NEWS1834 AM J HEALTH-SYST PHARM VOLUME 74 NUMBER 22 .docx

NEWS
1834 AM J HEALTH-SYST PHARM | VOLUME 74 | NUMBER
22 | NOVEMBER 15, 2017
Zellmer lecturer provides insights into future of healthcare,
opportunities for pharmacists
Pharmacists are poised to make strong contributions in the areas
of postacute care, behavioral health, and
population health, says Mark L. Hayes, 2017 recipient of
the William A. Zellmer Lecture Award.
The award recognizes leadership in advancing public
policy that improves medication use through the efforts
of pharmacists.
Hayes, senior vice president for federal policy and ad-
vocacy for Ascension, the nation’s largest nonprofit health
system, is the eighth recipient of the award. Hayes deliv-
ered his lecture on September 26 in Bethesda, Maryland,
as part of ASHP’s annual Policy Week activities.
The annual lecture takes place the day before Policy
Week participants meet with their representatives on
Capitol Hill to discuss issues important to the pharmacy
profession.
Hayes said professional opportunities for pharmacists
are related to the national shift from fee-for-service to
value-based models of healthcare delivery that attempt
to control rising healthcare costs.

“The payment model is what drives the delivery of
healthcare. The fee-for-service model says, ‘Do more
services, and you get paid more,’” Hayes said, citing
lessons he learned as a Senate healthcare staffer and as
chief health counsel for the Senate Finance Committee’s
Republican staff.
He said movement away from fee-for-service pay-
ments started decades ago, when policymakers first be-
gan bundling Medicare-covered inpatient services into
diagnosis-related groups, or DRGs, with the government
setting fixed rates for reimbursement.
“This is the first time we went from a cost-based
payment in hospitals to a bundled payment. It turns
everything in the hospital from a revenue center to a cost
center,” Hayes said. As a result, he said, hospitals began to
deliver care in ways that better manage costs.
And by later bundling Medicare reimbursement in
outpatient settings and introducing penalties for early
readmissions, he said, policymakers have created new
incentives for hospitals to be accountable for what hap-
pens to patients after they leave the hospital.
“That’s going to really transform how postacute care
happens. And I want to ensure that’s on [pharmacists’]
radar screen,” Hayes said.
Behavioral health is another area that pharmacists
should pay attention to, he said.
The Substance Abuse and Mental Health Services
Administration estimates that the United States will
spend $238 billion for prescription medications to treat

behavioral health problems in 2020, up from $179 bil-
lion in 2014.
To reduce costs and provide better care for people with
behavioral health conditions, Hayes said, it’s important
to tackle the stigma of mental illness and treat it as just
another medical condition.
And Hayes said healthcare providers “are just now be-
ginning to talk about social determinants of health,” such
as income, education, and housing, that affect day-to-day
health status outside of healthcare settings.
Hayes referred the audience to AJHP’s September
15, 2017, special issue on population health for specific
examples of how pharmacists are “doing amazing things
and changing the delivery of healthcare.”
But he cautioned that pharmacists still need to docu-
ment and track the return on investment for pharmacy
services in order to convince healthcare administrators to
support expansion of the profession’s efforts.
Hayes described himself as a “policy pharmacist” but
said he didn’t know in advance that he would follow that
professional path.
He said that while serving as ASHP executive resident
in association management in 1988, he learned about
the role played by Capitol Hill staff in shaping health-
care policy and delivery. After completing his residency
ASHP President Paul W. Bush (right) presents a plaque to Mark
L.
Hayes honoring his receipt of the 2017 William A. Zellmer
Lecture

Award. Hayes delivered the Zellmer lecture on September 26.
Continued on page 1836
NEWS
1836 AM J HEALTH-SYST PHARM | VOLUME 74 | NUMBER
22 | NOVEMBER 15, 2017
at ASHP, Hayes served for 5 years as a legislative assistant
for Christopher Bond, of Missouri, his state’s U.S. senator.
Hayes later served as a policy adviser for the Senate
Committee on Health, Education, Labor, and Pensions
and for Senator Olympia Snowe of Maine. In late 2002, he
became the health policy director and chief health coun-
sel for the Senate Committee on Finance. He served for
Continued from page 1834 8 years and was involved in the
drafting of major federal
health legislation, including portions of the 2003 Medicare
Modernization Act, which created the Part D prescription
drug benefit and the Medicare Advantage program.
He called the awarding of the William A. Zellmer Lecture
Award an “unexpected honor.”
“I am really humbled to be a part of this,” Hayes said.
—Kate Traynor DOI 10.2146/news170074
New drugs and dosage forms
Abemaciclib tablets ( Verzenio, Eli Lilly): The kinase

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Abemaciclib is also indicated for use in combination
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HR-positive, HER2-negative advanced or metastatic
breast cancer whose disease has progressed after
endocrine therapy.
Ascorbic acid injection (Ascor, McGuff Pharma-
ceuticals): The vitamin C product is indicated for
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Insulin aspart injection (Fiasp, Novo Nordisk): The
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able suspension (Zilretta, Flexion Therapeutics):
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Nursing home evacuation turns medication reconciliation
into emergency
The sudden arrival of nearly 120 nursing home resi-dents
without medication administration records 3
days after Hurricane Irma knocked out the home’s air
conditioning system meant “all hands on deck” for phar-
macy personnel at Memorial Regional Hospital in south

Florida, said Sara Eltaki, clinical coordinator for transi-
tions of care at the facility.
Nursing home records arrived, she said, but they had
no information about the residents’ current medications.
The electronic records system for the unaffiliated nurs-
ing home—Rehabilitation Center at Hollywood Hills—
remained inaccessible to hospital personnel for hours,
she said.
As for who the residents were, Eltaki estimated that
only 20–30 of them bore an identification wristband.
“It was extremely eye-opening for a lot of the providers
and even for ourselves that when we have absolutely no
information on these patients in terms of medications
. . . the medication reconciliation process is extremely
important,” she said.
Madeline Camejo, vice president of specialty and
ambulatory pharmacy services for Memorial Healthcare
System, the parent organization, said the events on
September 13 reminded her of mass casualty event drills
at the 553-bed hospital, which is a level 1 trauma center.
“On top of that,” she said, “the staff was already
stressed because we had just finished [working through]
the storm.”
In less than 5 hours, the hospital had received 141
residents from the nursing home, according to the
Hollywood Police Department.
Of those 141 residents, the police said, 119 were pro-
cessed by the hospital and 39 were admitted as inpatients

at the facility or another hospital in the health system.
The emergency evacuation started early on September
13 when, according to the police, rescue crews found 3
residents dead in the “excessively hot” nursing home and
“others in need of immediate transport” for medical care.
Eltaki said the hospital’s emergency department staff
called on her to assist because they knew of her prior work
with the nursing home, which is across the street.
“I actually knew the administrator very well,” she said.
“Unfortunately, I wasn’t able to contact him.”
Continued on page 1838
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Leadership, Governance,
Values, and Culture
Learning Objectives
After reading this chapter, you should be able to:

• Describe what strategic leadership entails.
• Compare the differences and similarities between leaders and
managers.
• Discuss why strategic success depends on finding,
developing, and evaluating capable leaders.
• Compare and contrast governance in for-profit and nonprofit
HSOs.
• Examine the relationship between an HSO’s organization and
the strategy it is pursuing.
• Analyze the importance of organizational values and culture
and the extent to which they can
enable or hinder strategy implementation.
• Explain how and why organizational change is inevitable and
desirable if an HSO wants to
improve its competitiveness and performance.
Chapter 2
Noel Hendrickson/Photodisc/Thinkstock
spa81202_02_c02.indd 39 1/15/14 3:47 PM
CHAPTER 2Section 2.1 Strategic Leadership and Developing a
Vision
This chapter focuses on the roles of power, leadership,
organizational culture, values, and
attitudes toward innovation as they relate to strategic planning

and management (refer
back to Figure 1.1 in order to see the components of the
strategic management model for
Chapter 2). The importance of leadership, the roles of top
management and the board of
directors, values and culture, and organizational change all
affect the quality of strategic
planning and are in turn affected by it.
2.1 Strategic Leadership and Developing a Vision
In articles in the business press and the literature, the words
manager, leader, executive, and
administrator are often used interchangeably. Consider,
however, the implied judgments
in the descriptions of a person as “a
real leader” versus “just a manager,”
and it becomes evident that the terms
are different.
One might assume the only person
who creates a vision is the individ-
ual at the apex of an organization,
such as the HSO administrator or the
president of a health system. This is
certainly not the case. Leaders can be
found at any level in an organization.
A leader is anyone who can visualize
a better state of affairs and persuade
others that such a vision makes sense.
A leader is anyone who is dissatisfied
with the status quo, has suggestions
for improvement, and is able to con-
vince others of the merits and bene-
fits of such changes. By contrast, managers are responsible for
implementing changes and
achieving performance objectives. Managers do not need to be

leaders, although what
they do is nonetheless critical to an organization’s success.
What makes leadership “strategic”? Strategic leadership
involves creating a vision and
strategy that helps the organization succeed at its mission in
both the short and the long
term. Whereas leadership may be required for bringing about
changes or improvements
to parts of the organization, strategic leadership determines the
long-run survival and
success of the entire organization.
Power in an Organization
All types of executives have the authority to force others to do
what they want done.
Executives with leadership capabilities more often use
communication and a range of pro-
social influence tactics (e.g., reward, rationality, and
friendliness) to gain others’ coopera-
tion (Lamude, Scudder, Simmons, & Torres, 2004). Leaders
have the power to influence
Blend Images/SuperStock
True leaders use influence rather than authority to get
people to do what they want them to do.
spa81202_02_c02.indd 40 1/15/14 3:47 PM
Vision

