Instructor Resources: PowerPoint slides of the book's exhibits and a transition guide to the new edition.
The US healthcare delivery system is undergoing unprecedented transformation. In response to rapid and profound changes in technology, competition, consumerism, and other areas, healthcare leaders must help their organizations develop and implement effective strategies to survive and thrive.
This fourth edition of Healthcare Strategic Planning, edited by John M. Harris (and previously authored by Alan M. Zuckerman), provides core insights into strategic planning practice and theory and shows how those insights can be applied to healthcare organizations. Examples from actual healthcare organizations add real-life detail and reinforcement. By following the book’s step-by-step guide to the stages of strategic planning—analyzing the environment, determining organizational direction, formulating strategies, and transitioning to implementation—readers will learn how to answer the question everyone in healthcare management is asking: Where are we going?
This new edition addresses strategic planning in the context of contemporary healthcare issues, particularly population health, value-based payment, and shifting provider–payer partnerships. It features the following new or enhanced material and more:
Fresh strategies for incorporating strategic thinking into management routinesExpanded coverage of environmental analysis, including tips on organizing the data collection process and identifying market trendsNew strategy formulation examples that illustrate the relationship among between crucial issues, goals, and key metricsA step-by-step process for creating an effective implementation plan and guidance for gaining board approvalNew case studies that illustrate how successful organizations handle the annual strategic planning processA new chapter on addressing business model shifts and technological and clinical advances at each step of the planning process
About the Author
John Harris is a director with Veralon, a healthcare management consulting firm in Philadelphia. His work focuses on mergers and acquisitions, strategy and the transition to value-based payment. He leads strategic planning processes and serves as a consultant to health systems and hospitals, accountable care organizations, clinically integrated networks, physician–hospital organizations and health plans. Mr. Harris is also a frequent speaker for the American Association of Integrated Healthcare Delivery Systems, the Healthcare Financial Management Association and other organizations, and is a guest expert on The Wharton School’s Sirius XM radio station.
Mr. Harris serves as faculty for the following ACHE seminars: Advanced Strategic Planning to Transform Your Organization Hospitals and Health Systems of the Future: Transforming to Thrive Strategic Planning: From Formulation to Action
Mr. Harris has also authored the following Health Administration Press publications:
Healthcare Strategic Planning, Fourth Edition
Read an Excerpt
The Value of Strategic Planning
The organization without a strategy is willing to try anything.
— Michael Porter
There is surely nothing quite so useless as doing with great efficiency that which should not be done at all.
— Peter Drucker
For decades, top scholars and strategy experts have debated the bottom line value of strategic planning and whether planning is an effective way to craft good strategy. Understanding concerns raised about the efficacy of strategic planning (notably Martin 2014; Mintzberg 1994) can be useful because, although criticisms do not invalidate strategic planning as a path to sound strategy, they do call attention to what can make planning fail. Thus, criticisms highlight how planning must be designed and executed to overcome potential pitfalls on the journey to meaningful strategy, and they can also heighten awareness of challenges in a way that is beneficial to students of strategy and planners alike.
Before one is able to appreciate why strategic planning is in fact a viable path to good strategy, however, establishing a common understanding of the more foundational elements is important — what strategy is, what defines good strategy, and what strategic planning is.
WHAT IS STRATEGY?
Though this book primarily focuses on the process rather than the content of strategy (as distinguished by Mintzberg 1978, 1994; Mintzberg, Ahlstrand, and Lampel 1998; Porter 1979, 1998), and specifically on the strategic planning process for healthcare organizations, defining the latter is critical to evaluating the value of the former.
The concept of strategy has roots primarily in military history and secondarily in political history. "The English word strategy comes from the Greek strategos, meaning a general ... and the Greek verb strategeo means to plan the destruction of one's enemies through effective use of resources. Many terms used in strategy today — objectives, mission, strengths, weaknesses — also have military roots" (Ginter, Duncan, and Swayne 2013, 7).
