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Performance management in health care in Iceland

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Performance management in health care in Iceland

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PERFORMANCE MANAGEMENT IN
HEALTH CARE IN ICELAND
Copyright 2000
by
Anna Lilja Gunnarsdottir
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(PUBLIC ADMINISTRATION)
May 2000
Anna Lilja Gunnarsdottir
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UMI Num ber: 3054874
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UNIVERSITY OF SOUTHERN CALIFORNIA
THE GRADUATE SCHOOL
UNIVERSITY PARK
LOS ANGELES, CALIFORNIA 90089
This dissertation, written by
Anna Lilja Gunnarsdottir
under the direction of hex Dissertation
Committee, and approved by all its members,
has been presented to and accepted by The
Graduate School, in partial fulfillment of re
quirements for the degree of
DOCTOR OF PHILOSOPHY
Dean
DISSERTATION CO]
Chairperson
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Table of Contents
List of Tables iii
Abstract iv
I. Introduction
A. Overview of the Study 1
B. The Icelandic Health Care System 7
C. The National University Hospitals in
Iceland 18
D. The Children’s Hospital 25
II. Theoretical Background
A. Overview of Performance
Management 29
Performance Management in a Few
Countries 32
Performance Management in Iceland 38
B. Overview of Steps and Interventions 43
The Accountability System at the
Children’s Hospital 50
C. Relevant Concepts:
Quality Management 52
Performance 66
Job Satisfaction 70
Absenteeism and Turnover 74
D. Characteristics of Performance
Management and Its Link to Theories 78
E. Hypotheses 87
III. Methods 91
IV. Results 99
V. Discussion
A. Interpretation of Findings 115
B. Implications 125
VI. Bibliography 127
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List of Tables
Table 1 The Main Factors in Performance
Management and the Derived
Outcomes page 78
Table 2 Two way ANOVA Results of the
Key Measures page 100
Table 3 Respondents from the Job
Satisfaction Survey page 102
Table 4 T - Test Analysis of the Job
Satisfaction Survey page 103
Table 5 T - Test Analysis of the Other Key
Variables page 107
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Abstract
The costs of health care have been rising for centuries in the entire Western
world. In Iceland, as well as in most other European countries, health care is mostly
provided through public organizations and paid for through taxes. In an attempt to slow
government spending countries have explored the possibilities of implementing
management reforms in public organizations. Results-oriented management reforms
have been examined closely by many of those governments. It involves requiring public
organizations to define their mission and goals, measuring the progress in achieving
those goals, and reporting the progress. Performance Management is one form of
results-oriented management. It is a management method consisting of three major
components, each of which is based on management theories. The theoretical
background includes the analysis of performance, job satisfaction, absenteeism and
turnover, total quality management, goal setting, job characteristics, and reinforcements.
Performance Management was implemented at the four inpatient units of the
Children's Hospital, a division of the National University Hospitals in Iceland. Three
departments served as control departments. Key operational numbers were gathered
monthly for a total of 40 months, 21 months prior to implementing Performance
Management, 7 months during the implementation phase and for 12 months following
implementation. The changes from the time period prior to the implementation of
Performance Management to the time period after implementation were analyzed and
compared. Job satisfaction was measured twice, once prior to implementation and again
one year following implementation.
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It was hypothesized that job satisfaction would improve, absenteeism and
turnover would decrease, the number of patients served would grow and that the total
operational costs would increase less in the experimental units than in the control units.
The results generally indicate more favorable changes in the experimental group
than in the control group, supporting the predicted outcomes of the Performance
Management program. Two hypotheses were accepted: absenteeism decreased and total
costs increased less in the experimental units than in the control units. Three hypotheses
were not accepted, however, in all three there was a trend in the predicted direction.
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I. Introduction
A. Overview of the Study
During the 1980s, many Western countries experienced severe economic
challenges. Countries were facing high government spending, budget deficits, and
increasing global competition. In an attempt to cope with this situation several
countries explored the possibilities for management reforms in government and public
agencies. Results-oriented management reforms were examined closely by many of
those governments. Results-oriented management reforms involve requiring
government agencies to define their mission and goals, measure the progress in
achieving those goals, and report the progress.
