Success Factors for Organizational Performance: Comparing Business Services, Health Care, and Education

Article excerpt

The relationship of the four manager-controlled, critical success factors (market orientation, learning orientation, entrepreneurial management style, and organizational flexibility) to performance in the manufacturing area has been thoroughly researched. But how these success factors affect nonprofits and for-profit service providers has been generally neglected. To gain a variety of perspectives, we submitted questionnaires to multiple respondents from organizations in three areas: business services, nonprofit health care (all hospitals), and nonprofit educational institutions, mostly higher education. Although all four factors were highly correlated with performance, the impact of the different factors on results in the different sectors varied widely. On the whole, education fared less well with respect to performance than the other two areas. Further research should help managers understand the roles of these critical factors.

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Overview

Past research findings in the management, entrepreneurship, and marketing areas have demonstrated that market orientation, learning orientation, entrepreneurial management style, and organizational flexibility are highly correlated with organizational performance. Most of the related research has been in the manufacturing area and only recently has the nonprofit sector received research attention (Ignacio, Gonzalez, Vijande, and Casielle, 2002; Hurley and Holt, 1998).

The United States has become a service economy. Much of traditional manufacturing has been outsourced to offshore suppliers, and many manufacturers have closed their domestic plants and located manufacturing subsidiaries in lower labor costs environments. In addition, many functions once within manufacturing firms have been outsourced to service organizations, including security, payroll, design, cleaning services, landscaping, logistics, and information technology--the list is continuously expanding. The result has been a dramatic increase in the services economy. Academic research has only somewhat recognized that services (industrial and consumer) are now the major portion of our gross domestic product and the engine behind domestic economic expansion. Services are also important for global trade. The U.S. international balance of trade shows a continuing deficit for goods, while the balance of trade for services shows a continuing surplus.

We need to recognize that services are also the major portion of the nonprofit sector, and the largest of these are health care and education. These may be the "hidden" service sectors, but they are not insignificant economic engines. In 2001, health care was 14.1% of the gross domestic product (GDP) (Centers for Medicare and Medicaid Services, 2004), education was 6.1%, and higher education, by itself, accounted for 3.8%. On a worldwide basis, the United States spent the most on education per capita (U.S. Department of Education, 2003). These large numbers should not be surprising. After all, good health and knowledge are perhaps the most sought after benefits in our advanced society, and the vast majority of the providers of these benefits are nonprofit institutions, not businesses.

In 2001, services-producing industries accounted for 81% of the nation's employment (U.S. Bureau of Labor Statistics, 2002). Between 1960 and 2002, employment in education went from 616,000 to 2,500,000, and employment in business services went from 656,000 to 9,300,000. Employment in health care rose from 1,500,000 to 10,700,000 (Hagenbaugh, 2002). Employment in the three sectors we cover in this study went from 2.8 million to 22.5 million in this 42-year period--an astounding 812% increase!

Earlier studies have called for additional research on the four critical success factors--market orientation (MKT), learning orientation (LRN), entrepreneurial management style (ENT), and organizational flexibility (ORG)--and have identified knowledge gaps in the following areas:

* Multiple respondents (Tsai, 2002; Dawes, 2000)

* Business services sector (Barrett, Balloun, and Weinstein, 2000)

* Nonprofit organizations (Ignacio, Gonzalez, Vijande, and Casielle, 2002; Hurley and Holt, 1998)

Our research addresses each of these. …