For purposes of business, Wickham Skinner (1969, 140) defined strategy as a "set of plans and policies by which a company aims to gain advantages over its competitors." Porter (1996, 70) asserts that "the essence of strategy is choosing what not to do" and that strategy is about making the choices necessary to distinguish an organization in meeting customers' needs. Others describe strategy more pragmatically as answering questions of where we are going and how we get there (Eisenhardt 1999). The defining attribute of strategy — the "nucleus" (Porter 1996) or "kernel" (Rumelt 2011a) — relates to establishing and leveraging sustainable competitive advantage and fulfilling the intention of a firm's strategic direction (Hamel and Prahalad 1989).
WHAT IS GOOD STRATEGY?
The authors of this book, adapting the framework proffered by J. Daniel Beckham (2000), propose seven key characteristics of effective strategy:
1. Sustainability. It has lasting power with greater long-term impact than other alternatives.
2. Performance benefits. It yields improvement on key performance and competitive position indicators.
3. Competitive advantages. Its approach is demonstrably unique and superior to those employed by competitors and thus yields competitive advantages.
4. Direction. It moves the organization toward a defined end, although not necessarily in a linear fashion.
5. Focus. It is targeted and represents a choice to pursue a certain course over other attractive alternatives.
6. Interconnectedness. Its components have a high level of interdependence and synergy.
7. Criticality. It may not be essential to organizational success, but it is certainly significant and fundamental.
In Good Strategy, Bad Strategy, Richard Rumelt (2011a) asserts that good strategy has a sound underlying logic and structure that make up the "kernel" of a strategy. A good strategy may consist of more than the kernel, but if the kernel is absent or misshapen, problems will ensue. The kernel of a strategy contains three elements: (1) a diagnosis that defines or explains the nature of the challenge, (2) a guiding policy for dealing with the challenge, and (3) a set of coherent actions that are designed to carry out the guiding policy.
Rumelt (2011b, 5) further elaborates, "A good strategy does more than urge us forward toward a goal or vision. A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effect."
WHAT IS STRATEGIC PLANNING?
A number of definitions have evolved to pinpoint the essence of strategic planning. According to Peter M. Ginter, W. Jack Duncan, and Linda E. Swayne (2013, 21), "Strategic planning defines where the organization is going, sometimes where it is not going, and provides focus. The plan sets direction for the organization and — through a common understanding of the vision and broad strategic goals — provides a template for everyone in the organization to make consistent decisions that move the organization toward its envisioned future. Strategic planning, in large part, is a decision-making activity."
Beckham (2016) describes true strategy as "a plan for getting from a point in the present to some point in the future in the face of uncertainty and resistance." A. B. Campbell (1993) adds the concept of measurement to his definition, which characterizes strategic planning as a process for defining an organization's objectives, the strategies to achieve objectives, and metrics that gauge effectiveness of strategies.
Connie Evashwick and W. T. Evashwick (1988), incorporating the concepts of vision and mission, propose that strategic planning creates a vision of the future based on how the organization fits into its current and anticipated environment given its mission, strengths, and weaknesses. Once a vision is in place, the organization develops a plan of action to position itself accordingly.
Many variations of the strategic planning model exist and are used, but all have common core tenets. Two similar approaches to strategic planning were developed in the 1980s. The first, proposed by Donna L. Sorkin, Nancy Ferris, and James Hudak (1984), features the following steps:
Scan the environment.
Undertake external and internal analyses.
Select key issues.
Set a mission statement and broad goals.
Develop goals, objectives, and strategies for each issue.
Develop an implementation plan to carry out strategic actions.
Monitor, update, and scan.
The second approach was tailored to healthcare and included these steps (Simyar, Lloyd-Jones, and Caro 1988):
Identify the organization's current position, including present mission, long-term objectives, strategies, and policies.
Analyze the environment.
Conduct an organizational audit.
Identify the various alternative strategies based on relevant data.
Select the best alternative.
Prepare long-range and short-range plans to support and carry out the strategy.
Implement the plan and conduct an ongoing evaluation.
This book synthesizes steps from the two approaches into four stages, as illustrated in exhibit 1.1.
