Title: Differentiation, integration and performance in selected Florida hospitals
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00097700/00001
 Material Information
Title: Differentiation, integration and performance in selected Florida hospitals
Alternate Title: Florida hospitals, Performance in
Physical Description: viii, 205 leaves : ill. ; 28 cm.
Language: English
Creator: Baldwin, Liston Eugene, 1926-
Publication Date: 1970
Copyright Date: 1970
Subject: Hospitals -- Florida   ( lcsh )
Hospitals -- Administration   ( lcsh )
Management and Business Law thesis Ph. D   ( lcsh )
Dissertations, Academic -- Management and Business Law -- UF   ( lcsh )
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
Thesis: Thesis - University of Florida.
Bibliography: Bibliography : leaves 204-205.
Additional Physical Form: Also available on World Wide Web
General Note: Manuscript copy.
General Note: Vita.
 Record Information
Bibliographic ID: UF00097700
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: alephbibnum - 000551530
oclc - 13356282
notis - ACX6009


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This project could not have been completed without the support and

assistance of several individuals. Professors W.V. Wilmot, Jr., J.B.

McFerrin, R. H. Blodgett and W.E. Stone, all of the University of Florida,

served on my committee and gave valued assistance and support. Professor

Walter Hill, also of the University of Florida, was extremely helpful in the

selection of the topic and in reading and criticizing the manuscript.

Mr. Jack Dixon graciously consented to apply his computer skills to

the compilation and analysis of questionnaire data.

Mr. JackMonahan, Director of the Florida Hospital Association and

Mr. George Deschambeau, Director of the Health Activities Management

Program of Orlando, Florida gave freely of their time to advise in matters

pertaining to hospital performance and the selection of hospitals for the pro-

ject sample.

I owe a debt of gratitude to the administrators of the fourteen hospitals

participating in the project for their fine spirit of cooperation.

I dedicate this dissertation to my wife, Jean, without whose support

and encouragement it would have been impossible to undertake this project.



ACKNOWLEDGEMENT S -------------------------------------------- ii

LIST OF TABLES ---------------------------------------------------- v

LIST OF FIGURES ---------------------------------------------------vii


I INTRODUCTION ---------------------------------------- 1

Objectives of the Project -------------------------- 2

Hypotheses -------------------------------------- 5

Research Methodology ---------------------------- 6

Expected Results -------------------------------- 9

II THEORETICAL BACKGROUND -------------------------- 12

Organization Theory Background ------------------ 12

The Lawrence and Lorsch Study ------------------- 19

Differentiation and Integration --------------------- 21

PART A: PERFORMANCE ------------------------------ 29

Hospital Objectives -------------------------------- 32

Performance Evaluation A Descriptive Analysis ----- 36

Performance Evaluation for the Hospital Sample ------ 54

PART B: DIFFERENTIATION--------------------------- 72

Departmental Differentiation ------ ------------ 76

Organizational Differentiation ---------------------- 104

Differentiation and Performance -------------------- 111

Su mary ----------------------------------------- 114

Chapter Page

PART C: INTEGRATION ------------------------------ 115

Required Integration in Hospital Organizations ------ 126

Determinants of Integration ----------------------- 131

Integration and Performance ---------------------- 154

Summary --------------------------------------- 159


Differentiation and Integration --------------------- 160

IV SUMMARY AND CONCLUSIONS -------------------------- 170

Summary --------------------------------------- 170

Conclusions ------------------------------------- 176

Areas Requiring Further Research ---------------- 179

APPENDIX A ------------------------------------------------------ 182

APPENDIX B ------------------------------------------------------ 183

Project Methodology ----------------------------- 183

BIBLIOGRAPHY---------------------------------------------------- 204


T able Page

EVALUATION INDICES ------------------------------- 38


3. AVERAGE LENGTH OF STAY (DAYS) 1968 -------------- 60



6. NURSE TO AUXILIARY RATIO --------------------------- 65



9. HOSPITAL PERFORMANCE RANKING ----------------- 70


11. FORMALITY OF STRUCTURE --------------------------- 84

12. GOAL ORIENTATION ----------------------------------- 91

13. TIME ORIENTATION ----------------------------------- 97

14. INTERPERSONAL ORIENTATION ------------------------ 101

LEVELS --------------------------------------------- 108



AVERAGES RANKING --------------------------------- 139





GROUP RESPONSE AVERAGE ------------------------- 148

GROUP RESPONSE ----------------------------------- 152

23. ORGANIZATION INTEGRATION -------------------------- 156



Figure Page

1. MODEL OF PROJECT ------------------------------ 7

CHARACTERISTICS ------------------------------ 80

3. MAJOR HOSPITAL SUB-SYSTEMS ------------------- 81





LPC SCORES ------------------------------------ 102

9. SUB-SYSTEM DEVIATIONS ------------------------- 111







LPC SCORES ------------------------------------- 136


AND CONFRONTATION BEHAVIOR ----------------- 153

OF PAIRS OF SUB-SYSTEMS ---------------------- 157

AVERAGES OF ALL HOSPITALS ------------------- 158

Figure Page

A-1 FACILITIES AND SERVICES ------------------------- 182


B-2 QUALIFICATION OF STAFF DATA ------------------- 186

B-3 QUESTIONNAIRE (Physicians Only) ----------------- 187

B-4 QUESTIONNAIRE ----------------------------------- 188





What organizational characteristics are best suited for general service

type hospitals in Florida? It is to this question that this project is addressed.

The significance of the hospital's product, patient care, hardly needs

debating. Few Americans escape the need for hospital services over any

lengthy period and most persons will die in a hospital. The quality of patient

care means life or death to some, and the difference between a healthy active

life or pain and restricted activity to others. The costs involved in hospital

care amount to a significant portion of our society's output. In specific terms

cost of patient care may be a prohibitive factor in the patient's receiving

adequate hospital care.

It is interesting to note that in the writer's discussion of hospitals'

objectives with hospital administrators that there was unanimity of opinion

that quality of patient care was the main objective of hospital organizations.

However, a few administrators did not consider the cost element involved in

producing this care as a valid organizational objective. They stressed the

need for quality care regardless of the costs entailed to produce it. One

administrator of a hospital with a state-wide reputation for efficiency and

operating in the black attributed this attitude to a personal defensive

rationalization on the part of administrators who are experiencing problems

in productivity. In addition the administrators taking this "quality at any

cost" position on organization objectives admitted to the writer that there had

to be some limit on the cost of patient care.

A recent study of industrial organizational characteristics by Paul

Lawrence and Jay Lorsch2 may provide a means of determining those

organizational characteristics that are most effective in general service

hospitals. The application of some of the findings and methodology of their

study to hospital organizations forms the basic part of this project.

Objectives of the Project

The purpose of this project is to study the organizational characteristics

of some general service hospitals in Florida to determine if the findings of the

Lawrence and Lorsch study3 can be validated in these hospital organizations.

More specifically, the organizational characteristics of a group of

relatively similar and comparable hospitals were studied to determine whether

the more effective hospitals have achieved the desired degrees of differentiation

and integration, and whether the less effective hospitals have failed to achieve

the desired degrees of differentiation of integration.

Differentiation, as used in the Lawrence and Lorsch study and as defined

for this project, is the difference in cognitive and emotional orientation among

managers in different major departments within the organization. Integration

is defined as the quality of the state of collaboration that exists among

departments that are required to cooperate in order to achieve the organization's


It should be noted at this point that organizational differentiation and

integration are essentially antagonistic. The more differentiated an organization

structure becomes the more integration is required among managers of

different departments. This polarization exists because the more training

and special knowledge required of a department manager the more likely he

is to have a narrower role perception as a manager. This leads to a differen-

tation between departmental and organizational objectives causing conflicts

when departmental managers must make joint decisions. Effective organiza-

tional performance requires decisions made on the basis of attempting to

achieve organizational rather than departmental objectives. Thus organizations

that need a high degree of differentiation to deal with their outside environment

also need some means of facilitating collaboration between departmental man-

agers. This conflict resolving activity is integration. While it is the opposite

of differentation it is necessary in degrees proportional to the differentiation

required in the organizational structure.

A general hospital organization structure can be viewed as being comprised

of five major departments:

1. medical doctors

2. professional staff nurses, radiology, laboratory

technicians and other professional service employees

3. non-professional staff dietitians, housekeepers,

maintenance and other auxiliary staff

4. fiscal accountants, purchasing agents, admissions

and other fiscal service employees

5. administration the administrators and their assistants

and associates.

Intuitively one would e:,pcct considerable differentiation in terms of structural

dimensions between these basic organizational departments and especially so

in the case of those departments with professional orientation. 5If this is the

case the quality and organizational level of integrative activity should be of

considerable significance to hospital effectiveness.

This project requires that organizational differentation be measured and

related to organizational effectiveness. It also requires measuring not only the

degree and levels of integration in the hospital's organizational characteristics,

but the mode of conflict resolution as well. These characteristics must also

be related to organizational effectiveness.

In addition to measuring these organizational characteristics it is also

necessary to attempt to measure organizational effectiveness. Since effective-

ness of hospital organizations has to be related to patient care quality as well

as costs an index taking into consideration both factors has to be developed. 6

This project then is addressed to the problem of improving hospital

performance by attempting to discover the relationship of organizational

differentiation and integration to hospital activity effectiveness.

Of major significance in the Lawrence and Lorsch study of ten industrial

organizations was the nature of the environment which firms in each industry

faced. One of their main hypotheses was that the more uncertain the

environment the firm's industry faces the more differentiation is required in

the firm's organizational characteristics. The dimensions used to measure

degrees of reactive uncertainty in the firm's, and its industry's environment

were clarity of information received, uncertainty of causal relationships and

the time span of feedback. This study pointed to the different degrees of

differentiation required for firms in each of three industries because of the

differences in dimension of reactive uncertainty in their environments.

The present project is not concerned with attempting to determine the

degree of uncertainty in the external environment which hospital organizations

face. It is assumed that the hospitals in the sample studied have similar

products and can be considered as firms or organizations in the same industry.

Thus they are facing the same environment. While the degree of uncertainty

in environment for this hospital "industry" is not determined it is assumed to

be the same for each of the hospitals in the sample.

The desired level of differentiation for the hospital organizations is

determined on the basis of current organization theory. However, it is not an

objective of this project to measure or identify the degree of uncertainty in

the hospital sample's environment. Since each of the sample hospitals face

a similar external environment no comparative study of the above mentioned

dimensions of uncertainty is required.

This project is limited to attempting to measure differentiation and

integration characteristics of the sample hospitals' organizational structure and

comparing these with organizational effectiveness to determine if a relationship

between these characteristics and effectiveness exists.


I. That the more effective hospitals have approximated

a desired level of organizational differentiation which

is at a higher level than the less effective ones.

II. That the more effective hospitals have achieved a higher

degree of integration than the less effective ones.

III. That the range of levels of integration is larger and

more significant to organizational effectiveness than

the range of differentiation in hospital organizations.

Research Methodology

Since the purpose of this project is to apply and extend the findings of

the recent Lawrence and Lorsch study to the hospital field a research

methodology similar to that used in the above mentioned study is used in this

project. Figure I illustrates the writer's conception of a model of the

Lawrence and Lorsch study and a model of the research methodology used

on this project.

This study is basically an empirical one and relies on primary data

gathered from the sample hospitals by questionnaire, by interview and from

statistical records. Established instruments used in the Lawrence and Lorsch
study were used wherever useful in this project. In addition other Lawrence

and Lorsch questionnaire and interview questions were used whenever

appropriate. In many cases Lawrence and Lorsch used established or

previously designed questionnaire and interview questions for determining or

measuring the various dimensions used in their study. Using these wherever

possible should add continuity and consistency to this project. It was necessary

in some instances to slightly alter the wording in the questionnaires and interviews

in order to reflect hospital environment.

Principal areas of investigation were:

1. to determine the desired level of organization

differentiation for hospitals in the study



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2. to measure levels of differentiation in the

hospitals' organization structure

3. to measure the degree of integrative activity

in hospitals in the sample

4. to determine the structural level within the

organizations where integrative activity is


5. to identify the mode of conflict resolution, that

is, the means of integration used.

Performance information and data of a primary nature were also obtained.

Data pertaining mainly to cost indices were secured primarily from statistical

records. 8 Quality of care data were solicited in parts of the questionnaire, in

interview questions and from certain records.
A potential sample of sixteen Florida hospitals which offer a similar

range of services and vary in size from 210 to 500 beds was chosen. 10 They

represent urban areas from widely separated locations in the state and operate

in similar demographic and social environments.

