COMH 321: HEALTH SERVICE MANAGEMENT

TOPIC THREE: STRATEGIC MANAGEMENT AND DECISION MAKING

3.0 Introduction

Welcome to topic three. This topic will cover the following: organization
mission and vision; management by objectives and by Exception; Decision
making- formal, intuitive and creative; problem solving methods- SWOT
analysis, cause-and-effect analysis.

3.1 Strategic management

A Strategy is a plan designed to achieve an objective. Strategic

management is identification and illustration of the strategies that
management implements in order to attain superior results (objectives)
for their organization, especially in comparison to the competitors in the
same industry. It is essential for an organizational management to
strategize and prepare for different odds. Health organizations of all types
have found strategic management to be imperative in recent years due to
the fast changing health environment and uncertainty of health problems,
both clinical and managerial.

Some of the changes in health environment include:

 Shorter health products and service life cycles e.g shorter drug
regimen, admission days etc
 Globalization of health problems and health care services (guided
by disease management protocols developed by World health
organization (WHO) e.g management of covid-19, HIV/AIDs etc
 Case referrals beyond the boundaries of a nation (e. g to India, USA,
Canada, Europe, South Africa etc).

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  International and Local migration of health workers (“Brain Drain”)
resulting in low absolute numbers and poor skill mix of health
workers
 The advancement in Information Communication and Technology
(ICT) in healthcare e.g scanning (CT Scans, MRIs, Health
Management Information Systems (HMIS), Human Resource
Information Systems (HRIS) etc
 The challenges of implementing devolved health care in the
counties as per the new constitution (2010)
 introducing economic and social reforms and the right of all
citizens to accessible and affordable health care to all citizens in line
with Chapter 4 of the bill of rights
 The agitation and resurgence of health workers demanding better
pay resulting in a wave of demonstrations and strikes
 Corruption, mismanagement and board room wars at the National
Health Insurance Fund (NHIF), Ministry of health and county
governments.
 Low budgetary allocations of funds to the health sector (below the
Abuja Declaration of April, 2001 where African Union (AU) Countries
pledged to increase government funding for health to at least 15%
of national budget), etc

Health Care Organizations therefore need to be proactive in formulating and

implementing strategies to leverage on the available opportunities and
forestall the emerging threats presented by the changing health care
business environment. They need to nurture and develop a strategic
behaviour that enhances strategic thinking.

Importance of Strategic management in health organizations:

Strategic Management can help a health care organization to:

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  run successfully
 Strengthen the organization’s competitive position
 Satisfy clients’ needs
 Assess the organization environment to identify
challenges/risks/threats and opportunities presented by the
environment
 Achieve performance targets
 Manage change successfully

Strategic management process

In a business/organization, strategic management is a continuous process

involving the following four steps:

1) Environmental scanning: refers to a process of collecting, scrutinizing

(e.g by SWOT or by cause-and-effect analysis) and providing
information for strategic planning purposes. It helps in analyzing the
internal factors (strengths and weaknesses) and the external factors
(opportunities and threats) influencing an organization.
2) Strategy formulation: After conducting environment scanning,
managers formulate functional strategies to help accomplish
organizational objectives and achieve organizational purpose (the
Mission and Vision of the organization)
3) Strategy implementation: implies making the strategy work as
intended. Strategy implementation includes designing the
organization’s structure, distributing necessary resources, developing
a sound monitoring process, and managing human resources.
4) Strategy evaluation: is the final step of strategy management process.
The key strategy evaluation activities are: appraising internal and
external factors that are the reason why the present strategies were
designed, measuring performance, and taking remedial / corrective

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 actions. Evaluation makes sure that the organizational strategy and its
implementation meets the organizational objectives.

