The Performance Measures and Management for Organizations Operating in the Healthcare Industry - Term Paper Example

The need for appropriate performance measures and management has been a recurring theme in management and accounting over the last 20 years. The caseof UK National Health Service. 1. Introduction The performance of organizations in the international market is usually depended on a series of factors; usually the size of the organization indicates its potentials for competing its rivals and achieving a stable growth. However, under certain terms, the prospects of a firm operating locally or globally cannot be identified with accuracy – this is a common phenomenon in periods of strong financial crisis. Of course, a wide range of theoretical models is available to managers for measuring the performance of their organization; however, the criteria used for the interpretation of the relevant findings are often inappropriate, a fact that leads to the production of invalid assumptions regarding the performance of the organization involved. Current paper focuses on the examination of the need for appropriate performance measures and management for organizations operating in the healthcare industry; reference is made especially to the UK National Health Service. The review of the literature published in the specific field led to the assumption that the performance measures and the management policies currently used by managers in NHS cannot respond to the organization’s needs – as identified through its daily activities. Moreover, it has been made clear that the above failure is related not only to the external but also to the internal organizational environment – referring to employees of all levels. It is suggested that measures are taken for the improvement of these policies trying to keep close control on the resources engaged and the time required. 2. Performance measurement and management of hospitals and other healthcare organizations The understanding of the criteria used for measuring the performance of healthcare organizations requires the reference to the characteristics and the needs of performance measurement – as a strategic tool for checking the level of achievement of organizational goals. At the same time, reference should be made to the challenges that managers face within modern organizations, as these challenges can negatively affect the quality and the effectiveness of the relevant management practices. All these issues should be also taken into consideration when evaluating the performance measurement and the management policies of NHS. 2.1 Performance measurement and management – overview, role One of the key characteristics of performance measurement is the fact that the specific activity has different forms across firms of different size and culture. This fact is made clear in the study of Taticchi (2010). In the above study emphasis is given on the limited scope of performance measurement in SMEs – implying that the effectiveness of performance measurement in large enterprises is expected to be higher, probably because of the support provided to the individuals involved (Taticchi 2010). On the other hand, the potential barriers that performance measurement systems and plans face in SMEs cannot reduce the value of these systems as key strategic tools. Of course, in large organizations the resources available for the development of advanced management and performance measurement plans are significant; thus, in organizations of such size the effectiveness of performance measurement methods is expected to be high, a fact that will be taken into consideration further on where the effectiveness of the performance measurement systems used in NHS will be discussed. At this point it would be necessary to refer to the characteristics of performance measurement – as part of the strategic process of organizations in all industries; in accordance with Rose (2005) ‘performance measurement is the language of progress for the organization’ (Rose 2005 in Taticchi 2010, p.3). In each organization, performance measurement needs to be combined with appropriate management techniques – which, usually, focus on the control of the performance measurement systems developed in the particular firm. The specific issue is highlighted in the study of Epstein et al. (2006); the above researchers emphasize on the importance of management plans not just for the achievement of organizational goals but also for monitoring the performance measurement systems involved. Moreover, it is made clear that ‘management control and the measurement performance systems can help managers to achieve the following benefits – simultaneously: increase the firm’s performance and support the employees’ welfare’ (Epstein et al 2006, p.5). However, it should be made clear that the level of intervention of the performance measurement in the firm’s strategic options should be carefully checked; a limit should be set regarding the power of performance measurement systems within organizations. The importance of the above suggestion is explained in the study of Stenzel et al. (2003); in the particular study emphasis is given on the following fact: in organizations where the level of intervention of performance measurement systems in the strategic business decisions is high the following problem can be identified: these organizations concentrate on the practices of their competitors and ignore the own actual needs and capabilities (Stenzel