The first stage is the environmental assessment, which focuses on the question, where are we now? It has three primary outputs:
1. Evaluation of competitive position, including advantages and disadvantages
2. Assumptions about the future environment
3. Distillation of key strategic issues to address
The goal of the environmental assessment is to determine how an organization may fare in the future given likely conditions and current position and to pinpoint the factors most critical to generating future competitive advantage.
The second stage of the planning process is organizational direction, followed by the third stage, strategy formulation. Stages 2 and 3 address the question, where should we be going? The main activity of the organizational direction stage is to define a desired future state by examining possible future external realities, mission, vision, values, and key strategies for the organization. Strategy formulation establishes goals, objectives, and major initiatives for the organization. The purpose of stages 2 and 3 of the planning process is to determine what broad future direction is possible and desirable and what future scope of services and position the organization will strive to achieve.
The fourth stage is implementation planning — how do we get there? This stage involves identifying the actions needed to implement the plan. Key activities include mapping out the tasks to accomplish the goals and objectives, setting a schedule, determining priorities, and allocating resources to ensure implementation. Implementation should begin as soon as possible after completion of the plan, if not during the final stage. Teams should ensure that commitment to ongoing monitoring of plan implementation and completion of periodic updates and revisions, as needed, are in place prior to finalizing the plan. Each stage of the planning process is discussed in detail in the following chapters.
BUT WHY STRATEGIC PLANNING?
Understanding Primary Criticisms
As referenced in the opening of this chapter, not all commentators agree that strategic planning is an effective way to set good strategy. Several criticisms and possible pitfalls commonly arise (the next section comprises a list of the latter), but three primary criticisms of strategic planning prevail:
1. It relies on past or current conditions and performance as relevant predictors of the future.
2. It yields a static output that is unable to account for dynamic realities.
3. The formality and prescriptiveness of the process may actually hinder the thoughtful reflection and forward-looking creative thinking that is critical to good strategy.
Note that none of the primary criticisms of planning actually preclude it from being a useful means to good strategy. Criticisms assume that certain attributes of planning are inherent or immutable, and that potential problems with some planning processes can be generalized to discredit the whole of strategic planning. As evinced in part in the following chapter and elaborated on in later chapters, these assumptions are not necessarily valid.
For example, consider the first of the primary criticisms noted previously — reliance on the past to predict the future. Yes, the practice of scanning the environment and the organization's performance and position requires using historical data. However, in a well-conceived strategic planning process, findings from analysis are not intended to be used as a basis to project forward. Rather, as described in chapter 6, historical data are just one input that must be contextualized based on assumptions about the future environment. This criticism falsely assumes that because planning could solely rely on past information to make decisions about the future, then it must necessarily do so, or that it could not be otherwise balanced by incorporation of future-oriented thinking.
The second criticism implies that strategic plans are not effective guides once the environment shifts or the organization undergoes change. This inference is logical if the planning process ended after strategy formulation and development of initial action plans; however, as described in chapters 9 and 10, an effective planning process establishes and activates a continuous implementation and plan management approach that ensures ongoing review and updates. These activities are typically sufficient to minimize the risk of plans becoming gradually less relevant and thus less useful over time.
The third criticism is more philosophical. It suggests that formal structures impede originality and therefore undermine strategic thinking. However, every artist works in a particular medium or media. Artists are constrained in some ways by the guidelines and tools of the chosen medium, but nonetheless express inspiration and imagination. A well-structured strategic planning process, as described in the remainder of this book, functions much like these guidelines and tools. It provides a framework to gather information, input, and insight supporting the development and implementation of effective strategy. Absent such a structure, an organization could theoretically get lucky, creating and executing great strategies, but it will be following a far riskier path that can more easily lead it astray.
Therefore, organizational leaders should focus on getting the strategic planning process right, not skipping it. While modifications to the comprehensive strategic planning process that this chapter previously outlined can be made, the fundamental logic behind and core steps of the planning approach should remain. Despite the ongoing debate over the efficacy and methods of strategic planning, it remains the most relevant means to develop strategy. Too often, leaders who avoid strategic planning also bypass strategic thinking.
