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Health Marketing QuarterlyPublication details, including instructions forauthors and subscription information:http://www.tandfonline.com/loi/whmq20
Strategic Decision-MakingAmong Top Executives inAcute-Care HospitalsBruce A. Walters a , Irvine Clarke III b , E. ScottHenley b & Mahmood Shandiz ba Louisiana Tech University, Departmentof Management and Marketing, College ofAdministration and Business , USAb Oklahoma City University, Meinders School ofBusiness , 2501 North Blackwelder, Oklahoma City,OK, 73106-1493, USAPublished online: 04 Oct 2008.
To cite this article: Bruce A. Walters , Irvine Clarke III , E. Scott Henley & MahmoodShandiz (2001) Strategic Decision-Making Among Top Executives in Acute-CareHospitals, Health Marketing Quarterly, 19:1, 43-59, DOI: 10.1300/J026v19n01_04
To link to this article: http://dx.doi.org/10.1300/J026v19n01_04
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Strategic Decision-MakingAmong Top Executives in Acute-Care Hospitals
Bruce A. WaltersIrvine Clarke IIIE. Scott Henley
Mahmood Shandiz
ABSTRACT. Recent changes within the dynamic healthcare industry havenecessitated further assessment of the strategic thought processes associatedwith financial success. Therefore, this study explored hospital executive’suse of a comprehensive strategy-making process and its impact on perfor-mance in acute care hospitals. Taken as a whole, the strategy-making pro-cess is found to be positively associated with financial performance.Supplementary analysis, investigating the unique effects of environmentalplanning, scanning and analysis, revealed that, when considered separately,scanning and analysis contribute significantly to performance, whereasstrategic planning, as classically defined, does not. Implications for deci-sion-making in hospital settings are discussed. [Article copies available for afee from The Haworth Document Delivery Service: 1-800-342-9678. E-mail ad-dress: <[email protected]> Website: <http://www.HaworthPress.com> ©2001 by The Haworth Press, Inc. All rights reserved.]
KEYWORDS. Health care industry, hospital strategy, strategic deci-sion processes, environmental scanning, environmental analysis, strate-gic planning
Bruce A. Walters is affiliated with Louisiana Tech University, Department of Man-agement and Marketing, College of Administration and Business.
Irvine Clarke III, E. Scott Henley, and Mahmood Shandiz are affiliated withOklahoma City University, Meinders School of Business, 2501 North Blackwelder,Oklahoma City, OK 73106-1493.
Address correspondence to: Irvine Clarke III (E-mail: [email protected]).
Health Marketing Quarterly, Vol. 19(1) 2001 2001 by The Haworth Press, Inc. All rights reserved. 43
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The health care industry has become intensely turbulent, character-ized by a threatening environment of increased competition and costcontainment, fundamental changes in technology and regulation, andconflicting demands by powerful, but changing stakeholders (Bellandi2000; Nauert 2000). A reconfiguration of the industry structure andcompetitive relationships is ongoing, forcing hospital executives to re-vamp strategies and organizations (Hofmann 2000). “Health care sim-ply happens to be in a period during which change is outpacing changeoccurring in many other environments” (McConnell 2000, p. 17).
With these dramatic industry developments has come renewed rec-ognition of the role of the strategist in hospital settings.
Change has been especially rapid in health care, forcing dramaticchanges in the way health care managers work. . . . Health caremanagement has had to change considerably in the past 30 yearsand will be required to change further still in the years to come. Inchanging with the industry, the role of the health care manager willinclude enhanced span of control and increased authority and re-sponsibility, and thus greater accountability. Given the changingnature of the environment, the most valuable characteristics of to-morrow’s health care manager will be flexibility and adaptability.(McConnell 2000, p. 1)
New governance relationships have tended to increase the authority andaccountability of the hospital Chief Executive Officer (CEO). HospitalCEOs are more informed of their strategies than are other executives,and the strategic choices made by senior executives can influence orga-nizational design outcomes and performance (Hambrick 1989).