or affect the people around or under
them. This is true regardless of
whether they hold leadership posi-
tions. There are five types of power
in an organization.
Legitimate power is the authority
derived by virtue of occupying a
position in the organization. The
higher the position a person occu-
pies, the greater the authority or
legitimate power that person holds.
Expert power is derived from a per-
son’s unique competencies, skills,
and experience. For example, a group
surviving a crash on a mountainside
is likely to willingly follow the mem-
ber with survival knowledge and
skills. Referent power is derived from
subordinates’ or followers’ respect,
admiration, and loyalty to the leader;
it is often referred to as leadership charisma. Leaders who have
the ability to give or with-
hold meaningful incentives hold reward power. Incentives can
be tangible rewards such
as pay raises, bonuses, or preferred job assignments or
intangible rewards such as verbal
praise or respect. A leader or manager in a position to punish a
subordinate is said to have
coercive power, which could take the form of firing someone,
denying a raise or bonus, or
reassigning the person to an undesirable location (Jones &
George, 2007).
Transactional leadership has been the dominant style in many

healthcare organizations
(Schwartz & Tumblin, 2002). Transactional leadership relies on
interactions between the
leader and follower, with followers rewarded for meeting
specific goals set by leaders.
For instance, hospital governing boards often set performance
expectations (financial and
quality criteria) by which the CEO is evaluated and rewarded.
The CEO, in turn, sets
performance expectations for top management, top management
sets performance expec-
tations for middle managers, and so on. Leaders in the
hierarchical healthcare environ-
ment are followed primarily because the followers benefit. For
example, the relationship
between hospital leadership and the hospital’s organized
medical staff is transactional in
that leadership relies on the independent physicians caring for
hospitalized patients to
assist the organization in meeting financial and quality
performance goals. The physicians
benefit from providing this assistance—they have a hospital in
which to care for their
patients that is financially strong and has a good reputation.
Mission and Vision Statements
Healthcare organizations—indeed, any kind of organization—
need mission and vision
statements. Like many terms in the business lexicon, these are
misunderstood and often
misused.
Thomas Northcut/Digital Vision/Thinkstock
A physician who has received many years of medical

training and achieved a position of authority in a
healthcare organization can be said to have both
legitimate and expert power. Whether she has referent
power will depend to a large extent on her own charisma.
spa81202_02_c02.indd 41 1/15/14 3:47 PM
Vision
Mission Statements
A mission statement is a concise statement of an HSO’s reason
for being—its purpose,
what it actually does, and for whom. It describes what services
are provided for which tar-
get market, as well as how the organization considers itself
different or unique. A mission
statement should not contain descriptions of values, strategies,
or objectives (although
many organizations make this error). It could also contain a
description of what the
HSO’s consumer will experience when using its services
(known as the customer value
proposition).
A mission statement answers the questions “What do you do?”
and “What is your raison
d’être (reason for being)?” For many HSOs, the answers have
not changed for many years.
With today’s fast-moving transitions in the healthcare industry,
many organizations are
revisiting their mission statements to determine if they are still
valid. The ideal time to do
this is at the end of the annual strategic planning process.

When crafting a mission statement, care should be taken in how
broadly or narrowly the
HSO is characterized. For example, an organization could
conceive of itself as a primary
care clinic or as a public health clinic, the latter precluding any
work or involvement in
the private sector. It could be a home health agency or a hospice
agency, the former being
broader and the latter more restrictive in the kind of services
provided and the target
consumers.
Suppose that in the course of conducting its strategic analysis,
an organization partnered
with a national health system. If its existing mission statement
characterized it as being
local in scope, then clearly the mission statement would need to
be modified and aligned
with the new reality. This is why both the mission and vision
statements are reconsidered
at the end of the strategic planning process.
Consider the following example of a poorly written mission
statement:
Care. Trust. Heal.
You might never identify this as the mission statement of a
hospital. While the statement
is short, as recommended by some management consultants, it is
probably more of a
marketing slogan than a mission. Missing is what the
organization actually does and for
whom, and so on. Contrast this with the well-written mission
statement of Mayo Clinic in

Rochester, Minnesota:
To inspire hope and contribute to health and well-being by
providing the
best care to every patient through integrated clinical practice,
education
and research. (2013, para. 1)
It is obvious from this mission statement that patients are the
primary reason Mayo Clinic
exists. How it strives to provide patient care is clearly
articulated. The customer value
proposition at Mayo Clinic is hope and best patient care.
Mission statements are a communication device—they inform
internal stakeholders
(physicians, managers, staff members) as well as external
stakeholders (consumers, com-
munity of interest, investors) about the HSO’s unifying themes
and goals that guide deci-
sion making, resource allocation, and planning. Although some
management consultants
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Vision
Examples of Vision Statements
Read the following vision statements, and, using the criteria
discussed, evaluate each.
Accurate HomeCare (2013, para. 2): “Build the largest and most

trusted home care company in the
Midwest.”
The Dental Service at the Salt Lake City Veterans
Administration Medical Center “will accomplish
the following”:
1. Provide an integral part of the patient’s total health care
2. Provide appropriate and quality care
3. Provide a caring atmosphere
4. Provide timely and efficient care
5. Function as a team to maximize use of resources
6. Advocate for eligibility reform/equitable access to dental
care
7. Provide holistic care
8. Provide quality education for dentists, auxiliaries, trainees,
and the community
9. Make health promotion for patients a priority. (2013, para. 2)
discourage organizations from including value statements in
their missions, HSOs affili-
ated with religious groups are an exception. Hospitals in the
Adventist Health System, for
example, always espouse a mission that includes references to
Christ’s healing ministry
and Christian values.
Vision Statements
Does a strategic leader simply conjure up in isolation a vision
for the organization? Do
effective leaders rely on others in the organization to support
the development of a realis-
tic vision? Let us examine the nature of organization vision
statements and the approaches
used to create them. A vision statement is a concise expression
of where the organization

would like to see itself in the next 5 or 10 years. What makes an
effective vision statement
rather than one that just sounds good? At some point, the
organization will want to know
if the vision has been achieved.
The vision of Centura Health, based in Denver, Colorado, is
“Fulfill a covenant of caring
for our communities with excellence and integrity to become
their partner for life” (2013,
para. 5). While this vision sounds very good, how will Centura
Health determine if this
vision has been achieved?
Vision statements should include some type of quantitative
measure. For example, the
vision for University of California, Irvine, Medical Center and
School of Medicine is “to be
among the best (top 20) academic health centers in the nation in
research, medical educa-
tion, and excellence in patient care” (2012, para. 3). This is a
measurable vision. Ideally, the
vision statement should be concise, inspiring, memorable, and
achievable—a tall order,
but not impossible. (For a few samples of real-world vision
statements, see Examples of
Vision Statements.)
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Vision
It is imperative that a healthcare organization’s strategy and

vision be completely aligned.
This is why an organization should review and, if necessary,
revise its vision statement
after deciding on the strategy and strategic direction, in case the
latter has changed.
Visionary leaders should collaborate with other top managers
and their board of directors
to craft a good vision statement that embodies their vision and
makes sense to all of the
organization’s stakeholders. Getting everyone’s agreement takes
time; however, such col-
laboration is necessary if the vision is to be truly shared and
owned by everyone. A great
vision becomes realized only when every person in the
organization makes a contribution
toward its achievement and does not merely rely on those at the
top. Table 2.1 summarizes
the differences between mission and vision statements.
Table 2.1: Characteristics of mission and vision statements
The mission statement focuses on current
activities—“who we are” and “what we do”
The vision statement concerns the future
path—“where we are going”
Current service offerings Markets to be pursued
Consumer needs being served Future service–customer focus
Operational and business capabilities Kind of organization that
management is trying
to create

Discussion Questions
1. Are most CEOs and presidents of healthcare organizations
today “strategic” leaders? Why or
why not?
2. Consider the following leaders. For each one, state the source
or sources of their power—
legitimate, expert, referent, reward, coercive—and explain the
reasons for your choice:
• Martin Luther King, Jr.
• Your mother
• U.S. surgeon general
• Michael Ellis DeBakey, world-renowned heart surgeon
• The professor of your strategic management course
3. If you wrote the mission statement for your local hospital,
what would it say? How does it
compare to the hospital’s official mission statement?
4. Why do healthcare organizations find it difficult to develop a
good vision statement?
5. If an organization has a good vision statement, why is a
mission statement necessary?
6. Vision statements typically look 5 or 10 years into the future.
Name an organization (or
an industry) where a vision statement might be developed for 20
or more years, and one
where less than a year might make sense.
7. Many organizations have vision statements that “sound nice”
purely for public relations
(PR) purposes. How can you tell the difference between the
“PR” vision statement and the

genuine thing?
8. Should every employee in the organization be able to recite
the mission statement? The
vision statement? Both? Why or why not?
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CHAPTER 2Section 2.2 Leaders and Transformational Change
2.2 Leaders and Transformational Change
Warren Bennis, a pioneer in the contemporary study of
leadership, once said, “Managers
do things right; leaders do the right thing” (Bennis & Nanus,
2012, p. i). Bennis’s words
echo a common saying in business that “leaders create change
while managers implement
change.” The way that healthcare leaders create change is by
creating a vision for the orga-
nization and then “selling” the benefits of that vision to the rest
of the organization. To
the extent that they succeed, they create followers and motivate
or influence them to put
forward their best efforts for making the vision a reality. The
leader’s vision then becomes
their vision. One test of leadership is whether the leader
actually has any followers. Who,
indeed, has the leader succeeded in influencing?
“Fundamentally, management is about
coping with complexity (control),
whereas leadership is about transfor-
mational change” (Schwartz & Tum-
blin, 2002, p. 1421). Robert Allio also

has written on the differences between
leaders and managers. The key differ-
ences he describes are summarized in
Table 2.2. He further provides five pre-
scriptions for improving the quality of
leadership. Allio contends that good
leaders must have good character and
integrity, a personal style that balances
managing with leading, a commitment
to collaboration, and adaptability.
Lastly, leaders are self-made, and good
leadership requires constant practice
(Allio, 2009).
Table 2.2: Leaders vs. managers
Leaders Managers
Take the long view Take the short view
Formulate visions Make plans and budgets
Take risks Avoid risks
Explore new territory Maintain existing patterns
Initiate change Transact
Transform Control
Empower Enforce uniformity
Encourage diversity Invoke rationality
Invoke passion Act amorally

