Chapter 11 Strategic Human Resource Management

Sociocultural influences

Are consumer preferences based on lifestyles and values. They directly influence major decisions. This is the most important macroenvironmental factor in determining a strategy. Consumer preferences dictate profits. Research indicates that consumers prefer home health care during a prolonged illness rather than a hospital stay. More insurance plans, both private and public, are reimbursing home health agency care because the care is cost effective.

fundamental HR management (HRM) process:

Recruiting, training, developing, and retaining appropriate employees. Is a fundamental HR management (HRM) process that contributes to the strategic planning process because the appropriate human capital is needed to achieve both short- and long-term success (Inyang, 2010). The HR department should align its policies with the strategic planning of the organization to ensure a sustained competitive advantage.

According to Lombardi (2017):

"approximately 30% of organizations used workforce data and analytics and less than 50% of organizations feed data from workforce planning back into their recruiting processes. This process needs to change. HR and management need to collaborate on the use of HR metrics. The metrics are routinely collected. HR needs to share the data with management to close the loop."

Examples of financial objectives are:

(1) increase annual revenues by 18% or (2) increase annual profit margins by 3%. Financial objectives measure what the organization's performance was in the past. Historical financial data are analyzed to assess if the objective was achieved.

Examples of strategic objectives are:

(1) increase market presence by 10% by 2020 and (2) acquire one healthcare agency by 2022. Strategic objectives measure what future action will be taken by the organization.

SWOT Analysis: Healthcare Organization:

-Strengths- Reputation Accreditation Employee satisfaction (HRM) Patient satisfaction Location Award-winning services (HRM) High occupancy rate -Weaknesses- Competitive market Leadership turnover (HRM) Medicare reimbursement issues No management succession plan (HRM) Weak strategic plan (HRM) New healthcare legislation -Opportunities- Merge with other healthcare facilities (HRM) Purchase another facility Improve information technology (HRM) Expand patient services -Threats- Increased competition New technology adaptation Labor shortages (HRM) Economy Financial issues Accreditation issues Employee issues (HRM)

To execute the strategy to achieve the desired objectives, the following must occur:

1.) Employees must have the required skills and knowledge to implement the strategy. 2.) There must be adequate financial resources allocated to strategy execution. 3.) The infrastructure of the organization must support strategic implementation. 4.) Employees must be motivated to execute the strategy. Tying incentives to productivity to achieve the strategy is an option. 5.) The importance of strategy execution must be routinely communicated at all organizational levels (Thompson, Peteraf, Gamble, & Strickland, 2012).

The role of HRM in the process is explained.

1.) Employees work as a team: The concept of teamwork is common in the healthcare industry. Patients often require a team of providers for treatment. The HR department will provide training to employees on how to work well in teams. Employees participate in the selection of other 2.) employees: If nurses need to be hired, existing nurses should be included in the review of résumés and should participate in the interview process. They are familiar with the job responsibilities and can be intuitive about who would be successful in the organization. A priority in the hiring process is to create a diverse workforce who are representative of their patients. The HR department will develop a process for employee selection and will train employees on how to interview and select employees. 3.) Formal performance feedback is an active process: A performance feedback system must be implemented in a timely manner, and feedback must be taken seriously by all parties to improve employee performance. In conjunction with management, the HR department will develop a feedback system that is appropriate for the healthcare organization. 4.) Employee rewards are linked to organizational performance: Healthcare organizations can link employee performance to healthcare quality indicators developed by the Agency for Healthcare Quality and Research, such as prevention quality indicators, inpatient quality indicators, and patient safety quality indicators (Quality Indicators, 2018). The HR department will provide training to assess these types of metrics. 5.) Technology is used to maximize processes: The organization must be scientifically current with any recent technologic advancement that can improve patient safety and care and that can improve organizational processes. The HR department would coordinate training programs to ensure that appropriate employees use this technology correctly. 6.) Ethical behavior is encouraged: The HR department will provide ethical training to all employees and will develop a code of conduct that is actively used with enforcement if unethical behavior occurs. 7.) Employees must understand the importance of their jobs to the organization: The HR department will provide training to employees regarding their understanding of the importance of their roles in the organization. If employees feel empowered, their performance will be at a higher level. 8.) Employees participate in any process or equipment changes: In conjunction with senior management, if there are changes that occur in an organization, the employees must be asked for input regarding any changes. If they believe their jobs are not challenging, then the HR department will change the job design or create different goals for the employees.