Executive judgment, an important source of competitive advantage,is aided by the decision processes hospital executives use to formulatestrategy. Yet effective strategy formulation processes may be lacking inthe health care industry (Bellandi 2000). Goes and Meyers (1995) foundthat the “ . . . strategic changes by individual hospitals usually did notprovide effective responses to the health care revolution” (p. 144).There is concern, for example, that not-for-profit hospitals may not sur-vive the new market-driven health care system because of limited skillsin strategy formulation (Blair and Boal 1991). Further, even if a givenset of formulation skills was appropriate prior to the new competitiveconditions, failure to adapt changes in process formation has been asso-ciated with market failure in the hospital industry (Arnould andDeBrock 1986; McConnell 2000). Given the increasing turbulence of
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the hospital industry, the elevation in hospital CEOs’ authority, and thepotential ramifications of CEOs’ strategic choices, research aimed atunderstanding how hospital senior executives’ strategy-making pro-cesses affect organizational outcomes appears warranted.
Developing a better understanding of the strategic evaluations madeby top executives would assist health care administration in the identifi-cation of the abiding factors of hospital success. Therefore, the primarypurpose of this study is to investigate the relationship between strategicdecision-making and financial performance in the dynamic acute-carehospital industry. Additionally, this exploratory analysis will assess thesingular affect of planning, scanning, and analysis on performance.Further refinement, in theory development and practice, concerning de-cision processes in the health care environment, is possible as theunique effects of each element are evidenced in this dynamic industry.
STRATEGIC DECISION-MAKING,PERFORMANCE, AND ENVIRONMENT
Fredrickson and Mitchell (1984) investigated the degree to which topexecutives use a comprehensive strategy-making process. That is, towhat extent is the strategy process exhaustive or inclusive in: (1) identi-fying goals, (2) scanning the environment, (3) assessing the internal en-vironment, and (4) determining alternatives? Accordingly, researchershave debated the appropriateness of planning, scanning, and analysis inan all-inclusive strategy formulation process within various environ-ments. Most studies indicate that the level of environmental dyna-mism–the rate of change, absence of pattern, and unpredictability of theenvironment–in the industry can be meaningful in locating organiza-tions on a continuum ranging from stable to dynamic (Priem, Rasheed,& Kotulic 1995).
Generally, studies have shown that greater use of a joint planning,scanning, and analysis process is associated with higher performance instable environments and lower performance in unstable environments(Fredrickson & Mitchell 1984). In an uncertain environment, such com-prehensiveness fails because the necessary data are not readily avail-able, relationships among environmental elements are not obvious, andthe future is unpredictable. Swift decisions are often associated withhigher performance in dynamic environments since these conditionsfrequently require quick, intelligent responses to fast-changing circum-stances (Eisenhardt 1989; Judge & Miller 1991).
Walters et al. 45
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Evidence may be more tentative in the case of the health care indus-try. Recent changes in the health care environment have created newchallenges for management, potentially altering the strategy formula-tion process necessary for exceptional performance. Further, the natureof health care organizations may create some significant differencesfrom the organizations previously studied. The assumption that man-agement is generic should be empirically tested, since the health careenvironment may be fundamentally different from other industries. Keydifferences include the difficulty of defining and measuring output, thehigh degree of coordination among diverse professional groups, uniqueorganizational control challenges, role ambiguity and role conflictstemming from dual lines of authority, complicated intra-system andinter-system linkages, and the tenuous balance of preservation and en-hancement of human life with “rational” administrative concerns(Fottler 1987). Thus, investigation of the consequences of various strat-egy-making processes in hospital settings could offer a significant con-tribution to health care research and practice.
Given the increased dynamism in the hospital industry, and based onthe assumption that a comprehensive strategy-making process is appro-priate in dynamic environments (Blair and Boal 1991; Goll andRasheed 1997), this study proposes that:
H1: Comprehensive strategy-making among hospital executiveswill be positively associated with performance.
Even if comprehensive strategy-making in general is associated withhospital performance, the separate dimensions of planning, scanning,and analysis could have varying degrees of impact because each em-phasizes a different task. The planning, scanning, and analysis pro-cesses, could vary in their degree of contribution; thus, the effect ofeach merits exploration within the dynamic health care industry.