The writer visited each of the hospitals in the sample and interviewed

the administrator or his assistant. During the interview the project was ex-

plained and cooperation in the project was solicited. General information

about performance evaluation and departmentalization was solicited at this

time to facilitate the construction of a realistic research methodology for

gathering information in these areas.

While the administrators of all sixteen of the hospitals agreed to partici-

pate at the time of the preliminary visit, two later withdrew from the project.

One withdrew because of a construction project doubling the bed capacity of

his hospital. The other withdrew for unspecified reasons. The remaining

fourteen hospitals became the sample for the project.

These were visited a second time by the writer on dates specified during

the preliminary visit. Approximately one eight hour day was spent at each

hospital in the sample, conducting the questionnaires, taping the interviews

and recording statistical data.
The questionnaires were given to managerial employees in the

hospital organization and to doctors who were full time staff members or

affiliated with the hospital. Approximately equal representation from each of

the five major segments of the hospital organization was sought to complete

the questionnaire form. In addition respondents from all levels of the

managerial hierarchy were included in the sample when possible.
The interviews were conducted with the chief administrative officer

of each hospital and his assistant or assistants. Two or three other managerial

personnel who participated in the questionnaire were also interviewed at each


The Blue Cross Blue Shield Corporation, the Hospital Administrative

Services, Inc. and various individual hospital records were the sources of

statistical data.

Expected Results

The possible results of this project are twofold. It is expected to contribute

to the field of organization theory and to the area of hospital administration.

Essentially this project's purpose is to validate the findings of the Lawrence

and Lorsch study. To the extent that the results of this project concur with those

of the Lawrence and Lorsch study it will serve to reinforce their contingency

theory of organizations. In addition, the opportunity to extend the findings of

the Lawrence and Lorsch study exists in this project. Their study involving

ten industrial organizations was in part concerned with each firm's reaction

to the uncertainty in its environment. The environmental uncertainty was

viewed in relationship to three basic factors: scientific knowledge, techno-

economic and market. There are some basic differences between the markets

of industrial firms and those of general hospitals. Intuitively one would expect

a considerable difference in the competitive atmosphere between industrially

oriented organizations and hospitals. While it is not the objective or purpose

of this project to investigate this aspect of the Lawrence and Lorsch study,

the findings of this project should permit the drawing of conclusions regarding

the effect of differences in degrees of competition in the firm's environment

on its organizational characteristics.

A practically oriented result of this project will be the possibility of

indicating to hospital administrators those organizational characteristics

that appear to be most beneficial to effective performance. The desired level

of organizational differentiation and the use of integrative devices are two

specific areas of hospital organizational characteristics to which this project

may contribute.


1. This point will be discussed in more detail in Chapter III.

2. Paul Lawrence and Jay Lorsch, Organization and Environment:

Managing Differentiation and Integration, (Boston, Harvard

University, 1967).

3. Ibid.

4. Ibid. p. 11.

5. R. H. Hall, "Interorganization Structural Variables, Administrative

Science Quarterly, (December, 1962).

6. See Chapter III for a detailed description of this index.

7. Lawrence and Lorsch.

8. See Appendix B for details of research methodology.

9. Jack Monahan, Director of the Florida Hospital Association, offered

valued advice in selecting the hospitals for the sample.

10. See Appendix A for a description of services and the location of

hospitals selected for the sample.

11. See Appendix B for a format of the preliminary visit information

check list.

12. See Appendix B for a sample of the questionnaire.

13. See Appendix B for a list of some of the typical interview questions.



Organization Theory Background

Traditional thought on organization theory has been centered about the

bureaucratic form of organization. One of the major contributors to this

theory was Max Weber. He describes a bureaucracy as the form of

organization that will be most effective in accomplishing complex tasks in

which large numbers of people are involved. The basic characteristics of

a bureaucracy are:

1. the work activity is assigned as official duties

and are specifically detailed for each position

2. the work activity is arranged in hierarchial

levels in which there is a supervision of lower

offices by higher ones

3. the preparation of written rules and procedures

to govern the activities of the office holders

which are termed "files. 1

He suggests that this form of organization has been evolved by managers and

government administrators through the years to meet the needs of an ever

more complex society. The force behind this evolution to a bureaucratic

organization form has been its superiority to mass or communal types of


"Precision, speed, unambiguity, knowledge of file,
continuity, discretion, unity, strict subordination,
reduction of friction and of material and personal
costs these are raised to the optimum point in the
strictly bureaucratic organization."

The obvious advantage of such a system, according to Weber, was that

everyone would know exactly what to do and what was expected of him. He

would be trained to acquire the skills necessary for the job. Impersonal

unbiased rules are laid down to guide the behavior of the individual. These

factors were believed to enable the organization to act as a unit. The decisions

of the man at the top of the hierarchy could be passed down level by level until

it reached the level for action where the rules and the managerial hierarchy

would assure prompt and proper execution of the decision. This same

hierarchy also provides for the appeal upward of decisions considered

inappropriate by lower levels. The hierarchy and the files provide the

necessary coordination of communications and activity.

Subsequent students of organization theory have found discrepancies in

the bureaucratic theory when applied to specific situations. R. K. Merton

suggests that conformity to bureaucratic rules leads to timidity, conservatism
and technicism, and to the adoption of rules as goals rather than means.

Selznik also suggests that bureaucratic delegation as a means of control tends
to encourage departmentalization and sub-optimization of goals. March and

Simon, A. W. Gouldner, and Thompson, are among other authorities

who have discovered inadequacies in the bureaucratic theory. In presenting

their differences many writers have not challenged the validity of the theory

but have attempted to change or revise it in some manner to accomocdate

their particular findings and preserve the idea that the bureaucratic

organization form is the one best type of organization form for all situations.

Others, however, have chosen to disregard the bureaucratic theory

because they considered it to be too general in dimensions to be useful.

Several scholars numbered among this latter group have pointed out that a

major weakness of the bureaucratic organization theory is that it does not

consider organization structure to be a function of technology. It is from this

group that a number of empirical studies have been conducted in order to

attempt to substantiate a functional relationship between an organization's

structure and its technology.
Burns and Stalker, 8in a study of twenty Scottish firms undertaken in

the early 1950's, observed how management systems changed in accordance

with the changes in the technical and commercial tasks of the firm, especially

substantial changes in the rate of technological advance. In this study it

appeared that two divergent systems of management practices were evident.

One system appeared appropriate for firms operating under relatively stable

conditions and the other appropriate for conditions of change. The former was
termed "mechanistic" and the latter "organic". The machanistic system,

appropriate under stable conditions, was similar to the bureaucratic model

with well-defined policies, rules, hierarchies, authority, etc.. The organic

system was much less structured with a continuing re-definition of tasks and

responsibilities. The conclusion of this study pointed out:

"The organization of the internal interpretive
system and the direction of the commercial, technical
and productive capacities of that system are conditional
for their success on an appreciation of the rate of change
affecting the technical and market circumstances con-
fronting the firm from day to day.

as the rate of change increases in the technical
field, so does the number of occasions which demand

quick and effective interpretation between people
working in different parts of the system. As the
rate of change increases in the market field, so
does the need to multiply the points of contact
between the concern and the market it wishes to
explore and develop. "10

Thompson and Bates made a study of the proposition that the type of

technology available and suitable to particular types of products and services

set limits on the type of structure appropriate for organizations and that the

functional emphasis and the process of administration will vary as the result.1

An example of the effect of the organization's product or service on its structure

is exemplified by the decentralized structure of a university compared to the

centralized structure of a manufacturing firm. The study was made of four

types of organizations; a mining enterprise, a manufacturing firm, a

university and a hospital. The results of this study inferred that product

concreteness and the rigidity of the production process technology are

independent variables which are the determinants of organization structure.

Joan Woodward made a survey in England of 100 firms employing 100

or more people.12 The original purpose of her study was to determine

whether one type of organization structure was more successful than others.

Structure was classified into three categories; line, functional and line-staff.

One of her findings was that the firm's degree of success could not be

empirically related to one type of organization structure. This discovery

made it necessary to re-study the concerns in a different manner and firms

were reclassified into categories according to the nature of their manufacturing

processes. These categories were used:

1. one of a kind output

2. batch producers

3. mass production and process producers.

By this classification a study of successful firms versus less successful ones

indicated that one type of organization structure was common to those success-

ful firms in each of the classes. The more successful firms among the batch

producers had mechanistic organization structures. The more successful single

unit producers and the mass production and process producers had organic

type structures based on the Burns and Stalker classification mentioned pre-

viously. The finding that successful mass production and process producers

have organic systems apparently conflicts with rather than confirms the Burns

and Stalker findings. This conflict is probably due to the definition of teclno-

logy used by Woodward which considered only the degree of technology present

in the process and omitted the rate of change in technology. The latter was an

important consideration in the Burns and Stalker classification. The conclusion

of the survey indicated:

"While at first sight there seemed to be no link between
organization and success, and no one best way of organizing
a factory, it subsequently became apparent that there was a
particular form of organization most appropriate to each
technical situation. ,"13

Harvey approaches technology as a continuum from technical diffuseness
to technical specificity. 1Technical diffuseness represents a number of tech-

nical processes in the firm and a wide range of products. In addition products

vary from year to year as a result of changes in technological production pro-

cesses. This diffuse type of organization is similar to Woodward's one-of-a-

kind category. Harvey's technical specificity classification corresponds to

Woodward's mass production or process producers.

An important implication of Harvey's study is that not only the form of

technology is an important determinant of structure, as presented by Woodward,

but that the amount of change, or rate of change, within a given form is also


In this study Harvey uses sub-unit specialization (number of sub-units),

levels of authority, the ratio of managers to total personnel, and program

specification as dimensions in classifying types of organization structure.

His hypotheses are that as technical specificity increases:

1. The number of specialized sub-units in the

organization increases. This is consistent

with Lawrence and Lorsch's differentiation

in organizations.

2. The number of levels of authority in the

organization increases. This is consistent

with Woodward's findings.

3. The ratio of managers to total personnel in

the organization increases. This is also

consistent with Woodward's findings.

4. The amount of program specification increases.

This conflicts with Woodward's findings and as

suggested by Harvey this may be because of the

weak evidence in support of Woodward's hypothesis

that both ends of the complexity scale are more

flexible than the middle range.

The results of the study, which he compared on a scale of technical

diffuse intermediate technical specific, confirmed his hypothesis although

he noted certain eNceptions did occur.

In another English study, D. S. Pugh, D. F. Hickson, C. R. Innings

and C. T. Turner conducted an investigation of 52 English work organizations.15

The purpose of this study \was an attempt to make a comparative analysis of a

wide variety of organizations, using a multi-dimensional analysis, to draw

conclusions in regard to the independent variables involved in organization

structure. This was a descriptive study based on five theoretically established

primary dimensions of organization structure; specialization, standardization,

formalization, centralization and configuration. (Unfortunately, a sixth

dimension, flexibility, could not be studied due to the short time span of the

study). Scales were constructed for 64 of the structural variables resulting

in a large matrix of 2, 016 coefficients illustrating degrees of correlation.

The results of this study empirically established four underlying

dimensions of organization structure: structuring of activities; concentration

of authority; line control of work flow; and relative size of supportive

components. The establishment of these dimensions makes it possible to

compare structural profile characteristics of organizations and through the

wide differences noted in the structures of organizations refute the traditional

notion of one ideal bureaucratic organization.

A significant point in relation to the empirical studies mentioned above

and others that have not been referred to here is the definition and use of the

word "technology'.'. There has been little agreement among the writers as to

exactly what is meant by technology. In the studies referred to previously

technology has been considered:

1. the degree of mechanization of the production process

2. the attitude and approaches of management to the

managerial functions

3. the rate of change in the firm's environment

or some combination of these dimensions. Given these variations in definition

and their use, there still seems to be ample evidence to indicate that

technology does have a causal relationship to organizational characteristics.

The Lawrence and Lorsch Study

Paul Lawrence and Jay Lorsch are amongthose students of organization

theory who believe the bureaucratic theory to be inadequate.