Several countries have implemented results-oriented management reforms. In
fact, reports from OECD (Organization for Economic Co-Operation and Development)
about the development of public management, state that approximately two thirds of the
OECD countries have implemented some form of performance management (The
Ministry of Finance, 1996). The United States implemented the Government
Performance and Results Act of 1993 (GPRA). The objective of GPRA is to change the
emphasis of management and accountability from what federal agencies are doing to
what they are accomplishing (GAO, 1995). To accomplish that objective, federal
agencies and federal programs are required to implement results-oriented management
reforms, such as strategic planning, performance planning, performance measurement,
and performance reporting. Alice Rivlin, the former director of the Office of
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Management and Budget says that the GPRA, “responds to, and seeks to overcome, two
deficits that shackle our nation and the federal government: the trust deficit and the
more-discussed, closely related budget deficit” (Rivlin, 1995: 3). Other countries such
as Canada, New Zealand, and the United Kingdom have also implemented reforms with
similar objectives as GPRA (OECD, 1997).
Great emphasis is placed on implementing some form of results-oriented
management in all public agencies and public companies in Iceland. This may in part be
due to its close ties with the other Nordic countries, i.e. Denmark, Norway, Sweden, and
Finland, which have been experimenting with some forms of results-oriented
management in public agencies. In February of 1996, the Icelandic Minister of Finance
established a committee with the goal of improving performance within the public
sector. Performance Management (PM) is one form of results-oriented management that
emphasizes defining the goals of the organization and demonstrating results according to
the goals. The committee was supposed to recommend how Performance Management
can be implemented in government agencies. The committee has completed its role and
made recommendations which were published as a special report in November of 1996.
The Icelandic Government has approved those recommendations, which emphasize the
methodology of implementing Performance Management in Iceland, both within the
various ministries and public companies and also in the cooperation between them. The
recommendations will be clearly described and analyzed in the dissertation.
The costs of health care have been rising for centuries, both per capita as well as
a percentage of gross national product (GNP) in the entire western world. The United
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States experienced the total health expenditures increasing from 5.9% of GNP in 1965
(Reinhardt, 1990), to 14.0% in 1997 (Statistical Bureau of Iceland, 1998). In an attempt
to slow the escalating health care costs the United States, in 1983, introduced the PPS
(Prospective Payment System) which uses DRG's (Diagnosis Related Groups) that
changed the reimbursement system for hospital services paid by the government. The
change from a cost-based retrospective system to a prospective payment system was
based on the DRG. Instead of the former system, which did not necessarily influence
cost savings, the new system forces hospitals into cost containment. The effects of the
PPS system on health care providers in the United States have been enormous. Length
of stay (LOS) has shortened significantly because patients are only hospitalized during
the most acute phase of their illness to minimize the cost of care. The result has been
lower occupancy rates in hospitals which subsequently have produced fierce competition
between them. In addition to DRG, which involves only hospital services paid by the
government, other payors are making managed care contracts with hospitals that are
based on similar terms as the DRG system, a discounted per diem rate, or a capitated
rate. In the current health care environment, hospitals have to provide quality care
within the reimbursement limits set by DRG and managed care contracts. Hospitals, as
well as other health care providers, have been searching for ways to decrease the costs of
providing care without hurting the quality of care.
The health care system in Iceland is a combination of public and private
organizations. Health care is mostly paid for through taxes, the public proportion
accounting for approximately 83% of total health care spending. Iceland spent 8.22% of
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its gross national product (GNP) towards health care in 1995, 8.15% in 1996, 8.00% in
1997 and 8.17 in 1998. In real dollars, the cost of the health care system has been
increasing every year (Statistical Bureau of Iceland, 1998). In the year 1997, while
Iceland spent 8,0% of its GNP towards health care, the other Nordic countries spent from
7,3% to 8,6% of their GNP. The United States spent 14,0% of its GNP for health care in
the year 1997 (Statistical Bureau of Iceland, 1998). Iceland, as well as many European
nations, continues to offer health care mostly through public organizations. Private
health care organizations exist in various forms but are only a small percentage of all
organizations within the health care sector. In Iceland, all hospitals are publicly owned
and operated. However, it has been argued that some of the services that the hospitals
offer, such as the operation of kitchens, the maintenance of housing and equipment,
laboratory services, cleaning services, and even some of the outpatient services, should
be privatized. However, the core hospital service will most likely remain a public
service. There are strong forces in Iceland to contain health care spending and as a result
all hospitals, as well as other public institutions, have been required to cut costs. To
change the financing of hospitals in Iceland from a fixed yearly budget towards some
kind of a prospective payment system, like the DRG system in the United States, has
been discussed for some time. It is likely that in the coming few years the financing
system will be changed.