et al. 2003). In this way, the specific organizations face difficulties in achieving their goals since the operational practices they adopt are usually inappropriate – even if these practices have helped the competitors to thrive. In other words, the performance measurement should be regarded as part of a firm’s management strategies and not as a strategic initiative of primary importance – even if its value for the success of organizational plans cannot be denied (McLoughlin et al 2010). In accordance with the above, the performance measurement systems developed in each organization need to be aligned with the aims, the needs and the strategic management plans of the specific organization – a fact which is made clearer in the case of organizations operating in the healthcare industry, in the context explained below. 2.2 Performance measurement in the healthcare sector Organizations that operate in the healthcare sector are differentiated from the organizations in other industries; the uniqueness of these organizations would be identified in their main objective, the provision of healthcare services to the public. In this context, the evaluation of the performance of these organizations cannot be based, at least not basically, on their profitability but, mostly, on the quality of their services as it can be identified through the following two rates: ‘a) the in-hospital mortality and b) the hospital acquired infections’ (Kazandjian et al. 1999, p.36). The above fact leads to the following assumptions: a) hospitals with high profits but, also, high rates of in-hospital mortality or in-hospital infections cannot be characterized as successful within their industry – as perhaps it could be happen in other industries, where the level of profitability of firms is the major criterion for evaluating their success, b) the improvement of the performance of hospitals would require different management plans compared to firms in other industries that would be interested in increasing their competitiveness; for instance, a hospital that would need to improve its performance should improve the standards of cleaning/ sterilization across its operational units. However, the two criteria, mentioned above, regarding the evaluation of the performance of healthcare organizations can have different interpretations and for this reason, they have been criticized as of their effectiveness (Kazandjian et al. 1999). The ‘National Quality Forum, a non-profit organization established in 1999’ (Joint Commission Resources 2008, p.14) guarantees the alignment of the operational practices of healthcare organizations with the relevant legal and ethical standards. At the next level, because of the volume of activities of healthcare organizations, additional measures were undertaken – securing the protection of the public health, a key requirement for the organizations operating in the healthcare industry. The Strategic Surveillance System – introduced in 2007 – is an online tool through which the performance of each hospital – ‘only those accredited by the Joint Commission’ (Joint Commission Resources 2008, p.112) – is measured; at the next level, the relevant information is available to the public; in this way, the risks and the safeguards of each healthcare organization – in relation to the health of its patients – can be reviewed and appropriately evaluated. The criteria used for the measurement of performance of healthcare organizations are analyzed in the study of Gittell (2009); through the above study it is explained that performance measurement in healthcare organizations can have two different forms: ‘quality and efficiency performance measurement’ (Gittell 2009, p.77). These criteria refer to the following issues: a) the surgical performance, i.e. the rate of success in the operations developed across the particular organizations, b) the quality of in-hospital services (as measured by referring to the level of in-hospital infections, the time required for recovery and so on) and c) the efficiency performance, i.e. the volume of cases handled by each hospital – usually on a weekly or a monthly basis (Gittell 2009). The above issues should be taken into consideration when evaluating the need for appropriate performance measurement and management in NHS, the key healthcare organization of Britain. 2.2.1 Performance measurement and management in NHS The management and performance measurement issues of NHS have been analyzed in the literature aiming to identify the methods that could help towards the improvement of the quality of services provided by this organization’s units across Britain. The potential weaknesses of NHS in terms of performance measurement would be understood only if its organizational structure is explained; moreover, the rules on which the operations of NHS are based should be also mentioned. NHS is heavily based on trusts – as explained below; in terms of accountability, ‘the boards of directors of these trusts are collectively responsible’ (Talbot-Smith et al 2007, p.111). The term responsibility, as used above in order to show the accountability for the management practices used in NHS refers to the responsibilities of trusts as independent organizations but also as organizations through which healthcare services are provided to the public; in the study of Talbot-Smith et al. (2007) reference is made to the ‘statutory, financial and legal responsibilities of NHS trusts’ (Talbot-Smith 2007, p.111). At the