"There is clearly no single best way for firms to
organize in all situations, and the central question of
this study What kind of organization does it take to
deal with different environments ? has great
significance to present-day managers. Because the
pace of technological and market change is so rapid,
our need to know what forms of organizational
arrangements will cope most effectively with change
imposed from outside and which of these forms will
facilitate those internal changes necessary to continuing
economic progress is essential. ,,16

Ten industrial organizations were studied in this project; six similar

organizations in the plastic product industry, two organizations in the bakery

product industry and two organizations in the container industry. The plastics

industry was considered to be facing a dynamic changing environment, the

baking industry a mildly dynamic environment and the container industry a

rather stable environment. The degree of reactive uncertainty, the rate of

change in the industry's environment, was determined by measuring three

environmental dimensions:

1. clarity of information

2. uncertain causal relationships

3. time span of feedback. 17

The desired level of differentiation 18 for each industry was based on current

organization theory findings. Then the actual organizational differentiation

was measured for each of the ten organizations. The dimensions used for

measurement were:

1. formality of structure

2. interpersonal orientation

3. time orientation

4. goal orientation.

The level or degree of differentiation in an organization affects the role

expectation of departmental managers. The more specialized and differentiated

the department, the more likely the manager is to place departmental objectives

above those of the organization. This narrow role perception by managers can

be the cause of conflict within the organization whenever joint decisions are

required. In addition, managerial role occupants of specialized departments

face a greater degree of departmental interdependence calling for increased

levels of cooperation and coordination. This factor further accentuates the

possiblitiy of conflict within the organization.

It is then clear that organization success will be least partially related

to the ability of the organization to facilitate conflict resolution and bring about

the required degree of cooperation and coordination, i. e., integration. 19

Integrative activity in the organizations studied was measured by using

six dimensions. Three of these measured integrative acitvity only for those

managers considered to have integrative roles in the organization. They are:

1. integrative orientation and departmental structure

2. influence of the integrator

3. reward system for the integrator.

Three other integrative dimensions were measured for all managers:

1. total level of influence

2. influence centered at the required level

3. modes of conflict resolution.

This last dimension was measured with respect to mode of conflict resolution

in three different activities; confrontation, smoothing and forcing.

Performance was determined for each of the organizations by measuring

the rate of change from year to year for three basic factors; sales, before tax

profit and return on investment before taxes.

A conclusion of this study was that organizations operating effectively

in different environments had different degrees of organizational differentiation

and developed different methods of achieving both the required differentiation

and integration. Thus different organizational characteristics are required to

be effective in different businesses.

Also, it was found that differentiation and integration within organizations

are essentially antagonistic. The more differentiation in organizational

characteristics, the more difficult it is to achieve the required degree of

integration which increases with an increase in differentiation.

In addition, the effective firms achieved both the desired level of

differentiation and integration by having appropriate integrative mechanisms

and by developing patterns of behavior among their managers which effectively

resolved conflict to reach integrated decisions.

Differentiation and Integration

Differentiation and integration are not new innovations in the field of

organization theory. Weber recognized differentiation as specialization which

played a significant role in each of the three basic bureaucratic characteristics.

The official duties of the office are specified in detail and the office holder

trained in the specific skill needed to fulfill the duties of the office. The

hierarchial levels also provide for specialization, especially at lower levels

where supervisors oversee subordinates carrying out specific tasks. The

"files" provide detailed rules for doing each special activity. So the sub-

dividing of activities into small specialized units is the backbone of the

bureaucratic model. Integration, known as coordination in the bureaucratic

model consists mainly of the communication network in the organization

structure which provides for the flow of information and facilitates control.

The hierarchy of authority and the "file" each have prominent roles to play

tin this function. The organizational hierarchy provides the routes for

information flow and indicates the appropriate levels and offices for decision

making on problems involving more than one sub-unit. As mentioned

previously the hierarchy also provides the route for decision appeals. The

"files" provide the format for coordination and detailed procedures for

assuring that the activities of the sub-units are integrated efficiently into the

pattern of the whole organization.

Chester Barnard relates specialization and coordination to the

organization's purpose:

"Thus, in an important aspect, 'organization' and
'specialization' are synonyms. The ends of cooperation
cannot be accomplished without specialization. The
coordination implied is a functional aspect of organization.
This function is to correlate the efforts of the individual
in such a way with the conditions of the cooperative effort
of the whole that purpose may be accomplished. ,20

He recognizes the dual function of an organization; the analytical aspects,

or the breaking down into sub-units, and the synthetical aspects, or

correlating effects of the organization structure. This represents the very

heart of the traditional organizing function of management. It is interesting

to note, however, that this view of an organization's specialization and

coordination functions does not indicate the nature of the relationship between

them. This point, brought out by Lorsch, will be discussed further on in this


Luther Gulick states at the outset in his "Notes on the Theory of


"Whenever many men are thus working together the
best results are secured when there is a division of work
among the men. The theory of organization, therefore,
has to do with the structure of coordination imposed on the
work-division units of an enterprise. "21

Specialization is necessary for organization effectiveness because of the

limited nature of man's skill, capacity, dexterity, etc., and because of time

and space limitations. However, "If sub-division of work is inescapable, coor-

dination becomes mandatory."22 The reason for the need of coordination,

according to Gulick, is that the workers will get in each other's way, work

could be done in the wrong order, and improper material flows. The more the

work is sub-divided the greater the danger of confusion and the greater the

need for overall supervision and coordination. Gulick recognizes the fact

that both specialization and coordination are necessary for effective

performance as well as the direct quantitative relationship between specialization

and coordination. They vary directly. Gulick also states two primary methods

of achieving coordination; through the organizational hierarchy as mentioned

previously, but also by the dominance of a singleness of purpose in the minds

and wills of employees who should seek to fit his work into the whole.

Mooney considers the principles of organization to be universal, applicable
to all types of organizations. 2He defines organization as concerted human effort.

In his description of structural organization specialization is implied and

coordination is emphasized. "Coordination, as we have noted, is the determining

principle of organization, the form which contains all other principles, the

beginning and end of all organizational effort. "24 Coordination activity is

traced through the hierarchial structure and divided into vertical and

horizontal components, line and staff, but its relationship to specialization

is not pursued by the author.

Another of the early writers on specialization and coordination was L.

Urwick. He states:

"These principles can be studied as a technical
question, irrespective of the purpose of the enterprise,
the personnel composing it, or any constitutional,
political or social theory underlying its creation. They
are concerned with the method of subdividing and allocating
to individuals all the various activities, duties and respons-
ibilites essential to the purpose contemplated, the correlation
of these activities and the continuous control of the work of
individuals so as to secure the most economical and the most
effective realization of the purpose. "25

He addressed the problem of the horizontal or staff activity in the

organization as suggested by Mooney and to the problem of whether the use

of staff personnel facilitates or hinders coordination. Critics of this type of

organization maintained that staff specialization hindered the coordinating

activity of the line executive. They suggested that staff officials, to act

effectively, needed authority that would interfere with the line official's span

of control and the scalar hierarchy through which coordination was attained.

Urwick contended that this was not true and pointed to the various military

units which effectively use staff or horizontal organizational elements. He

suggested further that the use of staff actually assists the line official in

coordinating. Detailed coordinating activity can be delegated to a staff

official relieving the line official of time-consuming minor activities. Also,

control activities, which are partly of a coordinating nature, can also be

delegated to a staff official. He also indicates two consequences of the lack

of coordination: one is the proliferation of committees which he suggests is

much more costly than the use of a staff official for coordinating. The second

is the petrificationn of leadership" on the part of management which results

from an overload of administrative work.

The views expressed above are typical of those in the classical school

who were concerned mainly with how to sub-divide the organizational tasks

and the best way to bring about the coordination of these sub-units. This

technical approach to specialization and coordination gave at most only a

passing nod to the influence this differentiation process had on the behavior

of organizational members. Lawrence and Lorsch pointed to this fact

indicating that writers of this school failed to see that the act of segmenting

the organization into departments would influence the behavior of the

organizational member in several ways:

"The members of each unit would become specialist
in dealing with their particular tasks. Both because of
their prior education and experience and because of the
nature of their task they would develop specialists
working styles and mental processes. "6

These differences in ways of thinking, attitudes and behavior, as well as the

more traditional segmentation of task and knowledge, are referred to as


Social scientists have been concerned about the effect of task

segmentation on organizational members' behavior. Lorsch, in "Product

Innovation and Organization, traces the findings of several empirical studies

which have shown that within the organization the development of the sub-
system is based on its primary task. 2The development of sub-systems

may cause different organizational structure from one sub-system to another

because of the different nature of their tasks. In turn these different structures

influence the norms and behavior of the members of each unit.


Lorsch also points out that the more different these sub-systems are

the more difficult it is for them to collaborate. Also, the more the need for

interdependence among sub-tasks and sub-systems, the more coordinating

activity is needed. This activity then is referred to as integration, the

facilitating of cooperation and coordination of different sub-units and sub-systems.

It is with this conception of the relationship of differentiation and

integration that we proceed to the analysis of the empirical data gathered from

selected hospitals.


1. H. H. Gerth and C. W. Mills (eds.), Max Weber: Essays in Sociology,

Fairlawn, N. J.: Oxford University Press, 1958, pp. 196-239.

2. Ibid. p. 214.

3. R. K. Merton, "Bureaucratic Structure and Personality," Social Forces,

18 (1959-1960), pp. 560-68.

4. Phillip Selznik, The Organizational Weapon, New York: McGraw-Hill,


5. J. G. March and H. A. Simon, Organizations, London; John Wiley and

Sons, Inc., 1958.

6. A. W. Gouldner, Patterns of Industrial Bureaucracy, Glencoe, Ill.: The

Free Press, 1957

7. V. D. Thompson, "Bureaucracy and Innovation, Administrative

Science Quarterly, 10 (June, 1965), pp. 1-20.

8. Tom Burns and G. M Stalker, The Management of Innovation, London;

Tavistock Publications, 1961.

9. Ibid.

10. Ibid. p. 231.

11. J. D. Thompson and F. L. Bates, "Technology, Organization and

Administration, Administrative Science Quarterly, 1 (1957-1958)

pp. 325-43.

12. Joan Woodward, Industrial Organization: Theory and Practice, London:

Oxford University Press, 1965.

13. Ibid. p. 231.

14. Edward Harvey, "Technology and the Structure of Organizations, "

American Sociological Review, 33 (April, 1968), pp. 247-58.

15. D. S. Pugh et al. "Dimensions of Organization Structures, "

Administrative Science Quarterly, 13 (June, 1968), pp. 65-105.

16. Lawrence and Lorsch, op. cit., Foreword by Bertrand Fox, p. iv.

17. See Figure 1., Chapter I for a model of the Lawrence and Lorsch study.

18. See Chapter I, pages 2 and 3 for definition of differentiation.

19. See Chapter I, page 3 for a definition of integration.

20. Chester Barnard, The Functions of an Executive, Cambridge, Mass.,

Harvard University Press, 1945, pp. 136-37.

21. L. H. Gulick, Papers on the Science of Administration, Gulick and

Urwick (eds.), New York, Institute of Public Administration, Columbia

University, 1937, p. 3.

22. Ibid. p. 93.

23. James Mooney, Papers on the Science of Administration, Gulick and

Urwick (eds.), New York, Institute of Public Administration, Columbia

University, 1937, p. 91.

24. Ibid.,p. 93.

25. L. Urwick, Papers on the Science of Administration, Gulick and Urwick

(eds.), New York, Institute of Public Administration, Columbia University,

1937, p. 49.

26. Lawrence and Lorsch, op. cit. p. 9.

27. Jay Lorsch, Product Innovation and Organization, New York,

Macmillan Company, 1965, pp. 4-23.




The interview responses to the question How do you, as an administrator,

evaluate the performance of a hospital? indicated that a considerable degree

of confusion and lack of direction is prevalent amongthe administrators of

the sample hospitals. Their responses to questions about the bases of

evaluation of overall hospital performance were nebulous and indicated little

in the way of a common method or means of performance evaluation.

Recent literature provides little in the way of enlightenment on the

subject. However, Ray Brown, then Vice-President of the University of

Chicago and superintendent of the University of Chicago Clinics, summed up

attempts to evaluate hospital administration performance in 1961:

"Hospital trustees and administrators have had
more than an ordinary right to be confused in recent
years as they have attempted to direct the operation
and development of the nation's hospitals. The basis
for their confusion lies in the diverse, and sometimes
contradictory, nature of evaluations made about
hospitals. These evaluations are at times so divergent
that is is difficult to recognize that the opinions are
concerned with the same institution. Like the fable of
the Blind Men and the Elephant, each critic is judging
the whole entity by the part he touches, or better stated
for this purpose, the part that touches him. The modern
hospital is a many-sided enterprise, and when different
individuals or groups judge it solely by a single side,
their separate evaluations become a many-splintered

guide for hospital trustees and administrators.1

It is interesting to note that he views a hospital as having nine facets or

areas of responsibility ranging from economic to religious and including

rather nebulous categories such as public, social, etc.. However, he has

recognized the primacy of two of these economic and medical care.

