Strategic Practices in Nonprofit Hospitals: the Convergence of Social Mission and

Sustainability
Autoria: Lucilaine Pascucci, Victor Meyer Jr., J. Patrick Murphy

Abstract
Nonprofit organizations play a significant role in society. Environmental changes and fierce
competition for scarce resources frustrate nonprofit organizations. Hospitals must improve
management practices if they want to survive as the complex and socially-relevant institutions
they are. Hospitals cannot sustain themselves on mission alone—no matter how important
their contributions to society are. Learning to cope with scarce resources and manage
strategically has challenged managers in every kind of formal organizations. Hospitals have
been under the severest scrutiny in recent years—nonprofits especially. This study analyzes
the strategic practices developed by a nonprofit hospital in Brazil to balance the social
mission with financial sustainability of the organization. The research is characterized as a
qualitative research at a well-known, comprehensive, nonprofit, oncological hospital located
in Curitiba, Parana, Brazil. Researchers conducted interviews of fifteen top, middle, and lower
managers, made observations, and collected archival documents for analysis. The study
reveals that the mission of the hospital has been an inspiration for the main decisions and
actions taking place within the hospital. Researchers found evidence that the mission
represents the glue that holds together people at the hospital. Managers support sustainability
efforts by creating a vision for the future that is widely shared by top, middle and operational
managers. Strategic practices are being developed at various levels in the hospital by a variety
of professionals through efforts like fund-raising, marketing, community relations and internal
managerial functions in general. Some practices are micro-strategies such as activities
undertaken by managers and volunteers working together. Examples include launching fund-
raising campaigns, improving the public image of the hospital through public relations,
administering the gift shop, and expanding the partnerships between the hospital and
corporations, foundations and government agencies. These strategic practices led to the
development of partnerships whereby the hospital produces and sells catheters as a related
business. The business generated a new revenue stream creating much-needed income to
improve hospital sustainability. The hospital is heavily dependent on public funds as a portion
of total income. Another revenue source is donations. As the number of donors and the
amount of donations per donor increase, the hospital can expand its social mission and
increase its sustainability. These improvements are results of improved managerial
performance, the strategic practices of volunteers in concert with management and the
institutional focus on mission as its unifying force. Management is building itself a market
orientation but the benefits or effect on performance is not yet measurable. The findings of the
study reveal the importance of strategic practices developed by managers, other professionals,
and volunteers—all unified by the glue of the mission—as key factors to generate stronger
revenues that provide sustainability.

1
Introduction
Nonprofit organizations have long provided benefits and made significant contributions to
society. In recent years hospital performance has become a critical focus of organizational
scholars (Bryson, 2004; Weerawardena, McDonald, & Mort, 2009). According to many,
sustainability is fundamental for the health and welfare of nonprofit institutions (Murphy,
2007); reconciling sustainability with mission has been a severe challenge for hospital
managers—even more so for nonprofits.
It is especially crucial for nonprofit hospitals to survive, they must require management to
provide excellent service while balancing the budget—the whole while building
sustainability. As hospitals have become more important to society as social institutions, they
struggle to balance budgets and focus their mission during times of skyrocketing costs. The
nature of the business demands more highly-qualified medical and administrative personnel,
along with modern and costly technology even while governments and society pressure them
to reduce costs and humanize service.
Hospitals cannot transfer their costs to users because of government regulations, constraints
from insurance providers and, especially for nonprofit hospitals, the social mission imperative
to provide services for the indigent.
Perhaps the greatest challenge for nonprofit hospitals is to carry out their social mission to
provide high-quality health services at a reasonable cost while maintaining long-term
sustainability. Hospitals face significant, constant change as a result of technological
innovation, new legislation, the need for highly-skilled professionals and the increase in
operational costs (Porter & Teinsberg, 2006). All these factors emphasize the need for
talented administrators who are able to craft strategies to meet their challenges, contain costs,
and meet the expectations of diverse stakeholders.
To survive in business, nonprofit hospitals are adopting new managerial practices and
becoming more business-like. As a result of strategic planning, total quality programs,
balanced scorecards, and budget and control systems, hospital managers have been able to
slow the onslaught of pressures from stakeholders and the environment. McDonald (2007)
suggests that survival in a changing and competitive environment demands that nonprofits
operate more like for-profit organizations by incorporating sophisticated management tools to
achieve sustainable performance while pursuing their social missions.
For nonprofit hospitals mission and values are the twin anchors in making decisions subject to
opportunities presented and resources available. Each of these concerns has a great impact on
the strategies developed. A major concern of managers is to balance efficiency and
effectiveness in operations while providing health services that add value and fulfill the social
mission. For some hospitals the issue is mission or sustainability, for nonprofit hospitals the
issue is mission and sustainability. Reconciling mission and sustainability has become the
major challenge to all hospitals; nonprofit hospitals are challenged more than most.
The purpose of this study was to analyze the strategies developed by community hospitals to
balance the social mission with the economic and financial sustainability of the organization.
The object of the study is one large, Brazilian, nonprofit hospital which enjoys a national
reputation as an oncology hospital and research center. The study seeks to answer the
question: what relevant strategies are practiced by a nonprofit hospital to reconcile social
mission and sustainability?

