANAGING FISCAL RESOURCES 123 is the actual cost per case plus 50 percent of the variance fiom the target, up to within 5 percent ol the target rate.ogy em- Clearly, the possibility exists undcr this system that hospitals may)es were cxperience substantial losses of revenue for a variety of reasons, includingClearly, unprolitable case mix, inefficiency of operations, and poor financialLQCQSSbIJ control systems.rnmental What are the strategies that hospitals may employ to minimize rev- enue losses? One is to offset thc losses through greater operational ef-3 govern- ficiency, for examplc, through staffing or supply reductions. Anotherlation in- strategy is to attcmpt to shift rcvenue losses to other payers, includingents and insurance carriers and private pay (self-responsible) patients. Other, less desirable approaches include obtaining revenue from nonpatient care activities and reducing the quality and accessibility of services (3). Implications for Nursing Servicespproach..nt deter- Although nursing services are included in the calculation of a hospitalsncentives average target cost, they do not receive separate reimbursement. For this reason, hospital administralors are beginning to pressure for jus- into the tification of nursing services. This is not enlirely unwelcome news toity Act of many nursing service administrators who believe it is important and:gislation ultimately politically helpful to be able to clearly and precisely identify,avings of quantify, and justify nursing activities.formulas One proposed method of justifying nursing services is based on patient acuity, which is related to DRG categories. Twenty-three major nursing care categories have been developed and subdivided into 356 general nursing care stralegies, which correlate with the DRG classifications. These nursing care strategies includc detailed nursing care plans thaiof which identify both the direct and indirect care needs of the patient (4).rt.These This linkage with the DRG process is an important one for nursing, as it is the first major rational eff<-rrt to correlate nursing services with3eneously:se of re- the reimbursement system. Nursing service adminstrators must increaseprinciple their knowledge and application of this new reimbursement system inures, age order to effectively plan and managc nursing services.ns or co- Several other important consequences for nursing services will result from the change in reimbursement systems. Hospitals will develop andategories, maintain a strong focus on efficiency of services and cost containment.etermine Since health care is a highly labor-intensive industry, nurse staffing will:get rates continue to be pressured through, demands for increased individualrospitals nurse work load and efficiency of performance, and perhaps a movementhe target advocating the use of less expcnsive labor. Such cost containment maythe case be accomplished at the expense of decreasing the proportion of profes- sional nurses (5).ls actual Nursing service administrators have a critical role in providing strongpayment professional leadership and increased professional cohesion in idcnti-
  19. 19. r32 CURRENT AND EMERGING CHALLENGES Variable costs, on the other hand, fluctuate in some manner with ac- comple;tivity levels. For example, the number of disposable supplies used-and trators.therefore the expense related to those supplies-will probably rise or the futufall as surgical patient days increase or decrease. If they vary to the it difficrsame degrei as volume, variable costs may be referred to as proportional servicescosts. Some variable costs only partially vary with changes in activitylevels. Payroll expenses, for instance, may decrease when patient days Zero-Brfall but may not do so in the same proportion or percentage An obvious advantage of the flexible budgeting technique is that it is The zerrmore sensitive to how expenses vary with volume changes. More ap- Presiderparent opportunities may be provided for controlling costs as more is to budgtno*n utbttt how costs will fluctuate as activity levels change. amount The behavior of varying costs may, however, not be easy to identify charactrwithout committing considerable time for study. Managers need to have rebuildia somewhat deeper knowledge of finances in order to effectively par- Everyticipate in and benefit from a variable budgeting system. The time re- each buquiied for budget development may also be considerably longer than this goa that required by other budget techniques. at least develop, tional dtPlanned Programmed Budgeting System benefit rDuring the 1960s, Robert McNamara introduced the Planned Pro- Sincegrammed Budgeting System (PPBS) in the Department of Defense. This est operiystem consisis of three