Moving Toward Strategic Planning

Unique To Healthcare
PETER M . GINTER, P H . D . , AND LINDA E. SWAYNE, P H . D .

T H E TWO FEATURE ARTICLES in this issue present the state of tlie art in and
the application of strategic healthcare planning.

THE TEN BEST PRACTICES AND FOUR STAGES OF

SOPHISTICATION
In examining the state of the art, Alan Zuckerman identifies ten best prac-
tices. Apparently, performing well on the first nine of the ten positions an
organization at stage two in his four-stage model of strategic planning sophis-
tication. Performing well on number tenmanaging strategicallyvaults an
organization into stage three. To achieve the highest level of sophistication
(stage four), Zuckerman proposes that the organization needs to employ an
additional five practices drawn from "pathbreaking" companies outside of
healthcare.
Zuckerman asks, "What should healthcare organizations do to increase
the rigor and sophistication of their strategic planning practices?" One might
argue, "Nothing!" If planners and executives are in agreement and pleased
with the results (as reported in his study), perhaps making strategic planning
more complicated and time consuming (rigorous and sophisticated) may not
be such a great idea. His assumption seems to be that "more advanced" will
mean more effective in the long run, but at the margin, the time or cost
required or the degree of effectiveness gained may not be worth the effort.
Zuckerman's best practices are separated into five that are related to the prod-
uct and five that address the process of strategic planning. Only the fifth prac-
tice, achieve real benefits, is actually a product; all the rest are processesthe
means and not ends in themselves. Furthermore, all ten best practices are not
created equal, but rather several serve as inputs to others. In addition, the five

Peter M. Ginter, Ph.D., is professor and chair ofthe department of health care
organization and policy at the School of Public Health ofthe University of
Alabama at Birmingham; Linda E. Swayne, Ph.D., is professor and chair ofthe
marketing department and interim chair ofthe management department in the
Belk College of Business, The University of North Carolina at Charlotte.