In their discussion of strategic planning in hospitals, Bruton, Oviatt,and Kallas-Bruton (1995) noted that prior research does not adequatelydefine planning. They envisioned a continuum which runs from“long-range planning” at one extreme to “strategic planning” at theother, and concluded that planning is the most thorough, “. . . focusingnot only on internal factors, but also on the external market needs andhow best to meet those needs with the resources of the organization”(p. 17). This concern with defining “strategic planning” parallelsMintzberg’s (1994) concern that strategic planning, as classically de-fined, cannot succeed because planning is a decompositional, analytic
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activity. He asserts that strategy formulation, on the other hand, requirescreative synthesis, concluding that analysis is not synthesis, and thatstrategic planning is different from strategy formulation.
Planning is relatively long-term oriented, and includes planning ofinvestments, the nature of markets, and goals and strategies over fiveyears into the future. This long-term emphasis may detract managementattention from immediate concerns and may be less effective in a dy-namic environment such as health care. Yet, hospital executives mustoften operate at the strategic as well as the operational level, so theircontribution to the planning process may be critical to the hospital’ssurvival. The challenge may be to balance the importance of long-termissues management with the real-time demands presented by the imme-diate environment.
Environmental scanning is concerned with such practices as the rou-tine gathering of feedback from patients, the tracking of competitors,and the continuous evaluation of performance within the hospital’s tar-get markets. Top executives scan the environment in order to learnabout external events and trends, and frequently-changing environ-ments make it increasingly important for management to foresee andunderstand those changes. “The organization’s executives can only acton those phenomena to which their attention is drawn. And, since exter-nal information is abundant, attention can be directed any number ofways, but not every way” (Hambrick 1981, p. 299). This implies that thevarious ways executives can scan the environment may variably affectwhich phenomena are acted upon and the appropriateness of subse-quent decisions. Unless executives are aware of environmental trendswhich may potentially affect the organization, and unless their percep-tions are accurate, they cannot form judgments appropriate for optimumdecision making. Given that the dynamic hospital industry has led to in-creased uncertainty among executives, and that scanning has been asso-ciated with higher performance when used in uncertain environments(Daft, Sormunen, & Parks, 1988), scanning would appear to enhanceperformance in the hospital industry as well.
Analysis includes operations research techniques; brainstorming bysenior management for novel problem solutions; and formalized, sys-tematic searches for opportunities. The focus of attention here appearsto be on real-time information with which to capitalize on opportunities,avoid threats, and adapt the organization to its environment. This maybe particularly important in a dynamic environment such as health care.On the other hand, although the shorter-term emphasis may help execu-tives evaluate opportunities and explore options to maintain flexibility,
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overanalyzing the situation may stifle the action needed to cope with achanging environment.
Given the potential for varying degrees of impact of planning, scan-ning and analysis on performance, this study proposes that:
H2: The strength of the relationship will vary between planning,scanning and analysis and financial performance.
METHOD
To test these hypotheses, data were collected from senior executivesof short-term, acute-care hospitals. The survey instrument focused therespondent’s attention on questions about perceived planning, scanningand analysis activities, as well as hospital performance.
Data Sources
One hundred thirty-one acute-care hospitals were identified from asouthwestern state’s Hospital Association’s membership listing. Thepopulation was defined as short-term (average stay of 10 days or less),general-medical-surgical hospitals in the region. Hospital executiveswere pre-notified of the survey 2 weeks before the initial mailing. Threesurvey instruments were mailed to each acute-care hospital’s Chief Ex-ecutive Officer, accompanied with a letter of endorsement from thepresident of the Hospital Association, and instructions explaining thestudy. Each CEO was asked to identify two other senior executives,within their organization, involved in strategic decision processes on aregular basis, and to have them complete and return the survey instru-ment.
Eighty-nine survey instruments from sixty-seven hospitals werereturned, for an institutional response rate of 51.2 percent and over-all response rate of 22.7 percent.1 Fifty-three hospitals returned oneinstrument, nine returned two instruments, and six returned three. Mul-tiple responses from hospitals were averaged to produce a firm levelvalue, limiting the potential for response bias (Avolio, Yammarino andBass 1991). Thirty-six of the respondents identified themselves as chiefexecutive officers, and 53 of the respondents identified themselves asother top executives including president, chief financial officer, chiefoperating officer, and vice-president. The average number of beds perhospital was 120, and the average number of employees was 472.