NB: These components are steps that are carried, in chronological order,
when creating a new strategic management plan. Present businesses that
have already created a strategic management plan will revert to these steps
as per the situation’s requirement, so as to make essential changes

Components of Strategic management process

environmental
scanning

strategy strategy
evaluation formulation

strategy
implementation

3.2 Organization Vision and Mission

A Vision Statement describes the desired future position of the

organization and a Mission Statement defines the organisation’s
business, its objectives and its approach to reach those objectives. In
other words, a vision statement focuses on tomorrow and what an
organization wants to ultimately become while a mission statement

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 focuses on today and what an organization does to achieve it i.e where
the organization want to be …(vision); the reason (purpose) the
organization exist (the mission). An objective is a strategic position to be
attained or a purpose to be achieved.

Examples:

1. Kenyatta national hospital:

Vision- A world class patient-centred specialized care hospital

Mission- To optimize patient experience through innovative, evidence

based specialized healthcare; facilitate training and research; and
participate in national health policy formulation

Strategic objectives:

i. Optimize customer experience

ii. Enhance service delivery
iii. Promote and expand services
iv. Improve financial performance
v. Improve resource mobilization
vi. Improve partnering
vii. Enhance risk management
viii. Enhance clinical governance
ix. Enhance research and innovation
x. Improve performance culture
xi. Improve automation
xii. Enhance human resource capacity
xiii. Improve infrastructure and equipment
2. National Ministry of health:

Vision- A Healthy, productive and globally competitive nation

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 Mission- To build a progressive, responsive and sustainable health care
system for accelerated attainment of the highest standard of health to all
Kenyans

Goal- Attaining equitable, affordable, accessible and quality health care

for all

Mandate-

 Health policy
 Health regulation
 National referral Health facilities
 Capacity building and
 Technical assistance to Counties
3. Egerton University
Vision- A world class university for the advancement of humanity
Mission- To generate knowledge and offer exemplary education and
training to society for national and global development
? “Transforming Lives through quality Education”

3.3 Decision making in strategic management

a) Management by Objectives

Management by Objectives describes the practice of aligning employee’s

personal goals and objectives to the organisation’s overall
goals/objectives, usually outlined in the mission statement. It is said that
having employees who understand their organisation’s mission and can
see that their day-to-day tasks are contributing to its performance,
improves motivation, productivity and morale. For example, an employee
who understands that their organisation needs to improve its customer
services in order to compete with their competitors is more likely to make
changes to their own personal work to improve the services. MBO model

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 was developed by Peter Drucker, in his 1954 book, ‘The Practice of
Management”.

Management by Objectives process:

Step One: Set or Review Organisational Objectives

Organisational objectives are set in line with the organisation’s mission. They
must be SMART (Specific, Measurable, Acceptable, Realistic and Time
bound), so that performance can easily be measured against their targets.

Step Two: Cascade Objectives Down to Employees

The senior management set targets for business units, departments, teams
and individuals. It is important that these targets are agreed upon at each
level and they align to the organisation’s objectives so that completion of a
task at the individual level contributes to the targets at higher levels.

Step Three: Encourage Participation on Goal Setting

All individuals should be involved in the goal setting process, for two main
reasons. Firstly, individuals find it easier to reach targets they have set
themselves. This is because they fully understand what is expected of them
and how to get there. Secondly, the input of all employees may reveal issues
or areas of success that senior management isn’t aware of.

Step Four: Monitor Progress

Once targets have been set, progress in completing them needs to be

monitored. This ensures progress is being made, so that any individuals or
team slipping behind can be highlighted. Monitoring progress is also a good
method of revealing which methods are not contributing to the overall
success of the organisation.

Step Five: Evaluate and Reward Performance

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In order for individuals’ contributions to feel valued and for them to be
motivated to continue to perform, feedback and recognition is crucial. This
may be in terms of emotional support or financial benefits.

Step Six: Repeat the Cycle

Completing the process once is likely to lead to an improvement in

organisational performance. However, repeat the process over and over
again and use lessons learnt, regarding what went well and what did not, to
make each cycle more and more effective.

Advantages of using MBO

 Improvement in the overall organisational performance because

having all the employees working towards their own personal goals,
which are neatly aligned to their organisation’s mission, will ensure
every task they complete contributes to the organisation’s
performance with maximum effectiveness.
 It is also an excellent tool for prioritising work and managing time, as
employees know the exact importance and urgency of each task, in
the organisation’s eyes.