In this dissertation a description of Performance Management will be provided,
its theoretical background and its implementation in a few other countries. The
theoretical background includes the analysis of performance, job satisfaction,
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absenteeism and turnover, total quality management, goal setting, job characteristics,
and reinforcements. The work of the Performance Management Committee in Iceland
will be described as well as its development and recommendations. For a better
understanding of the health care environment in Iceland a description of the Icelandic
health care system will be provided. Within that section the National University
Hospitals in Iceland and in particular its pediatric division, the Children’s Hospital, will
be described clearly. However, the emphasis of this dissertation will be on analyzing
Performance Management and its implementation at the Children’s Hospital.
Performance Management was implemented and some key operational numbers
as well as job satisfaction, absenteeism and turnover were monitored prior to the
implementation, during the implementation phase and after the implementation was
completed. The key operational numbers were studied for 21 months prior to the
implementation of Performance Management, for 7 months during the implementation
phase and for 12 months following the implementation, for a total of 40 months of
monitoring. Absenteeism and turnover were studied during the same time period. Job
satisfaction was measured twice through a survey, once prior to implementing
Performance Management and again two years later. The exact research methodology
will be described in the methodology section of the dissertation. Overview of the steps
and intervention when Performance Management was implemented in the Children's
Hospital is also provided.
The issue of quality management will be addressed in this dissertation, since no
cost-containment efforts in the health care system should be evaluated without
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examining their effects on the quality of care. The quality of health care will be
analyzed with special emphasis on structure, process, and outcomes. Avedis
Donabedian’s theories on the quality of health care will be examined and their
application in today’s health care environment evaluated. TQM has a direct effect on
Performance Management and is a part of its theoretical background. There are a
number of well-known theorists on quality outside the scope of this paper but the
theories of W. Edward Deming, Philip B. Crosby, and Joseph M. Juran will be analyzed.
Finally, the current discussion and application of theories, regarding quality for current
and future construction of health care, will be evaluated.
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B. The Icelandic Health Care System
“The Health Service Act of 1978 accords all citizens of Iceland access to the best
health service at any given time for the protection of their mental, physical and social
health” (Halldorsson, 1994; 2). The Ministry of Health and Social Security is
responsible for the administration of health care in Iceland. The Director General of
Health advises the Minister of Health and the Government regarding health care. The
Director General also collects statistical information regarding health care and is
responsible for all complaints and charges from the public regarding health care matters
in Iceland.
Health Care Costs
The population in Iceland is approximately 270,000. More than half of the
population lives in the capital Reykjavik and its suburbs. The Icelandic health care
system is a combination of public and private organizations. It is financed mostly
through taxes with the public proportion of approximately 83%. As said earlier, Iceland
spent 8.2% of its GNP towards health care in 1995 and 8.2% in 1996. In 1997, Iceland
spent 8.0% of GNP towards health care and 8.2% in 1998. In real dollars, the cost of the
health care system has been increasing every year (Statistical Bureau of Iceland, 1998).
In the year 1997 while Iceland spent 8.0% of its GNP towards health care, the other
Nordic countries spent from 7.3% to 8.6% of their GNP; Finland spent 7.3%, Norway
7.4%, Denmark 7.7%, and Sweden spent 8.6%. Other Nations such as the United
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Kingdom spent 6.7%, the Netherlands 8.5%, Canada 9.3%, France 9.9%, Germany
10.4% and the United States spent 14.0% of GNP for health care (Statistical Bureau of
Iceland, 1998).
Economic Numbers
The Icelandic budget towards health care in the year 1999 shows some increases
in real dollars. This is partly due to the good economic conditions in Iceland at this time,
allowing some leeway for increased financing for public service. The growth of real
GDP in Iceland was 5.5% in 1996, 5.0% in 1997 and 5.6% in 1998 and the estimate for
the year 1999 is 4.3%. This high growth of real GDP exceeds that of most other OECD
nations, where the average growth was 3.0% in 1996, 3.2% in 1997 and 2.2% in 1998
and the 1999 estimate is 1.7%. Inflation rate in Iceland was approximately 2.0% in the
year 1998 and is estimated to be 2.5% in the year 1999. Present unemployment rate is
2.5% and is estimated to remain at that level through next year. Private consumption
increased by 10.0% in the year 1998 and is estimated to increase by another 5.0% in the
year 1999 (Statistical Bureau of Iceland, 1998).