Source: Allio, R. J. (2009). Leadership—the five big ideas.
Strategy & Leadership, 37(2), 4–12. Used with permission.
Creatas/Thinkstock
Effective leaders know how to make others feel
comfortable, using nonverbal behaviors that create a
sense of personal connection.
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Is it difficult to be a leader? The list of attributes in Table 2.2
might appear daunting to a
junior person in a healthcare organization. To someone who
seeks out challenges, learns
from experience, works well with others, takes the initiative,
and in other ways “prac-
tices” leadership, it is a natural progression to leadership
positions with ever-increasing
responsibility and visibility.
Communication and Effective Leadership
Although personality, business acumen, legitimate power and
authority, and expertise
are factors in leadership ability, communication competence is
central to the practice of
influence and leadership in organizations. Without the ability to
relate to others at work
through interactions, influence and leadership are virtually
impossible. A foundation of
strong relational and communication skills is critical to the

ability to inspire motivation
within others and to encourage the pursuit of organizational
vision.
Impression Management
Leadership effectiveness and communication satisfaction within
organizations rely heav-
ily on perceptions of individuals in formal or informal
leadership positions. Thus, strong
leaders are able to manage others’ perceptions and have a
heightened degree of self-
awareness. They must be aware of what is appropriate and
expected in a given situa-
tion, possess the skills to deliver it, and demonstrate the
motivation for accomplishing
excellence.
Effective Message Content
Good leaders pay a great deal of attention to the content of their
messages. They approach
their leadership communication as a goal-directed activity,
rather than mindlessly. They
craft their messages strategically so as to provide others with a
clear, concrete sense of
their vision. The content of their formal and informal messages
should be motivational
and inspirational and succeed in convincing others that
behaving consistently with the
leader’s (or organization’s) vision is truly in their own best
interests. Needless to say, lead-
ers must also have unquestionable ethics and engage in this type
of influence carefully
and thoughtfully.
Strong Message Delivery
Effective message delivery, often referred to as charisma, is

central to leadership effec-
tiveness. Numerous research studies point to the importance of
message exchanges that
foster a sense of connectedness among communicators.
Although connection can be dif-
ficult to define, studies have isolated factors such as smiling,
using others’ first names in
conversation, appropriate touch and diminished physical
distance, making eye contact,
removal of physical barriers (for example, sitting on the same
side of a table or desk with
the other communicator and avoiding the use of lecterns during
public presentations or
meetings), engaging in some degree of self-disclosure, and
using animated facial expres-
sions as important to reducing the psychological distance
between people.
spa81202_02_c02.indd 46 1/15/14 3:47 PM
Leader Communicator Styles
An animated leader relies primarily on nonverbal
behaviors such as gestures, eye contact, and facial
expressions to motivate others. An individual who
fits this profile but is not able to draw on behaviors
associated with the other styles will lack influence
in contexts other than face-to-face communication.
An attentive leader relies primarily on listening
skills in relationships with others to exert influence.
Through both verbal (asking questions, paraphras-

ing, and validating others’ positions) and nonverbal
(eye contact, head nodding, and leaning forward)
means, attentive communicators illustrate that they
value individuals and their ideas. Attentive leaders
must be careful to listen to others and actually incorporate their
perspectives into organizational
strategies and plans to maximize their credibility and impact.
A contentious leader is argumentative and challenging in
communication with others. These lead-
ers may enjoy playing the devil’s advocate and will often
challenge others to prove or support their
positions. Although the contentious communicator can be
challenging to work with, this style can
enable transformation by encouraging others to think outside
the box. This leader’s communica-
tion style and interactions with others focuses on asking
questions, raising the bar, and being intel-
lectually stimulating.
A dominant leader is similar to a contentious leader, but instead
of questioning and challenging
others, dominant leaders take charge of conversations and speak
in a strong manner. They tend
to communicate more frequently than others in meetings and
conversations. This style suits the
authoritative leader but can be precarious for leaders operating
in more democratic environments.
A dramatic leader communicates both verbally and nonverbally
in flowery and exaggerated ways.
These leaders use narratives and expressive language to convey
their positions. They may even rely
on poetry, literature, or dramatic quotations from others to drive
home their point.

A friendly leader influences others through frequent delivery of
positive feedback and praise.
(continued)
Communicator Style
Communication researcher Robert Norton (1983) identified nine
primary communicator
styles that nearly 30 years of research have consistently
supported (see feature box Leader
Communicator Styles). When applied to leadership, they give
some insight into the reper-
toire of communication behaviors available to foster leadership
and encourage influence.
As you read about each, consider the situations in which they
would be most appropriate.
Remember, although an individual may have a primary
communicator style, people can
“borrow” habits from each of the styles. The most competent
communicators are flexible
and adaptive in their approaches to different situations.
© Ed Kashi/VII/Corbis
A leadership style that is facilitative, rather
than authoritative, is preferable for a home
model of healthcare delivery.
spa81202_02_c02.indd 47 1/15/14 3:47 PM
Leader Communicator Styles (continued)

An open communicator leader expresses emotion and self-
discloses personal experiences (both
positive and negative) as a way of inspiring and influencing
others.
An impression-leaving leader finds ways to deliver memorable
messages that others think about
after the conversation is over.
A relaxed leader is calm and understated in his or her approach.
These leaders rarely reveal anxiety
or nervousness and react unflappably under pressure. They
exude confidence and composure.
Effective leaders understand that impression management,
strong message content, and
effective delivery are central to their ability to influence others.
Further, they recognize
that there is not one perfect communicator style for a leader.
Strong leaders are adept at
analyzing people and situations and selecting a message,
delivery approach, and personal
style that best fits the circumstances.
Beckhard and Pritchard (1992) note that high-performing
organizations have a strong
sense of purpose with a team-driven model of management that
involves shared,
knowledge-based decision making. Continuous learning and
improvement are encour-
aged, and employees are considered valued partners in these
efforts. Paul O’Neill, former
chairman and chief executive officer of Alcoa, suggests people
working in a healthcare
organization should be able to answer “yes” to these three

questions every day:
• Am I treated with dignity and respect by everyone, every day,
in
each encounter, without regard to race, ethnicity, nationality,
gen-
der, religious belief, sexual orientation, title, pay grade, or
number
of degrees?
• Do I have what I need—education, training, tools, financial
support,
encouragement—so I can make a contribution to this
organization
that gives meaning to my life?
• Am I recognized and thanked for what I do? (Lucian Leape
Institute,
2013, p. ES2)
1. What are some strategies leaders can use for managing how
other people perceive them?
What are some specific ways in which you already practice
these perception-management
strategies in your personal and professional life?
2. Consider each of Norton’s communicator styles as they relate
to leaders and leadership.
Identify at least two situations in which each style would be
appropriate, and two situations
in which each style would probably be ineffective. Explain.
3. What is the difference between a goal-directed message and a
mindless message? Explain

your perspective. Why is goal-directed communication more
desirable for leaders than
mindless communication?
spa81202_02_c02.indd 48 1/15/14 3:47 PM
Leadership Traits
It is well known that experience is the best teacher of
leadership. An Accenture study of
leaders in all fields found they agreed that real work and life
experiences had taught them
more about leadership than any classes they had taken (Thomas
& Cheese, 2005). When
interviewed about the making of healthcare leaders, one hospital
vice president recounted
that he had not learned leadership skills in his graduate
program: “We received technical
education on finance, operations, accounting, policy and policy
development. Even with
my degrees, I still needed a lot of mentoring in terms of
executive expectations” (Witt/
Kieffer, 2007, p. 3).
While experience is certainly valuable to leadership
development, some key personal-
ity traits can typically be found in people with leadership
positions at various levels.
The first of these is vision—the ability to see the big picture,
imagine likely futures,
and infuse that vision with passion. Integrity is a requisite trait
because it is impossible

to influence others without gaining their trust. Communication
skills, compassion, and
charisma are needed to articulate the vision and persuade others
to embrace it. Leaders
demonstrate strong moral and ethical principles. Attention is
given to all stakeholders,
not some at the expense of others. A commitment to
collaboration encourages everyone
to work together to achieve a vision. A less obvious trait of
leaders is humility. Effective
leaders typically give others credit for an organization’s success
but will accept responsi-
bility for poor results. These traits can be summed up in the
phrase emotional intelligence,
which Goleman (2004) asserts is the indispensable ingredient of
effective leadership.
Five domains constitute Goleman’s definition of emotional
intelligence: self-awareness,
self-regulation, motivation, empathy, and social skills.
Robert K. Greenleaf introduced the servant leadership
philosophy in 1970 and defined
servant leaders as those who achieve results for their
organizations by attending to the
needs of those they serve (Greenleaf, 1970). Max de Pree, the
longtime chairman and
CEO of the Herman Miller office furniture company,
personified the concept of servant
leadership in business. He characterized the art of leadership as
“liberating people to do
what is required of them in the most effective and humane way
possible” (O’Toole, 1989,
pp. xviii–xvix). This puts the leader as the “servant” of his
followers by removing
obstacles that prevent them from doing their jobs, thus enabling
them to realize their

full potential.
The importance of humility also figures prominently in the
concept of Level 5 leadership,
developed by Jim Collins. Collins’s research examined how
companies were able to tran-
sition from being merely “good” to “great.” He concluded that a
leader builds “endur-
ing greatness through a paradoxical blend of personal humility
and professional will”
(Collins, 2001, p. 20). Table 2.3 further elaborates on humility
and will as these traits per-
tain to leadership. So where might you find a Level 5 leader?
According to Collins, “Look
for situations where extraordinary results exist but where no
individual steps forth to
claim excess credit. You will likely find a potential Level 5
leader at work” (2001, p. 37).
Level 5 leadership is transformational. Leaders in high-
performing HSOs inspire and
motivate followers to achieve greatness. Studies have shown
that healthcare leaders who
promote innovation and change are critical to the success of
implementing “best practice”
patient care (Aarons, 2006).
spa81202_02_c02.indd 49 1/15/14 3:47 PM
CHAPTER 2Section 2.3 Developing and Evaluating Leaders
Table 2.3: Summary of the two sides of Level 5 leadership
Professional will Personal humility