Even so, linking strategic planning to good strategy and specific organizational success is difficult (Ginter, Duncan, and Swayne 2013; Kaissi and Begun 2008), though scholars do acknowledge that strategic planning adds value to organizations: "By planning and evolving to meet expected changes head on, organizations have a better chance of survival" (Bellenfant and Nelson 2016, 1). Because strategic planning requires examining functionality and sustainability, it improves awareness of an organization's relative strengths and weaknesses. This enhanced awareness generates focus, which alone can have a positive impact on organizational performance and thus improve chances of long-term survival. Nonetheless, pinpointing specific effects of strategic planning is challenging, and success will depend on and vary with managerial, environmental, and organizational factors (Taiwo and Idunnu 2010).
The authors of this book fully acknowledge that strategic planning has limitations and is not a foolproof way to create effective strategy. Further, we reiterate the merit in understanding and purposefully addressing key criticisms. In fact, subsequent chapters dedicated to each of the four stages of the strategic planning approach specifically identify how planning can go wrong and how to be aware of and proactively correct for such challenges.
Understanding Common Pitfalls
The previously mentioned primary criticisms are the basis of many common problems faced in strategic planning, but several others are worth noting, as they often leave leaders jaded about the value of such planning.
Failing to Involve the Appropriate People
Sometimes too many stakeholders are involved; sometimes too few. Sometimes the number of participants is fine, but those involved are not necessarily the "right" people. Thoughtful involvement of the right type and mix of internal and external stakeholders is essential to both strategy development and successful implementation.
Conducting Strategic Planning Independent of Financial Planning
If financial considerations are excluded from the strategic plan, strategies may never become a reality. Sound strategic planning will explicitly incorporate financial realities and test the financial reasonableness of executing an identified strategic approach.
Falling Prey to Analysis Paralysis
The fast-paced healthcare market demands that provider organizations respond to opportunities and threats without extensive delays. As such, squandering time by endlessly analyzing and reanalyzing data in the hopes of more accurate baselines or forecasts works against the intent of planning: to prepare for and effectively respond to change.
Not Addressing the Critical Issues
Planning teams may avoid the most pressing issues because they are too difficult to discuss or address. In addition, planning teams may identify a litany of issues but not subsequently refine the list to those that are most critical. If leadership is not prepared to address key issues or to actively ensure a sense of focus, strategic planning can ignore or overlook the most threatening challenges and potentially powerful opportunities.
Failing to Achieve Consensus
Even an objectively great strategic plan cannot succeed unless it is strongly supported by those responsible for its execution. Leadership and strategic plan facilitators must purposefully build this support and cannot ignore disagreements or even a lack of strong, visible consensus on key plan components. Organizational leaders must repeatedly test for broad agreement and generate enthusiasm about the plan while it is being developed.(Continues…)
Excerpted from "Healthcare Strategic Planning"
Copyright © 2018 Foundation of the American College of Healthcare Executives.
Excerpted by permission of Health Administration Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Section 1 Making the Case for Strategic Planning,
Chapter 1 The Value of Strategic Planning,
Chapter 2 Benefits of Strategic Planning,
Section 2 Setting the Stage for Successful Strategic Planning,
Chapter 3 Organizing for Success,
Chapter 4 Major Planning Process Considerations,
Chapter 5 Encouraging Strategic Thinking,
Section 3 The Strategic Planning Process,
Chapter 6 Phase 1: Analyzing the Environment,
Chapter 7 Phase 2: Organizational Direction,
Chapter 8 Phase 3: Strategy Formulation,
Appendix 8.1 Example: Issue Documentation,
Appendix 8.2 Example: Strategic Plan Financial Analysis,
Chapter 9 Phase 4: Transition to Implementation,
Appendix 9.1 Example: Regional Health System: 2017â&8364;"2022 Strategic Plan,
Chapter 10 Annual Review and Update,
Section 4 Optimizing Strategic Planning,
Chapter 11 Enabling More Effective Execution,
Chapter 12 Addressing Innovation in Strategic Planning,
Chapter 13 Future Challenges for Strategic Planners,
About the Editor and Contributing Authors,