The Hospital System in Iceland
The public in Iceland has prioritized guarding the good results of the health care
system. People are thus afraid that the quality of health care will suffer as a result of the
cost containment efforts which have been implemented in the system. The National
University Hospitals in Iceland has been operating with a loss since the year 1993 and
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the same holds true for most other hospitals in the country. Management at all
hospitals has been scrutinizing every aspect of the operation and has been able to cut
costs to some degree without hurting patient care. However, waiting lists have gotten
longer, especially for elective procedures such as certain orthopedic operations. The
public has demanded that the weaknesses of the system be corrected and an increased
budget for high technology care is one of the responses to these demands. Steps have
also been taken to reduce the overall costs of the Icelandic hospital system and these will
be described later in the dissertation. The operating costs of Icelandic hospitals, as a
proportion of the total health care costs, have remained at approximately 53% since the
year 1990. In 1985 this proportion was at 60% and 64% in 1980 (Statistical Bureau of
Iceland, 1998). Health care costs for rehabilitation, medicines, and for the elderly have
been increasing as a proportion of total health care costs instead.
There are approximately twenty hospitals in Iceland, many of those small village
hospitals out in the country. There are two large high technology hospitals in the capital,
Reykjavik, the National University Hospitals and the City Hospital (about 825 and 550
beds respectively), and one relatively large hospital in the town of Akureyri, in the
northern part of the country, with approximately 215 beds. The cooperation between the
two large high technology hospitals in Reykjavik has just recently been increased
significantly by the state government taking over the operation of the City Hospital from
the city of Reykjavik and by the Minister of Health’s decision to hire a single Executive
Director for both hospitals. The year 1999 will be used to decide the strategic direction
of the two hospitals and at this time it is likely that the Board of Directors for the two
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hospitals will be combined so that strategic planning will be mutual. However, it is
likely that daily operation will be decentralized to the management of each hospital.
Ernst & Young have recommended merging the two hospitals, first in the year
1992 and again in the year 1997 (VSO, 1997). Additionally an increase in the
cooperation of high technology care in Iceland has been recommended by many, in order
to reduce duplication of expensive technology and to avoid dividing small, but highly
specialized, care. It has been argued that a minimal number of cases per year are
required for professionals to keep up their expert knowledge in each area of medicine.
In line with that argument a small nation such as Iceland should have cooperation in
small highly specialized services. However, at this time the arguments are ranging from
the importance of merging the two hospitals completely to the importance of keeping
them decentralized, at least clinically.
The Professional Committee
A professional committee of ten health care professionals, initiated by the
Ministry of Health, worked for nine months in the year 1998 on recommendations
concerning the future of hospital services in Iceland. The author of this dissertation was
a member of that committee, which completed its role at the end of 1998. The
recommendations mean changes in several areas of hospital care in Iceland and will not
be closely described here. However, some of the recommendations should be
mentioned, such as those of initiating clinical guidelines, calculating the average costs of
all procedures, and opening surgical admitting units in the two large hospitals. The
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reevaluation of some laws concerning hospital services is recommended as well as that
of the objectives of the Boards of Directors in hospitals.
The professional committee recommended service contracts, sometimes called
management contracts, between the Ministry of Health and all hospitals and it even built
a model for such contracts. The operation of each hospital was evaluated by the
professional committee, in cooperation with the relevant hospital management, and
changes were recommended.
The committee recommendations also involved significant increase in the
cooperation between the two large hospitals in Reykjavik. Combining small
departments that now operate in both hospitals, such as those of neurology, urologic
surgery, and vascular surgery, was recommended. The expected results of combining
those departments related to both cost savings and improved quality. The
recommendations also involved one management for all acute and sub-acute
rehabilitation in Reykjavik and its suburbs. This action is similar to what was done in
the area of geriatrics two years ago and which has resulted in improved care for the
elderly and has decreased costs. Additionally, changes were recommended in the area of
orthopedic surgery, where it is recommended that all acute patients be admitted to the
City Hospital and all elective orthopedic patients be admitted to the National University
Hospitals. Productivity is expected to increase as a result of this action.
Merging hospitals has been common practice in the other Nordic countries for
the last few years. As an example, five hospitals in Copenhagen, Denmark, have
recently merged, as well as three hospitals in Oslo, Norway. The results of these
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mergers, in order of cost containment and quality of care remains to be seen, but the
mergers are expected to be steps in the right direction.
Primary Health Care
Due to difficult weather conditions, with heavy snow and strong winds in the
wintertime, there are primary health centers in almost every small village in the country.
This has been deemed necessary to ensure good access to health care for all citizens.
Some of those centers are located within, and operating in conjunction with, community
hospitals, but others operate independently. In addition to hospitals and health centers
there are nursing homes located all around the country. It has been difficult to attract
professionals, such as physicians, nurses and midwifes, to work in some of the small
health centers, due to their isolation. Those professionals are always on duty, which is
not preferred and they complain about professional isolation, which makes it hard for
them to keep up their specialized knowledge.
