Neema Hospital Ltd.’s Business Performance

Topic: Strategic Management
Words: 4119 Pages: 15

Abstract

The paper discussed the state of Neema hospital performance and how the 7 S model, Balanced Scorecard, and SWOT analysis tools can be used to effect strategic management changes. Additionally, the strengths and weaknesses of each tool and their unique attributes in the healthcare business were discussed. The paper concluded that the best strategy is to integrate several tools to complement each other, so as to get assessment results that cover all factors that could have an impact on business performance. Therefore, an improvement to successful healthcare management or any other business requires a combination of the most useful elements of the tools to produce the best performance assessment outcome.

Introduction

Neema Hospital Ltd was started by a trio of doctors, through its traditional culture of medicine, its primary structure is mechanistic with top-down decision making. The management has vertical communication, narrow spans of control and specialized limited tasks, and requirements for approval at all levels of decision making. The hospital is at waves 1 and 2 in the evolution of human resource management (HRM), where they concentrate on the administrative aspects of HRM – including recruiting and contracting (Ulrich, 2019). They strictly comply with regulatory labor laws, as well as performance compensation and learning, as per the balanced scorecard (BSC). Meaning the HR department works essentially on instruction from the chief executive officer (CEO). Hence, HR does not participate in company business strategy, does not advise on strategic recruitment, methods of performance appraisal, or promotions, and does not participate in communication with external customers or stakeholders.

Statement of the Problem

It is important for Neema hospital to have an objective method to assess the status of its business. This is key in helping the management their subsequent monitoring to adjust operations optimally in response to internal and external influences that determine its success. There are four assessment tools namely McKinsey 7-S framework, Balanced Scorecard, SWOT Analysis, and PESTLE that will be used for this purpose. The paper will discuss the current state of the hospital’s performance and how the tools can be used to affect strategic management changes. Additionally, the strengths and weaknesses of each assessment tool and the unique attributes of each tool in the healthcare business will be highlighted.

McKinsey 7 S Model

The 7 S’s are structure, strategy, systems, skills, style, staff, and shared values. The model is oftentimes used as an organizational analysis instrument to assess and monitor changes in the internal situation of an organization (Jurevicius, 2021). The model is widely used in tools for planning because it emphasizes human resource structure, strategy, systems, skills, style, staff, and shared values. Its application moves away from the mass production of capital, infrastructure, and equipment as the necessity for higher performances within organizations. This model is anchored on the belief that the seven S elements can be synchronized to improve the company’s efficiency. It is believed that all the 7 items are interconnected and changing one automatically calls for changes in the other 6 for the company’s functions to be efficient.

The 7 items are divided into the ‘soft’ and ‘hard’ elements. Strategy, structure, and systems are the hard elements and are easier to identify and manage. In contrast, the soft elements including staff, style, skills, and shared values which are a bit difficult to manage. However, these four are most likely to give any company a sustained competitive advantage.

The 7 Factors

The strategy is a plan created by a company to get a sustained competitive advantage and to enable it to compete in the market. It must be articulate, long-term, and supported by the company’s vision, mission, and values (Jurevicius, 2021). The structure is the way the business divisions of the company are organized and includes information on staff duties and responsibilities. Systems are the elements of the company that determines how business is conducted. Skills element are the abilities, capabilities, and competencies of the employees, and the managers must know the skillset they need to implement their strategy (Jurevicius, 2021). The staff element looks into the type of employees, the number, recruitment, training, and reward for employees. Style reveals the management methods used by the company’s leadership. Lastly, shared values are the standards that direct employees’ behavior and the actions of the organization.

Advantages of 7 S Model

This model is broad and elaborate compared to the traditional assessment tool which only focuses on the strategy and structure of the company. It assists the firms to align their processes, systems, people, and values (Athuraliya, 2021). Subsequently, it is possible to state that the use of the 7-S significantly improves the company’s performance (Kocaoğlu and Demir, 2019). Additionally, it helps the companies to identify how they are supposed to align the different key parts of the organization to achieve their goals.