Creates superb results, a clear catalyst in the
transition from good to great
Demonstrates a compelling modesty, shunning
public adulation; never boastful
Demonstrates an unwavering resolve to do
whatever must be done to produce the best
long-term results, no matter how difficult
Acts with quiet, calm determination; relies
principally on inspired standards, not inspiring
charisma, to motivate
Sets the standard for building an enduring great
company; will settle for nothing less
Channels ambition into the company, not the
self; sets up successors for even greater success
in the next generation
Looks in the mirror, not out the window, to
apportion responsibility for poor results, never
blaming other people, external factors, or luck
Looks out the window, not in the mirror,
to apportion credit for the success of the
company—to other people, external factors, and
good luck
Source: Based on Collins, J. (2001). Good to great: Why some
companies make the leap . . . and others don’t. New York, NY:
HarperCollins Publishers.
Many primary care providers, particularly those practicing in
rural settings, are poorly

trained in leadership skills (Markuns, Culpepper, & Halpin,
2009). With primary care pro-
viders being asked to transform to patient-centered, medical
home models of healthcare
delivery, leadership skills that are facilitative in nature, as
opposed to the more common
authoritative approaches, will be needed.
1. What leadership traits, if any, have you learned in your work
experiences? What traits may
be more difficult to learn on the job?
2. When managers are promoted to more senior positions with
substantial leadership respon-
sibilities, what problems might they encounter in their first year
in the new position?
3. What is more important to a leader’s success: high
intelligence and solid technical skills, or
high emotional intelligence? Or are these traits equally
important?
4. Do you have what it takes to be a Level 5 leader? Why or
why not?
5. Recount an experience you have had that shows you have
leadership potential.
2.3 Developing and Evaluating Leaders
Leadership development in HSOs involves identifying future
leaders, giving them
opportunities to function in leadership roles, and providing
feedback and mentoring.
Many healthcare organizations fail to develop and groom talent.
In a survey of 200

healthcare provider CEOs, almost half indicated that no
potential successor to their orga-
nization’s top management spot had been identified, and only
17% felt that someone in
the organization was prepared to step into the top spot
(Witt/Kieffer, 2012). As the health-
care environment becomes more complex, the development of
leadership talent is becom-
ing more critical.
© Jetta Productions/Blend Images/Corbis
There are considerable advantages to developing leaders
internally rather than hiring from outside.
spa81202_02_c02.indd 50 1/15/14 3:48 PM
Studies have shown there are con-
siderable advantages to developing
leaders internally instead of hiring
from outside (Brant, Dooley, & Iman,
2008). While the talent pool of exter-
nal applicants can be impressive,
leaders hired from the outside are
less successful. By contrast, the lead-
ers of 10 out of 11 “good-to-great”
companies studied by Collins in his
book of the same name came from
inside the company. Companies that
failed to achieve great results hired
outsiders six times more often.

In addition to having a higher risk
of failure, recruiting external candi-
dates for leadership positions is more
costly. Direct costs include search fees, interview costs, signing
bonuses, relocation, and
severance packages, among others. There are also indirect costs
and post-hiring costs. One
study suggests that replacing a chief nursing executive could
cost a hospital upwards of
$1.5 million (Sredl & Peng, 2010). By contrast, developing
people in the organization to
assume leadership positions is much less costly. Internal
development costs are associated
with training, education, mentoring, and job rotation.
Finally, an organization that practices internal promotion is
more likely to retain high-
potential talent. Executive retention is positively correlated
with formalized succession
programs. In companies having an executive turnover rate of 1–
5% annually, 84% had
formal development programs. At companies reporting turnover
rates of 6–10%, 24%
had succession programs. Of businesses experiencing turnover
rates of 11–20%, only 11%
had succession programs.
Developing the next generation of leaders is a difficult
challenge for an HSO. Organi-
zations committed to promoting from within can take certain
measures to increase the
prospects of success (Allio, 2009). First, they must have a good
talent pool, which means
hiring people with leadership potential in the first place. The
organization must have a
leadership development program that intentionally puts these

people in challenging situ-
ations and as members of cross-functional teams. A good
development program obtains
feedback about them and their performance from those who see
them in action (Fulmer,
Stumpf, & Bleak, 2009).
A 2007 survey of 104 health systems found that 52% had
executive leadership develop-
ment programs, and programs were under development at
another 12% (McAlearney,
2008). Healthcare leaders suggest that some organizations
getting into leadership develop-
ment are “just going through the motions” and not implementing
a substantive program
(McAlearney, 2006). However, several healthcare organizations,
including the follow-
ing, were recently recognized as having outstanding leadership
development programs
and practices:
2.3 Developing and Evaluating Leaders
Leadership development in HSOs involves identifying future
leaders, giving them
opportunities to function in leadership roles, and providing
feedback and mentoring.
Many healthcare organizations fail to develop and groom talent.
In a survey of 200
healthcare provider CEOs, almost half indicated that no
potential successor to their orga-
nization’s top management spot had been identified, and only
17% felt that someone in
the organization was prepared to step into the top spot
(Witt/Kieffer, 2012). As the health-
care environment becomes more complex, the development of
leadership talent is becom-

ing more critical.
© Jetta Productions/Blend Images/Corbis
There are considerable advantages to developing leaders
internally rather than hiring from outside.
spa81202_02_c02.indd 51 1/15/14 3:48 PM
• HCA Healthcare, Nashville, TN
• Parkland Health, Dallas, TX
• Northwestern Memorial Hospital, Chicago, IL
• Nebraska Medical Center, Omaha, NE
• Baylor Health Care System, Dallas, TX
• William Osler Health System, Ontario
• Mayo Clinic, Rochester, MN
• St. Peter’s Health Care Services, Albany, NY
• Griffin Hospital, Denver, CO
• St. Jude Children’s Hospital, Memphis, TN
• Children’s Healthcare of Atlanta, Atlanta, GA
• Christiana Care Health System, Wilmington, DE
• Alexian Brothers Med Center, Elk Grove Village, IL
(Leadership Excellence, 2012)
Physicians are a critical source of new leadership talent for
healthcare organizations.
One would think that physicians seek executive leadership
positions because they are
not happy with taking care of patients. That is not necessarily
true, says Richard Afable,
M.D., M.P.H., president and chief executive officer of Hoag
Memorial Hospital Presbyte-

rian in Newport Beach, California. Dr. Afable believes that “the
best physician executives
are doctors who care so deeply about patients that they have
chosen to take that need
to care for people to a higher calling and lead organizations in
caring for communities”
(Witt/Kieffer, 2011, p. 4). Some healthcare organizations are
actively training physicians to
assume leadership roles. For example, Stanford Hospital &
Clinics has a strong leadership
development program for faculty physicians. Each year, 25 to
30 participants are selected
to participate in training and projects that prepare them to lead
small divisions, sections,
or teams within the academic medical center (Stanford School
of Medicine, 2012).
While there are clear advantages to promoting from within and
signaling to current man-
agers that the career path in the company goes right to the top,
there are circumstances
in which hiring a CEO from outside makes more sense. For
instance, there are occasions
when an HSO requires a transformational leader to shake up a
hierarchical health system
or to revitalize an organization that needs to expand into a
completely new service area.
Hiring People With Leadership Potential
Hiring future leaders is not as easy as it sounds. Imagine you
are interviewing someone
for a middle management job, such as project manager for your
clinic’s new electronic
billing system. The person could be very well qualified for the
position, but how do you

assess his or her leadership potential? There are a few things
that almost every employer
looks for in an applicant when recruiting potential leaders.
Obvious indicators are experiences in the applicant’s resume
where he or she made a dif-
ference. Having achieved something tangible is important, but
just as important is the way
it was accomplished. Did the applicant lead the initiative,
manage a group, or otherwise
demonstrate leadership qualities? References can provide
information about what the per-
son was assigned to do and whether delivered results met or
surpassed expectations. They
can also reveal whether teammates would work with that person
again. In other words,
spa81202_02_c02.indd 52 1/15/14 3:48 PM
a reference is a source who can help ascertain if the candidate
has a record of successfully
completing assignments and being unafraid to take on more
challenging ones.
During the formal interview, some employers put applicants
into various calculated situ-
ations to see how they would respond. For leadership positions,
an applicant may be
asked questions such as: How do you motivate your staff? Deal
with poor performers?
Handle patient complaints? “Mock situations” used to elicit
answers to these questions