Disadvantages

 MBO model can be costly and time-consuming to implement, in which

case it may not be worthwhile in small businesses.
 A system for tracking goals and performance (monitoring) must also be
in place for the initiative to be successful, which may rely on a high
volume of resources

b) Management by exception

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 Management by exception (MBE) is a management strategy in which
managers will only step in when there are significant deviations from
planned outcomes. These can be either operational or financial outcomes.

Assuming that the organisations recruit only competent people, it then

follows that they are quite capable of getting on with their jobs without
intervention from management. However, when performance isn’t up to
expectation, managers should step in. These are the “exceptions” where
management action is needed to ensure the organisation meets its
targets.

Management by exception consists of four steps:

1. Setting the objectives and defining what the norm should be

2. Assessing performance to see whether performance is on track
3. Analyzing work or records to determine where performance
deviates from objectives
4. Investigating and solving the exceptions to the norm

NB: Problem-solving abilities are essential for good management.

Managers must be problem solvers e.g cause and effect analysis

3.4. Other (routine) decision making processes

A decision is a choice made between alternative courses of action in a

situation of uncertainty while decision making is the thought process of
selecting a logical choice from the available options. There are various
decision making approaches. These include:

i. Rational decision making approach:

Is a systematic, step by step method in which 'hard' (quantitative) data

obtained through observation or mathematical (statistical) analysis or
modeling is used for making long-term decision. That is, it’s evidence based.

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Steps of making rational decision:

Step 1: Identification of the purpose of the decision

In this step, the problem is thoroughly analysed. There are a number of

questions one should ask when it comes to identifying the purpose of the
decision.

 What exactly is the problem?

 Why should the problem be solved?
 Who are the affected parties?
 Does the problem have a deadline or a specific time-line?

Step 2: Information gathering

A problem of an organization will have many stakeholders. In addition, there

can be dozens of factors involved and affected by the problem. In the
process of solving the problem, you will have to gather as much information
as possible that is related to the factors and stakeholders involved in the
problem. For the process of information gathering, tools such as 'Check lists'
can be effectively used.

Step 3: set principles for judging the alternatives

In this step, the baseline criteria for judging the alternatives should be set.
When it comes to defining the criteria, organizational goals as well as the
corporate culture should be taken into consideration. As an example, profit is
one of the main concerns in every decision making process. Companies
usually do not make decisions that reduce profits, unless it is an exceptional
case. Likewise, baseline principles should be identified related to the
problem at hand.

Step 4: Brainstorm and analyse the different choices

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For this step, brainstorming to list down all the ideas is the best option.
Before the idea generation step, it is vital to understand the causes of the
problem and prioritization of causes. For this, you can make use of Cause-
and-Effect diagrams. Then, you can move on generating all possible solutions
(alternatives) for the problem in hand.

Step 5: Evaluation of alternatives

Use your judgment principles and decision-making criteria to evaluate each

alternative. In this step, experience and effectiveness of the judgment
principles come into play. You need to compare each alternative for their
positives and negatives.

Step 6: Select the best alternative

Once you go through from Step 1 to Step 5, this step is easy. In addition, the
selection of the best alternative is an informed decision since you have
already followed a methodology to derive and select the best alternative.

Step 7: Execute the decision

Convert your decision into a plan or a sequence of activities. Execute your

plan by yourself or with the help of subordinates.

Step 8: Evaluate the results

Evaluate the outcome of your decision. See whether there is anything you
should learn and then correct in future decision making. This is one of the
best practices that will improve your decision-making skills.

Advantages of Rational Decision Making

 Since rational decision making is based on scientifically obtained

information, it can reduce the chance of errors, uncertainties,
assumptions, subjectivity and distortions in decision making.

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  Can also reduce the risk of failures because the evaluation and
selection process are based on sane and logic information and
knowledge.
 Can help the decision makers to deal with difficult problems in a
complex environment.