Most of the balance of current literature is, as Mr. Brown indicated

above, directed at particular facets of hospital administration responsibility.

Weil, in an exception to this tendency, offers guidelines for evaluating

performance of hospital administrators. He includes an investigation of the

following functions of the hospital administrator:

1. written goals and objectives for the hospital

2. emphasis and interest in patient care

3. the hospital's image in the community and in

the health and hospital field

4. communications between the governing board,

the medical staff and administration

5. the administrator's relationship with health,

medical and hospital agencies and associations

6. historical perspective is the administrator

leading the institution to new heights, maintaining

the status quo or allowing slow degeneration. 2

Mr. Weil is offering areas of measurement but without indicating

standards or objectives against which to make the measurement or

illustrating instruments with which to make such measurements.

A large portion of recent literature is addressed to improving

efficiency and reducing costs in a particular section or department of the

hospital or toward improving patient care in a specific procedure or


Lawrence and Lorsch measured the performance of the organizations

making up the sample in their study on the basis of three readily determined

and rather universally accepted criteria. They measure the rate of year to

year change in sales, net profit and return on investment for a five-year
period. 3In addition, they asked the chief executive of each organization for

his judgement of the performance of his organization. As the quotation on

Page 29 illustrates, measuring performance of hospitals is neither easily

accomplished nor likely to be universally accepted. The basic difference in

measuring performance in an industry and hospital organization appears to

be in the difference in their basic objectives.

Given the multiplicity of objectives in industrial and commercial

organizations and given that something other than profit maximization may

motivate industrial managers, nevertheless, the significance and primacy of

profit as an organizational objective cannot be denied. As a result sales, net

profit and return on investment are generally accepted as adequate measures

of performance of these organizations.

What do you measure when you attempt to judge the performance of a

hospital? The administrator is the chief operational executive. How do you

measure the performance of the organization under his direction? The

measuring instrument should reflect the degree of attainment of the objectives

of his organization.

Hospital Objectives

Most of the hospital administrators and assistant administrators

interviewed indicated that hospital organizations have two basic objectives,

quality patient care and financial soundness (efficiency). Some of the

respondents indicated their perception of the objectives directly during the

interviews while others, although not mentioning objectives specifically,

nevertheless inferred a duality of objectives in the indices they specified as

useful in measuring hospital performance. A total of 28 administrators and

assistant administrators were interviewed. Fourteen of these were interviewed

twice, once during the preliminary visit and again during the second visit to

the hospital.

The dual nature of the objectives of a hospital was expressed by an

assistant administrator in the following terms:

"To provide the best in patient care at a cost the
patient and the community can stand. 6

A significant point about these two basic objectives, however, is that

apparently they are perceived by most administrators as dichotomized, that

is, that one goal is achieved at the expense of the other. This does not mean

that administrators are mindless to costs or condone waste in their attempts

to provide quality care. Nor does it suggest that is is impossible to decrease

costs and improve the quality of patient care in some instances. However,

it does imply that increases in personnel and material requested in the name

of improved quality of patient care are frequently granted only at the increase

in cost to the institution for these resources. One administrator expressed


"... of course we have the problem of quality. We
can't consider dollars and numbers of personnel alone
because if we should we could cut the quality right down
to an unacceptable level. "7

Another stated:

"We're interested in assuring the highest quality,
according to the standards that we know, at every step
along the way as far as the patient is concerned and to
effective utilization of our resources. "8


"I look at it two different ways. One on patient care
and on financial stability, making sure that we're offering
a full range of services to all the patients, ...p nd still
being able to maintain a position in the black."

This quality versus cost dichotomy is not unusual or in any way limited

to the hospital field. It would appear that this same polarity is prevalent in

industrial concerns as well but rarely couched in the same terms. A common

phrase in industrial objectives, "a quality product at a competitive price, "

infers the same dichotomy.

The main difference in an analogy of objectives between hospital

organizations and industrial firms lies on the objective or goal emphasis

which provides the guiding direction for the administrators of the organization

to follow and motivates their efforts to achieve attainment. The emphasis

comes from influences external to the executive or administrator. In the

case of an industrial organization the owners and board of directors provide

emphasis on profit and as a result the quality objective becomes some minimum

acceptable level that is competitive. If the product quality falls below this

level and becomes non-competitive customer rejection of the product will

follow and profits will suffer. If the quality exceeds competitive levels it is

unlikely to be recognized sufficiently by customers to offset the increase in

costs which h in turn reduces profits. Carrying this analogy to the hospital

field we find that there is lacking a large unified body of influence aimed at

guiding the hospital toward a common or single direction. Instead there are

several influential forces operating in such a manner that the administrator

has no single goal toward which he can strive. Thus he must balance them

off in such a way as to appease the more influential groups yet still attempt

to provide the basic services for which the institution exists.

Brown has put this problem facing hospital administrators quite


"When, as in the hospital situation, such
special interests can be identified closely with
the interests of organized groups, the evaluation
is sometimes made in terms of programs or
platforms of the organization affected, rather
than in terms of the total responsibilities of the
agency being evaluated. In such instances the
agency may not be measured by how well it
serves one, or all, of its intended purposes;
rather, the evaluation may be made to suit the
purposes of the measuring organization.

"No enterprise or agency is so closely touched
with the interests of so many varied and well
organized national organizations as is the hospital.
The interests of these organizations are not always
identical and the interest of some seem to be in part
in opposition to those of others.

"When confronted by diverse evaluation which
emphasize separate and different purposes, the agency
being evaluated must choose which direction it will
follow. Faced with the reality of restricted resources,
it must choose how to allocate the resources available.
It cannot go off in all directions at once unless it wishes
to dissipate its resources and limit its effectiveness in
all areas of its service. This means it must choose the
evaluation to which it will respond and the degree to which
it will respond to each. "10

As was mentioned in the Introduction one assistant administrator

perceived the quality of patient care as the major objective of the hospital.

He attempted to rationalize or discount, at least to some degree, the place

for financial efficiency in the goals of a hospital organization.

"The 'objective of this institution, the overall
objective, and it's difficult to measure but I think it
can be measured once it's refined, is to meet health
care needs... We don't have any cost objectives, I think
this is unfortunate but that doesn't seem to be a primary
concern. "11

Perhaps this singleness in approach to the hospital's objectives can be

attributed to a defensive attitude about poor productivity in the administrator's

hospital. It is also possible, as mentioned previously in the quotation from

Brown, that the influence of the medical organization is such that it promotes

attainment in the quality of care area and minimizes the economic facet of

the objective considered significant by most hospital executives.

It is also interesting to note the possibility of singleness in objectives

in the opposite direction efficient utilization of resources. The administrator

of one hospital indicated during an interview that over-staffing could bring
about a decrease in quality of patient care.12 He suggested that a certain

number of staff was necessary for the quality care of patients but that

increases in staff personnel above this level would not only fail to improve

patient care but could actually decrease it. The same conditions were said

to hold true for supplies. He contended that excess staff or amounts of supplies

were an indication of managerial slothfulness and under this type of direction

and control the mere presence of staff and materials would do little to

enhance the actual quality of care extended to the patient.

However, one administrator suggested that costs were not a valid

objective thereby intiitiatin that administrators should strive only in the

direction of quality of care. Another suggested that the objectives are not

polarized but that quality care at the lowest cost is a single objective.

Performance Evaluation A Descriptive Analysis

During the writer's preliminary visit to each hospital one of the questions

asked of each hospital administrator was: Upon what basis do you evaluate the

overall performance of a hospital? Again during the second visit to each

hospital the question was repeated in interviews with the administrators and

also was asked of the assistant administrators interviewed. Their responses

were of an impromptu nature and in most cases highly unstructured. It also

was interesting to note that responses to the question varied from the same

respondent from the first to the second interview. Table 1 itemizes the

responses by each administrator and assistant administrator according to

the most frequently mentioned indices of performance evaluation. Only those

indices that were more commonly mentioned are listed and in some cases

variations in usage are consolidated under one heading.

As noted in the previous section many of the respondents classified

performance indices as applying either to quality of patient care or to

financial soundness and utilization-efficiency.

"I'd say that there are two major areas of overall
hospital performance that are subject to evaluation.
One is the financial area and the second is the quality
of patient care being rendered. "13

"I would expect that many people would base their
evaluation on finances and certainly this is very
important. However, I have always thought that financial
attainments aren't necessarily proof of a good hospital.
... I think probably clinical evaluation would be more
important. ,14

Patient Response

As shown in Table 1, patient response was considered by a large majority

of administrative personnel to be an index of hospital performance. Since the

patient is the product of the hospital organization, administrators, as a group,

seem anxious for any sort of feedback from the patient as to his opinion of the

hospital's service.

Several methods for securing patient feedback were noted from the inter-

views with hospital administrative personnel. A commonly used technique is

the patient questionnaire, given to the patient to fill out just prior to discharge,

to take home and return by mail to the hospital, or mailed to the patient a few

days after discharge.

"We have initiated a questionnaire type survey which
every patient has an opportunity t5fill out so we can get
some feedback from the patient. "

"We have a patient opinion poll ... Any patient that has
a constructive criticism, we check it out and give the
patient a reply. If they make a suggestion we like to let
them know if we can use it and if we can't we like to let
them know why. If they'rejust all good we send them a
routine thank you letter. "

"Now quality carries into patient attitude and we have
a very extensive patient opinion program. This year the
main questions I look at are: 'In general how would you
evaluate your hospital care ?' and: 'How woud you compare
your stay here with your stay elsewhere. '"

Another method employed by administrators to facilitate patient feedback

is a direct patient interview. Hospital employees interview the patient just

before their discharge to gather information about their opinion of the care

offered by the hospital. The most sophisticated use of this method was made

by one of the hospitals in the sample. The assistant administrator stated:

"We are getting responses from the patient. This
is an extremely important aspect of measurement of
hospital care. Since administratively we couldn't do it



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TABLE 1 (Continued)


0 ) 0 .. c
M*. O Cd 4- 0 a

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* Administrator or chief executive of hospital

** Assistant Administrator or second level executive of hospital

*** Respondent was not asked to indicate performance indices.

all ourselves we have an extended arm of administration
which we call the Patients Relations Department. This
includes four people who are trained in the needs of the
patient and are trained in interviewing techniques. These
people are meeting every patient in the hospital every day.
They are interviewing patients and families trying to exact
from them the problems they may have. "18

Another hospital conducted a similar survey but on a much less sophisticated

basis. A former head housekeeper was assigned the duty of interviewing

patients about the quality of care they were receiving. She was also given

authority to go directly to the appropriate department head to present patient

complaints about particular areas of patient care. The administrator was of

the opinion that this method provided rapid feedback to department managers.

Some hospital executives try to evaluate patient response to the care

they are receiving by making rounds and selecting at random patients to

interview about their opinion of the care they are receiving. This is one of

the more casual methods of getting patient feedback but it is apparently deemed

useful by some administrators since they are directly involved and can make a

first hand evaluation from the patient response.

However, a significant aspect of the nature of patient response feedback

was evident throughout the remarks made by the administrators indicating

patient response as a measure of hospital performance. This is the negative

aspect of this feedback. Patient response doesn't necessarily tell you how

good your patient care is but is more useful as an indicator of weak or bad

spots in the care your organization renders to the patients. This can be

inferred from the quotations noted above and is brought out even more

succinctly by one of the other respondents.

"We even have a program by which we send
questionnaires to approximately 50% of our patients
after their discharge to find out where we are falling

down. Naturally we have some complaints but it's
less than 1%.? "19

Besides looking to the negative aspects of questionnaires and surveys

several of the administrators interviewed used complaints from patients as

an indicator of performance. Obviously, they valued these mainly as a

source of information as to the location of specific trouble spots in the

organization. One assistant administrator, however, suggested that the

frequency of complaints was a performance indicator. When the number of

complaints was few this indicated that things were running smoothly. Some

administrators, in responding to how to evaluate hospital performance, singled

out patient complaints.

