Chapter 2 Designing Organizations

Reductive and Adaptive Organizational
Reductive Theory
Humanistic Theory as a Bridge
Adaptive Theories
Organizational Structures and Shared
Functional Structure
Service-line Structure
Matrix Structure
Parallel Structure
Shared Governance

  • Learning Outcomes
    After completing this chapter, you will be able to:
    Healthcare Settings
    Primary Care
    Acute Care Hospitals
    Home Healthcare
    Long-term Care
    Ownership and Complex Healthcare
    Ownership of Healthcare Organizations
    Healthcare Networks
    Interorganizational Relationships
    Managed Healthcare Organizations
    Accountable Care Organizations
    Redesigning Healthcare
    Organizational Environment and Culture
  1. Differentiate between reductive and adaptive organizational theories.
  2. Describe traditional and emerging structures in healthcare
  3. Choose a practice setting based on a preferred professional practice
  4. Explain how the ownership of and complex relationships among
    healthcare organizations impact nursing.
  5. Discuss how the organizational environment and culture affect
    workplace conditions.
    14 Chapter 2
    Key Terms
    accountable care organization (ACO)
    chain of command
    Hawthorne effect
    health home
    horizontal integration
    integrated healthcare networks
    line authority
    medical home
    organizational culture
    organizational environment
    retail medicine
    service-line structures
    shared governance
    span of control
    staff authority
    vertical integration
    vision statement
    When individuals come together to fulfill a common aspiration, organizations are
    formed. Some organizations are as small as two individuals with simple structures
    guiding the business relationship. Others may be large and complex. In healthcare,
    individuals form organizations to care for the ill and infirm or to advance health and
    well-being, yet they use different approaches to achieve these aims. A home care organization
    may focus less on the use of diagnostic technologies in favor of delivering
    hands-on and psychosocial support services where the patient resides. Other organizations
    may prefer to focus on technology usage, such as outpatient imaging services
    where patients go for care. Still other organizations may combine the two and add
    other aims, such as teaching future health providers. For these reasons, individuals
    studying to be healthcare providers will benefit from realizing early on that they will
    choose not only an area of clinical interest for a career but also a practice setting that
    aligns with their beliefs about organizations.
    Organizations almost always begin small, with structures that are easy to navigate.
    A nurse practitioner with a rural independent practice may provide clinic services
    with one or two others, but most organizations tend to grow in size and
    complexity. If the clinic grows in volume and scope of services offered, the time comes
    when more care providers are needed. At some point, a business manager is needed to
    specialize in billing and collecting revenues to offset the cost of providing services.
    Leaders begin to differentiate organizations into functions, divisions, and service lines,
    among other ways of structuring work discussed later in this chapter.
    In the earliest stages, especially during in an era when a business plan is needed to
    establish an organization in order to gain needed capital, organizational partnerships
    have a defined mission, purpose, and goals. Leaders shape their organizational structure
    based on what they want the organization to achieve.
    The philosophy is a sometimes written statement that reflects the organizational
    values, vision, and mission (Conway-Marana, 2009). Values are the beliefs or attitudes
    one has about people, ideas, objects, or actions that form a basis for the behavior that
    will become the culture. Organizations use value statements to identify those beliefs or
    attitudes esteemed by the organization’s leaders.
    A vision statement is often written; it describes the future state of what the organization
    is to become through the aspirations of its leaders. The vision statement is
    designed to keep stakeholders intent on why they have come together and what they
    aspire to achieve. “Our vision is to be a regional integrated healthcare delivery system
    providing premier healthcare services, professional and community education, and
    healthcare research” is an example of a vision statement for a healthcare system.
    The mission of an organization is a broad, general statement of the organization’s
    reason for existence. Developing the mission is the necessary first step to forming an
    organization. “Our mission is to provide comprehensive emergency and acute care
    services to the people and communities within a 200-mile radius” is an example of a
    mission statement that guides decision making for the organization. Purchasing a
    medical equipment company, therefore, fails to meet the current mission, nor does it
    contribute to the vision of improving the community’s health.
    Reductive and Adaptive
    Organizational Theories
    The purpose of a theory-derived organization is to design work and optimize human
    talent in a manner that best accomplishes the aspirational goals of the organization.
    Most healthcare organizations have theoretical foundations stemming from the late
    1800s to the early to mid 1900s, an era during which family-based industries such as
    farming were replaced with manufacturing plants developed in urban settings to
    accommodate mass production. Building on management principles derived from
    Adam Smith in 1776, who studied how organizations specialize and divide labor into
    piecework, new theories emerged. On analysis, these theories began to address work
    design, individual and group motivation to improve performance outputs, and the
    hypothesis that different situations may require adaptive strategies for the organization
    to remain viable.
    Reductive Theory
    Reductive theory, or classical approaches to organizations, focuses heavily on (a) the
    nature of the work to be accomplished, (b) creating structures to achieve the work, and
    (c) dissecting the work into component parts. The premise is to enhance people’s efficiency
    through thoughtfully designed tasks. Leaders who use this model aim to subdivide
    work, specify tasks to be done, and fit people into the plan. Reductive theory has
    four elements: division and specialization of labor, organizational structure, chain of
    command, and span of control.
    DIVISION AND SPECIALIZATION OF LABOR Dividing work reduces the number
    of tasks that each person carries out, with the intent to increase efficiency by assigning
    repetitive tasks to dedicated workers and improve the organization’s product. This
    concept ties proficiency and specialization together such that the division of work and
    specialization economically benefit the owner. When work is designed in such a standardized
    manner, managers exert greater control over productivity expectations.
    Designing Organizations 15
    16 Chapter 2
    ORGANIZATIONAL STRUCTURE Organizational structures delineate work group
    arrangements based on the concept of departmentalization as a means to maintain
    command, reinforce authority, and provide a formal communication network.
    Stated earlier, structures evolve over time, especially as organizations grow in
    size. The term bureaucracy is defined as the ideal, intentionally rational, most efficient
    form of organization. Today this word has a negative connotation, suggesting long
    waits, inefficiency, and red tape, yet its tenets continue to serve a purpose.
    CHAIN OF COMMAND The chain of command is depicted on a table of organization
    (called the organizational chart) through job titles listed in magnitude of authority
    and responsibility. Those jobs that ascend to the top reflect increased authority and
    represent the right or power to direct the activities of those of lesser rank. Those
    depicted at the lower end of the chart have the obligation to perform certain functions
    or responsibilities and yield less authority and power.
    The organizational chart gives the appearance of orderliness and clarity around
    who is in charge. Positions with line authority are depicted in boxes on the organizational
    chart, with the person holding supervisory authority over other employees
    located at the top. In Figure 2-1, line authority is illustrated by the chief nurse executive
    holding supervisory authority over nurse managers and the acute care nurse practitioner.
    Another type of authority is known as staff authority, in which individuals
    yield considerable expertise to advise and influence others; they possess influence
    that, without supervisory power, provides important direction and persuasion, minus
    supervisory status. In Figure 2-1, the nurse managers and acute care nurse practitioner
    possess staff authority with one another. This means that no nurse is responsible for
    the work of the others, yet they respect and collaborate to improve the efficiency and
    productivity of the unit for which the nurse manager bears responsibility.
    Chief nurse executive