Resurrection Health Care

A flood of disciples restoring marginalized and unreached communities with the Kingdom of Jesus. The Resurrection Health Care vision statement reflects the organization's focus on its religion and concern for improving healthcare disparities.

Mission and Vision Statements

A mission statement describes an organization's current activities and purpose. A vision statement provides guidance about the aspirations of an organization. With any mission and vision statements, the role of the human resource (HR) department is to ensure that there are employees in place who have the skills and knowledge to achieve the mission and vision of the organization.

Organizational Quality

A strategic goal of any healthcare organization is the quality performance of the employees, which translates to quality service to healthcare consumers. The Institute of Medicine (1998) created the most accepted definition of quality in the healthcare industry: patient services current with scientific knowledge that result in a desired health outcome. This definition targets the relationship between the provider and the patient or population. In addition to this relationship are the activities and the structure involved in the provision of care, which would include the facility itself and other personnel directly or indirectly involved in patient care. To maintain a high-quality organization, the HR department provides policies and procedures for all organizational levels. This concept of quality is inherent in healthcare strategic planning to ensure that quality is a long-term strategic objective. This chapter will focus on the five steps of strategy development and implementation introduced earlier in this section and the role of HRM in the strategic management process.

Dealing with Workforce Shortages:

According to Dixon (2017), healthcare workforce shortages face unique challenges. Increasing the number of available physicians and nurses takes time because of the educational and licensing requirements, and it impacts the industry because of an overworked clinical workforce. The following are recommendations to ease this labor issue: 1.) Using technology to increase efficiency and employee satisfaction 2.) Increasing licensing reciprocity in different states, which increases access to care 3.) Increasing use of telemedicine, which increases access to care 4.) Increasing use of nurse practitioners who can prescribe medicine 5.) Increasing reliance on workforce data to project workforce needs more accurately Dealing with labor shortages is a challenge for healthcare organizations. The HR department and HRM must develop an organizational culture that offers flexibility for work-life balance, encourages employee empowerment, is a leader in change, offers professional development for employees' careers and training to enhance their job performance, and encourages quality performance by offering incentives. These strategies will increase employee retention and performance, which will also lower employee turnover.

Attractiveness of an industry

According to Michael E. Porter, the attractiveness of an industry, or how profitable an industry can be for a company, is the result of five competitive pressures in the market: rivalry or competition, suppliers of resources needed by the organization, substitute products or alternative services that a customer can choose, potential new organizations entering the industry, and buyers of the product or service. According to Porter, each force needs to be assessed according to its level of power over the organization—low power, medium power, or high power of influencing the organization's efforts to be profitable. If the analysis indicates these forces have high power, then it may be a poor decision to open a home health agency. If it is determined that the forces have low power, then this may be an opportunity for the hospital to increase revenues (Porter, 1979). The following is an analysis of the hospital's industry using Porter's model to assess whether opening a home health agency is a viable option.

characteristics

According to Noe, Hollenbeck, Gerhart, and Wright (2011), high-performance work system characteristics consist of the following items. Any healthcare organization can use all of these system components.

Macroenvironment

Analysis is influenced by two levels of the external environment: the macroenvironment and the immediate or industry environment. The macroenvironment is composed of the following influences: economic, technologic, sociocultural, demographic, governmental, and legal (Thompson, Peteraf, Gamble, & Strickland, 2012). Each of these influences can impact a healthcare organization. As an example, consider the macroenvironmental influences on a hospital's decision to expand its facility to increase potential revenues. The hospital's senior administration is researching whether to open a home healthcare agency.

Substitute products or services

Are any alternatives a consumer would have to select instead of a home healthcare agency service. A substitute product or service could be a family member caring for the individual. Another option could be placing the homebound individual in an institution. Both are options, but they have limitations. A family member often becomes exhausted from this type of care and eventually opts for home health care. Using an institution for health would be more expensive and require additional copayments from the family or individual. Analysis: low to medium power.