"Did the patient complain about his service?
I think this is one thing we have to test. "20

"I think one is by, and this is by no means the
most important way, but the one that always strikes me,
is by the number of complaints written or verbal you
have from patient care. "21

"I would say that it is an element (patient responses)
that should be considered, particularly negative. I'm
really not concerned with the positive flowback. Where
you have specific complaints this we can individually
follow up. "

"We are very sensitive to complaints and every patient
that leaves the hospital is encouraged to give us objective
findings on any facet of the hospital operations. We feel that
patient complaints is a direct measurement of the hospital
quality and if the complaints were rapidly mounting we'd feel
the hospital was deteriorating regardless of any other
comparative statistics we might have. "23

In one hospital the discharge desk and cashier's office were intentionally

situated just across the hall from the administrative offices. The administrator

pointed out by keeping his door open he could then be aware of problems that

patients presented at time of discharge. He stated that patients usually were

inclined to express their gripes about the service and care when they were

being discharged and being presented with their bill.

The value of patient response in measuring hospital performance was

questioned by some of the respondents because they felt the patient wasn't

qualified to judge or evaluate the care he received. Ironically, one of those

presenting this limitation to the validity of patient respaose was on the admin-

istrative staff in the hospital where the administrator had quite positive
feelings about its validity. 24

'The trouble here is the patient doesn't know what
quality of care is. It is patient opinion. Some of them
know right down to a T what to expect but others don't
have the slightest idea. "25

Others expressed similar doubts as to the validity of patient response in

measuring hospital performance.

"We have the patients fill out opinion surveys. We
did this about six months ago. As to whether or not we
had a valid survey, I'm not sure...The responses were
too favorable. So, I'm not sure it was valid... It pointed
out too pretty a picture. We got about 95% favorable on
almost every department... It showed a picture that I
took to an extent with a grain of salt. I didn't feel that
we were that good. 26

"We used to have questionnaires and I'll probably
do it again in the future. They have some merit... I27
really couldn't feel that it justified all the expense. "

In summary, some of the hospital executives felt that the rate of

complaints received was an excellent indicator of the quality of care

performance of the hospital organization. Others questioned its validity

on the premise that the patient wasn't technically competent to judge quality

of care and actually was commenting about the comfort of his stay. The

complaints received from patients, though not perceived to be valid in every

case, were considered valued sources of information as to the location of

weak or trouble areas in the organization.

Community Attitude

Six of the respondents considered community attitude toward the

hospital to be an indicator of hospital performance. The response of people

in the community, not necessarily those just released from the hospital, but

the stable members of the community was felt to be a useful source of

information about the effectiveness of the hospital organization. This was

stated several ways by hospital executives.

"Your reputation in the community certainly is an
important part of it. People attract a certain opinion of
a hospital which generally is correct, although not always. "2

"... general attitude of the public toward the hospital.
If you look at the number of people who make donations.
The people who are members of our Association who own
the hospital. Certainly this is an indication that they are
satisfied with the hospital. "29

"Just general comments of the people, especially here
in town, who have been here and have been to two or three
other hospitals in town, as they compare it. "30

"I think that by getting around in the community, to
business clubs, to all types of civic clubs and to churches,
these are the places where you get to know people and they
can tell you how the hospital is running from a patient care
standpoint. "31

One administrator pointed out the problems of validity of this type of

performance index. "The general public may not know whether you are

taking real good clinical care of the patient. ,32 The general attitude of the

public is based on a comparative analysis by many individuals and tends to

measure, not how well the hospital performs but as one of the administrators

mentioned above, whether they were satisfied with it. This could conceivably

reflect more cost and comfort values than quality of clinical patient care.

Medical Staff

Nine of the administrators and assistant administrators interviewed

mentioned the opinions of doctors as being useful in evaluation hospital

performance. At first sight one would think that the doctors are the group

most qualified technically to judge or evaluate the quality of care the patient

receives in the hospital. It was pointed out however, that while the doctors

judge how effectively his orders for the patient are carried out, the

availability of personnel and equipment, etc., he actually does not become

involved in the whole process. He usually sees each of his patients only

briefly each day. One administrator suggested that the doctor really judges

administrative staff personalities when asked to give his opinion regarding

hospital effectiveness. Another stated:

"So, as far as the doctors are concerned it's a
matter of just their own personal feelings. They're
in a good position to evaluate certain aspects (of
hospital performance). 33

Another executive stated that it's not unusual for doctors to evaluate certain

aspects of hospital patient care activity quite differently. He pointed to an

example when one doctor complimented him on the fine care the Nursing

Service Department was giving. A few minutes later in a different

conversation another doctor indicated that the Nursing Service Department

was mediocre at best.

Some of the hospital executives though, appear to rely on feedback from

members of their medical staff and affiliates as the following statements


"Of course I think you get a real good indication
of all this (quality of care) from the medical staff opinion. "

"Another thing we put considerable credence on
here is: Was the doctor happy with the services
rendered to his patient.?"3

"We occasionally will do a suggestion type survey
from doctors. "36

It would appear that the doctors affiliated with the hospital offer the

administrator a source of evaluation of the quality of care effectiveness of the

hospital organization. The fact that the doctors are quasi-members of the

hospital organization may work to strengthen the validity of their evaluation

by providing a degree of objectivity not so easily attainable by those more

closely tied to the organization structure. However, their professional ties

must be recognized as a possible impediment to their objectivity.

Employee Morale and Attitude

Eight of those hospital executives interviewed indicated that one of the

bases upon which they judged or evaluated the overall performance of their

organization was the morale of their employees. Stated simply, as one

assistant administrator put it, happy employees are more likely to give good

patient care than unhappy ones. ( A positive correlation between morale and

productivity has not been established). A similar thought was expressed by

another assistant administrator.

"I think you can judge by the way that personnel
react to the way the hospital is being administered.
I feel like that a happy employee is usually indicative
of a person that is satisfied with the way things are
running. "37

Another stated:

"We feel that our staff is our key to the success
of our operations. We watch very carefully for
unsettlement of personnel. When personnel are
discharged, (or quit) we are discharge interviewing
to establish the reasons for their leaving. We're
maintaining statistics on this... We feel that we do
have good departmental communications. We feel
that they give us the key to how effectively we are
dealing with the patients. "38

Another administrator engaged a private firm to do attitude surveys of

employees in an attempt to measure employee morale. With many of the

employees coming in direct contact with the patient it would appear reasonable

to place considerable emphasis on the way the employee felt about his job, the

organization as a whole and his role in the organization's product patient


Joint Commission on Accreditation Data

The Joint Commission on Accreditation attempts to set minimum

standards of patient care in hospitals seeking its approval in the form of

accreditation. The rating of the Joint Commission is made in one of three

gradations; not accredited, accredited for one year, and accredited. The

one year accreditation is issued only once and only on the first attempt of the

hospital to meet accreditation standards. The full accreditation granted to

hospitals is valid for three years and application for accreditation must be

made again at the end of the three year period by the hospital.

Most administrators felt that this accreditation was of limited value in

evaluating hospital performance. Receiving accreditation indicates only that

some minimum standards of patient care are being met but does not indicate

degrees of patient care achievement above this level. While the administrators

showed little enthusiasm for accreditation as a whole as an indicator of performance,

some felt that some of the indices and ratios used in the accreditation standards

were valuable in themselves as indicators of performance.

"I think the clinical evaluation would be more
important, (than financial evaluation), with the
approval of the Joint Commission, of course, but
also all the various indices and coefficients that they
have. "39

"You also have the Joint Commission... You can
sort of measure your quality ratios with their quality
ratios. "40

The application form for Joint Commission Accreditation is several pages

long and requires detailed data on the qualifications of the medical staff, the

numbers and types of the various procedures undertaken during the last

period and several ratios which are compared to Joint Commission standards.

Certain of these ratios will be discussed later in this chapter.

Quality Control Programs

Four of the administrators considered the existence of quality control

programs in hospital procedures as an indicator of its performance. The

most common quality control program in the hospitals in the sample was the

Health Activities Management Program, (HAMP). The purpose of this program

is to provide management services to members of the Florida Hospital
Association.41 A full time staff of several industrial engineers and manage-

ment consultants provide services in the area of quality control, staff utilization,

training programs and special studies for a monthly fee to member hospitals

of the Florida Hospital Association. The quality control programs developed

to date apply to the nursing service, dietary, housekeeping and business

office departments of the hospital organization. Twelve of the fourteen

hospitals in the sample have some type of HAMP program. One hospital had

just discontinued the program on the basis that it didn't justify the cost.

Another, just enrolled in the program, was evidently having some misgivings

as to its merits.

The extent of the value of this type of consultant service would appear

to be in the diligence with which these programs were applied to the various

departments by management after they had been set up by the consultants.

Merely subscribing to the program and training supervisors in administering

them would not alone promote quality of care. Management emphasis,

direction and control also are 'necessary for making such programs effective.

One of the hospitals had established a Systems Engineer position, in the

administrative department, whose chief responsibility was to develop programs

for improving both organization efficiency and the quality of patient care.

While this hospital subscribed to the HAMP services the administrator felt

that the Systems Engineer could supplement this program.

"I think we are one of the pioneers in the country in
introducing quality control programs in our hospital. We
have the most sophisticated drug quality control program
in the country, I'm sure. In the lab we have a sophisticated42
quality control program, ... and in other departments too."

Quality of Staff

Hospital executives were asked during the interview discussions of

hospital performance if they felt that the degree of qualification of professional

staffs was a valid indicator of hospital performance. This question was asked

to determine the opinion of hospital administrative personnel as to the

relationship between technical qualification of staff and the quality of patient

care rendered by the staff. During the writer's second visit to each hospital

data were solicited concerning the numbers of Registered Nurses, Licensed

Practical Nurses and Aides used in Nursing Service; the numbers of ASCP

registered and non-registered laboratory technicians employed in the medical

laboratories; the numbers of ART registered and non-registered x-ray

technicians in the x-ray laboratory; the numbers of registered and non-

registered therapists; and, the numbers of registered and non-registered
pharmacists employed in the hospital pharmacy.43 The purpose of collecting

these data was to attempt to measure the qualifications of the hospital's

professional staff in terms of a ratio of certified to non-certified professional

employees. A tabulation of these data is presented later in this section.

Of the eighteen executives that responded to the question on the value

of qualification of staff in performance evaluation, sixteen indicated that it

had some validity. However, the administrators were not in complete

agreement as to the extent of its usefulness or the conditions under which it

would be valid. Their acceptance of qualification of staff as a performance

index varied from general acceptance to guarded approval.

"I would think so. It indicates those people have
met the minimum standards within their field of interest. "

"We feel that by hiring Registered Nurses that are
certified and Licensed Practical Nurses that have passed
'Boards' that the percentage of those to total people
working gives us some clue that we are at least dealing
and working with highly qualified people. "45

Some of the respondents had reservations as to using the technical

qualification of an employee as a measure of the quality and effectiveness of

his work in any specific instance. It is obvious that motivational factors and

the capacity of the individual's mental and motor faculties are important in

his work performance. The fact, then, that he has met technical qualifications

does not in any particular case insure that his performance will be at a certain

level. In fact, employees without technical qualifications but with adequate

mental capacities and in an excellent motivational climate could in any given

instance, with proper training and leadership, perform at a better level than

a more highly qualified worker.

Another area in which the validity of qualification of staff as a performance

indicator might be questioned is illustrated by this statement by an assistant


"Yes, if you can honestly say, and I contend that
there aren't many hospitals that can say this, that the
more professional of your staff are involved with primary,
or what they academically call, direct patient care...
If you have nurses that are trained in patient care doing
paper work, then I would say that such a hypotheses can't
hold water. "46

So, when technical qualifications are not actually used in the work performed

they would have little effect on the quality of the person's work.

Two of the respondents felt that qualification of the hospital's professional

staff was not a valid indicator of performance. One of the reasons, already

mentioned, was that motivational factors, in the respondent's view, were of

considerably more significance to worker performance. Another objected to

the seemingly continual raising of technical standards for hospital professional

employees. He contended that additional requirements for certification such

as college degrees and formal courses added more to the cost of care than it

did to the quality of care making it difficult to justify in terms of patient needs.

The consensus, however, was that in general terms the degree of

qualification of the professional staff was useful as a performance indicator.

The professionalizing of hospital functions has had as a main purpose to

raise the standards of member performance. This has been recognized by

schools and colleges which continually attempt to improve the quality of

training they offer; the community in justifying higher salary payments for

the more qualified people; and by accreditation agencies which require certain

levels of qualification to demonstrate technical proficiency. Where the person

is working in his area of technical training, under normal motivational

situations, the more qualified the members of a technical hospital function

the higher the quality of care they will render to the patient because of

increased self-motivation resulting from increased professionalization.