Disadvantages of Rational Decision Making

 If the business environment is very complex sometimes the

information obtained may be insufficient which may cause difficulties
in evaluating the issue or even defining the problem. As a result, the
manager cannot evaluate the alternatives and has to use his
experience to make a decision.
 Another disadvantage is time limitations. Rational decision making
need a lot of information in the evaluation step and to obtain the
information, usually, it need a long time of observation, collection and
analysis. In today’s fast paced business environment time is crucial
when deciding business

ii. Intuitive decision making

Intuitive decisions describe something that is known, perceived, understood

or believed by instinct, feelings or nature without actual evidence, rather
than by use of conscious thought, reason, or rational processes. Though it is
not analytic in the sense that it does not deliberately look for cause-and-
effect (causal) relationships, intuition is not mere guesswork. Instead, it
draws on previously acquired experiences and information and directly
apprehends a totality. Intuition can be visionary or delusionary, uncannily
correct or horrendously wrong in its conclusions

Most of us are used to making intuitive decisions in our daily life. Where
subjective judgment is involved, rational reasoning is very difficult to apply.

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Typical examples where intuition can play an important role in making
decisions are: Choosing your life partner, selecting a meal when eating out,
selecting the next book to read, decide how to dress for today, and so on.

Intuitive decision making is far more than using common sense because it
involves additional sensors to perceive and get aware of the information
from outside. Sometimes it is referred to as gut feeling, sixth sense,
inner sense, instinct, inner voice, spiritual guide, etc.

Problems with intuition in decision making

Intuition plays a significant role in the choices we make. Unfortunately, if

used alone, intuition can be the source of significant errors in the course of
making a decision. Here are some of the problems with intuition that can be
avoided by using a structured (rational) decision making process:

 Flawed information - Intuition decision making will respond quickly to

inaccurate, insufficient, unreliable, or incomplete information based on
patterns from previous experiences.
 Short term emotional bias - Cognitive research has shown that even
experts' decisions are influenced by unrelated emotions during the
time of making a decision.
 Insufficient consideration of alternatives - Intuition generally relies on
pattern recognition and will point to solutions that have worked well
with the current perceived pattern. This will limit considered options
even though you may be dealing with a new decision situation that
might require a novel or unique solution.
 Prejudices - Emotions help form our intuition and can allow flawed
experiences to overrule sound facts and evidence.

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  Lack of openness - Every person has a different experience base that
provides the platform for their intuitions. Given that one's intuition is
not easily explained, it is difficult to use intuition in a group context.
 Inappropriate application - People that have good experience,
expertise, and intuition in one area can become overconfident and
apply their intuition in an unfamiliar or unrelated area. This also
includes using "Rules of Thumb" that may not match the needs of the
current decision context.

Decision making situations where intuitive approach can be of help include

the following:

1. When expedient decision making and rapid response are required. The
circumstances leave you no time to go through complete rational
analysis.
2. In fast paced change. The factors on which you base your analysis
change rapidly.
3. If the problem is poorly structured. The factors and rules that you need
to take into account are hard to articulate in an unambiguous way.
4. When you have to deal with ambiguous, incomplete, or conflicting
information.
5. When there is no precedent.

iii. Creative decisions

Creativity is the generation of new, imaginative ideas. With the intense

competition among organizations, individuals and organizations are driven to
be creative in decisions ranging from cutting costs to creating new ways of
doing business. The five steps to creative decision making are:

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Step 1: problem identification - which is the step in which the need for
problem solving becomes apparent. If you do not recognize that you have a
problem, it is impossible to solve it

Step 2: Immersion - is the step in which the decision maker thinks about the
problem consciously and gathers information. A key to success in creative
decision making is having or acquiring expertise in the area being studied

Step 3: Incubation - During incubation, the individual sets the problem aside
and does not think about it for a while. At this time, the brain is actually
working on the problem unconsciously.

Step 4: Illumination - or the insight moment, when the solution to the

problem becomes apparent to the person, usually when it is least expected.