Pfizer Inc.

At Pfizer, we're inspired by a single goal: your health. That's why we're dedicated to developing new, safe medicines to prevent and treat the world's most serious diseases and why we are making them available to the people who need them most. We believe that from progress comes hope and the promise of a healthier world. Pfizer's vision focuses on creating medications that are safe and increasing the availability of medications to the consumer.

CHAPTER VOCABULARY

Barriers to entry Buyer forces' power Competition Demographic influences Economic influences Employee turnover Employee turnover rates Financial objectives High-performance work system High-performance work system characteristics Human capital metrics Human resource metrics Industry attractiveness Labor budget Leave of absence rates Macroenvironment Mission statement Outsourcing Porter's Five Forces analysis Productivity loss rate Quality Ratio analysis Recruitment and selection rates Sociocultural influences Strategic management Strategic objectives Strategic thinking Strategy Strategy execution Strategy evaluation Substitute products or services Succession plan Suppliers Strengths, weaknesses, opportunities, and threats analysis (SWOT) Talent analytics Trends analysis Vision statement Workforce planning

Dana-Farber Cancer Institute

Dana-Farber Cancer Institute's ultimate goal is the eradication of cancer, AIDS, and related diseases, and the fear that they engender. The Dana-Farber Cancer Institute's vision is to eradicate cancer and other major chronic diseases that scare people. Like the mission statements, these vision statements are formulated to inspire employees and the world about their organization's future plans.

balanced scorecard approach

Developed by Kaplan and Norton in the 1990s, the balanced approach is used to assess an organization's performance by setting both financial and performance objectives. Financial data, as well as business operations, customer management, and HR data are collected to provide a balanced view of performance (Balanced Scorecard Basics, 2018).

Federal Emergency Management Agency (FEMA)

FEMA's mission is helping people before, during, and after disasters.

Healthcare Organizations' Mission Statements:

Federal Emergency Management Agency (FEMA). Centers for Disease Control and Prevention (CDC). Mayo Clinic. Each of these organizations has developed one powerful statement that clearly indicates the overall focus of their organization. both FEMA and the Mayo Clinic have chosen one very impactful mission statement, and the CDC has opted to develop a more robust statement. Neither statement is incorrect; it is a matter of preference.

Performance Objectives

Financial and strategic objectives measure the performance of an organization to ensure that the organization is achieving its mission and working toward its vision. Once the objectives are defined, a strategy is developed and executed based on the capabilities of the organization and the influences of the external environment.

vision statement

Focuses on where the organization is headed. The vision statement is a futuristic and inspirational statement. It contains a long-term goal and often includes information about how the organization is going to achieve that goal.

Advances in technology

Have led to new capabilities in patient care using improved medical procedures and equipment. Technology has become an integral component of health, which is a cost to the agencies. Technologic advances in portable medical equipment have increased the number of home healthcare agencies. More care can be provided on an outpatient basis because of these advances. A major technologic advance is the use of electronic medical records, which allows rapid transfer of patient information electronically. This technology has a positive impact on home health care, increasing the efficiency of its operations.

Employee turnover

In a healthcare organization is very costly. The HR department can play a role in developing an organizational culture that empowers employees and encourages their productivity. Another integral role that the HR department plays in strategic planning is forecasting the supply of labor and the future labor demands of the healthcare organization. In addition to finding qualified employees for the organization, budgeting for labor costs is necessary because labor costs are the greatest operating expense of a healthcare organization.

Demographic influences

Include age, race, income levels, ethnicity, geographic location, education, family size, and life expectancies. Statistics indicate that the population is living and working longer, which results in chronic healthcare conditions, such as obesity and diabetes. Therefore, the development of a home healthcare agency may be an option for the hospital for these reasons.

Buyer forces' power

Is linked to how many substitute products there are, how frequently the buyer purchases the service, how loyal the buyer is to an existing provider, and if there is a cost for a buyer to switch to another service provider. There would not be any costs involved in switching from one home health agency to another, provided the insurance covers the new agency. The main reason that consumer power would be high is because most consumers have strong loyalty to their healthcare providers and often form bonds with them. A well-developed marketing strategy would need to be developed to emphasize superior customer care. Analysis: high power.