can provide insight into the applicants’ leadership potential.
These types of behavior-
based interviews are common in healthcare organizations.
Candidates for a position are
asked to recount specific situations where they have used
behaviors or skills necessary to
the position. For example, a person applying for a management
position may be asked to
describe an incident that involved a lot of pressure to meet a
deadline and how this situ-
ation was handled (time management behavior). An applicant
may be asked to tell about
a situation that involved talking with consumers or colleagues
during a difficult circum-
stance (communication skills).
Finally, following the old adage “It takes one to know one,”
several people currently in
leadership roles can interview the applicant to provide a
balanced and complete picture
before actually hiring the person. Allio advises that candidates
for future leaders pos-
sess three attributes: (1) motivation and a need to achieve, (2)
attitude and the ability to
inspire even when facing adversity, and (3) morality—the
possession of positive values
and benevolent motives (Allio, 2009).
By no means should all hiring decisions take into account
leadership potential. Some peo-
ple are more interested in playing a supporting role in the
organization. Not everyone has
the motivation or interest to lead. In healthcare organizations,
there are many positions
that do not require leadership competencies. One important
purpose of recruiting, how-

ever, is to keep the potential leadership pipeline—the cadre of
highly developed leaders
capable of filling slots in the organizational hierarchy—full.
Effective Leadership Development
Health systems with leadership development programs often
start the programs because
of “dissatisfaction with their executives’ preparation for
advancement to leadership posi-
tions” (McAlearney, 2008, p. 24). Such programs enhance the
organization’s strategic goals
and succession planning. The leadership training program that
began in 1996 at Central
DuPage Health (a health system in Illinois) initially consisted
of classroom programs and
educational retreats. Courses ranged from 2-day training
sessions to 15-day seminars
offered over a period of 10 to 12 months. Participants in the
learning programs came
from all corners of the health system—senior executives,
frontline staff, new employees,
physicians, employees in physician offices, and governing board
members. By the end of
the second year, the target of having 2,000 individuals enrolled
in the full curriculum of
leadership and staff development programs was met (Boynton &
Sibery, 2002).
In health systems offering leadership development
opportunities, the most heavily
emphasized managerial competencies are communication and
relationship management,
leadership skills such as negotiation and motivation, general
management principles,
quality improvement theories and frameworks, managerial

ethics, financial management,
and human resource systems (McAlearney, 2008).
spa81202_02_c02.indd 53 1/15/14 3:48 PM
Although small HSOs may lack sufficient internal resources to
design and support ongo-
ing leadership training programs, there are some solutions.
Training consultants and
vendors offer several on-site and online learning products. For
instance, the more than
400 leaders in the Lancaster General Health system are given
access to Harvard Man-
ageMentor, an online provider of leadership development
services and products (Chief
Learning Officer, 2013).
To complement more formal development programs, current
leaders should be careful to
model behaviors they expect potential leaders to emulate.
Potential leaders should seek
a mentor, either in the same organization or outside it, to help
their development. Some
healthcare professional associations offer mentoring programs.
For example, The Ameri-
can Society for Healthcare Human Resources Administration
(ASHHRA) has a mentoring
program for healthcare HR professionals to help them enhance
and grow knowledge,
skills, and abilities to excel in their careers (ASHHRA, 2013).
Modeling desired behaviors
and mentoring opportunities are often overlooked aids to

leadership development.
Leadership Development Pitfalls
Not all leadership development programs produce desired
results. According to Douglas
Ready, a researcher on leadership development efforts,
organizations that experience dif-
ficulties implementing a successful development program or fail
entirely manifest com-
mon “pathologies” (Ready & Conger, 2003).
Some organizational leaders have a “control, ownership, and
power mentality.” This is
characterized by a reluctance of those in positions of authority
to give up control, to relin-
quish ownership of resources, or to share information. This
leads to unenthusiastic or
even zero cooperation with leadership development programs.
Another pitfall is the “pro-
ductization” of leadership development. This means creating a
new program based on
the latest management fad or the magical new offering promoted
by a leadership training
firm, without regard to whether it has anything to do with the
organization’s strategy or
future needs. To make matters worse, in tough economic times
the program is viewed as
an unnecessary cost and often curtailed.
The National Center for Healthcare Leadership (NCHL), a group
dedicated to improv-
ing leadership development practices in healthcare
organizations, has identified five
evidence-based “best practices” for leadership development
systems:

• Leadership development and organizational business strategy
are
aligned
• Board is accountable for leadership succession
• Learning is competency-based, interprofessional, and action
oriented
• Key talent management and strategic human resource
processes are
integrated and aligned
• Leadership development dashboard tracks key measureable
out-
comes (NCHL, 2013, para. 1)
spa81202_02_c02.indd 54 1/15/14 3:48 PM
1. How could you discover whether an applicant for a job in
your organization had leadership
potential before hiring that person?
2. If you were asked to develop a score sheet for interviewing
managerial candidates to assess
leadership potential, what would it look like?
3. Why do HSOs persist in hiring senior and executive positions
from outside despite research

findings that people promoted from within do better and are less
costly?
4. Are formal leadership development programs a cost or an
investment? If the latter, how
might you calculate a return on that investment?
5. How can smaller HSOs implement the NCHL evidence-based
“best practices” for leadership
development systems?
6. What do you think an HSO should do to develop potential
leaders when it has no budget for
leadership development?
A 2010 NCHL survey of 504 hospitals and 31 healthcare
systems found that greater adop-
tion of these best practices occurred in hospitals affiliated with
healthcare systems and in
large free-standing and teaching hospitals. Smaller hospitals,
nonaffiliated hospitals, and
other specific hospital types were less likely to implement many
of the best practices. For-
profit and nonprofit hospitals were more likely to implement
best practices than public
hospitals (NCHL, 2011).
Evaluating Success
How can the success of leadership development programs be
evaluated? Some organiza-
tions make the mistake of applying the wrong metrics. It sounds
great when the human
resources department delivers leadership training programs at
lower-than-expected costs.
Yet, the cost of the program is not the metric that counts. The

value of leadership develop-
ment programs should be measured by answers to questions
such as, “Are we better able
to fill key management jobs when they arise?” or “To what
extent are potential leaders
knowledgeable about and committed to our strategic direction?”
How investments in leadership development are integrated with
the organization’s stra-
tegic goals differs among HSOs. Experience has shown that
more substantial returns are
achieved when the program is explicitly aligned to support
organizational goals. The
primary expense associated with particularly sophisticated
leadership development
programs is not the cost of external speakers or coursework,
“but rather the personal
investment of senior leaders’ time, effort and patience in
identifying and developing their
high-potential future leaders” (Garman & Lemak, 2011, p. 2).
spa81202_02_c02.indd 55 1/15/14 3:48 PM
Leader Succession Planning
The complexity of healthcare today and the changes needed to
reform and improve our
healthcare system require skillful people in leadership
positions. When there is turnover
of senior leaders, their successors must be adequately prepared
for the challenges ahead.

Succession planning is a process by which organizations
continuously identify inter-
nal, qualified candidates who are available to assume vacant
leadership positions. Suc-
cession planning, especially at the top of an organization, is
vital. It is too late to think
about succession when a CEO or other key senior leader
announces his or her resigna-
tion, even when the transition date is a few months away. The
time to think about suc-
cession planning is years before the actual event. In other
words, it should be done on
an ongoing basis.
Good succession planning requires that a leadership pipeline be
full at all times. This can
be quite challenging, especially for large hospitals and health
systems. There are four
principal reasons why it is difficult to maintain a leadership
pipeline (Brant, Dooley, &
Iman, 2008):
• Inadequate criteria. When asked to recommend individuals in
their unit who had
leadership potential, managers’ recommendations may be based
on criteria that
reflect local values but do not match standards used in other
functions or parts
of the organization.
• Assessing potential vs. performance. Sometimes leaders find it
difficult to distin-
guish between current performance and evidence of perceived
ability to handle
a more responsible role.

• Inadequate data to make an informed decision. Decisions
about leadership potential
may rely too heavily on performance appraisal scores that are
high and fail to
distinguish between candidates. The assessments suffer from
“leniency” and
have less to do with raters’ ability to make accurate judgments
than with their
willingness to be candid.
• Over-reliance on traditional training. Leaders feel that
traditional leadership train-
ing methods, such as membership in cross-functional teams, are
sufficient.
To ensure that potential leaders and successors are being
developed, leaders should estab-
lish criteria for identifying talent throughout the healthcare
organization. Standard termi-
nology is important so that everyone knows what is meant and
what one is looking
for and why. Identifying promising candidates for leadership
development should be
organization-wide and begin with recruiting.
In addition, there must be a formal system to provide feedback
about particular indi-
viduals after assignments are completed. These multiple
evaluations are used to help
identify employees best suited to a particular position from
among all the potential candi-
dates. Finally, an aggressive schedule of development
opportunities should be devised to
provide these talented people with maximum leadership growth.
The multifaceted suc-
cession planning process at one healthcare system is described

in Case Study: Healthcare
System Succession Planning.
spa81202_02_c02.indd 56 1/15/14 3:48 PM
1. When obtaining feedback on an individual already in a
leadership development program,
whose feedback is more important—the person’s supervisor,
peers, those directly reporting
to the individual, or consumers who interact with the
individual?
2. Design a feedback form to capture information you would
find useful in assessing and devel-
oping someone’s leadership potential.
3. What principal elements of a potential leader’s performance
in a leadership development
assignment should the organization really look for?
4. Are formal succession programs a cost or an investment? If
the latter, how might you calcu-
late a return on that investment?
Case Study: Healthcare System Succession Planning
After recently hiring a new CEO, the board of trustees at a
small healthcare system in the south-
west became concerned about the organization’s lack of a
structured succession plan for key lead-