Disadvantages of 7 S Model

The model is considered time-consuming because it involves research and benchmarking before its implementation. Further, its focus is mainly on the internal factors within the organization and ignores the external factors (Athuraliya, 2021). Factors such as political, economic, cultural, or other health changes that occur in society are beyond its scope (“McKinsey 7s framework example,” 2022). In addition, the model needs the help of senior management, which at times may not be readily available especially when the top managers are very busy.

Steps on Using the Tool in Neema Hospital

The 7S model is appropriate to be applied by Neema hospital to facilitate organizational changes. It can help them to identify how their operations may change in the future, or facilitate its expansion plans (Jurevicius, 2021). The framework is used in a context where the organizational design and effectiveness are weak. This is exactly the case with Neema hospital Ltd. Because it has no clear strategic plan on how to recruit and manage its staff.

First of all the management must review the 7 S elements to identify if they are interconnected. This is will be followed by looking at the gaps, inconsistencies, and weaknesses between the elements in the hospital’s management (Jurevicius, 2021). The next step will be to determine the effective organizational design which is good for the hospital. Thirdly, Neema hospital must decide where and what changes it should make, and how the company would like to implement the action plan. The fourth phase is the implementation and it involves making the necessary changes including hiring consultants to guide the process. Lastly, Neema hospital will have to continuously review the 7S from time to time because they are dynamic and change constantly.

Application of 7 S Model in Neema Hospital

The application of the 7 S model tool in Neema hospital will incorporate three columns table namely, the model element, the current position of the hospital management, and the proposed change (Jurevicius, 2021). Further, Neema hospital is medium sized facility, so a complex matrix structure and comprehensive business systems is not needed. This paper will use a simplified table structure to show how the tool should be applied.

Table 1: Neema Hospital’s proposed changes using 7 S Model

Element Neema Hospital Current Position Proposed Change Using 7 S Model
Strategy The 5 year strategic plan developed, based on evaluation by PESTEL and SWOT analysis. External factors emphasized over internal operations. 7-S framework not employed, so evaluation of some internal aspects of the company’s operations not done, not catered for in the plan Neema hospital must incorporate 7-S framework for better assessment of the internal status of the hospital in combination with SWOT and PESTEL. BSC must be to developed directly from the strategic plan and aligned to the objectives
Structure Hierarchical structure. Top-down decision making, little cross-department communication, approvals required from CEO There must be a clear communication channel from the top-managers to the junior staff and across all the departments of Neema hospital
System Protocols exist on paper frequently overridden by instructions from the CEO. Managers therefore consult CEO before taking any action Order processing and control, customer support, personnel management and strategic planning systems.
Skills Basic skills present in staff, but high turnover causes loss of continuity and predominantly less experienced staff affecting quality of care Skills related to services offered are need. Employ experienced on permanent terms for continuity and long term service.
Staff Mostly recruited on the basis of affordability, not necessarily strategic importance The hospital must recruit employees who are strategically important for its business growth and performance irrespective of whether they are expensive
Style Relatively new company, style still under development, mostly mirrors the management style of the CEO The hospital must urgently develop a style which is democratic and allows all employees to use their knowledge freely without fear
Shared values Not emphasized currently, focus is on financial stability. The influence of staff identifying with the vision, mission and values on the company’s performance not recognized or emphasized The hospital must lay emphasis on enthusiasm, excellence service to customers, diversity of its employees, common language at work, timely delivery of services, teamwork and trust

Balanced Scorecard (BSC)

This is one of the best frameworks for assessing companies’ performance and many organizations have used it since the 1980s. It requires the organizations to create internal metrics to assist them in assessing their business performance in four perspectives. The first one is financial which incorporates cash flow, sales performance, operating income, or return on equity on the scorecard (Marr, 2021). There is the customer perspective with scorecard metrics including a percentage of sales from new products, on-time delivery, and net promoter score. The internal business process incorporates measuring unit costs, cycle times, yield, and error rates. Lastly, the learning and growth metrics include employee engagement scores, retention rates of high-performing staff, and skill increases of employees.

Advantages of Balanced Scorecard

There is evidence that organizations that use BSC assessment approcah normally outperform their competitors. It provides companies with a powerful framework for creating communication strategies (Marr, 2021). Its model is focused on strategy maps which allow managers to build consensus on a set of associated objectives. Therefore, the performance outcomes and its enablers of future performance are identified to create a vision for the company’s strategy. In addition, it facilitates communication among the levels of the professional hierarchy, which assists in reducing medical errors (Street et al., 2020). Additionally, organizations that use BSC tend to have high-quality information and increased benefits from how such information guide management insights and decision making. There is improved performance reporting as companies using BSC normally disseminate their performance better than organizations that are not using this tool.