2
Mission and Sustainability: The Challenge to Management
As complex systems, hospitals house an assortment of professionals, medical and
administrative, with varying backgrounds and affiliations who exchanging ideas, experiences
and information, make decisions and enact them. The nature of hospital work is tangible,
intangible and human because it deals with life-and-death decisions daily.
Like other nonprofit organizations, hospitals pursue missions to serve particular social needs
that either are not delivered well by for-profit or governmental organizations or not delivered
at all. According to Moore (2000) the social value added is the ultimate reason for the
existence of nonprofit organizations. For-profits are motivated by profit, increased equity
value, and the wealth of stockholders.
Cravens describes nonprofit hospitals as “missionary organizations,” meaning “mission-based
organizations” (2006, p.15), because their purpose is to make a contribution to the social order
(Boddewyn, 2003) and add social value (Moore, 2000). Thus, the mission of nonprofits
defines the values intended to benefit stakeholders and society (Moore, 2000, p.183).
Essentially the mission of hospitals is known as promoting health by rendering a variety of
services provided by professionals working together. Each hospital further distinguishes itself
in the quality of care or organizational values. For instance, hospitals sponsored by religious
organizations may incorporate the distinctive values of the sponsoring religious group or
patron. Several examples from the US include the Franciscans, Daughters of Charity,
Seventh-Day Adventists, and many others—all sponsors of hospitals with different missions
and values.
Today the healthcare sector is itself seriously ill. One poignant reason for this illness is the
growing gap between the declining quality of services rendered and the increasing costs and
limited accessibility by the underprivileged (Christensen, Grossman, & Hwang, 2009). It is
increasingly difficult to provide quality and reliable medical care in a diverse market
populated with patients ranging from the impoverished to the wealthy. This situation has
increased competition in the sector by attracting private hospitals to the market serving
patients with private insurance or personal wealth—patients traditionally served by
nonprofits.
Salamon (2003, p. 76) calls attention to a growing identity crisis experienced by nonprofits in
the US. He states that one risk challenging nonprofits is the identity crisis represented by
“[…] a growing tension between the market character of the services it is providing and the
continued nonprofit character of the institutions providing them”. He further points out that
the tension in healthcare is analogous to private universities that experience tension between
mission and corporate sponsorship.
In Brazil the paucity of public support to the health sector has intensified the competition for
funds among nonprofit hospitals. While the operational costs continue to increase, the number
of people able to pay for healthcare declines over time. Nonprofit hospitals, therefore, suffer
from pursuing worthy missions to serve needy patients who cannot pay and for whom public
funding is insufficient. As a result hospitals struggle to pursue the social mission while
balancing the budget. Sustainability is at risk.
Nonprofit hospitals find it increasingly difficult to separate social issues from mission or pro-
bono work. They cannot overlook the need to generate revenue to sustainable operations
(Gilmartin & Freeman, 2002). The central focus is to build a business model that generates
sufficient revenue from paying customers to provide social value by serving those who cannot
pay the whole cost of healthcare. Gilmartin and Freeman (2002) also highlight the urgent need
for hospitals operating on the "business model," generating profit, continue serving in the
3
field of healthcare. The healthcare sector needs both kinds—for-profit and nonprofit. There is
a growing consensus as to which social enterprise will sustain itself more easily (Boschee &
McClurg, 2003).