Length of Patient Stay

Seven of the hospital executives disclosed during their interviews that

they used length of stay data to evaluate hospital performance. Hospital

Administrative Services reports provide average length of stay in days data

for each of its member hospitals. The Blue Cross Corporation tabulates

length of stay data resulting from the hospitalization of its insured members.

These data are reported in four specific categories; obstetrics, removing

tonsils and adenoids, general surgery and general medical. During the

writer's second visit to each hospital the administrator was requested to give

his permission for the writer to obtain these data pertaining to his hospital.

These data are analyzed in detail later in this section.

The respondents pointed to the danger in using overall average length

of stay as a performance indicator because of the variable types of illnesses

and services involved in an overall average. The more specific Blue Cross

length of stay data appear to be useful to some of the administrators as they

compare their rates with those of comparable hospitals.

Financial Position

Fourteen of the hospital executives indicated that financial position was,

an indicator of the hospital's performance. Most of them, however, were quite

vague as to the nature of the indices used in making an evaluation of financial

standing. It was inferred that the basic factor used in this evaluation was the

relationship of costs and revenues. It was discussed frequently in terms of

being in the "red" or "black. Only one of the administrators indicated a

specific objective in the financial area. He stated that his hospital worked

toward a 2 to 2-1/2% profit. The others obviously wanted to end each

accounting period in the "black" but none stated any specific objectives.

"Our books look good. We're in the black, not the
red. This indicates progress in the right direction. "

"The financial evaluation is a monthly occurrence.
We review monthly with the Board the total financial
position and what has occurred in terms of generating
costs and also generating revenues. This is a detailed
evaluation. ,,48

The comparison of actual expenses and revenues with expense budgets

and revenue estimates undoubtedly is an important feature of this indicator.

If the budgets and revenue estimates are representative of the administrative

objectives for the cost revenue relationship, then how well performance

measures up to these goals is certainly an indicator of the performance of

the organization.

Hospital Administrative Services Data

The Hospital Administrative Services (HAS) is a division of the American

Hospital Association whose function is to compile statistical data on hospital

operations from member hospitals throughout the nation.An integral part of

this service is the monthly publication of comparative analysis of these data

on a national and state basis classified by hospital size as measured in number
of beds.49 The costs and revenues of the various departments in the hospital

are reported in terms of percentage of the total for the hospital. Expenses

also are reported in terms of departmental costs in dollars per bed or other

measuring unit as well as in terms of man hours to output units. In this

monthly report the hospital administrator can compare the dollar expenses,

productivity and departmental income and expense percentages with the

median of his hospital's size group and with the high, low and median of the

size group for the previous three months. The hospital's comparative rank

by quartile also is shown.

Twenty-two of the executives interview indicated HAS data are useful

to them in evaluating hospital performance. Some administrators referred

to the HAS reports in general while others mentioned specific indicators in the

HAS reports. Some of these specific indices most frequently mentioned are

nursing care hours, percentage of occupancy, procedures per man hours,

employee ratios to number of patients, and cost and revenue data.

Some of the administrators indicated these reports are used as

indicators of specific departmental performance.

"We're in the HAS program. I do sit down and my
controller sits down with some of the other department
heads to evaluate how we stand as one, two, three or
four (quartile rankings). I know that on some places we
are much higher than the general hospital but I think I
can justify it with the type of service we give. "50

"We try to tie to a departmental work unit, for example,
time per job procedure. We apply man hour data to it to see
how we're doing both in numbers of people and that sort of
thing. "51

"We certainly use HAS statistics a lot. Most of my
departments are ones you can pretty well check out as
far as HAS is concerned. These areas we are constantly
concerned with. ,52

Others indicated a more general use of the HAS reports.

"We use the HAS statistics. We participate in this.
Costs are an important factor. "53

"There is the standard way (of evaluating performance).
HAS (reports) which point cut how your hospital is doing
compared to others of like size in the Southeast, the nation
and the state itself. "54

Some of the administrators pointed out that some of the HAS indices

were not necessarily comparable. An example given was that the age of the

physical plant varied from hospital to hospital which would require different

amounts of maintenance expense per bed. Other factors mentioned were

differences in physical layout of hospitals, different wage rates in different

locations in the state, and the possibility that hospitals were not reporting

uniformly the figures for some of the indicators.

It would seem, however, that most of the executives accepted the

validity of these data as reported in the HAS reports with an occasional

exception when they felt justified in not using the comparison because of some

special aspect of their particular operations.

Performance Evaluation for the Hospital Sample

It has been shown that there are no simple or easily determined

indicators of hospital performance. Hospital executives use various methods

and indices for evaluating the performance of their hospital depending upon

the emphasis and influence on objectives that are prevalent in his particular

hospital situation. The choice and weighting of performance indices vary

from hospital to hospital and frequently between executives of the same


However, it is necessary to attempt to establish a means of hospital

performance evaluation if the hypotheses of this project are to be tested.

The question then arises as to the nature of the criteria by which the

various indicators,mentioned in the previous section, can be judged for

determining suitability for the purpose of evaluating overall hospital

performance. It would appear that one such criterion should be the

objectivity of the indicator. The information used in the indicator should

reflect actual conditions and be as free as possible from personal bias.

Another criterion is that the performance indicator should be measurable in

terms of a specific or common attribute. Also, the indicator should be

feasible in terms of the practical availability of the data. In addition, the

data should be comparable. It should reflect in common terms information

about the indicator.

The various indicators specified by hospital executives as being useful

in evaluating performance vary considerably in respect to these criteria.

Patient Response

Patient response, which is used by so many hospital executives as a

means of securing feedback from the patients, is not suitable for evaluating

performance on several counts. First of all, it is used by a majority of

administrators mainly in its negative aspects to gain information about weak

or trouble spots in the organization's service pattern and not to measure

performance in total. Secondly, many administrators have serious doubts as

to the validity of patient response because of their lack of technical qualifications

to judge the quality of care they receive. This type of information is highly

susceptible to subjectivity. In addition, there are obstacles to measuring

patient opinion so as to be comparable from institution to institution. Sample

uniformity and questionnaire wording are two significant variables that could

present problems in this area. Some administrators have suggested that the

relationship of the time that the questionnaire is given to the patients to the

time of his discharge could have a serious effect on the nature of his response

to specific questionnaire questions. Despite the fact that patient response is

useful to administrators it is not suitable for measuring overall hospital

performance because of the lack of technical qualifications of the patients,

absence- of objectivity in their responses, and difficulties in comparing results.

Community Attitude

Community attitude about the hospital's performance is not suitable as

an indicator for many of the same reasons as patient response. Subjectivity,

on the part of the community member, due to the lack of technical knowledge

and, in some cases the lack of any concrete evidence about the hospital, make

it difficult to defend as an indicator of hospital performance. In addition, there

are numerous problems connected with the measurability and comparability

aspects of community attitude which make it inappropriate for use in this


Employee attitude and morale

While employee attitude and morale are undoubtedly pertinent factors

in the hospital's performance they are also unsuitable as a performance indicator.

The degree of subjectivity and measurement difficulties are factors which make

this attribute inappropriate. Morale and attitude are difficult to define and thus

more difficult to measure. 'Administrators are justifiably concerned about

employee attitude but under present conditions any useful comparable measure

would seem impractical for performance evaluation purposes.

Quality Control Programs

As was suggested in a previous section, the existence of a quality control

program does not insure any particular level of quality in the organization's

product. One might say that it is the quality of the quality control program

that manifests itself in product quality. Twelve of the hospitals in the sample

subscribed to the IAMP services. However, the type of specific HAMP

program in use varied from hospital to hospital and emphasis, direction and

control of these programs also varied considerably as was evidenced by the

administrators' remarks concerning the effectiveness of the various HAMP

programs. It would seem logical that the existence of quality control programs

could affect performance but the degree of effectiveness is not readily

determined in hospital organizations because of the nebulous nature of its

product patient care. Thus the problems associated with measuring the

actual contribution of a quality control program to the quality of the

organization's performance prohibits its use as a performance indicator.

Financial Position

By the criteria established previously on pages 54 and 55 one would

expect that financial position would be an excellent indicator of hospital

performance. The data presented in financial reports are acceptably objective

and they are readily measurable and expressed in terms easily compared

with other time periods and other institutions. In addition, many

administrators indicated this aspect of hospital activity was an important

consideration in their evaluation of performance. The normal industrial indices

of financial position reflecting emphasis on profitability are not suitable for

hospital measurements. An index was sought that would show the cost revenue

relationship for hospitals which administrators indicated reflects organizational

objectives. In the HAS monthly report both adjusted revenue and expenses

less depreciation are reported. The relationship between expenses and

revenues can be expressed in terms of expenses as a percentage of revenue.

This would indicate how well the administration was doing at staying out of the

red and to what extent they were keeping in the black which was frequently

mentioned as a major concern of hospital administrators. Table 2 illustrates

this relationship for the twelve hospitals in the sample for which these data

were available.



Monthly Monthly
Average Average Expenses
Hospital Expense Revenue as a % of Rank
per Patient per Patient Revenue
Day Day

16 $55.53 $63.81 87 2 (H)*

15 56.87 58.46 97 10 (L)

12 75.26 81.45 92 7 (M)

11 75.39 86.00 87.5 3 (H)

10 70.90 78.90 90 5 (M)

9 55.55 55.09 101 12 (L)

8 48.41 54.77 88 4 (H)

7 53.13 58.50 91 6 (M)

4 45.48 45.67 100 11 (L)

3 56.99 61.06 93.3 9 (L)

2 57.20 61.39 93.1 8 (M)

1 47.56 55.14 86 1 (H)

* High, medium and low ranking within the group

When this ranking was tested for reliability however, it was discovered

that it could not be correlated to the other indicators with any acceptable degree

of significance. Two possible reasons for this lack of correlation significance

come to mind. One is the lack of specific financial goals in terms of

organizational profitability. While one administrator indicated an objective

of 2 to 2-1/2% profit others inferred a sort of break-even philosophy. So, as

long as the hospital was in the black emphasis on the cost-revenue relationship

would not be as significant as when operations were in the red. Also, some

hospitals have other sources of revenues with which to supplement patient

revenue such as donations and grants which would permit an unfavorable

expense-revenue relationship. The other reason is the nature of the source

of hospital revenues. Hospital care is not usually something that can be fore-

gone or postponed. While increased patient charges are not desired by

administrators, they are not pressured in an industrial competitive sense to

maintain operational efficiency, and prices can be advanced to make the

expense-revenue relationship satisfactory in many instances.

Thus, on these grounds, financial position is not used as a performance

indicator in this project.

Length of Stay Data

Length of stay was mentioned by several administrators as a performance

indicator. Length of stay data, as reported by the Blue Cross Corporation, is

based on the experience of its insured members. The number of patients

involved is large enough to be representative of the service the hospital

renders. Length of stay data are of an objective nature, readily measurable,

and reported in terms of a common attribute, number of days per procedure.

Table 3 slio'.s these data for each of the sample hospitals by four categories



Hospital O.B. Rank*

T&A Rank* Surg. Rank* Med.

Rank* Overall

16 3.3

15 3.2

13 3.6

12 3.4

11 3.8

10 3.9

9 3.5

8 3.8

7 3.6

5 4.1

4 3.7

3 3.5

2 3.5

1 4.2

2 1.2

1 1.4

7-1/2 1.7

3 1.9

10-1/2 1.8

12 1.9

5 1.2

10-1/2 1. 1

7-1/2 1.2

13 1.4

9 1.3

5 1.4

5 1.6

14 1.3

* Adjusted arithmetically for ties.

** Ties in overall rank adjusted by computing average percentage deviation
from arithmetical mean.







































































for hospital patients insured by the Blue Cross Corporation. Since these data

are available for all fourteen hospitals in the sample and represent the most

objective data available for all the sample hospitals it is used as a performance

indicator in this project and the other acceptable indicators are tested for rank

significance with it using Spearman's rank-order correlation.

Hospital Administrative Services Data

The HAS services were subscribed to by all of the hospitals in the sample.

Administrators indicated they used these data in various manners. Some used

the overall indices, others used specific indices. Some used the dollar indices

while others made use of the man hour productivity indices. Despite some

criticism about the uniformity in reporting the raw data to the HAS most of

the administrators appeared to have confidence in these data. These data meet

all the criteria established on pages 54 and 55. In selecting indices from

the many reported on the HAS monthly report those reported in dollars were

omitted because wage rates varied between sample hospital locations making

comparison difficult. Indices reported in man hours per unit of output or in

output unit per man hour were chosen. In addition, indices representing the

productivity of the larger departments within the hospital were chosen. Table

4 shows the seven departmental measurements used in tabulating this index.