Steps have been taken to make contracts concerning human resources
management between the small health centers and the village hospitals and the high
technology hospitals in Reykjavik and Akureyri. Those contracts allow professionals
from the small health centers and the village hospitals to work a certain number of days
each year in the large hospitals, as part of their continuing education, during which time
the large hospitals send their professionals to replace them. Additionally, physicians
from Iceland frequently work in Norway or Sweden during parts of their vacation time.
Summer vacation in Iceland, as well as in most of the other European nations, is
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approximately six weeks and physicians get continuing education time in addition,
approximately two weeks each year. Physicians, nurses and midwifes also get extra paid
time off if they work evening or night shifts. Vacation time is therefore long and it is
popular for health care professionals, especially physicians, to use some of this long
vacation time to work in the large hospitals or in hospitals in other countries.
Health Care Professionals
Hospitals are all publicly owned and operated, as well as most rehabilitation
centers and nursing homes. However there exist a few privately owned rehabilitation
centers and nursing homes. One health center is also run by physicians. The objectives
of health centers are to provide primary care, including preventive measures and other
health care that is provided outside hospitals. Compared to most European countries
there are more physicians per thousand inhabitants in Iceland but fewer nurses. All
nursing education in Iceland is at the university level where nurses earn their BSN. A
diploma nursing school was closed in the early eighties. Advanced training in nursing
has been sought in other countries, usually in the United States. However, last year the
University of Iceland started to offer masters education in nursing and the Royal College
of Nursing in Great Britain offers, through the University of Iceland, a masters level
education that takes place both in Iceland and Great Britain. Most physicians do all their
advanced medical training abroad, usually in the United States, Sweden or Norway.
Most professionals return to Iceland after their advanced education is completed.
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The Budget for Health Care Organizations
Hospitals operate on a fixed budget, health centers are paid based on capitation
and nursing homes are paid based on a daily rate per occupied bed. Health centers also
receive a small co-payment from patients (approximately $10 per visit for adults and $4
for children). However, there is a cap on the out of pocket payments from patients for
health care services and after the cap is reached the co-payment decreases significantly.
This cap is approximately $170 per year for adults and $45 for children and elderly per
year. After the cap has been reached patients pay at most 1/3 of the co-payment rate
within the year.
All staff members are employees of the hospitals or the health centers.
Physicians can also own their private practice where patients pay a small co-payment but
the National Insurance Institute in Iceland is billed for the care. Physicians and the
National Insurance Institute make contracts through bargaining. The contracts state the
approved fee per procedure at each time. There is a global budget for private practice
and when physicians exceed that budget the fee is discounted before it is paid to the
physicians. Some other health care professionals, such as physical therapists and nurses
can also, to some extent, get contracts with the National Insurance Institute.
Outcomes of the Health Care System
The outcome of the Icelandic health care system, as measured by life expectancy
and infant mortality rate, is very good. Life expectancy is among the highest and infant
mortality rate among the lowest of all Western nations. However, the long life
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expectancy rate in Iceland is not solely due to the health care system. Public education
is relatively good and literacy rate is very high. The crime rate is also very low and
nutrition from fish products, which are prominent in the diet, has been considered
healthy. However, the low infant mortality rate has to a large extent been associated
with the widespread availability of health care to all citizens.
The main weaknesses of the Icelandic health care system are the waiting lists for
procedures. This is partly a side effect of the fixed budget financing of hospitals. To cut
costs and to stay within the budget the hospitals cut the number of elective treatments
offered. The hospitals have to accept all acute patients, which for example at the
National University Hospitals account for approximately 72% of all patients admitted.
This proportion is lower in most other hospitals but has been increasing in the two large
hospitals in Reykjavik over the last few years. When hospitals decrease the number of
elective operations, such as hip or knee replacements, a waiting list starts to accumulate.
This has been partly solved by the provision of special allocations for financing a certain
number of operations to shorten the waiting time for elective patients. However, a long
term solution requires a change in the financing of hospitals.
Changing the Financing System in Health Care
The changing of the financing system is currently being debated in Iceland. The
author of this dissertation argues that the financing of hospital services should be
changed into a mixture of fixed, variable, and performance based financing. A fixed
budget per year should cover all fixed costs of each hospital as well as the capital costs.
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The fixed budget should also include teaching of health care professionals in the larger
hospitals. A variable amount should be paid to hospitals based on the number and types
of treatments provided. To do so the average cost of every procedure must be known or
every DRG if the procedures will be divided into groups similar to the PPS system in the
United States. The expected number of treatments should be included in the yearly plan
that is attached to the service contract but when the actual number is realized an
appropriate change in financing should be made. A small additional portion should then
be paid to hospitals based on performance, e.g. if the goals and objectives of the hospital
are met. The PPS system in the United States was introduced in the early eighties and
has proved its usefulness in the health care industry. The European nations have been
experimenting with some forms of DRG and have adopted its philosophy and some
countries use it to some extent in financing the hospital system.