next level, it should be noted that the Strategic Health Authorities are mainly responsible for the control on the management practices of NHS – including the trusts and the other NHS units across England (Talbot-Smith 2010). The above detail is of particular importance in order to evaluate the current performance of NHS, but also its potentials for further improvement – in the context discussed below. In terms of legislation, the activities of NHS are regulated through the ‘2003 Health and Social Care Act’ (Talbot – Smith 2007, p.110). In accordance with Bali (2007) the key management failure of NHS can be identified in the lack of effective knowledge management mechanisms; indeed, the exchange of information across the NHS units seems to be rather problematic, a fact that negatively affects the performance of these units – as the term performance in relation to the healthcare industry has been analyzed above. A similar assumption regarding the effectiveness of management and performance measurement practices of NHS is made through the study of Davies et al. (2004). The above researchers tried to identify the weaknesses of NHS regarding its management practices and came to the conclusion that the key problem of the specific organization is the lack of modernization. Reference is made to the following statement included in the ‘NHS Plan, in July 2000: NHS is a 1940s system operating in the twentieth first century’ (Department of Health, 2000, in Davies et al. 2004, p. 252). The issue of modernization of NHS – as mentioned above – refers not just to the modernization of its facilities (technology engaged, quality of materials and so on) but also to the modernization of the management practices used across the organization – referring also to the lack of support to innovation in daily operational activities. Apart from the above issues, job satisfaction has been also proved to be an important problem across NHS; in fact, the level of this problem is such that the performance of the organization’s employees is considered to be rather low – taking into consideration their skills. Because of the lack of job satisfaction, as explained above, the organization’s performance is kept at low levels, a problem that should be resolved the earliest possible; it is at this point that the update of the organization’s performance measurement system would help (Davies et al 2004). The administrators of NHS have developed a series of schemes aiming to support the organization’s performance. An indicative scheme is the ‘Payment by Results’, which however did not achieve the targets of its planners (Conrad et al 2011) – a fact that proves the existence of factors which set barriers in the organization’s development. These factors will be analytically discussed below. Despite the fact that NHS follows the rules and the standards applied on all organizations operating in the healthcare industry – as explained above – it seems that its operational practice and ethics are slightly differentiated from those of the other healthcare organizations across Britain. An indicative example of the above fact is mentioned in the study of White (2010); in accordance with the above researcher, ‘NHS hospital, mental health and ambulance services are provided by trusts’ (White 2010, p.46); moreover, it is noted that the current number of NHS trusts across England has been estimated to 120 (White 2010). This means that the measurement of performance of the above departments is under the control of these trusts’ administrators – not of the relevant governmental authority, as one could possibly assumed due to the nature of the particular organization. On the other hand, the specific characteristic of NHS regarding its operational structure may not be considered necessarily as a weakness. This view could be based on the fact that the activities and the obligations/ rights of these trusts – as parts of the NHS – are controlled through a series of rules and standards which can be found in the ‘Short Guide of NHS Foundation Trusts, 2005’ (White 2010, p.46). In any case, the use of an appropriately customized performance measurement system, such as the Balanced Scorecard, could help NHS to achieve a stable growth. The above view is included in the study of Protti (2002) and is based on the fact that the balanced scorecard could help to measure the organization’s performance from: ‘the financial perspective, the internal business process perspective, the customer perspective, and the learning and growth perspective’ (Protti, 2002, p.221); therefore, the achievement of a long term growth would be more feasible if the specific performance measurement system was introduced in NHS. A similar suggestion is included in the study of Goddard et al (1999); however, a different criterion is used for choosing the performance measurement system that could support the growth of NHS. More specifically, in accordance with the above researchers, the performance measurement system implemented in NHS would be able to effectively capture information – in this way, the knowledge management problems of the organization, as highlighted above (Bali 2007) could be effectively addressed. Moreover, Goddard et al. (1999) note that managers in NHS should take into consideration the value of ‘soft’ information, and not so much of the formal requirements, when having to decide on the performance measurement system used across the organization. The trend of NHS to cooperate with other