Disadvantages of Balanced Scorecard

This strategic approach is oftentimes criticized that it takes too much time to initiate within an organization. It is said to be too rigid and does not influence changes in the business because it is mostly focused on the measurement of the company’s financial performance only. Critics of this tool point to the fact that it is internal and completely ignores macro-economic or other external aspects of managing a business (Finch, 2017). BSC tool is seen as a mere reporting framework rather than a true way of running a business.

Application of Balanced Scorecard at Neema

The Balanced Scorecard is not a series of equally-weighted perspectives but a process. It must start at the bottom and work your way upwards and each pillar unlocks the company’s ability to perform better (Marr, 20221). In healthcare management, BSC is of special importance since the peculiarity of the industry is in a large number of stakeholders, each of which is interested in quality. This can increase the firms’ responsibility and may cause “cultural misalignment where each participant pursues the own interest (Kaplan, 2020, p. 1). Neema hospital management must visualize the BSC from a strategic mapping point of view with a series of leading and lagging steps in their strategic objectives.

For example, it must use the learning and growth, internal processes, and customer as leading steps that will facilitate the delivery of financial performance. Neema management should therefore balance their activities between the hospital’s main drivers of business success. The leadership must assign real metrics to every perspective to increase accountability, better communication of their strategic objectives, and financial profitability.

Application of BSC in Neema Hospital
Figure 1. Application of BSC in Neema Hospital. Source: (Marr, 2021)

The Theory on Implementing the Balanced Scorecard

It is based on the understanding that Neema’s managers’ ability to learn and grow will determine their capacity to manage the hospital’s internal processes. When the processes improve internally, there will be a net positive effect on the hospital’s clients as well as reducing Neema’s cost of doing business (Wright, 2021). The combined benefit of low cost and high customer engagement is envisioned to increase the financial or profit margins of the hospital (Wright, 2021). BSC will help the hospital to discover obstacles and areas that require the right competencies to solve.

Implementing Balanced Scorecard at Neema

Neema hospital managers will have to incorporate BSC in their strategic planning because it sets the basics for all the things that the hospital will be doing going forward. The top leadership must orientate the hospital’s strategic plan around the BSC. All four perspectives must be set as key strategic focus areas of the hospital together with objectives (Wright, 2021). This will make the strategy of the company to be anchored around the BSC for a better understanding of the management methods and processes (Wright, 2021). Leaders of Neema hospital should ensure that all the perspectives have a mixture of overall outcomes, what they will do, and measures of success. Finally, the leadership team should create a BSC dashboard to give a strategic report that will show a score for all four perspectives together with a summary of the progress of key objectives.

SWOT Analysis

A SWOT analysis is an organized list of a business’s strengths, weaknesses, opportunities, and threats. Strengths and weaknesses are internal to the company while opportunities are determined by external factors. This instrument helps companies with realistic, factual, and evidence-based information about their operations against competitors (Kenton, 2021). The organization must keep the analysis precise and accurate by avoiding conceived beliefs and focus on the real situational context. It assists organizations in assessing their performance, competition, risks, the potential for business, and threats.

The Four Quadrants

SWOT has four quadrants which are represented as a visual arrangement that gives the company’s position. The strengths describe what the company does better than competitors (Kenton, 2021). In contrast, the weaknesses are what impede the company from performing at its optimum level. Opportunities, on the other hand, are favorable external factors that the company could exploit to give them a competitive advantage (Kenton, 2021). Lastly, the threats are the factors that could harm the operations of the company.

Advantages of SWOT Analysis

SWOT analysis is simple to create within an organization as many factors take place at the same time or at regular intervals. It helps managers and staff to understand bigger goals as they focus on details of the smaller objectives. SWOT enables companies to identify and maximize their strengths and weaknesses to their greatest benefit. Organizations can use this tool to decide the appropriate tools necessary for accomplishing goals (Samuel, 2021). This can help them have the advantage of finding available opportunities at any given moment. Through the tool, companies may uncover market opportunities that make profits and in fending off new competitors (Samuel, 2021). Lastly, may enhance communication, improve planning, and better decision-making process within the organization.