ership positions. The first step toward creating an effective
organization-wide succession planning
process was to implement the program in one functional area—
nursing—which included five levels
of leadership.
A project team of nursing representatives started by identifying
10 competencies and defining
behaviors for each leadership level. Next, all nursing leaders in
the system were surveyed about
their short- and long-term career goals and leadership
development needs. Armed with the results,
the project team had a better idea of the system’s leadership
pipeline potential and who might
benefit from further training.
Next, the team conducted capability review meetings with high-
potential leadership develop-
ment candidates. Past performance was evaluated using
standardized key organizational metrics
and future potential considered. Out of the more than 120
individuals invited to capability review
meetings, 23 potential candidates were identified and 21
accepted invitations to participate in the
formal nursing leadership succession group.
People in the succession group are involved in action learning
activities, project assignments, and
individual and team coaching. Participants have an
individualized leadership development plan
that outlines their goals and action steps. This plan helps
prepare them to be ready for promotion
when a leadership position becomes available.
Lessons learned from implementing the succession program in
nursing are now being applied to

the creation of succession programs in other functional areas in
the health system.
spa81202_02_c02.indd 57 1/15/14 3:48 PM
CHAPTER 2Section 2.4 Governance and the Role of the Board
of Directors
2.4 Governance and the Role of the Board of Directors
The American Hospital Association (AHA) recognizes a number
of different types of HSOs,
including for-profit, religious nonprofit, other nonprofit,
hospital district, and other gov-
ernment. A mix of for-profit and nonprofit activities has long
been found in the health ser-
vices sector. Pharmaceutical and medical device companies
have always been organized
on a for-profit basis. Both for-profit and nonprofit health
insurance companies are com-
mon. Because hospitals originated and evolved as charitable
institutions, organizations
that provide healthcare services to patients have traditionally
been considered nonprofit.
Since the enactment of Medicare in the 1960s, there has been
growth in for-profit corpora-
tions as direct providers of health services. Thousands of for-
profit HSOs, owned by local
investors who are often physicians, now provide healthcare
services. These organizations
range from large investor-owned hospital and nursing home
chains to smaller indepen-
dent medical facilities, such as ambulatory surgery centers,
weight control clinics, urgent
care centers, cardiopulmonary rehabilitation, and alcohol and

drug abuse programs.
Yet, despite these differences, the formal governance structures
among HSOs are quite
similar and have not changed much in the last few decades.
Most HSOs are organized as
corporations with governing boards that set strategies and
oversee achievement of strate-
gic objectives. However, “a few HSOs may be set up as general
or limited partnerships
(mostly those owned by a few physicians), and a few nonprofit
hospitals may be orga-
nized as unincorporated associations” (Horty & Mulholland,
1983, p. 17). State and fed-
eral regulations governing for-profit and nonprofit HSOs
influence board membership,
oversight responsibilities, and board activities.
Governance of Nonprofits
A body of individuals known as the board of directors (or
trustees or governing board) is
responsible for the conduct of an HSO. Understanding the
mission, helping the organization
to fulfill it, and adapting it to a chang-
ing world is at the very core of non-
profit governance (McFarlan & Epstein,
2011). The board employs senior lead-
ers to manage the HSO’s day-to-day
operations. For hospitals, the board of
directors may include influential peo-
ple in the local community, representa-
tives of the hospital-affiliated religious
organization, physician leaders of the
medical staff, and possibly represen-

tatives from other healthcare corpora-
tions and larger local employers. Some
district hospitals are established as
quasi-public agencies with the board
of directors publicly elected.
The Joint Commission, an organization
that accredits and certifies more than
20,000 U.S. healthcare organizations
Exactostock/SuperStock
In a hospital, the board of directors may include
physicians on the medical staff, individuals from the
larger community, and representatives of religious
organizations affiliated with the organization.
spa81202_02_c02.indd 58 1/15/14 3:48 PM
of Directors
and programs, requires that organizations have a governing
body with overall responsi-
bility for the conduct of the facility. The conditions of
participation for the federal Medi-
care program require that each hospital have
an effective governing body legally responsible for the conduct
of the hos-
pital as an institution. If a hospital does not have an organized
govern-
ing body, the persons legally responsible for the conduct of the
hospital

must carry out the functions . . . the governing body (or the
persons legally
responsible) must include a member, or members, of the
hospital’s medical
staff. (CMS, 2012, p. 29074)
For some HSOs, federal or state regulations may have fairly
strict board composition
requirements. For example, nonprofit or public entities
designated as federally qualified
health centers serving designated medically underserved
populations/areas or special
medically underserved populations must be governed by a
community-based board of
directors: “The board must have between 9 and 25 members”
that reasonably represent
the patient “population served in terms of demographic factors
such as race, ethnicity and
gender.” At least “a majority (51%) of board members must be
consumers of the health
center services” and must live in the service area (HRSA, 2012,
para. 17–18).
Governance of public health departments is subject to state
regulations. For instance, in
Missouri the county health departments operate under a board of
trustees appointed
by county commissioners. North Dakota has 28 different public
health units, each with
governing bodies. The Public Health Accreditation Board
(PHAB) does not mandate a
particular board structure or membership but does encourage the
governing entity to
“(1) be an official part of the Tribal, state, regional, or local
government; (2) be responsible
for policy-making and/or governing; and (3) advise, advocate,

or consult with the health
department on matters related to resources, policy making, legal
authority, collaboration,
and/or improvement activities” (PHAB, 2011, p. 242).
Governance of For-Profits
For-profit HSOs also have a board of directors with
responsibilities similar to boards in
nonprofit HSOs and subject to the same state, Joint
Commission, and CMS requirements.
In for-profit HSOs, the owners of the corporation (private
investors or shareholders) elect
the board of director’s members. In many cases, some of the
board members are also offi-
cers of the corporation. State corporate laws govern corporate
board elections and report-
ing requirements.
For-profit HSOs that are subsidiaries of investor-owned
healthcare systems or holding
companies have another layer of governance at the system level,
where there is another
board of directors that oversees organization and operation of
the entire business. If the
healthcare system is a public company—meaning that its shares
are publicly traded on
a U.S. stock exchange—there is additional oversight by the
United States Securities and
Exchange Commission (SEC) to ensure accurate and responsible
financial reporting. The
SEC requires public companies to disclose various information
to the public, with the
intent to “protect investors, maintain fair, orderly, and efficient
markets, and facilitate
capital formation” (U.S. Securities and Exchange Commission,

n.d., para. 1).
spa81202_02_c02.indd 59 1/15/14 3:48 PM
of Directors
The SEC requires public healthcare organizations to have a
board of directors elected by
the shareholders at their annual meeting. The role of the board
is to represent shareholder
interests and oversee the strategic decisions that the CEO and
management team take and,
when necessary, to reclaim decision-making power and make
the crucial decisions itself.
Boards of directors of public HSOs are required by the SEC to
have three standing com-
mittees, outlined in Table 2.4, to help them fulfill their
obligations.
Table 2.4: Standing committees required by the SEC
Committee Responsibilities
Audit Hires and reviews the performance of the independent
public
accountants who audit the organization’s financial systems and
reports; ensures the integrity of the accounting practices and
controls and reviews significant changes in accounting policies.
Compensation and Benefits Determines compensation packages
for the CEO, president, key top
managers, and board members; oversees pension and other

welfare
policies for all employees.
Nominating and Corporate
Governance
Reviews possible candidates for board membership and
recommends
nominees for election; oversees the process for performance
evaluations of the board and its committees; reviews the
organization’s executive-succession plans.
Sarbanes-Oxley Act of 2002
Reacting to the Enron Corporation financial scandals in 2002,
the U.S. Congress passed
Public Law 107-204, also known as the Sarbanes-Oxley Act of
2002. Often shortened to
“SOX,” the Sarbanes-Oxley Act made internal control the direct
responsibility of direc-
tors. For accounting crimes, SOX imposes large fines and prison
sentences. After the
Sarbanes-Oxley Act was passed, the New York Stock Exchange
and the American Exchange
required independent directors to head the major standing
committees (Petra, 2005).
Today, boards of directors of companies trading on those
exchanges are required to have
a majority of the board be independent and the audit committee
be composed entirely of
independent directors (Hitt, Ireland, & Hoskisson, 2007). Even
so, in some cases, the CEO
is powerful enough to offset the independence of the board.
Some companies have coun-
tered this with efforts to prevent the same person being
chairman of the board and CEO

concurrently (Lorsch & Zelleke, 2005).
When first enacted, SOX seemed not to affect HSOs, especially
those designated as chari-
table organizations. Yet it is now apparent that several sections
are relevant. For instance,
Title III, section 302 requires that the principal officers and
financial officers sign the finan-
cial report, certify that the report contains no false statements,
and certify that the report
is materially correct or face stiff penalties (Levine & Short,
2004). Today, most boards in
nonprofit hospitals and healthcare systems have an audit
committee with one member
having financial expertise. This committee meets each year with
the HSO’s external audi-
tor without senior management present. Boards in high-
performing hospitals are better
able to effectively oversee the organization when they receive
timely financial reports and
education in financial management principles (Kane, Clark, &
Rivenson, 2009).
spa81202_02_c02.indd 60 1/15/14 3:48 PM
of Directors
1. What stakeholders are represented at the nonprofit hospital
located nearest to you? Why
might it be challenging to find people willing to serve on a
hospital governing board?