Joint Commission on Accreditation Data

All of the hospital administrators are concerned about Joint Commission

on Accreditation data since it is very important to the hospital to achieve

accreditation. However, the value of the accreditation in itself as an indicator

of performance wvas questioned since the accreditation merely indicates the

reaching of a standard level in the various quality of care indices. Some

administrators suggested that certain of the ratios and indices used in the

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Joint Commission accreditation are useful as measures of quality of care.

These indices are based on objective data, readily measured and generally

comparable from institution to institution. Since specific measurements are

tabulated in these ratios and indices they are useful to indicate degrees of

quality of care attainment.

Seven separate indices were chosen from those used by the Joint Commission

on Accreditation which are representative of the quality of care attributes of the

hospital's service. Data for these indices were taken directly from the sample

hospital's Joint Commission on Accreditation application form and are shown

in Table 5.

Quality of Staff

The consensus of opinions of the hospital executives interviewed was that

in general usage the technical qualifications of the hospital staff are an indicator

of performance. The information concerning the technical qualifications of the

hospital professional staff is objective and is readily available. The data are

expressed in common terms in respect to registration or certification of the

employee. Accepting possible variations in the motivational climate within

departments and between hospitals these indices should reflect quality of patient

care rendered by professional departments.

During the writer's second visit to each hospital data were solicited on the

qualifications of professional employees. The data were gathered in two

categories; the ratio of registered nurses to licensed practical nurses and aides,

and the numbers of registered versus non-registered technicians in the medical

laboratory, x-ray laboratory, pharmacy and therapy departments. Table 6

shows the RN to LPN and Aide ratios for the hospitals in the sample. Table 7

illustrates the ratio of registered personnel to non-registered personnel in the



i .F 1 L )

S. 3. 10 03
al' 0 a |g

7- 7 20 1.20 7 1/1.3 63 1/57. 1 1/1. 0 ()

16 .48 3 .002 1 3.52 5 .450 1 1/1.57 1/27 4 1//51. 9 4 1 (H)
13 .70 7 .60 9 8.00 10 1.20 7 1/1.7 6 1/52.8 10 1/. 90 2 12 (L)

11 .82 8 1.18 11.11.80 12 1.00 3 1/1. 32 5 1/30.5 5-1/21/0. 87 1 6 (M)

10 .15 1 1.62 12 9. 20 11 .90 2 1/1.71 9 1/30. 5 5-1/2 1/1. 28 10 8 (M)

8 .60 6 .20 3.70 1.40 5 (M)

16 .48 3 .00- 1 3.20 3 1.6045 1 1/1.15 37 1/57.0 11 1/1.01 5 7 (H)
1.195 11 .90 413.60 8 1.500 1/0.1 /26.7 2 1/15.0 8 3 (L)

1.26012 .2 9 3.80 710 1.20 7 1/1.77 10 1/21.5 10 1/1.07 9 10 (L)
11 .88 .25 1 4.60 8 1.13 5 1/1.20 1/30.5 5-1/21/1.22 91 8 (M)
10 .15 1 1.62 12 9.20 11 .90 2 1/1.71 9 1/30.5 5-1/2.1/1.28 10 8 (M)

8 .60 6 .20 4 3.70 6 1.40 9 1 5(M)

11 .15 1 .10 3 3.40 4 1.17 6 1/2.10 12 1/28.3 4 11/2.20 112 4 (H)

:'hese. data'-\ere not available on a uniform time period basis since applications for accreditation
are made at three year intervals. Some of these data were taken from applications made in
1967 and early 1969, as well as 1968.



Ratio of R N
to LPN & Aides*

















* These data reflect staff conditions at the
end of 1968 or during the early months of




Ratio of
Hospital Registered to Rank
technicians **








* These data reflect staff conditions at the end
of 1968 or during the early months of 1969.

** See pages 48 and 49 for a description of the
technical positions included in these data.

technical department of the hospitals in the sample.

Medical Staff

While several of the hospital administrators indicated the value of

physician opinion regarding the quality of care rendered by their hospital there

was something less than complete agreement as to the validity of this opinion

as a measure of hospital performance. Some administrators felt that such opinion

was likely to be too subjective and the doctor might find it difficult to exclude his

feelings for the administrative staff from his judgement of hospital performance.

*It should be recognized, however, that the doctors possess the highest

of technical qualifications in respect to the quality of care that patients receive.

They cause the patient to be admitted and discharged from the hospital. They

prescribe certain elements of care the patient receives in the hospital. They

make the judgements on the results of clincial tests as to the patients progress

or condition. It would seem that any index of overall performance should

include among those indices measuring quality of patient care some response

from the doctors whose patients are the object of the hospital's services.

A questionnaire form was used to solicit information concerning aspects

of hospital organizational characteristics. Appended to the questionnaire form

given to selected physicians at each hospital was a question asking them to

rank the overall performance of the sample hospital. 5They were asked to

rate the hospital's performance as excellent, good, fair or poor. The results

of the response to this question are shown in Table 8.

In using this index the technical qualification of the physicians is

considered to be of ample significance to over-ride the disadvantages of the

possibility of subjectivity and the existence of measurement problems.



Hospital Physicians' Rating Rank *
Maximum = 4. 0

































* Adjusted for ties

Summary and Ranking

In summary, it was noted that no simple readily determined performance

indicator is available for measuring or ranking the performance of hospital

organizations. In the absence of such indicators a descriptive approach was

used to determine how hospital executives evaluate hospital performance.

Twenty-eight hospital executives were interviewed from the fourteen hospitals

making up the sample. Analysis of their opinions showed that they perceive

hospital objectives as having both quality of care and cost-efficiency attributes.

The performance indicators used by these administrators in most cases reflect

degree of attainment of one or the other of these objectives. Further, the

analysis revealed that there was considerable variation in what indicators

were used and the emphasis placed on each, not only among hospitals, but

also from administrator to administrator within the same hospital.

A set of criteria was established by which to judge the suitability of

these various indices for evaluating hospital performance. As a result of the

application of these criteria, six performance indices were selected for

hospital performance evaluation. Length of stay data was used as a base index.

A composite HAS index was selected to complement the length of stay data in

measuring the cost-efficiency performance of the sample hospitals. Selected

indices were chosen from Joint Commission on Accreditation applications as

a measure of quality of care. In addition two indices reflecting the degree of

professional staff qualifications were used. Finally, the opinions of physicians

were also included as an indicator of quality of care performance.

Table 9 shows the composite index which combines each of these six

indicators in equal weighting to rank the performance of the fourteen hospitals

in the sample.





Sco C
0 C

*( P -4 -.
0 ed <^3^ ^1T3 ^
a ^ a ^ 3| ^ ^

M *M H




Spearman's rank-order correlation between the Length of
stay index and the other indices were significant at 05
(corrected for ties).


Having divided the hospital sample into three ranked groups based on

their performance it is now possible to proceed to organizational differentiation

and effectiveness.


It is possible to divide a hospital organization into groups of members

or sub-systems based on their function in relation to the organization's

product. The number of such sub-systems depends upon how finely the task

activities are divided. In investigating hospital organizational characteristics

in this project five major groups or sub-systems are recognized.

One major sub-system consists of the physicians affiliated with the

hospital. Doctors hold a rather unique position in the hospital organization.

They can be considered as quasi-members of the organization. While they

are not paid by the hospital in the majority of cases, they, nevertheless,

are closely tied to other organizational members in turning out the hospital's

product. Since they are not paid by the hospital the control that the organization

exercises over them is quite limited, mainly resting in the privilege of

affiliation which allows the physician to use hospital facilities for treating

his patients. The physician's function is quite distinct. One administrator

likened his function to that of salesman in an industrial firm. It is the doctor

who causes the patient to be admitted to the hospital. In fact it is impossible to

enter a hospital without a doctor initiating the process. The doctor prescribes

some of the patient's treatment in the hospital, checks on the progress of the

patient, and determines when the patient can be discharged. With few exceptions

he is subject only to his peers for evaluation of his professional activities.

Some hospitals have paid physicians on their staff who function as laboratory

chiefs. They function as technical consultants in such fields as radiology and

pathology and are not directly related to the main group of physicians who have

affiliation status with the hospital organization. In addition, the physician's

position is unique in that he spends only part of his working hours at the hospi-

tal and admits only some of his patients to the hospital facilities. In this sense

they can be considered as part-time organization members. Also, they can be

affiliated with more than one hospital. However, the significance of their

activity and the unique nature of their contribution to the organization's product

suggest that their function should be considered as a separate group or sub-


Another sub-system in the hospital organization is the group of pro-

fessional employees who are directly involved in caring for the patient and

meeting his health needs. This group is largest in terms of number of employees

in the hospital organization. It includes the nursing service department, x-ray

department, medical laboratory, various therapy departments, pharmacy and

other smaller technical departments involved in direct patient care. The basic

activities of these employees contribute directly to the organization's product.

Their tasks vary according to their technical specialty but each is involved in

the health care process which is culminated when the patient is discharged.

Another group of employees in the hospital organization consists of those

workers in supportive type activities. While this group of people is not directly

involved with meeting the health care needs of the patient they perform the

necessary ancillary tasks needed for patient comfort and safety. This group

of activities includes those of the housekeeping department, dietary department,

laundry department and the maintenance department. This major sub-system

within the hospital organization is the second largest in terms of number of

employee members. Their function, though important to the organization's

product, is not directly related to it. This major group or sub-system is

referred to in this project as the non-professional group.

In addition, there is a group of employees whose function is less directly

involved in patient care than the non-professional employees. This group of

employees is involved with the ancillary activities often times referred to as

office work. This group is referred to as the fiscal group in this report.

Their activities can be further divided into two groups, service to patients and

service to management. The patient billing and admitting departments are the

two main segments of this group whose activities are related to the patient.

Most of the other departments within this major sub-system are involved with

providing services or information to administration. These departments

include purchasing, personnel, accounting and data processing. In the hospitals

making up the sample there is considerable variation as to the type of activities

of members in this fiscal group. Certain of the activities performed by these

employees are considered as fiscal in nature commonly but some of the other

activities are, in some cases, included in the professional or non-professional

groups according to the specific needs of the administrator. It is apparent,

however, that in all hospitals there are activities of the fiscal type which are

not readily classified into the other major sub-systems. Several employees

stated during interviews that they considered this group to be part of adminis-

tration. This sub-system is the smallest in size of the four major sub-systems


Administration is the other major group identified in the hospital

organization. The administrative function is also rather unique to hospital

organizations. This is due mainly to the methods of dividing responsibilities

among administrators and assistant administrators. An assistant administrator

may be responsible for a group of departments which includes groups from the

professional, non-professional and fiscal sub-systems so that he cannot be

classified as a member of any of those sub-systems. The administrator may

share departmental responsibility with one or more assistant administrator

and these departments can consist of heterogeneous mixture of activities. The

line between general administration and departmental management is quite

clearly drawn in the hospital sample. Perhaps this is due to the more

traditional organization form found in hospitals until recent years which

featured a very wide span of control for the administrator in which all the

department heads reported directly to him. The department head is the top

functional manager. In reviewing the sample hospitals' organization charts

it is obvious that their organization structures are in the process of changing

from the traditional flat structure to a divisional structure in which at least

one administrative level is inserted between the administrator and the

department heads. This trend was further demonstrated in interviews with

administrators in which several stated they were currently involved in

reorganization along divisional lines. 5In the hospitals in the sample which

had divisionalized structures there appears to be no established pattern of

dividing responsibility at the assistant administrator level. One administrator

indicated that he assigned departmental responsibility to assistant administrators

on the basis of matching the assistant's personality with the personalities of

department heads. Therefore it is necessary in this project to consider the

administrative function as a distinct one and the administrators as a major

group or sub-system. In terms of numbers this is the smallest of the groups

within the hospital organization.

Departmental Differentiation

Lawrence and Lorsch used four basic dimensions to determine

organizational characteristics. 57 These are formality of structure, goal

orientation, time orientation and inter-personal orientation. The purpose of

measuring these dimensions for hospital organizations is to show that these

major sub-systems develop different organizational characteristics to

facilitate the effective accomplishment of their particular tasks. 58

Differentiation, then, is the difference in organizational characteristics

between departments within an organization.