Some researchers recommend redefining the purpose and mission of nonprofit organizations
(McDonald, 2007). Nonprofit hospitals, they suggest, could cope with the environment
effectively. Others, like Durst and Newell (2001), suggest nonprofits define their missions
more broadly. Still others seek a re-orientation to the market to employ modern managerial
practices (Eikenberry & Kluver, 2004).
The tendency to use the market as a benchmark for nonprofits may create risks to the social
missions themselves. The risk to hospitals comes from the possibility of financial
shortcomings that in turn jeopardize the mission. A study on the increasing market orientation
of health services in the UK has shown improvement in service rendered without any negative
effects on mission (Weerawardena et al., 2009).
To Weerawardena et al. (2009) the environment is driving the need to build sustainable
nonprofit organizations that in turn adopt strategies improve managerial efficiency and
effectiveness. For these authors sustainability for nonprofits essentially concentrates on the
organizational capacity and commitment to survive in service to constituents.
For a hospital, sustainability is the ability to survive over time while maintaining high-quality
of healthcare to all patients, but especially the disadvantaged. For a nonprofit hospital, social
sustainability implies that the organization will be able to meet its commitments to the
government, suppliers, donors, society, and, mainly, their patients. These hospitals are
dependent on stakeholders to fulfill their mission. Sustainability requires stakeholders to trust
in the purpose and commitment of the hospital.
Nonprofit hospitals generate three main sources of revenue: payment for services provided,
government support and donations. In Brazil, as in other countries in Latin America,
nonprofits benefit from tax exemptions—a major consideration for nonprofit hospitals. In
other countries, despite tax benefits hospitals must search for additional funds to balance their
budgets because operational costs are out of control (Christensen et al., 2009).
To cover the cost of services provided, as Bryson (2004) has pointed out, every nonprofit
needs to ensure sufficient flows of revenue to sustain itself. Donors, then, quickly become a
vital resource along with volunteers who provide networks to raise funds to support a variety
of projects. Governmental and corporate support are two more sources of support nonprofits.
The literature on strategic management has focused on sustainability as a fundamental
concern in private organizations. Studies have further discussed the growing need for
organizations to seek competitive advantages by improving their financial performance to
guarantee survival and growth long range. However the literature on nonprofit organizations
does not reflect this concern, despite the increasing vulnerability and challenges they face,
especially in nonprofit hospitals. Yet Murphy (2007) has pointed out the strategic component
of nonprofits—that their missions are their “raison d’être”.
More and more researchers are recommending the notion of "earned income strategies" by
social organizations in the search for sustainability (Peredo & McLean, 2006, p. 60). Under
this perspective management practices adopted by both private and community hospitals are
quite similar because “social entrepreneurship can take place equally well on a for-profit
basis” (Mair & Marti, 2006, p. 39).
For nonprofits it is becoming increasingly difficult to separate social issues from financial
matters. Nonprofit hospitals, like other nonprofits, need to generate sustainable operations
4
(Gilmartin & Freeman, 2002). The central issue is building sustainability while adding social
value through the mission. This requires careful strategic management. Most agree that social
entrepreneurship should have economic independence in order to operate (Boschee &
McClurg, 2003).
As a result, hospital managers face the challenge of building sustainable organizations that
render quality services and add social value while accomplishing the social mission.
Strategies, commitment and involvement of all the participants are needed.