Strategic thinking

Is the ability to assess the organization's operations with a long-term perspective using creativity and intuition. It is about what to modify or eliminate (Harris, 2018). HRM plays an integral role in the strategic management of any organization, including healthcare organizations. In order for a healthcare organization to be competitive, it must provide quality care to its consumers or patients. Quality care comes from quality employees. Quality employees come from quality HRM procedures, which include a recruitment and selection process that will find the appropriate employees for an organization. The HR department must provide appropriate training for employees as healthcare organizations evolve and change their strategic plans. Long-term planning also requires employees to remain up to date with the newest scientific information regarding health care.

Workforce planning

Is the biannual or annual process of planning an organization's future job openings at all levels. There are operational workforce planning and strategic workforce planning (Dessler, 2012). Workforce planning can be difficult due to the continued healthcare workforce shortages. As part of workforce planning, the HR department assesses rates for workforce shortages and internal workforce organizational changes due to employee turnover, layoffs, and any strategic changes.

Strategy execution

Is the most difficult step in the strategic management process because management is converting plans into actions. Executing the chosen strategy occurs at every level of the organization.

Competition

Is the strongest force of the five forces. If there are several home healthcare agencies that would compete directly with the hospital's new agency, then it may not be the best opportunity for the hospital to increase its revenues. Existing agencies may already have a dominant market share. The hospital may still have an opportunity to start a home health agency, but it may determine that it should be placed in a different geographic location. If it is determined that there are existing home health agencies that have dominated the market, then the power of the competition is high. If there are few competitors in this market, then the power of the competition is low and, therefore, the opportunity is more attractive. Analysis: low to high power.

Based on the macroenvironment analysis, Porter's Five Forces analysis, and the SWOT analysis:

It appears that starting a home healthcare agency could be beneficial to the hospital. Even if it is determined that the strengths and opportunities of the organization are positive, to ensure that this new venture is successful, the weaknesses of and threats to this hospital cannot be ignored and must be addressed in order to proceed.

Strategy Evaluation

Once the strategy is executed, the final phase of strategic management is strategy evaluation by reviewing financial and strategic objectives. Strategy evaluation is the appraisal of plans and their results. According to Rumelt (1999), the strategy must be consistent with the mission, demonstrate a competitive advantage, and emphasize the strengths of the organization. If these objectives are met, then the strategy should be monitored to ensure that there is no change in the external environment or within the competitive landscape. If the objectives established are not met, then the strategy must be reviewed with respect to changes. The process of changing a strategy is the responsibility of senior management. The time frame for corrective action varies from days to months.

Barriers to entry

Refers to the limitations that are imposed on a potential competitor to entering the home healthcare industry. Barriers to entry typically include high capital requirements, high level of regulation, specialized knowledge needed to enter the industry, or the power of existing competition already present in the market. Start-up costs for a home health agency are not high. There could be some issues with labor supply shortages, which could be one major barrier. If there are many government regulations that an organization must adhere to, these would be a barrier to entry. Analysis: medium to high power.

Three vision statements of different healthcare organizations:

Resurrection Health Care, a Chicago-based Catholic healthcare organization; a global pharmaceutical company, Pfizer Inc.; and the world-renowned healthcare organization, the Dana-Farber Cancer Institute.

labor budget

Should predict the following: staffing levels; salaried versus wage employees; labor expenses, such as overtime; benefits, such as paid time off and health insurance; monetary benefits; and taxes, such as payroll and unemployment taxes (Fried & Fottler, 2008). If an organization has determined that it does not have employees who can perform in an area of expertise, the organization will outsource the activity.

Centers for Disease Control and Prevention (CDC)

The CDC works 24/7 to protect America from health, safety, and security threats, both foreign and in the United States. Whether diseases start at home or abroad, are chronic or acute, curable or preventable, human error or deliberate attack, the CDC fights disease and supports communities and citizens to do the same. The CDC increases the health security of our nation. As the nation's health protection agency, the CDC saves lives and protects people from health threats. To accomplish our mission, the CDC conducts critical science and provides health information that protects our nation against expensive and dangerous health threats and responds when these arise.