PETER M . G I N T E R A N D L I N D A E. SWAYNE 33
 practices (planning characteristics) out-
lined by Zuckerman and drawn from
pathbreaking companies outside ofthe
healthcare sector are actually "characteris-
tics" or "qualities" for performing the ten
best practices.
STAGE-FOUR STRATEGIC PLANNING
FOR HEALTHCARE
For years we have advocated that health-
care organizations should adopt strategic
management practices developed in the
business sectorespecially considering
the relatively long history of strategic
planning in business and the relatively
short history of its use in healthcare. Cer-
tainly, in the late 1980s and 1990s many
healthcare organizations had much to
learn from pathbreaking companies. It
appears that this approach has, for the
most part, worked pretty well. As a result,
healthcare organizations have come a
long way in installing strategic planning
and management practices since their
cost-plus protective covering was ripped
away in the mid-1980s.
Transferability
Practices from pathbreaking companies
outside ofhealthcare for "stage-four
strategic planning," however, may not
transfer to healthcare. It is not that
increased rigor and sophistication of
strategic planning practices (stage-four
strategic planning) is not an appropriate
goal for healthcare organizations or that
the pathbreaking company's planning
models do not provide some useful
insights, but rather that an entirely dif-
ferent type of stage-four planning may
be requiredone that acknowledges
healthcare's unique organizational and
market characteristics. "Coarse grain"
(stage one) strategic planning practices
34 FRONTIERS OF HEALTH SERVICES
may be applied to any industry. "Fine
grain" (stage four) practices may or may
not apply. Healthcare needs to defme its
own stage-four strategic planning quali-
ties. Unique considerations might
include the following.
1. Some strategic alternatives available to
non-healthcare organizations may not be
realistic for many healthcare organizations.
For example, unrelated diversification or
vertical integration may not be viable, as
organizations with a single dominant core
business that is both capital intensive and
human intensive have considerable diffi-
culty operating successfully outside of that
core. Further, service area limitations
restrict market expansion (market devel-
opment) for many services. New technolo-
gies and techniques are often developed
by outsiders (drug companies, research
institutions, teaching hospitals, equip-
ment manufacturers, robotics companies)
and therefore many heathcare organiza-
tions' product development strategies take
a very narrow focus. Finally, contraction
strategies are limited for some healthcare
organizations because services may be
mandated, mission required, or needed by
the communityfor example, emergency
room services, OB/GYN services, or drug
addiction treatment.
2. Healthcare organizations have unique cul-
tures that influence the style of and participa-
tion in strategic planning. For example,
physician managers often maintain a
medical practice as well as conduct their
administrative responsibilities, making
strategic planning an "add-on" responsi-
bility. Thus, strategic planning processes
must be streamlined. Excellence in a
product line is often built around physi-
cian reputation (individual or team) and
not controlled directly by the strategic
MANAGEMENT 23:2
planning institution. Physicians often
operate as independent contractors with-
out ties or much allegiance to the organi-
zation. Many healthcare organizations,
especially hospitals, have semi-
autonomous power centers throughout
the organization. These power centers
may remove objectivity and innovative
thinking in strategic planning. Finally,
many healthcare organizations (especially
hospitals) are hierarchical by nature, tradi-
tion, and culture, and will probably remain
so, thus altering bottom-up planning and
participation.
3. Healthcare has always been subject to con-
siderable outside control. Beyond local,
state, and federal legislative control, one
of healthcare's customersphysicians
drives the entire process. Physicians are
ignored at the healthcare organizations'
peril; however, their wants/needs/desires
are not always what is best for the health-
care organization's other customers
(patients, govemment) or the healthcare
organization itself In addition, payment
systems are unique to the industry, with
outsiders such as Medicare, insurance com-
panies, and other third-party payers wield-
ing considerable pricing and market power.
4. Society and its values place special
demands on healthcare organizations.
The concepts of healthcare as a right,
access to care, quality of life or death,
who will pay for the cost of care, and
other social issues alter healthcare
strategic planning.
Strategic Planning Simply Applied
Strategic planning should not be made
more rigorous or complicated than it
absolutely has to bethe simpler the bet-
ter. Strategic planning is not an end in
itself but rather a means to better results. and structuring participation (two of
PETER M .G I N T E R A N D L I N D A
Greater sophistication may lead to
improved performance, but organizations
must be careful as they invest more and
more in strategic management processes.
Established processes, over time, tend to
become ends in themselves. That stage-
four strategic planning in healthcare is
dramatically different from stage-four
strategic planning in industries outside of
health may be acceptable. Maybe stage-
four healthcare strategic planners have
borrowed all they can from other indus-
tries and must become pathbreaking
themselves.
PLANNING IN AN ACADEMIC
MEDICAL CENTER
Donna Sollenberger provides an illustra-
tive case of strategic planning in an acade-
n
mic medical center (AMC) closely
following the best practices processes out-
lined by Zuckerman. Although most
O
healthcare organizations have faced sig-
nificant change in the past two decades,
nowhere has change been more turbulent
than in AMCs. Their very purpose and
nature have been questioned as their
focus on the sickest patients and those
with the most unusual diseases and con-
ditions threaten their continued existence.
At the University of Wisconsin Hospital
and Clinics (UWHC), the previous "stable
leadership" appeared to have ignored the
significant changes occurring in health-
care in general (and medical centers more
specifically) and seemed to offer little H
preparation for encountering the future.
Sollenberger began the strategic planning
process with an understanding of charac-
teristics that are critical for success as well
as reasons that strategic management fails.
She thus spent considerable time in
ensuring the organization's preplanning
E. S W A Y N E 35
 Zuckerman's "best practices"). Effort was
expended to find the right consultant, but
we believe that consultants are not always
necessary or beneficial. Consultants may
impose on an organization planning tem-
plates that are not right for it, or present a
strategic plan that has been implemented
elsewhere rather than aiding a healthcare
organization to develop its own unique
strategic plan. In addition, a great deal of
time is often spent "educating" consul-
tants on the unique aspects and culture of
the organization.
In attacking critical issues, greater
focus on the external environment and
the future was needed. UWHC focused
on internal problem solving rather than
creating its future (an
k strategic plan is unique approach that may have
for each organization in been appropriate given its
internal problems).
its environment with its UWHC's initial foray into
resources, competencies, strategic planning was
and capabilities. rnore of a problem-solving
exercise emphasizing cul-
ture change. The five subcommittees
seemed to be based on internally identi-
fied problems (the dire statistics
reported) rather than on strategic think-
ing about the organization's future.
Obviously, at the time the focus was war-
ranted and necessary: without fixing the
internal operations, UWHC could not
expect to successfully compete in a
changed external environment. Some
information was gathered from outside
"reactor panels" but we do not have any
information as to how the panels' data
were incorporated into the process. The
external environment has significant
impact on a healthcare organization's
ability to be successful. Phase two ofthe
planning process would prove to be
much more strategic.
36 FRONTIERS OF HEALTH SERVICES
DIRECTIONAL STRATEGIES
Strategic thinking and establishing vision
set the direction for UWHC. UWHC's
mission was a critical component of its
strategic plan, and although a mission
existed, it was not shared with the reader.
A "textbook" vision was developed by the
leadership group; was it shared and com-
mented on by other internal and external
groups.^ The market position statement
contradicts the vision statement: a
"regional healthcare provider" is very dif-
ferent from one that is "foremost in Wis-
consin serving as a statewide and national
leader." UWHC values are really first rate
in two ways: the content ofthe values
themselves and the acronym that makes
them easy to remember and thus opera-
tional for every employee.
UWHC identified five goals. No orga-
nization can undertake and successfully
achieve a large number of goals (three to
five goals are doable). The ten strategies
identified to achieve the five goals
seemed to be additional goals (and were
SO called in their descriptions); we had
some difficulty in aligning them to the
five goals. The use of a model illustrating
the relationship ofthe strategic goals to
the ten strategies would have been benefi-
cial. The question might be, "Did UWHC
really develop a focused strategy and dif-
ferentiate itself from the competition?"
A SIMPLE AND SUCCESSFUL PLAN
UWHC appears to have successfully
managed implementation and was able
to manage strategically. UWHC devel-
oped a plan that was not relegated to a
shelf; managers reported quarterly on
results and dashboards were created.
This organization learned through its
original strategic planning process and
became more aware ofthe importance of
MANAGEMENT 23:2
the extemal environment. The nine new
strategies, developed in the second round,
are stated in a much more patient-focused
and employee-focused manner than the
internally focused original strategies.
Clearly, the leadership of UWHC has
found a process that works for them. The
process may be different from what might
work for another organization, but it
reminds us that a strategic plan is unique
for each organization in its environment
with its resoiirces, competencies, and capa-
bilities. Would the five pathbreaking
processes have helped UWHC? Do they
need to increase their rigor and sophistica-
tion with five pathbreaking practices from
outside of healthcare? We think they are
doing fine.

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PETER M. GINTER AND LINDA E. S W A Y N E 37