Disadvantages of SWOT Analysis

Simplification of concepts and programs makes them easier for some employees, however, oversimplification of issues can create other problems which become difficult to solve. Those who are given the mandate to conduct SWOT analysis may include their biases due to vested interests which could compromise the objectivity of the results (Samuel, 2021). SWOT can only work on the know factors within the organization and it can not bend to cover unknown factors which could emerge during the process. It normally works only on the generalities of the company rather than the specifics.

Application of SWOT Analysis at Neema

This SWOT analysis for Neema hospital is based on its vision that emphasizes its strengths, weaknesses, opportunities, threats, and how the facility sees itself in the market. The tool is used to assess the resources and capabilities of Neema hospital with regard to the competitive environment in which it operates. The management first identified and analyzed its strengths, weaknesses, opportunities, and threats to its operations. This was through creating a list of questions that guided the completion of the SWOT framework table (“Practice Builder,” 2017). The process involved all top managers of the hospital brainstorming about the core strengths and weaknesses, opportunities and threats (Kenton, 2021). The results of this SWOT analysis should be used by the top management of Neema hospital to set its new goals and objectives including strategies for addressing weaknesses and threats (Gray, 2021). Based on these parameters, currently, the hospital’s strengths, weaknesses, opportunities are presented in the table below.

Table 2: SWOT Analysis Matrix. Source: (“Practice Builder,” 2017)

SWOT ANALYSIS

Strengths:

  1. A Strong brand name
  2. Personalized care
  3. Niche patient base
  4. Excellent location
  5. Continuous investment in clinical equipment

Weaknesses:

  1. Limited number of physicians
  2. Longer patient wait time
  3. Poor financial management
  4. High staff turnover
  5. Inability to attract new patients

Opportunities:

  1. Provision of diagnostic and lab services to other medical practices
  2. Attract quality physician and staff
  3. Expansion to underserviced areas
  4. Cost-effectiveness
  5. Successful referral programs with other physicians

Threats:

  1. Stiff competition
  2. Staff dissatisfaction
  3. Dissatisfied patients
  4. Expansion could face challenges of poor coordination and communication

PESTLE Analysis

The acronym PESTEL stands for political, economic, social, technological, environmental, and legal factors that influence the operations of a business entity. It is important that any organization should conduct a situational analysis of its macro-environment periodically to identify and understand any changes that could affect its operations (Pathak, 2020). This is the best way to maintain a competitive advantage over their competitors by conforming to the demands of the external environment.

Elements of PESTEL Analysis

The political factors determine the effect that government policies on trade, fiscal, and taxation may have on the businesses. Economic factors including interest rates, employment rates, cost of materials and equipment, and could have a direct impact on profitability of the company (Pathak, 2020). There are emerging social trends such as education levels, cultural trends, attitudes, and lifestyle changes that any business should study regularly to understand customers’ behaviors. Further, any business in the 21st century must consider changes in digital or mobile technology, research, automation, new strategies of logistics and distributions. For sustainability, it is important that businesses consider the influence of climate, recycling procedures, carbon footprint, and waste disposal on their operations. Additionally, every company must comply with all the legislation applicable to its operations including employment, consumer, health and safety, trade regulations, and restriction laws.

Advantages of PESTEL Analysis

PESTEL is a good assessment tool because it can give an indication to organizations on the potential threats and opportunities which could impact their operations in the future. It alerts the companies to be aware of the external environment in which they carry out their businesses (Pathak, 2020). Additionally, this analysis helps companies to understand the external trends and how they could affect their operations.

Disadvantages of PESTEL Analysis

In contrast, many researchers claim that this tool is too simple and therefore not sufficient nor comprehensive because it only assesses the external environment. PESTEL has the risk of being wrong because it works on assumptions. When numerous amount of data is generated, there is the risk of undertaking too much data analysis that could lead to confusion in the whole process (“PESTLE Analysis,” 2021, para. 17). Further, the pace of change makes it difficult to anticipate the developments and it could affect the company in the future.