Strategies for Sustainability

All organizations develop strategies one way or another. In Moore`s terms (2000) an
organization has a strategy when there is a commitment to a vision indicating how the
organization is going to operate to create value and sustain itself in the future. However, how
strategies are formed and how their practices are developed differ among organizations in the
nonprofit sector (Oster, 1995; Bryson, 2004).
Fundamental differences exist between managing hospitals and managing traditional formal
organizations. Most managerial approaches have been designed for and applied to for-profits
(Bolman & Deal, 2003; Mintzberg, 1994; Gilmartin & Freeman, 2002; Mintzberg & Rose,
2007). Strategic priorities of nonprofit hospitals are usually concentrated on rendering health
services to the community with government subsidies, private health insurance programs and
patients as end users. Scarce resources, politics and ideologies also restrain strategic choices
and actions in this kind of organization (Johnson, Scholes, & Whittington, 2008).
Complex organizations like hospitals are subject to the bounded rationality of human beings
as described Simon (1997), the autonomy of their members, the interdependence in the
production of goods and services as well as intense relationships among their members—
everyone holding different interests and beliefs (Mintzberg, 1979; Gilmartin & Freeman,
2002). In practice then, strategy occurs interdependently, and is the result of cooperation and
interrelations among participants as agents in charge of the actions that take place in
organizations (Stacey, Griffin, & Shaw, 2000).
These factors have highlighted the need for especially-talented administrators, who can
employ careful planning to align external demands with internal needs and expectations of
multiple stakeholders with resources available. To better meet these complexities, hospitals
have sought to adopt or enhance new managerial approaches using strategic management,
sophisticated budgeting practices and cost analyses while exercising great care over the
quality of service.
In Brazil, the health sector is regulated by the state, which establishes rules and regulations
and sets standards to monitor the services offered by hospitals. Like in many other countries,
the performance of nonprofit hospitals has often been the target of criticism and complaints
by costumers, funders, government agencies, and society.
Scholars have long studied hospitals, examining conflicts in decision making (Shook, Payne,
& Voges, 2005), strategic management, and financial performance (Ginn & Lee, 2006), the
participation of professionals in strategic decisions (Goldstein & Ward, 2004),
implementation of strategies in complex systems (Meyer & Pascucci, 2009) and
organizational sustainability.
Researchers who focus on sustainability have suggested several strategies for adoption to
provide financial sustainability—the application of business principles to fundraising and
employing relationship marketing (Remley, 1996), using identity-based donations and
5
creating cross-sector, strategic alliances (Berger, Cunningham, & Drumwright, 2004). More
common is the practice of relating sustainability to strategic management literature by
focusing on the resource-based view (Barney, 1991), market orientation (Slater & Narver,
1995), or core competencies (Prahalad & Hamel, 1990) thereby stressing the need to pursue
competitive advantages that lead to survival and growth in the long run.
A major difficulty related to the search for sustainability by nonprofit hospitals is its social
status. Many may agree, "at the heart of the discourse is the amoral nature of perceived
healthcare's ‘corporate transformation’ in juxtaposition with the social function of healthcare
service" (Gilmartin & Freeman, 2002, p. 53).
In more recent years a new approach has emerged changing the focus of strategy away from
the rational view predominant in management literature (Whittington, 1996; Johnson, Melin,
& Whittington, 2003; Jarzabkowski, 2003). This new approach, “strategy as practice” (SAP)
focuses on the practices of strategists within the organizational context.