Mayo Clinic

The Mayo Clinic's mission is 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.

HR metrics

Which assesses organizational performance. Several examples of HR metrics include turnover rates, revenue per employee, promotion ratios, and worker's compensation rates (Merrill, 2012).

High-performance work system (HPWS)

Which consists of the appropriate employees, technology, and structure that are put in place for strategy execution. Research has indicated that this type of system recruits more job candidates, is more selective in its hiring process, and spends more hours providing employee training (Dessler, 2012).

Once the mission and vision statements are formulated:

a separate mission and vision statement should be formulated by each department of the organization. The departments of each organization must develop separately a mission and vision statement that complements the corporate mission and vision statements. These lower-level statements will further strengthen the focus of the organization.

Financial objectives

are lagging indicators of an organization's performance. They measure what the organization has already accomplished.

Strategic objectives

are leading indicators of what the organization would like to achieve. Strategic objectives focus on market standing and improving competitive vitality (Thompson, Peteraf, Gamble, & Strickland, 2012).

HR metrics

assesses the operational efficiency and effectiveness of HR. If any of these metrics reflects poorly on the organization, then HR and management need to develop solutions to these problems.

Economic influences

can occur at the national and local levels. In 2018, the U.S. economy is doing well with a low unemployment rate and little inflation. These economic conditions may or may not be occurring at the local level, but most likely there will be an impact because of national conditions.

Succession Planning

consists of a strategic plan that identifies replacements for key employees, such as a CEO. But there is talent at all levels, so it is important to plan for replacements throughout the organization. In a healthcare organization, it is just as important to identify key replacements for lower-level employees, such as the information technology executive, laboratory technicians, physical therapists, or other knowledge workers (Pawlak, 2018). In conjunction with management, the HR department should develop a plan to address the replacement of these key workers.

SWOT analysis

examines the strengths and weaknesses of a company and the opportunities of a company (what situations are available to the company that could be positive for their position), as well as threats (what issues exist that could negatively affect the company's situation). This SWOT analysis is unique because of the role of HRM in the strategic planning. For example, there are seven typical strengths identified for a healthcare organization. Of the seven, two—award-winning services and employee satisfaction—are a direct result of the positive role HRM plays in an organization, as the HR department provides training for the employees. Of the six identified weaknesses, leadership turnover, no management succession plan, and weak strategic plan all are a result of weak HRM. The HR department can turn these weaknesses into strengths by improving the selection plan for hiring employees and working with senior management to develop a succession plan and a strategic plan for the organization. There were four opportunities identified, of which HRM could assist with two: information technology training for employees to improve efficiency and assistance with counseling of employees during a merger with another facility. Finally, of the seven threats identified, the HR department could help the organization manage labor shortages by training employees for job rotation and could train senior management on how to deal with employee issues. HRM can play a positive and integral role in strategic planning. A SWOT analysis is both an external and an internal analysis of a company's current situation.

Talent analytics

is about making workforce decisions based on the metrics (Feffer, 2017). According to Feffer (2017) and Davenport, Harris, and Shapiro (2010), several HR metrics are analyzed, including: 1.) Employee turnover rates: Turnover can be both internal and external to the organization. Employees not only leave the organization through quitting, firing, and retirements but also transfer within departments. Each case should be analyzed. 2.) Leave of absence rates: This metric includes maternity leave, disability, injuries, or illness. 3.) Productivity loss rate: This metric can result, for example, from employee dissatisfaction or family illness. 4.) Recruitment and selection rates: How successful is the HR department in recruiting and selecting qualified employees? 5.) Organizational growth: If the organization expands, how many employees will be needed?