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Operationalization of Variables
The completed survey instruments were used to address perceptionsof the hospital’s existing planning, scanning and analysis processes.Multiple questions were used to assess each dimension of strategic de-cision-making. The original scales were taken from Miller (1987), andhave been used considerably in subsequent research (Miller 1992;Priem, Rasheed & Kotulic 1995).2 Minor modifications were made toadapt the scales to the hospital industry. These scales are presented inthe Appendix.
Hospital performance measures were selected from items recom-mended, by the American Hospital Association’s advisory panel meet-ing, as appropriate financial viability measures for hospitals and healthcare systems (Altman, Price and Martin 2000). Accounting measureshave been severely under-represented in hospital management re-search, and “. . . since different measures will be important to differentstakeholders, there should be no expectation of convergence among themeasures. It is only important that the purpose of the measures and thecriteria of effectiveness be clear” (Bruton, Oviatt, & Kallas-Bruton1995, p. 20). Each respondent was asked to rank his/her hospital’s per-formance for the previous five-year period compared to other similarcompetitors (Dess & Robinson 1984). The performance measures in-cluded after-tax return on total assets (ROA), after-tax return on sales(ROS), and sales growth. Five-year averages were used to minimize theinfluence of short-term variations on the reported performance of eachhospital. Self-reported measures such as these have been shown to behighly correlated with objective performance measures.3 These itemsare available in the Appendix.
RESULTS
Correlations for the data gathered from the strategy-making execu-tives are presented in Table 1. Cronbach’s alphas of .71 for planning,.82 for scanning and .65 for analysis were found.4 As reflected in Table1, strategic decision-making (planning, scanning and analysis together)is positively associated with the performance measures. Upon examin-ing the separate strategy-making processes in relation to performance,scanning and analysis are both significantly associated with all threeperformance measures. Planning is not found to be significantly associ-ated with any of the performance measures.
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To test Hypothesis 1, the planning, scanning and analysis variableswere combined to produce an aggregate variable (strategic comprehen-siveness) which was regressed on each performance measure.5 Due tothe correlation of bed size with each performance measure, as well aswith environmental scanning, bed size was also included in the regres-sion equations.6 The results from this analysis indicate that strategiccomprehensiveness is associated with return on assets (F = 4.28, p < 0.1),return on sales (F = 6.30, p < .05), and sales growth (F = 7.27, p < .01),supporting Hypothesis 1. Thus, for this sample of hospital executives,increased use of planning, scanning, and analysis combined is associ-ated with higher hospital performance.
To fully explore Hypothesis 2 the performance measures were eachregressed on the individual process variables, of planning, scanningand analysis, to determine the separate influence of each on hospitalperformance. As these primary processes may be distinct from one an-other, independent investigation may unmask important distinctions forhospital executives.
Environmental scanning includes such activities as routine gatheringof feedback from patients, the tracking of competitors, and the continu-ous evaluation of performance within the hospital’s target markets. Ourfindings indicate that scanning is significantly related to return on as-sets (F = 3.89, p < 0.1), return on sales (F = 5.33, p < .05), and salesgrowth (F = 7.55, p < .01). Thus, environmental scanning appears tocontribute to all three performance measures.
Analysis includes operations research techniques; brainstorming bysenior management for novel problem solutions; and formalized, sys-tematic searches for opportunities. Findings regarding the importanceof analysis on the performance measures indicate a positive association
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TABLE 1. Strategic Decision-Making Correlation Matrix
1 2 3 4 5 6 7
1. Strategiccomprehensiveness
0.18+
2. Scanning 0.23* 0.88***
3. Analysis 0.06 0.81*** 0.59**
4. Planning 0.12 0.73*** 0.43** 0.40**
5. ROA 0.23* 0.23** 0.22* 0.23* 0.11
6. ROS 0.25* 0.30** 0.27* 0.31** 0.14 0.97***
7. Sales growth 0.28* 0.30** 0.32** 0.29* 0.09 0.73*** 0.74***
Notes: +p < 0.1, *p < .05, **p < .01, ***p < .001
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with return on assets (F = 4.76, p < .05), return on sales (F = 7.67, p <.01), and sales growth (F = 8.03, p < .01). Thus, analysis is also found tobe related to all three financial performance measures.