Strategy as Practice
The premise of the strategy-as-practice approach is that organizations do not have strategies
but people do (Whittington, 1996). Within this perspective strategy is an activity undertaken
by people in organizations—the strategist is the center of the strategic scenario—and the
focus is on what actors actually do and the activities they carry out as strategists. Strategic
activity is activity, related or unrelated to the formal, intended strategy, that affects “the
strategic outcomes, directions, survival and competitive advantage” (Jarzabkowski, Balogun,
& Seidl, 2007) of the organisation.
Understanding people and their behavior in doing strategy is one of the key issues in strategy-
as-practice research. Within this perspective, as Whittington (2002) has stressed, the central
concern is over “practitioners, practices and praxis” and to micro-strategies (Jarzabkowski,
2003; Johnson et al., 2003). Practitioners are actors responsible for action or strategizing.
Practices are routines, norms and typical procedures carried out by strategists while thinking
and acting. Praxis refers to the actual activity that actors do in practice or strategizing
(Whittington, 2002).
The focus on micro-strategy is the attempt to bring to the surface and value the work of agents
at various levels and in various units throughout the organization. While top managers
perform key roles in the process of strategy formulation, middle managers also undertake the
crucial work of “doing strategy” or strategizing. Besides, they strategize through the top-down
processes of agenda setting, proposal selection and information filtering (Whittington, 2003,
2006). More recently research studies have examined the role of middle managers as strategic
practitioners (Frølich & Stensaker, 2009; Hope, 2009; Tippmann, Sharkey-Scott, &
Mangematin, 2009).
Based on this approach strategic practices are done either formally and informally by agents
within the organization who are thinking, acting, and making sense of what they do. Typical
activities include making decisions, setting directions, allocating resources, monitoring
results, and exchanging thoughts and experiences.
Understanding how strategizing occurs in pluralistic or complex environments has been a
major concern to strategy-as-practice theorists. In hospitals much of the practices performed
by professionals using a variety of resources may have strategic implications in the broad
managerial sense. With reference to the public sector, professional services and regulated
industries, Jarzabkowski and Felton (2006) identified different aspects of strategizing and
6
organizing. Jarzabkowski (2003) studied micro practices of strategy in UK universities.
Analyzing the strategies in hospitals, Meyer and Pascucci (2009), concluded that most of the
time middle managers—not top managers—are in charge of key (corporate) strategic
practices.
Strategy-as-practice is an adequate framework for analyzing strategies and their practices in
hospitals. This claim is based on the strategic practices in hospitals, as complex organizations,
where professionals manage diversified activities with varying expertise.

Research Method
This is a comparative qualitative case study (Yin, 1987) in Hospital Erasto Gaertner (HEG)
located in Curitiba, Parana, Brazil. The criteria that guided the selection of this case are its
social characteristics, healthcare service, teaching and research, the recent professionalization
and adoption of strategic management and the fact that it was nonprofit. HEG is a major
cancer treatment center in southern Brazil, of international significance in the treatment, cure
and research of cancer. The hospital serves as a teaching hospital and leading center of
research in oncology. To fulfill its mission of "Fighting Cancer with Humanism, Science and
Affection" (HEG, 2009), the hospital has sought alternatives to will guarantee a sustainable
future.

Table 1
Characteristics of the Hospital
Characteristic HEG
Foundation date 1972
Renowned in oncology in
Position in health market
the South of Brazil
Number of staff 1,000
Number of beds 153
Percent of patients using federal healthcare
92%
program (SUS
Average number of patients 12,300 per month
Source: HEG Annual Report 2009

The level of analysis is the organizational; the unit of analysis is the perception of the key
managers about the real strategists and strategic practices adopted by the hospitals to reconcile
its social role and sustainability.
Data was gathered in between August, 2009, and March, 2010, from interviews, non-
participant observation and archival documents. These sources were defined to avoid possible
biases resulting from a single data source, particularly when retrospective analysis was
involved (Eisenhardt, 1989; Denzin & Lincoln, 1994).
For data gathering a semi-structured questionnaire was used, with open and standardized
questions, aiming to identify strategists and strategies adopted by the hospitals to reconcile its
social role and sustainability; special attention was given to practices adopted. The
questionnaire was previously tested and validated by managers of other hospitals. The
researcher interviewed 15 managers directly involved in the strategic management of the
hospital.

7
 Table 2
Characteristics of Respondents
Type Number
CEO 1
Top managers 4
Middle managers 3
Operational managers 7
Total 15
Source: Authors

The interviews were taped and transcribed; transcriptions totaled more than 370 pages.
Researchers also kept notes as non-participant observers which they recorded in field diaries.
In sum, the material transcribed for analysis numbered more than 430 pages. Reports of
activities, leaflets, information gathered from websites were used—documents supplied by
interviewees.
The data were content analyzed. The specific technique was content analysis—categorical
analysis using themes within units. In addition to "presence" and "frequency" researchers also
recorded “intensity," specifically its contextual meaning, according to Bardin (1977). The
variety of methods used for data gathering allowed the use of triangulation (Yin, 1987;
Eisenhardt, 1989) to assure the validity of the information obtained. Triangulation of data
sources was sought in various types of publications, interviews, and observation strategies.