Formality of Structure

The degree of formality in an organization structure is one dimension

of the characteristics of the organization. This dimension can be measured

for an organization by investigating a number of organizational factors which

show how highly structured the organization is. The degree of formality of

structure of a department or group within the organization can vary according

to the nature of the department's activities. Among the five major hospital

groups one can expect that the physicians should have the least amount of

formal structure in their work environment. Since their relationship to the

hospital organization is unique, as has been pointed out previously, the

procedures and work rules that apply to other organization members are not

applicable to them. The high degree of professional training and the physicians'

membership in a highly organized profession also should contribute to the lack

of formality of structure since highly professionalized groups usually perform

best with a minimum of control and supervision.

On the other hand, the large group of employees called the professional

group in this project, could be expected to work best in the highest degree of

formality of structure within the hospital organization. Despite the term

"professional" this group is not as highly professionalized as the physicians.

The nature of their work, which is vital to the health care needs of the patient,

is such that close supervision and control is necessary for effective performance.

Since the hospital's product deals directly with human life, the activities of those

employees who work directly with the patient, and whose activities can affect the

patient's physical welfare, should be subjected to close supervision and control.

The two other major hospital sub-groups, non-professional and fiscal

employees, should fall somewhere between the physicians and the professional

groups in the degree of formality in their department's organizational

characteristics. It could be expected that the non-professional group would

have the second highest degree of formality of structure in their departments.

While their relationship to the patient is less direct than the professional

group of employees their activities are very significant to the patient's comfort

and welfare and control and supervision could be expected in order to insure

proper performance. In addition, their training and skill levels are

considerably lower requiring more in the way of procedures and work rules

and other formal structural characteristics.

The fiscal group of workers could be expected to have less formality

of structural characteristics than either the professional or non-professional

employees. Their work is not closely related to the hospital's service and is

of such a nature as not to require the same degree of supervision and control.

Some of the activities of this group require high skill levels and group members

can belong to professionalized organizations as in the case of accountants,

purchasing agents and others.

The fifth major sub-system, the administrative group, was not measured

for formality of structure because their numbers within the organization are so

few. Also, their unique position in the hospital organization in which they are

responsible for departments from three of the major sub-groups makes it

difficult to identify them with any particular activity for measuring purposes.

In viewing the hospital organization sub-systems in relation to the

formality of structure dimension one could expect to find that the most highly

structured group would be the professional employee group; the second highest,

the non-professional employee group; the third highest, the fiscal employees,

and the least structured group, the physicians.

SFigure 2 illustrates the method used to measure the formality of

structure dimension of the four major hospital sub-groups. Six specific

structural characteristics are measured for each of the major sub-systems.5

The range of differences in each characteristic was arbitrarily classified into

four categories or degrees of differentiation from the lowest degree of formality

of structure to the highest degree of formality in the structural characteristic.

(Groups 1 through 4).

Average span of control for each major group was determined from

interviews with department heads, personnel department officials, and from

hospital organization charts. The larger the span of control the less

structured the department.

The number of levels to a shared supervisor was calculated in the same

manner. The smaller the number of levels to a shared supervisor the less

structure in the departmental organization.

The time span of review of performance was determined by interviewing

department heads from each of the major groups and by interviewing

administrators and assistant administrators. The less frequent the review

of departmental performance the less structured the sub-system work environment.

The specificity or review of departmental performance was determined

by interviewing appropriate administrative personnel. The less specific the

nature of performance review the less formality in the departmental structure.

The significance of formal rules was determined by interviewing

department heads and administrators and by reviewing, in some instances,

procedure manuals when they were available. The formal rules involved in

this structural characteristic are those organizational rules regarding work

activities and employee behavior. The less comprehensive and numerically

frequent the rules the less structured the sub-unit in the organization.

The specificity of criteria for evaluating performance of the role

occupants was measured by interviewing department heads and administrators

and reviewing personnel department employee evaluation forms. The less

specific the criteria for performance evaluation the less formality of

structure in the department's organizational characteristics.

The tabulation of formality of structure characteristics for the sample

hospitals is shown in Table 10. The raw data by sub-system group and by

characteristic, are shown for each hospital in the sample. The data are

reduced to a differential scale according to the classification illustrated in

Figure 2.60

Figure 2 shows the classification of major sub-systems which are

referred to as group numbers in Table 10.

The formality of structure dimension for each department or group of

each hospital is shown in the last column of Table 10. One represents the

lowest degree of formality of structure and four the highest degree in the

sample data for each of the six structural characteristics. The group degree

of formality of structure rating, the last colurnin in Table 10, is determined by

Structural Degree of Formality
Characteristic 12 3 4

Average span of

Number of levels
to a shared

Time span of review
of departmental

Specificity of review
of departmental

Importance of
formal rules

over 20 11 20









6- 10




rules on

under 6




rules on

Specificity of criteria
for evaluation of
role occupants


no fixed

less than 5









* See page 1 for a detailed description of this group.



Group Total of
Six Structural Differential
Characteristics Ranking

0-10 1 (lowest)

11-13 2

14-16 3

17-19 4

20-up 5 (highest)






0 4 > 0
1 Q) 4 Q)
O " CS0
>d 0 C / c d C0 r C -r
Z 0 <+ Q)
CL 0 0
0 > 0 -S 0 C)
o &0 0 t
0 ~ Z o



















TABLE 10 (Continued)

0 ., ;4 .'-s r

0 ~ 0~ 0o
,fl0 0 Z EWC: EWO zs 0
0 0 0 0Ss

S" 3 Q) -) 0
SO 2 l C 4 o > ao Q n Q







SI J. I .










Group Number
Hospital 1 2 3 4 Total

Group Average















1. O0














































* Data not available for this department. The average of responding
departments used.

adding the degree of formality rating for each of the six structural

characteristics to get a total for each group of employees for each hospital.

The characteristics were weighted equally since the nature of their inter-

relationship is not known. The total for each group is then differentially

ranked to determine a degree of formality of structure. The scale for this

ranking, illustrated in Figure 5, was arbitrarily assigned to permit a

comparative analysis.

Table 11 shows the formality of structure dimension differential ranking

by employee group for each hospital. Averages by group or department

indicate that different degrees of formality of structure do exist in groups

having different functions and activities. The physicians (Group 1), as

anticipated, is the least structured of the major sub-systems within the

hospital organization. The fiscal group, Group 5, is the next lowest in the

degree of formality in structure. The non-professional employees, Group 3,

ranks second highest in structure. The professional workers, Group 2, shows

the highest degree of formality of structure as was predicted. Figure 6

indicates the relative degree of formality of structure for the four major

sub-systems for which this dimension was measured.

1 4 3 2
T IT T 1 -

1 2 3



Note that the physicians group have received values of (1) for each of the

six structural characteristics as shown in Table 10. This further points to the

unique relationship of the physicians to the hospital organization. When

evaluated by organizational standards for these characteristics their work

system is so constructed as to make measurement by these standards quite

difficult. For example, the only resemblance to an organizational hierarchy

for doctors affiliated with the hospital is a committee type organization with an

elected Chief-of-Staff. The Chief-of-Staff has little authority over the members

and his main function is to be a liason link between the medical staff and

hospital administrators. Thus the structural characteristics of average span

of control and levels to a shared supervisor possible should be measured on

some other scale than the differential ranking illustrated in Table 1. Physicians'

performance is rarely evaluated in terms of hospital objectives by the

administrators or board of directors. Their professional conduct is evaluated

by their peers but only in a negative direction. As a result of this rather

nebulous relationship to the rest of the hospital organization the six structural

characteristic rating scales apparently do not accurately reflect the degree of

the formality of structure dimension for this major sub-system. However,

even though the 1. 0 rating may be inaccurate in proportion to the evaluation of

the other major groups, the general direction is correct and by organizational

standards it is safe to assume that the physicians' sub-system is highly unstructured.

The average for the professional group for the sample hospitals indicates

it is the most highly structured of the groups, as was expected. The number

of employees of the departments making up this group is a significant factor

in the degree of formality of structure in their sub-system. The nursing

service department is commonly considered to employ 50% of the total

hospital workers. The radiology and medical laboratories also are relatively

large in terms of number of employees. Combined with the nature of their

work activity the size factor would seem to account for the high level of

formality of structure in their sub-system organization.

The non-professional group average for formality of structure for the

hospital sample was not as highly structured as the professional group. It

was expected that this group of employees would indicate a structural rating

between those of the professional employees and the fiscal group on the scale

of formality of structure differentiation. The nature of the work activities of

this group and the generally lower level of skill required are factors

suggesting that the formality of structure dimension of this group would be

higher than that of the fiscal group.

The average for the fiscal group indicated a lower structured organizational

characteristic than the professional and non-professional groups. The relative

position of this group also was as expected.

The fifth major group, the administrators, could not be evaluated in the

formality of structure dimension.

The formality of structure is one of four dimensions used to measure or

indicate differentiation between departments of an organization based on function

or work activity. Four of the major hospital sub-systems were measured in

terms of six structural characteristics to determine the degree of formality in

their sub-organizational structure. The results of this investigation showed

that in general the anticipated differentiation between the major groups is

valid in the hospital sample. The professional employees organization is the

most highly structured, followed by the non-professional employees and the

fiscal employees. The physicians' sub-system organization is the least structured

of the four nujor groups measured.

Goal Orientation

The second dimension used to measure differences in organization

characteristics is the goal orientation of organization members. Members of

different departments within the organization can be expected to have goals of

different nature and magnitude depending on the task or function of the group

to which the member belongs. These differences in objectives are a natural

outgrowth of the specialization that accompanies the departmentalization of

the organization around the task to be accomplished.

Physicians affiliated with the hospital could be expected to be more

concerned about scientific knowledge and the establishment of new and improved

procedures than other organization members. One also would expect that the

major hospital sub-groups dealing most directly with the patient would be

primarily concerned with patient welfare and comfort. The professional and

non-professional groups would be primarily concerned with these objectives.

The fiscal group members, being less directly associated with the patient

could be expected to be mainly concerned with costs and efficiency. The

administrators, because they are responsible for departments comprising

professional, non-professional and fiscal group members could be expected to

be concerend with both patient welfare and with costs and effectiveness.

The data needed to measure goal orientation of organization members

were obtained by responses to a portion of the questionnaire which asked

hospital managerial employees and physicians to indicate the areas of major

concern, in their opinion, from nine statements dealing with three different

decision making criteria involved in a hypothetical decision concerning a new

procedure. 6Three of the statements dealt with scientific factors involved in

a decision about a new procedure. Three statements were concerned with

patient welfare and comfort decision making criteria. The remaining three

statements dealt with cost-effectiveness criteria for decisions involving a new

procedure. The respondents were asked to rank the nine statements into three

groups of three statements each according to their opinions of their importance

in decision making about a new procedure. First choices were rated (2),

second choices were rated (1), and third choices were left blank. Table 12

shows the results of the questionnaire responses by major group and by

hospital for the three criteria categories. A total of six points indicates

that the average of the respondents from the sub-system was at the maximum

level of goal orientation for that decision making criterion. A zero would

indicate a minimum level of orientation for the criterion among members of

the responding hospital group.

The group averages, classified by the three decision making criteria;

scientific knowledge, patient welfare and effectiveness, indicated that

differences in goal orientation do exist between t-e various major depart-

ments of the hospital organization. However, the magnitude of the goal

orientation was not as strong in certain instances as one would have expected.

Figure 6 illustrates the range of goal orientation strengths of five major

hospital groups for each of the three sets decision criteria.

As Figure 6 shows, the physicians are more oriented toward scientific

objectives than the other four major hospital employee groups. However, the

strength of this goal orientation is not as great as one might anticipate. Also

interesting is the relative strength of cost-effectiveness goals among physicians

responding to the questionnaire. It could be expected that cost and efficiency

would be of least concern to physicians as opposed to their apparent strong

concern for this objective. Patient welfare appears to be relatively strong

as a physician's objective.

, I




Scientific Knowledge*

12 43


Patient Welfare*

1345 2
, T1T T ,


Significant at the 001 level using Kruskal-Wallis analysis

** Averages significant only at .5 level using Kruskal-Wallis analysis






GROUP# 1 2 3

GOAL Sc. Pat. Cost Sc. Pat. Cost Sc. Pat. Cost
















.0 5.0

2.3 3.3

3.0 2.6

.0 5.0

2.5 2.5

1.5 3.5






















































































































* Sc. Scientific Knowledge; Pat. Patient Welfare;
Cost Cost-Effectiveness

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