Planning encompasses a relatively longer-term orientation, includ-ing planning of investments, the nature of markets, and goals and strate-gies over five years into the future. Our findings indicate that planningis not significantly related to return on assets (F = 2.70, p > 0.1), returnon sales (F = 3.41, p > .01), and sales growth (F = 3.88, p > .01). Evi-dence is not found to support the proposition that more planning leads tosuperior hospital performance. Interestingly, planning is not found to besignificantly related to any of the performance measures. Therefore,when considered separately, scanning and analysis are both importantstrategy processes for all of the performance measures in this sample,but planning does not appear significant with either measure.
IMPLICATIONS FOR HOSPITAL EXECUTIVES
Although these results must be interpreted with caution, hospital ex-ecutives may find benefit in this study through the management of theirstrategy fomulation processes. For this exploratory sample of senior ex-ecutives in acute-care hospitals, a comprehensive approach to strategicdecision-making–represented by planning, scanning, and analysis–wasstrongly associated with return on assets, return on sales, and salesgrowth. Taken alone, this would imply that improvements in financialperformance in acute-care hospitals may be partially explained by theincreased employment of these processes in aggregate. However, whenconsidered separately, environmental scanning and analysis werestrongly associated with all three performance measures, while plan-ning was not associated with any of the three performance measures.
Thus, effective top management may benefit by engaging in morescanning and analysis of the rapidly-changing environment, whereasincreased levels of planning may be less effective. Environmental scan-ning can include a variety of activities aimed at keeping managementinformed about impending developments. For example, routinely gath-ering opinions from patients and conducting market research studiescan aid in the appropriate emphasis of various service offerings. Ex-plicit tracking of the policies and tactics of competing hospitals can sup-port management’s appraisal of the competitive uniqueness of theirown hospitals as well as those in their strategic groups. Forecasting rev-enues, customer preferences, and the potential influence of technology
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on hospital operations may assist executives to anticipate necessary ad-justments.
Timely analysis also appears useful to hospital executives. This im-plies such tasks as: periodic brainstorming by senior managementgroups for novel solutions to problems; systematic search for and evalu-ation of opportunities for hospital acquisitions, new investments, andnew markets; use of staff specialists to investigate and write reports onmajor decisions; and research techniques such as simulations to decideupon major marketing, financial, and operational decisions.
Perhaps our more surprising findings are those related to planning.Our results indicate that five-year planning, forecasts, and projectionsmay provide relatively less benefit in the acute-care hospital industry.Quick, intelligent responses which adapt to the industry, based on stabledecision-making skills, may have a greater affect on performance thandeliberate planning activities. Caution is required, however, in thatplanning cannot likely be ignored completely. Rather, there may be apoint at which more planning leads to diminishing returns and opportu-nities must be noticed and captured in the short-term.
Apparently the use of real-time information, from a variety ofsources, assists hospital executives in evaluating and implementingstrategies which help them adapt their hospitals to their environment.Integrating informational linkages, or strategic networks, may improvethe development of change-response mechanisms and overall hospitalperformance (Goes 1989; Goes & Park 1997). A network strategy, link-ing with other hospitals in the region, may provide the resources neces-sary to improve the important tasks of environmental scanning andanalysis (Goes & Meyer 1995). Hospital managers may also benefitfrom exploiting the inherent informational linkages developed throughthe wave of mergers and acquisitions which are sweeping through thehealth care industry. These newly-formed hospital networks could as-sist in providing timely information, and in the scanning and analysisrequired of the changing environment.
DISCUSSION AND CONCLUSION
Decision processes leading to sound judgments are critical to organi-zational success, and these processes take place before judgments areformed. Thus, empirical findings of relationships between strategy pro-cesses and organizational outcomes have important implications for bothhospital executives and theoreticians. As this environment is indeed be-
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coming more turbulent, hospital managers can benefit by knowingwhether certain strategy processes help or hinder hospital performance.In this case, environmental scanning and analysis were found to be asso-ciated with increased performance, whereas strategic planning, as clas-sically defined, was not. Some might consider this to be counterintuitive;that is, one could easily question the value of expending the necessaryenergy and resources required to adopt these processes given the rap-idly changing nature of the health care industry. Nonetheless, it appearsthat in this study, the processes were worth the effort. Thus, hospital ex-ecutives may find it rational to further integrate environmental scan-ning and analysis processes into their management and controlstructures.