components: planning, programming, and to "buybudgeting. First, a plan that includes multiyear objectives and alter- processnatiie methods of achieving the objectives is defined. Substantive, or the flonrlong-range, objectives as well as fiscal objectives are included, giving to forcerise-to -,rttiy"ur fiscal projections. A program that includes methods developfor achievingthe objectives is outlined. Activities necessary to yield the The trattainment of tn" specific objectives or outputs and the costs associated extensivwith producing the desired results are then compiled Finally, financial developfo.ecasts and a process to facilitate administrative control of the entire plementprogram are applied. ing to p Resources are generally allocated on the basis of the defined programand the associated services, supplies, and so on that are required tomeet the objectives or output. Such requirements may cut across tra- RELATditional divisional lines but be assigned to a single administrator or PROCIdirector. An example of a hospital setting in which a PPBS might beutilized is the emeigency room service. Specific objectives might be de- Budgetiveloped, activities necessary to meet the objectives delineated, and re- it is inte,o,r..", assigned from multiple departments to accomplish the objec- framew<tives. Administrative responsibility would then be under the control of erally, athe emergency room service director. ducing t In geneial, FfeS -uy facilitate price establishment for services, out- that areput, Ir products. Moreover, it facilitates the organizational linking of examinzresources to outcomes, products, or services. However, PPBS involves the focu
  20. 20. MANAGING FISCAL RESOURCES 131tivity belo insure o c o o Uthe cashnization.lhe least Volume (number of services) FIGURE 10.3 Fixed budget.the mostr balance amount are established and are not altered throughout the budget period) predict regardless of whether changes in volume (number of services rendered);ash bal- occur (see Figure 10.3).mine the From the brief description above, it is readily apparent that this ap-fore, this proach is fairly straightforward to prepare and manage. It is easilyensuring understood by most managers regardless of their level of financial so- phistication, and it is highly adaptable to accounting systems. Variancesy budget can be compared to a constant. Perhaps the greatest potential advantage budgets, of the fixed budget in our current reimbursement climate is that thethe other technique is in harmony with the intent of allocating a fixed amount of resources (dollars). The less desirable consequences of the fixed budget include the fact that it is not or cannot easily be adjusted for actual changes in activity levels. It is further difficult to analyze variances caused by changes in volume or price if actual activity levels vary.:chniquese become;, such as Flexible Budgetingny event, The flexible, or variable budget, was characteristic of the 1970s. It hasrinciples been described as a series of fixed budgets based on varying forecastsand cons or activity levels. Various cost expenses are identified according to how they behave in relation to volume. Mechanisms exist within the flexiblecribed in budget approach to adjust forecasts and actual budget during the fiscal:ide with period on the basis of changes or varying activity levels and the asso-,, a single ciated costs. Although most health care institutions do not fully imple-lescribed ment this technique, most are concerned with identifying how costs vary with volume changes. The first cost category usually identified during the flexible budgeting process is fixed costs, which are costs of time. These costs accumulate over the fiscal period irrespective of volume or output. Examples of suchand still costs include depreciation, insurance premiums, and the like. They occurbudgets. regardless of whether patient days, acuity, or other work load indices-time es- increase or decrease.:d) dollar
  21. 21. t3a CURRENT AND EMERGING CHALLENGES It is important that the statistical forecasting of patient activity becarefully considered in development of the commodity budget to insureaccuracy of the planning function. o q oCash Budget o UThe final budget component, as illustrated in Figure 10.2, is the cashbudget, which delineates the cash flow in and out of the organization.It is important to the financial health of any business that the leastcostly method of financing cash needs be determined and that the mostadvantageous investment opportunities for any temporary cash balancesurplus be identified (6). amounl A properly prepared cash budget enables management to (1) predict regardlthe timing and amount of future cash flows, net cash flows, cash bal- occur (rances, and cash needs and surplus and (2) systematically examine the Fromcost implications of various cash management decisions. Therefore, this proachtool assists in both protecting a hospitals cash position and ensuring underslthat it invests its assets appropriately. phisticz It is important to note that the cash budget is not a primary budget can be ,in and of itself. It is derived from the operating and capital budgets, of the Inot from fundamental operating forecasts and decisions, as are the other techniqmaster budget components. resourc The I rhat ir iTYPES OF BUDGETING APPROACHES levels. l volumeIn developing a budget, an enterprise may utilize a variety of techniquesor approaches. Some of these, such as zero-based budgeting, have becomefamiliar through frequent use in the news media, while others, such as Flexiblvolume-adjusted budgeting, are not quite so widely known. In any event, The flerit is helpful for the nursing administrator to know the basic principles been drunderlying the major techniques as well as some of the pros and cons or acti,associated with each. they be In this section, several budgeting approaches are briefly described in budgetrather pure form. Thus, the descriptions may or may not coincide with periodthe realities of budgeting in any given institution. That is to say, a single ciated <corporate entity may use variations or combinations of the described ment tttechniques in order to meet its purposes. with vc The fFixed Budgeting process over thtFixed budgeting is often viewed as the traditional approach and still costs inseems to be the most common technique utilized for nursing budgets. regardlIn general, a fixed budget is developed based on a single, one-time es- increasrtimate of work load or activity. Expenditures for a specific (fixed) dollar
  22. 22. MANAGING FISCAL RESOURCES t29udget, a Capital Budgetal struc-for a re- The capital budget identifies expenditures on assets whose returns areLzations expected to extend beyond one year (6). Definitions of capital equipmentoughout vary among institutions but may typically be defined as major movablepolicies, equipment items that have a unit cost greater than or equal to $500 andrt be ac- a life expectancy of two or more years. Nursing administrators typicallynization participate in the development of this budget by assessing and sub-ssful. Fi- mitting patient care unit equipment needs. Capital construction budget:dgeable items are costs related to the acquisition and maintenance of the physicalnitoring, plant. Although nursing administration involvement is seldom sought in development of the capital budget, the benefits of participation may be well worth the administrators efforts of seeking participation.umerous Operating Budgetnot have The operating budget is a plan of revenue and expenditures geared to the cash a certain level of services to be rendered for a particular period of time.y for the In most institutions, the operating budget consists of two distinct com-mponent ponents: the revenue budget and the expense budget. The revenue budgetre capital includes revenue and statistical projections, while the expense budgete admin- encompasses payroll and commodity elements.nent and The revenue budget defines the plan that quantifies future incomethe level based on statistical forecasts of activity. This linkage of dollars to patienthe devel- activity indicators is an important area for nursing involvement. Pre-istrators, dicted levels of patient activity directly influence the plans for nursea typical staffing reflected in the payroll budget. Expense budgets incorporate all institutional expenditures, most no- tably payroll and commodity components. The payroll budget identifies all anticipated payroll expenditures for the fiscal year by department or other specific grouping. It includes the following elements: (1) regular salaries, indicated by appointment hours as well as dollars; (2) special salary items (e.g., overtime pay, temporary and agency salaries, holiday pay, shift differential, on-call pay); (3) fringe benefits, (e.g., health in- surance premiums, retirement plans); and(4) miscellaneous payroll ex- penses such as prerequisites and tuition refund payments. The payroll budget tends to occupy more of the nursing administrators time in planning, developing, monitoring, and evaluating than do the other budgets. The commodity budget identifies all nonpayroll expenditures that do not meet the institutions definition of capital equipment. It may include the following items: postage, telephone and telegraph services, travel epenses, equipment depreciation charges, repairs and maintenance, general and office supplies. medical and surgical supplies, and phar- maceutical supplies.