Step 5: Verification and application- this is the final stage and happens when
the decision maker consciously verifies the feasibility of the solution and
implements the decision

3.5 problem solving methods

This course will discuss the SWOT analysis and two cause-and-effect
methods namely, the Fishbone and the Problem tree.

a. SWOT analysis.

SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities

and Threats.

 Strengths refer to positive internal factors- Those things that you do

well as individuals or organization. Strengths can be tangible e.g Loyal
customers, efficient distribution channels, very high quality products,
excellent financial condition etc or intangible e.g Good leadership,
strategic insights, customer intelligence, solid reputation, high skilled

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 workforce etc. These are often considered “Core Competencies” – Best
leverage points for growth without draining your resources
 Weaknesses refer to negative internal factors- Those things that
prevent you from doing what you really need to do. Since weaknesses
are internal, they are within your control. These include: Bad
leadership, unskilled workforce, insufficient resources, poor product
quality, slow distribution and delivery channels, outdated technologies,
lack of planning.
 Opportunities refer to favorable external environment conditions i.e
Potential areas for growth and higher organizational performance.
These include: market for your product, customers unhappy with your
competitor’s product or service, better economic conditions, more
open organization policies, etc
 Threats refer to unfavorable external environment conditions-
challenges that are confronting the organization but external in nature.
These include: bad press coverage e.g on medical negligence, shifts in
consumer behavior, availability of substitute products, new
government regulations, shortage of supplies (inputs), bargaining
power of suppliers or service providers etc. The more accurate you are
in identifying threats, the better the position you are for dealing with
the effects of change.

b. Cause-and effect analysis tools

1. The Fish-bone analysis tool

A fishbone diagram is a visual way to look at cause and effect of a problem in

a more structured approach. The problem or effect is displayed at the head
or mouth of the fish while possible contributing causes are listed on the
smaller “bones” under various cause categories such as materials, methods,
environment, manpower etc. A “fishbone” diagram can help in brainstorming
to identify possible causes of a problem and in sorting ideas into useful

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categories. Once you have identified the root causes and contributing
factors to the problem, you will then need to address each root cause and
contributing factor as appropriate.

Steps to follow when a team is using fishbone diagram tool:

 Step one: Agree on the problem statement (also referred to as the

effect). This is written at the mouth of the “fish.” Be as clear and
specific as you can about the problem. Beware of defining the problem
in terms of a solution (e.g., we need more of something).
 Step two: Agree on the major categories of causes of the problem
(written as branches from the main arrow). Major categories often
include: materials, manpower, environmental factors, methods,
machines/equipment, and measurement).

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  Brainstorm all the possible causes of the problem. Ask “Why does this
happen?” As each idea is given, the facilitator writes the causal factor
as a branch from the appropriate category (places it on the fishbone
diagram). Causes can be written in several places if they relate to
several categories.
 Again asks “Why does this happen?” about each cause. Write sub-
causes branching off the cause branches.
 Continues to ask “Why?” and generate deeper levels of causes and
continue organizing them under related causes or categories. This will
help you to identify and then address root causes to prevent future
problems.

2. The Problem tree analysis tool

A problem tree analysis is a pictorial representation of a problem, its

causes and its consequences. Like any other tree, the problem tree has
three parts: a trunk, roots, and branches. The trunk represent the main
problem, the roots the causes of the core problem while the branches
represent its effects. The figure below shows an example of a problem
tree related to women getting HIV infection.
This analysis tool helps the project team get a quick glance of how a
range of complex issues contribute toward a problem and how this
problem branches out into a set of consequences.
Once the causes and consequences (effects) of a problem are
identified, the project team should formulate clear and manageable
objectives (or solution) and the strategies of how to achieve them.

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 EF
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 PRO
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Further reading

Mandatory reading

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  Dam N. V and Marcus J (2012), organization and management- An
international approach, Groninton/Houten, The Netherlands

Optional reading

1. Ivancevich J.M and Matteson M.T (1987), organizational behavior and

management, business publications inc, Plano, Texas
2. Kenya vision 2030
3. Kenya National health sector strategic plan and investment III

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