Service (management) Contracts
The goals and objectives of each hospital are stated in the service contracts which
are being negotiated between the Ministry of Health and each service provider. The
service contracts between the Ministry of Health and the small village hospitals became
effective in the year 1999 but the contracts with the larger hospitals will come in effect
in the year 2000 or 2001. Those contracts are a part of Performance Management as
recommended by the Performance Management Committee.
Service contracts will be made between all public agencies and their appropriate
ministries. The objectives of the contracts are to define closely what services the
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Government is willing to buy from each organization and the amount it is willing to pay
for the defined service. This allows each organization to plan for a longer period of time
than just the next budget year. The contracts require each organization to define their
strategic direction based on the role and projects it is supposed to engage in. The
strategic direction includes defining a mission statement and setting long and short-term
goals and objectives. The contracts also include a financial plan for the next three years,
based on the special role of each organization and the services it is supposed to render.
The responsibilities of both the Ministry and the organization are closely defined. The
organization is responsible for sending its strategic plan for the next three years and its
one year operational plan to the appropriate ministry. By the end of each year the
organization is expected to send a report to the ministry, depicting the outcomes of that
particular year. Success is measured by comparing the goals and objectives in the
strategic plan to the actual outcome of the year. The relevant ministry is responsible for
giving comments within a certain time period concerning the strategic plan, the
operational plan and the yearly report. It is also required to ensure that the financing is
according to the contract and for working with each organization to evaluate the
contract, based on changes in services.
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C. The National University Hospitals in Iceland
Iceland’s largest hospital, Landspitalinn (the National University Hospitals) was
founded in 1930. It had been a dream for a long time for the Icelandic nation to build a
“modem” hospital in Iceland and the Icelandic people had been saving for fifteen years
in order to let the dream come true. Before 1930 there had only existed some small
houses to house sick people, mostly those with infectious diseases. In 1930, when
Landspitalinn was opened, there were only 92 beds in the hospital and those were
divided into surgical and medical wards. There were six physicians and two residents at
that time and fourteen nurses. The total number of staff in 1930 was 61. The monthly
salary for a head physician was 600 kronas (approximately $9), 200 kronas
(approximately $3) for the head nurse and a nurse aid had approximately 50 kronas
(below $1) per month. The total number of patients in this first year of operation was
991 (Magnuss, 1981).
The National University Hospitals has changed significantly from 1930 and has
become a high technology, academic medical center. The main medical area is located
in the center of Reykjavik, with satellites being operated in several other locations. The
National University Hospitals is one of two major medical centers in the Reykjavik area,
the other being Reykjavik City Hospital. The National University Hospitals has around
825 inpatient beds and Reykjavik City Hospital approximately 550 beds. The total
number of beds has been decreasing the last few years. In 1987 there were 1140 beds in
the National University Hospitals.
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As discussed earlier, the cooperation between those two main hospitals has just
recently been increased significantly with the ownership of the City Hospital being
moved from the City of Reykjavik to the State and by the hiring of a single Executive
Director for both hospitals, beginning January 1st 1999. So far the ownership and the
single Executive Director is the only change but the year 1999 will be used to decide
further on the strategic direction of the two hospitals.
Cooperation between the two hospitals has existed in some areas, such as in
continuing education for the staff and in the purchasing departments. Additionally, the
two hospitals divide the days of the year between them in such a way that only one of
them is on active duty at each time for serving acute patients. Each hospital therefore
has acute service duty for approximately 180 days every year, during which all acute
cases are brought there. Exceptions are made however where a particular specialty area
is only located at one hospital, in which case patients needing that service are admitted to
that particular ward. Additionally, patients who need to be readmitted within a year of
being discharged are admitted to the same hospital they were discharged from in order to
ensure continuity of care. In psychiatry this time period is two years.
The National University Hospitals is a state run facility, headed by the Ministry
of Health & Social Security and governed by a seven-member board. The Minister of
Health appoints the Chairman of the Board, four members are appointed by the
Parliament, and the employees of the hospital appoint two members. The hospital is, to
a large extent, financed by the State through global budgeting. The public share is
approximately 90% but the remaining 10% come from co-payments, largely collected for
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outpatient services. The National University Hospitals consumed approximately 9.9
billion Icelandic kronas in the year 1998 (about 130 million dollars) which is
approximately 5% of the State Budget and approximately 21% of the total public
expenditure towards health care. There are approximately 3,000 employees at the
hospital and full time equivalent positions are close to 2,500. The costs of salaries
account for approximately 65% of the total costs of operation.