  23. 23. L23 CURRENT AND EMERGING CHALLENGES In order to develop and execute a meaningful and relevant budget, aset of organizational prerequisites must exist. The organizational struc- Capitalture of the institution must be effective and stable. Provisions for a re- The ca1sponsible accounting system must be operational. The organizations expectegoals and objectives should be well-defined and disseminated throughout vary anthe organization to maintain a constant focus on the mission, policies, equiprrplans, programs, anci priorities. Adequate statistical data must be ac- a life ercumulated and distributed to appropriate persons in the organization partici,for the financial control and evaluation functions to be successful. Fi- mittingnally, the organization must develop a cadre of fiscally knowledgeable items atmanagers who are able to contribute to the development, monitoring, plant. Iand evaluation of the financial plans. in deve be wellTypes of BudgetsThe master budget of an organization may be composed of numerous Operatitbudget subsets. Nursing service administrators typically do not havesignificant involvement in all budget components-for example, the cash The ope a certaibudget-but do have substantial responsibility and authority for thedevelopment and monitoring of others, such as the payroll component In most ponentsof the operating budget. Still other budget subsets, such as the capital includerbudget, may require the nursing administrators input, but the admin-istrator may have no authority or responsibility for development and encompcontrol. Institutional policies and practices normally dictate the level The r based orof nursing administration participation; however, in view of the devel-opment of substantive financial skills by many nursing administrators, activitythese practices are being challenged. Figure 10.2 illustrates a typical dicted I staffingschema of master budget components. Exper tably pa all anti< or other salaries salary il pay, shi CAPITAL BUDGET CASH BUDGET su.rance Capital equrpment Receipts penses s Capital construction Disbursements budget Net cash plannin budgets OPERATING BUDGET The cr Payroll not mee Commodity (supply) the follr Revenue Statistical expense general FIGURE 10.2 Master budget model. maceuti
  24. 24. UANA_GM.G_II$E4! 3E!A!3cE_s- _- ) ?7 unit for which costs can be determined Cost center. organizationalfor the Variable cosl: expense that changes in relation to volume (output) changes (e.g., surgical supplies)rctivity- Fixed cost. expense that is a function of time and is not related to changes in volume (e.g., equipment depreciation)e entity Direct cosl: expense that can be traced specifically to a given cost ob- jective (e.g., salaries)an item Indirect cost: an expense that cannot be related to a cost objective (e.g., equipment depreciation)vo sides Full-time equfualent (FTE): unit of staffing measurement related to time worked by a full-time (40-hour-per-week) employee in a period of oneding of year: period Fiscal year: the 12-month budget year designated by an institution; may or may not coincide with the calendar year.income, Variance: difference, expressed in dollars or percentage, betweenIe same budgeted amount and actual expense Profit center: organizational unit for which costs can be determined and revenue producedounting Accounts receivable: funds owed to a provider, usually for patient care well as services renderede, of the Accounts payable: frnds owed to other institutions, usually for suppliesI frame-ill begintasks of THE CONCEPT OF BUDGETINGlso pro-rospital A budget may be viewed as a descriptive plan as well as a process. As:e in to- a plan, a budget may be (1) a numerical depiction of the activities of the institution derived from written objectives and the behaviors needed to achieve the objectives, (2) a financial description of department ob- jectives and activities, and (3) a financial plan serving an as estimate of and control over operations to occur in the future. As a process, aI have a budget may be (1) the process of allocating limited resources to unlimitedof fiscal demands and (2) the process of relating expenditures to revenues to ser-rent ac- vices rendered and then evaluated.ound or Viewing a budget as both a plan and a process suggests the followingms may set of objectives for a budget in an institution:r sectioninitions To provide a quantitative expression of policies, plans, programs, and prioritiesent and To provide a mechanism of evaluating financial performance withamiliar: policies, plans, and programs To provide a useful tool for the control of costsLs actual To create and reinforce cost awareness throughout the organization
