Meeting the Expectations of Key Stakeholders: Stakeholder Management in the Health Care Industry

By Kumar, Kamalesh; Subramanian, Ram | SAM Advanced Management Journal, Spring 1998 | Go to article overview

Meeting the Expectations of Key Stakeholders: Stakeholder Management in the Health Care Industry


Kumar, Kamalesh, Subramanian, Ram, SAM Advanced Management Journal


Introduction

The 1980s ushered in an era of significant influence by stakeholders on the way businesses operated. The areas affected ran the gamut from corporate social responsibility to internal governance. The media emphatically underscored the prominence of stakeholders and concluded that "the days when CEOs could neglect their . . . owners and other corporate stakeholders are coming to an end . . . now managers will have to listen to - and learn from - other groups who are demanding a voice in the running of the corporation" (Nussbaum and Dobrzynski, 1987: 103). As stakeholders are becoming a major force, managers must consider ways to manage stakeholders. The current study attempts to throw some empirical light on stakeholder management by presenting the results of a survey that asked hospital executives the importance they attached to a variety of performance goals relating to stakeholders and their levels of satisfaction in achieving these goals.

The Study's Setting

In recent years hospitals have experienced what many observers feel are "fundamental, turbulent and even revolutionary changes" (Fottler, Blair, Whithead, Laus, and Savage, 1989). These changes have profoundly affected the management of hospitals and have resulted in a shift from ". . . health care as a social good to health care as an economic good." (Shortell, Morrison and Friedman, 1990). As a result, hospital executives now must respond to an increasing number of active and powerful stakeholder groups who influence issues ranging from hospital governance to financial management to quality of patient services (Blair & Fottler, 1990). Each of these stakeholder groups has its own expectations, and if the hospital executives are to gain their acceptance, they must set their performance goals to address the specific concerns of each group (Savage, Blair, Benson, 1992).

It would be of interest to learn how hospital executives have prioritized their performance goals for managing the key stakeholders and how successful they think they have been in achieving the goals related to the expectations of these stakeholders. Such information could serve as a means of self-assessment for the hospital executives. It could also provide some insight into the problem areas of stakeholder management and could help in developing future strategies.

Additionally, although the number and type of stakeholder groups would be somewhat the same for both not-for-profit and for-profit hospitals, the power of the different groups visa-vis the hospitals would be different because of the differences in their organizational setup, philosophy, and values (Kralewski, Gifford, and Porter, 1988). Hence the importance attached by the hospital executives of both kinds of institutions to different performance goals designed to meet stakeholder expectations could be different. Their levels of satisfaction in meeting various performance goals could vary as well, since the attitude toward profit affects a hospital's management orientation and its ability to obtain resources (Topping & Hernandez, 1991).

Key Stakeholders and Their Primary Concerns

While there are many stakeholders for hospitals, a recent study of hospital executives identified the five most important and powerful (Fottler, Blair, Whithead, Laus and Savage, 1989). These are: medical staffs, patients, hospital managements, professional staffs, and boards of trustees. The medical staff's (physicians and nurses) expectations are primarily related to high clinical quality (often expressed in terms of new and technologically advanced services and facilities) and adequate support services. Patients, like physicians, care about clinical quality, but they are also concerned about service quality and low costs. The expectations of hospital management include cost containment, profitability, and institutional leadership. The primary concerns of the professional staff (occupational therapists, radiologists, lab personnel, etc.

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