The medical center is closely linked with the University of Iceland and provides
clinical and research experiences to a vast number of students in medicine, nursing and
the allied health professions. The professors in each area of medicine work partly for the
University Hospitals and partly for the University of Iceland’s Faculty of Medicine.
The National University Hospitals is a tertiary care facility, providing specialized
care to the population of Iceland as a whole. Approximately 60% of total bed days in the
hospital are from patients living in the capital, Reykjavik. It is the only hospital in
Iceland performing procedures such as adult and pediatric open heart surgery, PTCA, in
vitro fertilization, etc. It also runs the country’s only neonatal intensive care unit. Its
obstetrics unit is the nation’s center for high-risk pregnancy, serving women from every
part of the country. The center for eye surgery is operated within the National University
Hospital. A bloodbank is operated within the medical center as well as various
specialized labs.
Total bed days are approximately 260,000 per year with approximately 25,000
admissions. Day stay is approximately 70,000 days per year with approximately 8,700
admissions. Around 24,000 patients are served each year. There are 142 admissions per
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1,000 inhabitants per year to the University Hospitals. Average length of stay (ALOS)
is 6.6 days for acute somatic departments and 35 days in psychiatric departments. The
ALOS for surgical departments is 7.8 days, 8.2 days for internal medicine, 3.8 days for
obstetrics and gynecology, and 8.2 days in the pediatric departments. The ALOS for the
hospital as a whole is 10.8 days (it should be noted that both the day of admission and
day of discharge are counted, resulting in a higher ALOS). Approximately 3,000 infants
are bom every year at the hospital. Occupancy rate for the University Hospitals is 93%
(The National University Hospitals Year Report, 1997). Approximately 66% of the
entire Icelandic population was bom at the National University Hospitals’ department of
obstetrics and gynecology.
The operation of the National University Hospitals has been developing in the
same direction as university hospitals in other western countries. The number of beds
has been decreasing significantly during the past years and has gone down from 1,140
inpatients beds in 1987 to 825 at this time. During the last five years two medical wards
have changed their seven day a week operation into five day operation. This started out
as an experiment involving only admitting into that unit patients who merely needed to
be hospitalized for a few days. This experiment was successful and resulted in lower
costs o f operation. Another four wards at the hospital have changed their seven day a
week, twenty-four hours per day operation into a five day, eight to ten hours per day
operation. This experiment has also been successful and the plan is to take further steps
into that direction.
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The average length of stay (ALOS) has decreased significantly in the last few
years. In 1986, the ALOS for acute somatic departments was 11 days and 60.9 days in
psychiatry. Currently the ALOS is, as mentioned earlier, 6.6 days and 35 days
respectively. Productivity has increased due to those operational changes. The total
number of patients served in the year 1997 had increased by 17.3% from the year 1993
while the number of employees decreased by 4.4% during the same time period and the
number of patients per each employee had increased by 22.8%. (The National
University Hospitals, 1998).
A five-member management team directs the daily operation of the hospital. The
team is composed of the Executive Director of the hospital, the Director of Medicine, the
Director of Nursing, the Director of Technology, and the Director of Administration. In
addition, the President of the Department of Medicine at the University of Iceland and
the Hospital Chief of Medical Staff attend management meetings but they have no voting
rights. The management meets formally once a week but more often informally. The
daily operation of the hospital is decentralized into ten divisions. They are: Surgery,
with approximately 490 full time equivalent (FTE) positions; Internal Medicine, with
approximately 490 FTE positions; Obstetrics and Gynecology, with approximately 200
FTE positions; Pediatrics, with approximately 125 FTE positions; Psychiatry with
approximately 450 FTE positions; Clinical Services (Radiology, pharmacy, emergency,
dietary services, social worker services) with approximately 135 FTE positions; Human
Resources Development with approximately 20 FTE positions; Technology and Plant
Management with approximately 240 FTE positions; Administration with approximately
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140 FTE positions; and Laboratory Services with approximately 140 FTE positions
(The National University Hospitals Year Report, 1997).