Analysis and Discussion

The overall finding of the study is that the strategic practices developed by the hospital are
quite influential in achieving levels of sustainability in the hospital. The findings indicate that
the hospital’s clear and compelling mission has been a significant driver and inspiration for
decisions and actions that guide major decisions and strategic practices. The number of
volunteers has grown based on the clear mission; new stakeholders are making gifts through
fund raising campaigns
Another mission effect occurs when new sources of income are identified they are reviewed
in terms as to fit with the mission and whether they would improve health care services.
Hospital managers evaluate proposed projects against the mission.
Another finding identified in the study was that strategic practices are carried out by a widely
diversified group of professionals—especially at the micro-level. Both employees and
volunteers conducted fund-raising, marketing and community relations activities; patient care
by employees and volunteers also contributed to the overall improvement of hospital
performance in critical areas. Donations increased because of these efforts based on the
networks created and nurtured by volunteers. The image and prestige of the hospital increased
also through micro-actions of volunteers.
The practices adopted by HEG and identified as strategic were classified into four types: fund
raising, marketing, community relations, and functional.

8
 Table 3
Practices of Sustainability
Type Practices Micro-strategies
Charity events Dinner, campaigns, entrance fees
Fundraising Government agencies and foundations
Tax exemption Incentive campaigns
Fund Planned giving Efficiency and loyalty
raising Donation of goods and
For individuals and businesses
in-kind gifts
Networking
Influence and relationships
Relationships
Related to quality, good management practices,
Strengthen the image
medical reference
Marketing
Product sales Developed for specific campaigns
Social Marketing Search for partner companies
Partnerships, donations, Focus on individuals, businesses and government
Relations sponsorships and support agencies
Volunteer work Psycho-social, assistance and professional activities
Concentration Development for their own use and commercialization
Diversification of market
Functional Focused on attracting patients private and covenants
niche
Cost reduction Campaigns, accountability, meritocracy
Source: Authors

A good reputation serves as a red carpet when it comes to attracting patients, resources and
partnerships. Many practices adopted in the HEG serve to reinforce the image and reputation
of the organization in terms of medical quality and the human touch. As one manager put it,
"a line of action when it comes to improving the external image of the hospital is investing in
quality" and also "we are working hard to strengthen our social foundations of communication
and build an image of efficiency, a hospital facing the prevention of cancer." In the case of
nonprofit organizations, Weerawardena et al. (2009) showed strategy to be fundamental to
managerial efficiency and effectiveness. Several examples show that hospital strategies have
achieved results: HEG was the first charitable organization to receive the seal of hospital
accreditation (HEG, 1998).
As pointed out by Eikenberry and Kluver (2004) and McDonald (2007), HEG adopted
management practices known as ISO 9000 that included budgeting and strategic planning. As
one middle manager said, "these are operational issues, but they are linked to the hospital's
growth strategy to become a benchmark, to be recognized nationally, and to improve the
external image to get more donations and more partnerships with the government." A top
manager added "currently in fundraising, if you want a donation in the long run, you have to
plan and show that the hospital has attempted this through planning and training.”
However, its characteristics are complex (Etzioni, 1961; Kast & Rosenzweig, 1979) and
differentiated with respect to market thereby requiring appropriate management approaches.
Noting the difficulties inherent in this process, a middle manager said "I believe it is very
difficult to generate creativity," paraphrasing Stacey (1996).
When micro-actions improve or strengthen the image or reputation; it is considered strategic.
Accountability, for example, is strategic when practiced at every opportunity and by different
stakeholders. As Gilmartin and Freeman (2002) pointed out, the efforts to integrate and the
convergence of interests among stakeholders are essential to the success of hospitals.