  25. 25. 126 CURRENT AND EMERGING CHALLENGES Cost t Six basic accounting principles comprise useful information for thenursing service adminstrator: Varia changes1. Entity concept: the hospital (or any business) is viewed as an activity- Fi-x.ed driven entity capable of taking economic actions. changes2. Transactions concept: all transactions that have an effect on the entity Direct must be reflected in accounting reports and records. jective (3. Cost valuation concept: the most useful basis of valuation of an item Indire is the price paid for the item. (e.g., eq4. Double entry concept: accounting records should reflect the two sides Full-ti of every transaction (i.e., changes in assets and liabilities). worked5. Accrual concept: the accounting system requires the recording of year revenue when realized and the recording of expenses in the period Fiscal in which they contribute to operations. may or6. Matching concept: to accurately present and determine net income, Variat revenue and expense items must be brought together in the same budgete accounting period. (6) Profit and revr This text provides only an introduction to the practice of accounting Accouto differentiate it from the concept of financial managment as well as servicesto illustrate what is probably the most notable tool, or technique, of the Accou;financial management process. Mastery of the basic conceptual frame-work and definitions of financial management and accounting will beginto prepare the nursing service adminstrator for the herculean tasks of THE C(forecasting and preparing the nursing service budgets. It will also pro-vide him or her with the necessary broad view of the world of hospital A budgefinances within which the effective nurse manager must practice in to- a plan, :days health care environment. the insti to achieFundamental Fiscal Concepts and Definitions jectives of and cAs previously indicated, contemporary nursing managers must have a budget nsolid foundation in the fundamental concepts and definitions of fiscal demandrterms in order to effectively participate in financial management ac- vices rertivities. For individuals who have no finance or business background or Viewirskills, it is important to note that the definitions of many terms may set of obvary according to the institutional setting. It is the intent of this sectionto provide an overview of the most common concepts and definitions To probefore proceeding to develop the concept of budgeting. priorit There are numerous terms related to financial management and . To probudgeting with which the nursing administrator must become familiar; policie To pro Annualize: to project yearly data based on less than 12 months actual To creiinformation
  26. 26. )tive ap- l. Planningiccess or External environment Organizational environmentd future l4arketing f--C.rd-_l t cr,""t;-l t P*p*=_l f-t.rr-l A. Assessing the l-R"ilgi*-l tfip"ifti-l f-Filf.t-l [-uffil I labor of I environment |lect*"rrgi*i I l-undrng I I Pnlici.s ll I r *::;"-:;---1Fhfid] I Protessronar I r-*,*_l fP..;d,,"n I structure Irent, the t - R"il-l tlr.@ I--P"rrti;l,ial man-both the;, imple- R;;;J Goals and objectives IP"ttC---_l I I tlr.--;r lTasksandl l-l I;sociated B. Programming t fi"".---_l I I ll vateriats ll lffil activrtresLs chang-adminis- t Fr.r;"d;rbilty I L__.1possible.rncial of-rtive andhose em- f;,-,-;,1 r-tl [ffi:rl.-l t*-ll order to C. Budgetine I I l.".no,oe"tl lc,pitu,ouogetl lrristrators I fEp"t1] I I I I I I ll ll llaatancesneetll:ial man- llr"a;rl; various ll. lmplementingtems. Al- Working capital Noncurrentassets,liabilities Residualequitiesrethodol- --..l nec"i".bb.l f-c"-t-d, I tr*;t."tl fs.--rt"ro",,lunting to Fil;bl f- Bril"!"s.l I caeitat I financial [- "*a,",* iJSH::L I Liabilities I t-Gr-l fApp"phtill [-L.i-, I TEqrD."rt I l-c""6--l t c""t.*G--l I-otn*--_llhe art ofeting, in lll. Controllingystem, or General controls Report characteristicsrment the R"p*til e.*trok_l fragementand prac- reffitn."ntl T r.*r.t* I Type of reports F;*,__lt I h.f",".";;l svstem I External I Policiesancl ll-l I procedures lll Accountinc ll f;il.un."m"dtb;_l___--> l-o*"""rtb"-l ll t_l oPeationat ll T- op""d;l Kaluzny,.t Services. r-l ll t-l Other ll fotn",---l:mission.)

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