The results offer additional evidence for an association betweencomprehensive strategy-making and performance in dynamic environ-ments. Previous research suggests environmental dynamism is a poten-tial moderator of the strategy process-performance relationship (Goll &Rasheed 1997; Priem, Rasheed, & Kotulic 1995). This single-industrystudy, within the healthcare sector, took place in an environment whichis widely held as dynamic. In general, these results appear to be consis-tent with the proposition that uncertainty calls for fast, all-inclusiveconsideration of a number of alternatives. Hospital managers will bene-fit from the design of decision-making criteria which consider the rap-idly-changing health care environment.
In particular, these results inform strategic-decision process researchregarding the unique acute-care hospital industry. As Fottler (1987) hasarticulated, management theories should be tested in various contexts,and prescriptions appropriate for some industries may or may not be ap-propriate for the hospital environment. Future research efforts mightexplore more fully the strategy process-performance relationship, aswell as the separate performance effects of planning, scanning andanalysis. Although the sample indicates some shared variance amongthese components (see Table 1), the findings indicate that planning isnot associated with any of the performance measures, while scanningand analysis are both associated with all three performance measures.Thus it is possible to conclude that scanning, analysis, and planningmay actually tap into different aspects of strategy-making, and thusshould be examined for their unique contributions.
As with all research, this study is subject to limitations. First, the hos-pital executives sampled were located in a single southwestern state,and although there is no reason to believe that decision processes wouldbe unique to hospital executives in this region, prudence is suggested in
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generalizing these results beyond the parameters of the study. Addi-tionally, performance is a multidimensional construct, and althoughvarious accounting measures are employed, other measures appropriateto the hospital industry are also plausible. These could include measuresof patient satisfaction, treatment outcomes, and productivity-efficiencyindices. Further studies, with differing objectives, may serve to expandthe sampling frame and vary the performance measures pursuant to theresearch needs. Moreover, while the use of multiple respondents in thisstudy may increase the overall accuracy, the data are exclusivelycross-sectional, which may limit any causal assertions to logical exten-sions of prior theory development. Finally, while evidence exists forshared variance between planning and scanning on financial perfor-mance, the low R2 for the overall model would indicate that there arelikely other factors associated with the overall financial performance ofthe hospital, potentially limiting the predictive ability of these pro-cesses.7
In conclusion, environmental scanning and analysis appear to be im-portant components for financial performance in acute-care hospitals,whereas planning is suspect.8 Previous research has shown that perfor-mance effects of strategic decision-making are context-specific. Giventhe evidence supporting a relationship between strategy formulationand performance in dynamic environments, and the increasing turbu-lence of the acute-care hospital environment with an accentuated focuson the bottom line, hospital executives may be well-advised to cultivatesystematic scanning of the environment and detailed analysis of alter-natives so that operational and financial outcomes may be enhanced.
NOTES
1. Follow-up calls, on a sample of the non-respondents, discovered no systemic pat-terns for non-respondents. Additionally, no statistically significant difference werefound between responding and non-responding hospitals for number of beds, numberof employees, annual expenses, and payroll (�2 = 88.43, p = .437, �
2 = 86.88, p = .335,�
2 = 92.00, p = .451, �2 = 97.00, p = .452 respectively).
2. As summarized in Miller (1987), the notion of strategic rationality accommodatestwo divergent views of decision making. One camp emphasizes the importance ofcareful analysis, systematic scanning for problems and opportunities, and methodi-cally planning strategies (Andrews 1980; Ansoff 1965; Steiner 1969). The other viewholds that strategy making is subject to bounded rationality, that firms must satisfice,and that strategy making is more intuitive and spontaneous (Cyert & March 1963;March & Olson 1976; Quinn 1980). Whichever view one takes, these measures appearto operationalize the rationality construct adequately, and there is growing evidence
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that even in dynamic environments, strategic rationality can positively enhance firmperformance (Goll & Rasheed 1997; Priem, Rasheed, & Kotulic 1995).
3. Correlation of the self-report measure of sales and objective sales measures, as re-ported by the regional Hospital Association, show a high association (.81) betweenself-report and objective measures. This would support the finding of Dess and Robin-son (1984), Robinson and Pearce (1988) and Venkatraman and Ramanujam (1987)whereby, subjective measures of performance are appropriate for the study of attitudi-nal constructs such as strategic rationality.