Strategy

is management's plan for operating the organization over the long term. Beckham (2016) describes strategy as a plan for getting from the present to a point in the future with uncertainty and resistance to change. With the dynamic changes that occur in the healthcare industry, this definition is appropriate. The goal of a strategy is to achieve a competitive advantage. The process of crafting a strategy consists of these elements: 1. Mission and vision statements 2. Performance objectives 3. A strategy to achieve the objectives 4. Strategy execution 5. Performance evaluations and development of 6.corrective actions based on the evaluations

A SWOT analysis:

is performed before strategy development. In addition to the SWOT analysis, a Porter's Five Forces analysis is performed to assess the industry's conditions to determine what strategy can be implemented to give an organization a competitive advantage. The Five Forces analysis examines forces in an industry: barriers to entry, competition, buyers, suppliers, and substitute products or services that are available to buyers. Once the strategy is executed, an evaluation of the company performance to assess its success is performed. A strategy may be changed based on the evaluation process.

ratio analysis

is performed to assess the number of employees who will be needed to satisfy the increased services. For example, if a hospital decided to add two new pediatric care floors, it will need to determine the ratio of registered nurses (RNs) to patients and the support staff needed per floor. If there will be 24 patients per floor with a ratio of one RN per eight patients, the organization will be required to hire three RNs per floor for a total of six RNs. In addition to the actual wages paid, payroll and unemployment taxes must be calculated.

Turnover rates in the healthcare industry occur at all employee levels:

physicians, nurses, senior management, and administrative staff. Voluntary turnover (quitting) occurs with physicians and nurses because of professional disillusionment or being overworked because of labor shortages. This level of turnover can be devastating to an organization because there is a disruption in patient care, which could influence the quality of care. The cost of a turnover can be over 150% of an employee's salary. The turnover of a physician results in a $200,000 loss to the organization. In 2016, the average turnover was nearly 20% (Growing Turnover Rates Wreck Healthcare Budgets, 2017).

Suppliers

provide materials or labor for an organization. The more specialized and unique a product or service is, the more power the supplier will have over an organization. In this instance, the suppliers for a home health agency would consist of the medical personnel and medical equipment. Medical equipment could be obtained from different suppliers; therefore, the power the supplier would have over the organization would most likely be low. Depending on the types of services offered, supplier power could be low to high. Many home health agencies offer general assistance to homebound individuals, so these employees would be easy to hire. However, depending on the geographic area, nursing labor shortages could exist; therefore, supplier power could range from medium to high.Qualified labor is the key component in providing direct care, so this force has a considerable influence on whether this new venture would succeed.

mission statement

should include four elements: the purpose, the specific business, geographic location, and customer base. According to Hader (2006), a mission statement should be more than just a written exercise. It should be the foundation of a realistic and attainable goal. To develop a mission statement appropriate for the organization, senior management should ask for initial input from employees, review organizational documents, and, as the mission evolves, should receive continued input from employees at all levels. An active agenda should be developed to educate the staff on how to achieve the organization's mission. In addition, there should be an evaluation process of the organization's activities to ensure that the mission statement is achieved by all employees. TABLE 11.1 lists examples of healthcare mission statements. Some organizations have only a one-sentence mission statement, and other organizations have a mission statement that comprises several sentences. Once a mission statement is developed, a vision statement will also be crafted for the organization.

The Porter's Five Forces analysis indicates:

that there is a mix of low to high power of the five forces. If the new agency is structured appropriately, the power of the five forces could be limited to low. Potentially, this industry could be attractive. However, to assess the success of this industry choice, a SWOT analysis must be performed in conjunction with Porter's Five Forces analysis.

Trends Analysis

to assess positive or negative trends. The HR department must also compare these rates with industry rates. If the organizational rates are below industry rates, no action may be needed. However, if the organizational rates are above industry rates, then action must be taken.

Outsourcing

which consists of hiring an individual(s) external to the organization, is becoming more prevalent in healthcare information technology because of its rapid changes and its increased use in daily activities. If the organization determines that there are no employees who can provide a quality performance and expertise in a certain specialty, it will outsource the activity to an external individual. Outsourcing can be a cost-saving measure because the organization typically does not pay for the individual's benefits, thus decreasing substantial labor costs. A disadvantage of outsourcing activities is the potential lack of loyalty between the parties, as the outsourced individual is not truly part of the organization. If an organization outsources activities, the HR department should provide an orientation about the organization to the individual, so that the person can develop a sense of loyalty to the organization.