9
Employees and volunteers have used strategies in fund raising which have made important
contributions to fund raising campaigns. Providing healthcare services to the poor enhances
the image of the hospital and provides new opportunities for fund raising. Practices adopted
charity events (such as entrance fees, bingo and dinners), telemarketing, loyalty campaigns for
donors and encouraging donations through tax exemption all continue to make significant
financial contributions to the hospital.
One successful practice of fund raising is the creation of projects to attract contributions from
the public sector, large corporations, and national and international foundations. A top
manager emphasized this by saying that "[…] since then, the hospital has established a new
level of relationship with the leaders of society and the government" and added "when they
[people and companies] see that the government gives us equipment worth a million dollars,
they also come to make donations, because they see and believe that we are reforming and
improving the hospital". One top manager noted about the medical field as a result of
agreements, amendments and parliamentary projects, "we've got a lot of equipment to
upgrade the hospital and maybe the hospital may have, today, one of the best technical parks,
surgery, surgical center and medical care in oncology in Brazil". This micro-action was the
result of making sense of a manager who, according to Orton and Weick (1999), saw the
opportunity, developed a proposal to develop special projects then structured it and trained
people. The team that previously collected donations of $1 per phone call now picks up a few
thousand in a single project. In addition, the acquisition of new equipment is strategic to the
hospital because besides representing a savings of millions, it represents fundamental
technological upgrades to the change in the customer mix desired by the hospital.
The increase in the number of residential customers served by the covenants and HEG is
crucial in terms of sustainability. Today, the largest customer of the HEG is the government
which pays for care for the large proportion of people without private health insurance.
Historically, this kind of service is unprofitable but in 2010 it represented 92 percent of the
patients served at HEG. According to the CEO, to continue fulfilling the mission to "treat all
patients regardless of their soccer team, religion, whether rich or poor, we have to keep the
hospital [...] maintained within a rather complex structure as a hospital, it means talking about
money". Maintenance activities include the search for additional resources to cover the costs
of services rendered to the government as well as upgrading technology. That is, the search
for resources is necessary for the hospital to sustain its mission. As one middle manager said,
"You have to really demonstrate the important points for those who will make a donation to
our mission".
Bryson (2004) states that the quality associated with cost reduction should be a strategy of
nonprofit organizations. An example of this is the strategic practice adopted to reduce costs of
expensive materials used by the hospital. Besides reducing its own costs of surgeries and
medical equipment, HEG produces and sells catheters to companies throughout Brazil—
thereby generating new revenues for the hospital and a much-needed service to others. Micro-
actions such as creating partnerships with universities and research institutes through the
active participation of the Institute of Bioengineering Erastus Gaertner (IBEG) expanded the
product mix by increasing sales by 20 percent compared to previous years (HEG, 2010). As
one top manager stated "one of the catheters developed by IBEG is the only national product.
It is the only one that is developed, manufactured and sold here in Brazil".
Another practical strategy at the hospital is the establishment of partnerships with educational
institutions and the provision of post-graduate courses on cancer topics. HEG, therefore, trains
professionals in the hospital as a service to employees and students at partnership institutions
thereby providing a rare resource to the community. Asked about the financial outcome of
10
such a partnership, a middle manager replied "first of all, we need to empower people. Part of
our mission is to empower people to invest". This advances the mission in the decisions and
strategies adopted by the hospital.
The distribution of HEG revenue in 2010, presented in Figure 1, shows that although
“donations” is representative of the whole, alternative income sources in total are still small.
Comparing the performance between 2006 and 2009, total revenue increased 26 percent over
all sources. Donations alone grew 30 percent; product sales increased 39 percent. Revenues
from health services on the other hand increased only 23 percent. This is because the inability
to attract many more private customers paying full costs and the unchanged rate of
reimbursement from public programs while costs continued to increase during the period.