organizations in order to serve the needs of the public is also emphasized in the study of Klein (2006); in the above study it is explained that the change in the managerial practices and the operational activities of NHS can be identified in 1997; it was at that year, through the White Paper, that the NHS was given the following power: the organization could interact with ‘other agencies in order to solve social problems’ (Klein 2006, p.196). At the next level and under the pressure of the risks that the dependency of NHS on private healthcare institutions would have, the British government has decided to establish ‘Health Care Zones’ (Klein 2006, p.196); within these zones the terms of cooperation between the NHS units and the private healthcare organizations could be better supervised ensuring the high quality of the healthcare services provided to the public. However, the above ‘Healthcare Zones’ would lead to the following result: the potentials of managers in NHS to take initiatives in regard to the management of their unit would be limited – the options for strategic alliances – referring to the organizations of the private healthcare sector – would be reduced. In other words, the intervention of the state in the management options of NHS units can be considered as rather negative – in terms of innovation. On the other hand, the benefits of the above governmental initiative cannot be ignored: through the establishment of these Zones, the British government 3. Conclusion The development of performance measurement systems in healthcare organizations has been proved to be an effective solution in order for the growth of these organizations to be achieved – even in the long term. In the case of NHS, the achievement of the above target seems to face delays. Indeed, in a relevant report of the Department of Health in 2007 it is noted that ‘the use of accountancy rules for covering unjustified expenses across the organization’ (The Stationery Office 2007, p.132) has been one of the main deficits in NHS. In the above Report, the improvement of the organization’s financial performance is set as a priority – indicating the key criterion on which the management practices across NHS should be based. On the other hand, the examination of the organization’s management practices led to the assumption that the elimination of operational failures in NHS can be a challenging task; as discussed above, job satisfaction, lack of innovation and lack of modernization are among the issues that top managers in NHS have to face. However, the current style of governance of NHS can be characterized as rather ineffective. The boards of directors of the NHS trusts are able to develop key management decisions along with the Strategic Health Authorities; the fact that the borders of power in NHS are not clearly defined, in the context described above, is considered as the main reason for the delays in the update of the organization’s management practices – including its performance measurement systems. For this reason, it is suggested that in NHS the involvement of performance measurement and management should be primarily defined – in terms of the distribution of the relevant powers; then the potential update of the organization’s performance measurement system and management practices should be attempted. References Bali, R. (2007) Healthcare knowledge management: issues, advances and successes, Springer Conrad, L., Uslu, P. (2011) Investigation of the impact of ‘Payment by Results’ on performance measurement and management in NHS Trusts. Management Accounting Research, Volume 22, Issue 1, pp. 46-55 Davies, H., Tavakoli, M. (2004) Health care policy, performance and finance: strategic issues in health care management. Ashgate Publishing Epstein, M., Manzoni, J. (2006) Performance measurement and management control: improving organizations and society, Emerald Group Publishing Gittell, H. (2009) High Performance Healthcare: Using the Power of Relationships to Achieve Quality, Efficiency and Resilience, McGraw-Hill Professional Goddard, M., Mannion, R., Smith, P. (1999) Assessing the performance of NHS Hospital Trusts: the role of ‘hard’ and ‘soft’ information. Health Policy, Volume 48, Issue 2, pp. 119-134 Joint Commission Resources (2008) Tools for Performance Measurement in Health Care: A Quick Reference Guide, Joint Commission Resources Kazandjian, V., Lied, T. (1999) Healthcare performance measurement: systems design and evaluation, ASQ Quality Press Klein, R. (2006) The new politics of the NHS: from creation to reinvention. Radcliffe Publishing Protti, D. (2002) A proposal to use a balanced scorecard to evaluate Information for Health: an information strategy for the modern NHS (1998–2005). Computers in Biology and Medicine, Volume 32, Issue 3, pp. 221-236 Stenzel, C., Stenzel, J. (2003) From cost to performance management: a blueprint for organizational development, John Wiley and Sons Swayne, L., Duncan, W., Ginter, P. (2006) Strategic management of health care organizations, Wiley-Blackwell Τalbot – Smith, A., Pollock, A. (2007) The new NHS: a guide. Routledge Taticchi, P. (2010) Business Performance Measurement and Management: New Contexts, Themes and Challenges, Springer Τhe Stationery Office (2007) Department of Health departmental report 2007. The Stationery Office White, T. (2010) A Guide to the NHS. Radcliffe Publishing Young, D. (2003) Management accounting in health care organizations, John Wiley and Sons Read More