4. The Cronbach’s Alphas found in this study compare favorably to the alphas re-ported by Priem, Rasheed and Kotulic (1995) of .83 for planning, .82 for scanning and.68 for analysis, and adhere to “desirable” scale reliabilities for exploratory research(Nunnally 1967).
5. One caveat on the possibility of collinearity with respect to the individual mea-sures of strategic comprehensiveness is worth noting. In general, the stability of betasand overall significance levels become suspect when inter-item Rs exceed 0.40, partic-ularly with small sample sizes. Future research may wish to consider this possibilityduring the development of their research design.
6. Bed size is generally considered to be a reasonable indicator of hospital size(Altman, Price and Martin 2000; Ashmos, Hauge and McDaniel 1996). Bed size wasused to “co-vary out” an element in magnitude primarily to reduce the variance of theerror terms and thereby possibly improve the overall model (Neter, Wasserman andKutner 1990). For this study, the mean bed size was 119.6 with a standard deviation of132.47.
7. This study found R2 values for the composite variable of planning, scanning andanalysis of .009 for return on assets, .13 for return on sales, and .15 for sales growth.There are other factors which may affect performance (i.e., location and ownership).The exploratory nature of this research limited the control variables to number of beds,as this variable has become the hospital industry norm. Future research may build onthe findings provided here, to develop more control variables in the development of acomprehensive model of hospital performance.
8. In order to rationalize the planning findings, readers must recognize that this studyis simply a snapshot of a particular sector of the health care industry. A longitudinalstudy has greater potential to uncover planning as a success factor.
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58 HEALTH MARKETING QUARTERLY
APPENDIXStrategic Decision-Making Survey
AnalysisTo what extent are the following techniques used in decision making?
Used rarely Used very frequently
The application of operations researchtechniques, such as linear programmingand simulation, to decide upon majorproduction, marketing and financial decisions.
1 2 3 4 5 6 7
Periodic brainstorming by senior manage-ment groups for novel solutions to problems.
1 2 3 4 5 6 7
Formalized, systematic search for andevaluation of opportunities for acquisitions,new investments, new markets, etc.
1 2 3 4 5 6 7
Use of staff specialists to investigateand write reports on major decisions.
1 2 3 4 5 6 7
Choices among strategic alternativestend very often to be made quicklyand without precision as timepressures are often substantial.
1 2 3 4 5 6 7 Much thoughtand analysisenter intokey decisions.
Planning
Decisions aimed at theresolution of a crisisare most common.
1 2 3 4 5 6 7 Decisions aimedat exploitingopportunitiesin the environmentare most common.
There is a bird-in-the-hand emphasis on theimmediate future inmaking management decisions.
1 2 3 4 5 6 7 Long term(over 5 years)goals andstrategies areemphasized.
Mediumterm orientation
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Walters et al. 59
To what extent are the following activities carried out?
Very rarelyand/orhaphazardly
Very frequentlyand intensively
Long term (over 5 years) forecastingof sales, profits and the natureof markets.
1 2 3 4 5 6 7
Long term (over 5 years) forecastingof the technology relevant to productsand services offered by hospitals.
1 2 3 4 5 6 7
Planning of long-term (over 5 years)investments.
1 2 3 4 5 6 7
ScanningRate the extent to which the following scanning devices are used by your hospital to gather informationabout its environment.
Not everused
Used extremelyfrequently
Routine gathering of opinions from patients. 1 2 3 4 5 6 7
Explicit tracking of the policies and tacticsof competitors.
1 2 3 4 5 6 7
Forecasting sales, customer preferences,technology, etc.
1 2 3 4 5 6 7
Special market research studies. 1 2 3 4 5 6 7
PerformanceFor the following items, please circle the number (from 1 to 5) which you feel best estimates how yourhospital compares to similar hospitals in the health care industry.
Characteristics(average over past 5 years)
Top20%
Next20%
Middle20%
Lower20%
Lowest20%
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After Tax Return on Total Assets(average over past 5 years)
1 2 3 4 5
After Tax Return on Total Sales(average over past 5 years)
1 2 3 4 5
Hospital Total Sales Growth(average over past 5 years)
1 2 3 4 5
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