Application of PESTEL Analysis at Neema

Neema hospital management will have to organize a meeting with the heads of every department of the business to brainstorm ideas. This will be followed by a consultation and seeking opinions from various experts outside the business domain (Pathak, 2020). The team should then conduct research to gather data and evidence on all the macro-environmental issues for its analysis of their possible impact on the business. The outcome of PESTEL analysis should then be used by the hospital leadership to create a business plan and strategies that conform to all macro-environment factors (Pathak, 2020). In addition, Neema hospital must continue to conduct PESTEL analysis on regular basis to enjoy a competitive advantage by spotting new trends before rival businesses. The hospital management after the analysis should address the macro-environmental factors.

Political Factors

Neema hospital must comply with all the tax policies, environmental regulations, trade restrictions and reforms, and tariffs. This will create a positive relationship between the hospital management and the government which is very important for its business operations (Pathak, 2020). Sometimes the government could introduce tax reforms that might change the revenues of the company or hinder how the hospital operates but that affects all business.

Economic Factors

The hospital must be flexible enough to initiate economic changes necessitated by economic growth, inflation rates, wage demands, working hours, cost of drugs, and cost of living. In cases where a combination of these factors creates a favorable climate for doing business, the hospital must transmit these directly to its employees and customers (Pathak, 2020). For example, when the inflation rate decreases, it means the cost of living comes down, therefore, the hospital should then lower the cost of medication to benefit its patients.

Social Factors

The hospital must, adopt diversity and inclusivity of cultures in its operations by employing people from different races, cultures, sexual orientations, ages, educational backgrounds, and genders (Pathak, 2020). Diversity will give them a competitive edge in the market in terms of public perception and having a big pool of experiences within their ranks. Further, the marketing department will benefit by having a diverse team within the hospital that understand the taste, preferences, and behaviors of customers from different cultural backgrounds.

Technological Factors

The hospital must be very innovative in its operations by adopting modern technological aspects of medical provisions. It should create a technology infrastructure that allows its doctors and physicians to meet the expectations of clients online through the use of smartphones, tablets, and even laptops (Pathak, 2020). Neema hospital can leverage technology by offering online services such as consultations and even medical prescriptions through a mobile phone application.

Legal Factors

The hospital should put in place a department that studies all the new legislation that may have a direct impact on the business and its operations. The study of the changes should look into the taxation regime, legislation on drugs and be able to advise the hospital on the best way forward or on how to comply (Pathak, 2020). The hospital must also refine its internal rules and regulations to conform to laws and legislation set out by the government.

Environmental Factors

Neema hospital should formulate and adopt a business model that adheres to a sustainable environment. It must operate its business by observing healthy waste disposals, and safety standards that protect the environment. The hospital should aim to reduce the effects of environmental pollution to zero by adopting safe and globally standardized waste disposal methods (Pathak, 2020). It must also maintain clean and healthy hygiene around the facility and its immediate surrounding.

Conclusion

The analytical tools available for assessing the performance of companies have their strengths and weaknesses. When organizations employ these tools independently, they are likely to miss on all the factors affecting their businesses. For example, the 7 S model, SWOT analysis, and Balanced Scorecard tools only assess internal factors that may affect the performance but completely ignore macro-economic or external factors. Likewise, PESTEL only evaluates political, economic, social, technological, environmental, and legal factors but not those within the organization. Therefore, the best strategy is the combination or integration of many tools to complement each other. This will translate into assessment results which cover all factors that could have an impact on business performance.

Recommendations for Change

As the CEO I would change the management structure of the hospital to reflect waves 3 and 4 of human resource system that integrates HR strategy into the overall business strategy. This will enable the HR department to hire the best staff who can implement business plans of the hospital. Further, it will ensure HR incorporates into the business and functions of the hospital as part of its day-to-day operations, to improve the company’s reputation and boost the clients’ confidence in the hospital. Therefore, HR manager will be elevated to be the second in command after the CEO to coordinate all departments as reflected in figure 3 below.

Neema Hospital Organizational Structure before changes
Figure 2: Neema Hospital Organizational Structure before changes
Neema Hospital Organizational Structure after changes
Figure 3: Neema Hospital Organizational Structure after changes

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