2. Discuss some ways in which a board of directors might
maintain its independence from
management.
3. What is the role of the governing board in keeping
organizations “honest” and ethical?
4. What is the benefit of having a member of the hospital
medical staff serve on the hospital’s
governing board?
5. Do you think SOX has been successful at increasing the
financial transparency and account-
ability of publicly traded healthcare organizations?
6. In July 2011, a former top executive of nonprofit Children’s
Hospital of Philadelphia pleaded
guilty in federal court to embezzling $1.7 million from the
hospital. He had devised a
scheme to embezzle money from the hospital by creating
fraudulent invoices, fake compa-
nies, and phony bank accounts. The assistant U.S. attorney in
charge of the case said the
scheme went on for such a long time because the hospital
executive had a position of trust
and authority. What could the hospital board of directors have
done to protect the organiza-
tion’s financial assets?
Healthcare organizations are not immune from board liability
concerns. An example is the
federal guilty plea agreement signed in January 2003 by the
nonprofit United Memorial
Hospital in Michigan in which the hospital admitted to
fraudulent billing of inappropri-

ate pain management surgical procedures. As Levine and Short
describe it,
Careful reading of the allegations contained in United
Memorial’s plea
agreement reads like a primer on what not to do from the
governing board
on down. The hospital’s systems for information reporting,
internal audit
and investigation, conflict of interest disclosure, and responding
to com-
plaints all were questioned. (2004, p. 4)
Suspicion of accounting crimes led to a federal criminal
investigation of Birmingham-
based HealthSouth, a large healthcare system with
approximately 1,700 hospital, outpa-
tient surgery, diagnostic imaging, and rehabilitative facilities
nationwide. HealthSouth
management was alleged to have “conspired to inflate assets
and overstate earnings by
between $1.4 and $2.7 billion through false and delayed
accounting entries and bogus
transactions” (Levine & Short, 2004, p. 5).
While governing publicly traded and investor-owned healthcare
organizations is com-
plicated, new regulations are making governance in all HSOs
more challenging. In later
chapters, the strategic management process will be described in
more detail in a manner
that works equally well in all types of HSOs. The emphasis will
be placed on what the
management team must do to make and act on its strategic
decisions. At the same time,
the board plays a critical role in overseeing and sometimes

controlling what manage-
ment does.
spa81202_02_c02.indd 61 1/15/14 3:48 PM
CHAPTER 2Section 2.5 Organizational Designs and the Role of
Top Management
2.5 Organizational Designs and the Role of Top Management
Organizational design is a major
determinant of whether an HSO
can effectively implement its strate-
gic objective through deployment of
organizational resources. It entails
dividing the workforce into specific
departments and jobs, identifying
formal lines of authority, and creat-
ing mechanisms for coordinating
diverse organizational tasks. Strat-
egy execution depends on compe-
tent people who have the resources
and the knowledge, and who know
what to do and how their jobs relate
to everyone else’s. Additionally, they
require information where and when
they need it. How the HSO is staffed
and organized becomes critical. Over
time, as the HSO grows, the difficul-
ties of implementing the strategy
increase. Organizational design in an HSO must evolve as it
grows to become a multi-state
health system, or expands its services, or acquires other HSOs,
and so on. Details about
executing strategies come later in the book. This section

introduces the different kinds of
organizational design, the reasons each one is effective, and the
drawbacks.
Functional Organizational Design
The functional organizational design is a common design used
in HSOs. Employees are
grouped together according to discrete functional activities in
the belief that work will
be done more efficiently. Top management and workers have a
direct relationship. An
example is a primary care clinic. Registration employees are
grouped with health record
and billing employees. Clinical staff members, such as medical
technicians and nurses,
are grouped together with physicians and other practitioners, or
the latter two may form
a third grouping. By grouping individuals, there is better
communication and task exe-
cution. However, barriers that inhibit organization-wide
teamwork can form between
groups. Figure 2.1 illustrates the functional structure in a
physician hospital organization
(PHO), an entity composed of physicians and one or more
hospitals. A PHO is formed for
the purpose of contracting with payers and controlling costs.
© Mike Agliolo/Corbis
In a functional organizational design, individuals are
grouped together by function or task; this improves
efficiency but may create barriers between groups.
spa81202_02_c02.indd 62 1/15/14 3:48 PM

Top Management
Figure 2.1: Functional organizational design in a physician
hospital organization
The functional organization design in a physician hospital
organization is formed for the purpose of con-
tracting with payers and controlling costs.
Functional organization designs are variants of the following
structure: At the top of the
hierarchy sits the CEO or president. In for-profit organizations,
this includes the chairper-
son of the board of directors and office of legal counsel. Below
the CEO may be several
vice presidents responsible for one or more functional areas.
Some HSOs have a chief
operating officer (COO) or executive VP, who has the authority
to act as CEO in the lat-
ter’s absence. That executive sometimes oversees the functional
vice presidents. Report-
ing to most vice presidents are C-level officers, with
responsibilities for their functional
areas. Examples include the CFO (chief financial officer), CNO
(chief nursing officer),
CMO (chief medical officer), and newer ones like CIO (chief
information officer) and CCO
(chief compliance officer).
The primary disadvantage of this form of organizational design
is that it discourages hori-
zontal communication across functions. For example, a situation
might arise in which the

hospital nursing department identifies ways to improve patient
safety with the purchase
of a new technology, but the finance department is not informed
of this recommendation
and funds are not available for this purchase. To get around this
problem, HSOs often
form interdisciplinary committees composed of members from
each affected functional
area. Special project teams might also be established to tackle
one-time issues such as new
federal regulations dictating changes in information security
practices. Interdisciplinary
committees and project teams are rarely full-time activities but
rather must be done in
addition to regular jobs and responsibilities.
Business
Development
Marketing Finance Contracting
Provider
Relations
Medical
Management
Information
Systems
Board of
Directors
Physician Medical
Director
Chief Operating

Officer
Chief Executive
Officer
spa81202_02_c02.indd 63 1/15/14 3:48 PM
Top Management
It can be more difficult for HSOs with vertically organized
functional units to create inte-
grated patient care programs at the service level to best meet
patients’ needs. Nationwide
healthcare reform efforts are requiring HSOs to adopt a more
global view of healthcare
processes. To meet these challenges, the organizational
structure may need to change.
HSOs with very divided functional units in which there is little
collaboration among pro-
fessionals and more attention to completing specific tasks will
find it difficult to adapt to
provisions in the 2010 Affordable Care Act. Cowen et al. (2008,
p. 417) suggest that con-
temporary healthcare organizations face many challenges in
determining how “to deploy
and manage patient-focused interdisciplinary care teams, how to
provide them with rel-
evant and timely information, and how to connect them to the
resources and priorities
of the parent organization.” It will be important to know how
each task is to be accom-
plished and also who will accomplish the tasks.

Divisional Organizational Design
Much like functional organizational designs, the divisional
organizational design works
better for some HSOs than others. A divisional or market design
is most effective when
an organization has a broad line of
services that serve different markets.
Northwestern Memorial HealthCare
(NMHC), based in Chicago, is an
example of an HSO with a divisional
design (see Figure 2.2). Northwestern
Memorial HealthCare is the parent
corporation of Northwestern Memo-
rial Hospital, Northwestern Lake
Forest Hospital, and the Northwest-
ern Memorial Foundation, which
provides fundraising and grant-
making support for the hospital’s
mission and strategic goals. North-
western Memorial Hospital has three
subdivisions representing its physi-
cian groups, its healthcare services
area, and its professional and general
liability insurance arm (Northwest-
ern Memorial Hospital, 2013).
© Images.com/Corbis
When a large healthcare system engages in different lines
of service, such as grant-making or fundraising efforts
for a hospital’s strategic goals, a divisional organizational
design is ideal.
spa81202_02_c02.indd 64 1/15/14 3:48 PM

Top Management
Figure 2.2: Divisional organizational structure at Northwestern
Memorial HealthCare
Source: Northwestern Memorial HealthCare. (NMHC) (2013).
About us. Retrieved from http://www.nmh.org/nm/about-us-
northwestern
-memorial-healthcare. Used by permission of Northwestern
Memorial Healthcare.
Northwestern Memorial HealthCare, based in Chicago, Illinois,
has a divisional organizational structure.
The divisions or subsidiaries are considered “line departments,”
as they continue the
chain of command up to the CEO and overall board of directors.
Staff departments, such
as human resources, labor relations, finance, and legal counsel,
exist at the corporate office
and serve all divisions and subsidiaries. If the HSO does
business outside the United
States, an international department coordinates the operations of
divisions in different
countries. Divisional organizations, while simple in concept,
can become quite complex
as they grow and expand.
The test to determine if a divisional organizational structure is
the best choice for an HSO
is whether each of the divisions has somewhat different
customers, competitors, or strate-

gies and therefore needs to be run by a separate director. The
divisional structure provides
an opportunity for better attention to consumers’ needs with
increased flexibility and
quicker reactions to changes in the market. This structure
allows for enhanced coordina-
tion between functional areas with opportunities for
multidisciplinary input. The divi-
sional structure, nonetheless, has some weak points. Resources
that are duplicated in each
division can be costly for the organization. There may be
divisional rivalry for scarce
resources, and a reluctance to share can be problematic.
Northwestern
Memorial
HealthCare
Northwestern
HealthCare
Corporation
Northwestern
Memorial
Insurance
Company
Northwestern
Memorial
Physicians
Group
Northwestern
Memorial

Hospital
Northwestern
Memorial
Foundation
Northwestern
Lake Forest
Hospital
spa81202_02_c02.indd 65 1/15/14 3:48 PM
http://www.nmh.org/nm/about-us-northwestern-memorial-
healthcare
http://www.nmh.org/nm/about-us-northwestern-memorial-
healthcare
Top Management
Matrix Organizational Design
A matrix organizational design is preferred when an
organization’s “needs for coordi-
nation are so large that a traditional functional organization is
not effective or when the
interdependencies between services are so strong that a
divisional configuration is inef-
ficient” (Creteur & Pochet, 2002, p. 19). The matrix structure is
said to improve depart-
ment coordination and organizational flexibility and allow a
quicker reaction to customer
requirements and “ensure an efficient use of resources and

economies of scale” (Creteur &
Pochet, 2002, p. 19). Figure 2.3 illustrates a matrix
organizational design for a skilled nurs-
ing and long-term care facility. The managers from the program
and service areas and the
functional managers report directly to the CEO of the facility.
Figure 2.3: Matrix organizational design
In the matrix organizational design for a skilled nursing and
long-term care facility, the managers from
the program and from the service areas and the functional
managers report directly to the CEO of the
facility.
Functional Managers
P
ro
g
ra
m
o
f
S
er
vi
ce
L
in

e
M
an
ag
er
s
Traumatic
Brain Injury
Nursing
Rehabilitative
Services
Nutritional
Services
Pharmacy
Activity
Services
Health
Records
Behavioral
Health
Acute
Respiratory
Disease