Vendas de Doações
Produtos 11%
Outros Serviços 2%
2%
Serviços
Educação
1%

Receitas da Área
Saúde
84%

Figure 1. Distribution of Income in 2009

Source: HEG, Annual Report 2010

Besides the aforementioned practices of fund raising, marketing and operations, good
community relations have attracted companies and individuals interested in helping out
financially or through volunteer work. These practices have been supported hospital fund-
raising and assisted in the spread of its social mission.
The use of volunteers and their networks provided another key role in raising funds from a
variety of sources. Fund raising generated resources to help meet the increasing operational
costs and balance the budget. Besides networks, volunteers hosted charitable events, launched
campaigns, operated bazaars, sought funding partners for specific needs of the hospital, and
recruited sponsors and donors. One top manager noted that "the volunteer is the spokesperson
for the hospital, because in this case there is the middle ground, whoever is working as a
volunteer is working because he or she fell in love with the cause." Another top manager
mentioned that "They are in tune with our goals, including the purpose of sustainability and
bring many ideas which we may be looking for or other sources of funds for our survival".
According to the CEO, while they achieve the mission by humanizing care, the volunteers are
crucial in financial terms. They represent unpaid labor, offer help in daily activities, and
provide psycho-social assistance and administrative work. One top manager pointed out, "[…]
11
today I have 400 volunteers doing an activity at the hospital, that would require 300 or more
paid workers to do the job." He continued, "Thus this kind of work is strategic and has a big
impact for us, especially financial".
Three important features of management at HEG were identified, 1) leadership, 2) the role of
stakeholders, particularly volunteers, and 3) managerial approaches to cope with efficient and
effective uses of resources to reduce costs. The study identified that the micro-actions of
actors, especially middle managers, may have assigned resources according to the
contribution towards the quality of services rendered. Agents directly involved in the
operation have different perspectives and approaches to problem solving, according to
Whittington (2002). Hospital practices such as systematic monitoring of results, discussion
forums on controversial issues—with middle and operational managers fully participating—
encouraged managerial creativity and process improvements.
Considering sustainability and social mission, decision making at HEG occurs at different
levels. Micro-actions as processes were developed, disseminated and used by clinical staff,
middle and operational managers. As one manager said "this is what we seek always within
Erastus Gaertner, balance."

Conclusions
The study identified the critical influence of strategic practices at the micro-level. It also
revealed the importance of managerial capabilities in the hospital in coping with a volatile
environment and the high cost of operations in the pursuit the social mission.
As a complex system the hospital needs to constantly learn more professional managerial
practices. For-profit managers have profits to measure performance—easily understandable
for most audiences. Nonprofit managers manage operational surplus but more importantly,
they manage mission accomplishment. This is done by providing quality services at
affordable costs to a range of clients (paying and non-paying) while sustaining the enterprise.
Thus, the functioning and productivity of nonprofits happens with narrow margins and
performance goals that are harder to define. Even the mission is hard to define and implement
most of the time. In this regard hospital managers as leaders have been especially skillful
aligning goals, objectives and actions, while motivating employees and creating a work
climate suitable to carry out the social mission.
Thus, managers have imported practices and measurements from the for-profit sector and
added them to time-honored nonprofit practices such as fund-raising and the use of
volunteers. The results indicate that strategic practices developed by managers, professionals,
and volunteers advance organizational mission and build sustainability. These activities
mainly occur in the form of micro-strategies within managerial practices. These efforts have
spawned new managerial practices and enlarged organizational capacity.
Hospital mission emerged as a critical component of the study in overall effectiveness.
Mission emerged as a unifying reference and source for inspiration for most managers and
volunteers. Stakeholders like volunteers are strongly influenced by the mission in their
decision to join the organization and work for it. Passion among volunteers is often
palpable—an unpaid dividend derived from the match of personal values with hospital
mission. Mission is a source for other stakeholders as well. Corporations, foundations,
governmental agencies, and wealthy people identify with or experience empathy for cancer
patients and those who serve them because of the mission.

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The ability to manage diverse streams of income arose in the study. Hospital managers have
been learning to explore fund-raising, marketing, and community-relations activities through
the work of volunteers—all with the effect of diversifying income sources and strengthening
sustainability.
Some areas and issues remain unaddressed by this study. Deserving further examination are
issues of professionalism in management, management of volunteers, management of fund-
raising, cost containment, the brand and image management, knowledge management, and the
role of mission in stakeholder support. All these issues require a deeper analysis especially in
evaluating their effect on the performance and sustainability of the organization.

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