Orthopedic
Parkinson’s
Disease
Alzheimer’s
Disease
spa81202_02_c02.indd 66 1/15/14 3:48 PM
Top Management
1. What is the organizational design at your place of
employment (or your college)? What are
the advantages and drawbacks of its organizational design?
2. Describe how a small nonprofit HSO might change from a
functional organizational design
to one that might better support a new for-profit health service
product.
3. What organizational design would be best for public health
departments?
Healthcare managers often find the matrix structure attractive
because it combines two
main objectives: avoid duplication of resources and view the
patient’s care from a global,
rather than segmented, perspective. But coordination costs may
be high and authority
sharing can be difficult. There is a functional manager for each

department and different
managers for each program or service line. Employees are
assigned to both functional and
program or service line areas—meaning they report to more
than one manager.
Large multi-state or national health systems may be organized
in a matrix structure. The
organizational matrix could be two-dimensional; think of a
spreadsheet in which service
line managers are column headings and state or country
managers are row headings,
or even three-dimensional with the third dimension being
disciplines like physicians,
nurses, technicians, support staff, administrative staff, and so
forth.
Choosing an Organizational Design
The best way to structure an organization is to adopt a design
that is sufficiently flexible
to respond to strategic requirements while ensuring excellent
internal coordination and
communication. For simplicity, only three organizational
designs are described above,
while there are in fact several variations on these basic designs.
Also keep in mind that
the right structure for today may be the wrong structure for
tomorrow. During the inter-
nal assessment step of strategic planning, leaders should
examine the current organiza-
tional design to determine if changes are needed. Regardless of
what type of design is
adopted by an HSO, certain minimal requirements should be
considered:

• Have we created the fewest possible management levels and
the shortest pos-
sible chain of command?
• Does the design enhance, not impede, communication?
• Does the design expedite decision making to ensure
achievement of strategic
objectives?
• Are roles and responsibilities clear at all levels?
• Are resource duplication and loss of efficiency minimized?
• Do employees know where they belong in the organization and
where their
tasks fit into the work of the organization?
• Are employees organized in a manner that encourages a sense
of community
and belonging?
• Does the organizational design facilitate the development of
future leaders?
spa81202_02_c02.indd 67 1/15/14 3:48 PM
Top Management
Role of Top Management
It is top management as a group that runs an organization under
the guidance of the CEO.
Depending on the management style of the CEO, the
relationship can be highly participa-
tive and democratic with strategic decisions made jointly. If the

CEO is more dogmatic or
autocratic, top managers may be asked for input but are not
directly involved in making
strategic decisions.
Composition and Authority
The composition and authority of top management varies
according to organizational
design. In a functional design HSO, the top management team
typically comprises all vice
presidents and C-level executives. In a divisional design HSO,
the top management team
comprises key staff directors and all divisional and subsidiary
presidents. In a matrix
design HSO, the top management team often includes the
department heads, key staff
directors, and sometimes managers of large and critically
important programs.
The degree of decision-making authority also varies with the
organizational design
adopted by the HSO. For example, in a functional HSO, vice
presidents or C-level execu-
tives have authority only in their functional area. A vice
president of nursing services can
decide tactical questions only in patient care areas involving
nurses. On the other hand, a
divisional president acts like a CEO within the division in
question, overseeing all activi-
ties of the division.
Building Capability
Implementing a strategy involves more than just doing tasks
that have always been done
in the same way as before. Strategy implementation over time
becomes more demanding

as external challenges intensify. For that reason, top
management must do more than sim-
ply keep the organization running.
To build the necessary capabilities required for effective
strategy implementation, the orga-
nization must continually recruit the kinds of people it needs
and train others in newer
systems, processes, and technologies. It must develop and keep
full a pipeline of poten-
tial management and leadership talent that can fill higher-level
positions as they become
available. It must strive to develop a core competence if it
doesn’t have one already or
strengthen the one it has. If it does not, the business will erode
over time. Part of building
capability is to push decision-making authority down to lower-
level managers so they
can prove themselves worthy of taking on more responsibility
(Thompson, Strickland, &
Gamble, 2007).
Top management must also be effective at evaluating and
developing managers and
supervisors at lower levels. It becomes a top-management issue
in larger HSOs where
internal demand for good managers and leaders is high and the
positions varied. In such
an organization, potential leaders need to be cross-trained in
different functional areas
or different service lines as they develop their problem-finding
and -solving capabilities.
spa81202_02_c02.indd 68 1/15/14 3:48 PM

Top Management
1. Under what circumstances might an organization need an
autocratic leader?
2. What steps might be taken if one or more members of the top-
management team were
suspected of withholding information or pursuing a hidden
personal agenda?
3. Members of the top-management team were appointed to their
positions because of their
leadership and take-charge abilities yet must behave more like
team players when helping
to make strategic decisions. How might such a seeming
disparity be handled?
4. As CEO of an HSO, how would you handle high turnover in
your top-management team?
How could you or should you influence such change?
5. Would a top-management team at an HSO be better if its
members had experiences at
other HSOs before having been promoted internally? Why or
why not?
6. Is it possible for a top-management team to do a good job of
assessing the state of its own
management and leadership? Why or why not?
7. Aside from its value as part of an internal assessment of the
HSO, what other benefits

might accrue from a detailed assessment of the state of
management and leadership in
the organization?
8. Do you believe management and leadership evaluations
should be done annually? Biannually?
Once every three years? Give reasons for your answers.
Evaluating Management and Leadership
The organization’s management and leadership capabilities
affect its ability to achieve
strategic goals. Thus, it is important that HSOs have a process
for periodically evaluating
those in charge. C-level and vice-president executives, middle
managers, and supervisors
are evaluated individually by their immediate superiors, direct
reports, and any groups
they have worked with. The CEO and president are evaluated by
the board of directors,
usually with input from their direct reports. The following are
some key areas that should
be included in any evaluation of an HSO’s leadership:
• In what regard do their peers and direct reports hold them
accountable? Do they
command respect? Are they easy to approach and communicate
with?
• How open are they to new ideas and new ways of doing
things? Do they learn
from past mistakes or tend to repeat them (Pfeffer, 2008)?
• What ethical standards and values do they espouse? Are they
good role models,
leading by example?

• Do they put a high priority on developing the people they
supervise? Are they
good motivators? Do the people they develop often get
promoted?
• Are they critical and demanding—that is, do they have high
standards and
espouse ambitious goals? Do they put the organization’s goals
ahead of their own?
• Are they empathetic and compassionate?
spa81202_02_c02.indd 69 1/15/14 3:48 PM
CHAPTER 2Section 2.6 Organizational Values and Culture
2.6 Organizational Values and Culture
According to authors Thompson, Strickland, and Gamble (2007,
p. 27), an organization’s
values are “the beliefs, traits, and behavioral norms that
company personnel are expected
to display in conducting the company’s business and pursuing
its strategic vision and strat-
egy.” In some organizations, such norms are democratically
derived and clearly stated, if
not rigorously followed. In some organizations, no explicit
values statement exists. Does
it matter? In today’s business world, whether a formal statement
of organizational values
exists, it is unfortunate that individuals may feel at liberty to
behave any way they want.
The Value of Core Values

More than half of the 1,700 hospital workers surveyed in 2004
reported having
occasionally witnessed broken rules, mistakes, lack of support,
incompe-
tence, poor teamwork, disrespect, and micromanagement. Many
had seen
some of their colleagues cutting corners, making mistakes, and
demon-
strating serious incompetence. However, fewer than one in ten
fully dis-
cussed their concerns with their coworkers or their boss.
(Maxfield, Grenny,
McMillan, Patterson, & Switzler, 2005, p. 3)
According to a 2011 survey conducted by the Ethics Resource
Center (2011), 45% of U.S.
employees observed wrongdoing within their organizations. We
can assume that pub-
lic exposure of any these incidents would erode consumer
perceptions of credibility and
trust, which would be disastrous for the organization’s
reputation.
While the HSO’s reputation must be protected, most important
is protection of patients
from the harm that can result from mistakes or incompetent
acts. To deliver safe health-
care services, everyone involved must adhere to the highest
standards of patient care and
professional values.
What should a statement of values contain? Ideally, it should
summarize the culture and
state how the company wants everyone to behave. For instance,
Northwestern Memorial

Hospital pursues four values:
• Patients First: We put the patient first in all we do. No matter
where
in the hospital we work, we remember always that caring for the
individual patient and his or her family is at the heart of our
mission
and our philosophy.
• Integrity: We adhere to an uncompromising code of ethics that
emphasizes complete honesty, transparency and sincerity.
Through
our words and actions, we earn the complete trust of our
patients
and their families, our community and our coworkers. We seek
to
do the right thing, always and everywhere, in our day-to-day
work
and lives.
spa81202_02_c02.indd 70 1/15/14 3:48 PM
CHAPTER 2Section 2.6 Organizational Values and Culture
• Excellence: We continuously strive for excellence. We never
stop
learning and working to improve our skills, programs and
services.
• Teamwork: We can only achieve our mission and goals by
working
together. Through the collective and coordinated efforts of our
staff,
we apply our diverse talents, backgrounds, ideas and

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