A strategic plan has been defined for the next five years at the National
University Hospitals and this was published in a special brochure in March 1997. Since
that time, several teams and task groups have been working on special projects towards
the strategic direction. This work started in the fall 1996 when a request was made that
all divisions define their strengths, weaknesses, opportunities and threats (SWOT). A
team, composed of the Director of Nursing, the Director of Medicine, a consultant from
Pricewaterhouse, and the author of this dissertation as the Director of Planning and
Economics, directed this process and additionally managed the whole strategic planning
process. Several teams worked from October 1996 until March 1997 when the strategic
plan was ready and introduced to the employees of the hospital. In accordance with the
plan, 58 task groups were formed to carry out special projects, considered necessary for
the plan to be fulfilled. Most of the groups have completed their mission but others are
still working. Included in the strategic plan are the mission statement and the future
vision of the National University Hospitals, as well as long-term goals for clinical
service, research and education, information management, quality and security
management, plant management, financial management, human resources management,
and administration.
Recently a contract was signed between the State Government of Greenland and
the Icelandic Minister of Health and Social Security, regarding health care for the
population of Greenland. A similar contract is expected to be signed this year between
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Iceland and the Faroe Islands. The populations in those countries have for years been
sent for more specialized type of care in Denmark but it is more convenient for them to
come to Iceland. The National University Hospitals will surely participate to a large
extent in fulfilling those contracts due to its high level of technology. The total
population in Greenland is approximately 56,000 and 44,000 in the Faroe Islands.
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D. The Children’s Hospital
The Children’s Hospital was formally opened as the pediatric division of the
National University Hospitals in Iceland in 1965. However, a special pediatric ward
within the hospital had been operated from the year 1957. In the pediatric ward there
were 30 beds and two physicians on staff but in 1965, when the Children’s Hospital was
opened, the number of beds was increased by half and the conditions for sick children
improved significantly. In 1976, the neonatal intensive care unit was opened in
connection with the obstetrics and gynecology department but under the management of
the Children’s Hospital.
In 1964 the average length of stay (ALOS) in the pediatric ward was 16.1 days.
Ten years later, in 1974, the ALOS had been reduced to 11.9 days and today the ALOS is
8.2 days. Outpatient care has increased significantly also. While the size of the
Children’s Hospital has remained the same since 1965, the demand for improved
housing conditions has been getting stronger every year. Finally, in 1997, the Icelandic
Parliament included the building of a new Children’s Hospital, in connection with the
National University Hospitals, in the Budget for the year 1998. The building has now
been started and will be ready for operation in the year 2002. A great support from
philanthropic associations towards pediatrics has been realized for years. This has been
in the form of special gifts for new equipment, a research fund and money intended to be
used in the new Children’s Hospital.
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There are currently a total of 65 beds at the Children’s hospital, 52 regular beds
and 13 day beds. The day beds are used for children who need to undergo special
research procedures, such as cystoscopy, or treatment which does not require regular
admission. Total admissions into the Children’s Hospital were 2,751 in the year 1997
with 17,431 bed days. Of those admissions 1,755 were acute admissions but 996 were
elective. Admissions to the day care department were 561 with 1,682 total days. The
number of visits to the outpatient department has increased significantly the last few
years. The outpatient department for children is located within the emergency unit and is
intended for those acutely ill. These outpatient visits were 5,159 in the year 1998.
The Children’s Hospital is divided into 5 departments, a 14 bed Neonatal
Intensive Care Unit, a Surgical Unit with 13 beds, an Internal Medicine Unit with 13
beds, a 13 bed Day Care Unit and a special unit for children under the age of two, which
has 12 beds. In addition to the 5 departments, there is a special outpatient cancer unit, a
special admitting unit, and an outpatient unit. A preschool and elementary are operated
in connection with the hospital, serving the hospitalized children.
In addition to the Childrens’ Hospital there exists a 12 bed pediatric ward at City
Hospital, specializing in ENT Medicine, and another small general pediatric ward at
Akureyri Hospital in the northern part of Iceland. There is a clinical connection between
the three hospitals and cooperation regarding continuing education for staff members.
The Director of Medicine, the Director of Nursing and the Professor of Pediatrics
at the University of Iceland are responsible for the overall management of the Children’s
Hospital. Each of its five units has a unit manager and an assistant unit manager. The
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total operating cost for the Children’s Hospital in 1997 was 427 million Icelandic
kronas (approximately 6 million dollars) and the total number FTEs was 123, including
15 physicians, 56 registered nurses, and 21 licensed practical nurses. Other staff, such as
social workers, teachers, secretaries, and nurse assistants was 30.
The Children’s Hospital has several specialty areas. Children with diseases such
as cancer, heart disease, immunological diseases, infectious diseases, hormonal
imbalance, bums, and neurological diseases come to the Children’s Hospital where the
most specialized clinical service is offered. Open heart surgeries for children started at
the National University Hospitals in 1997; prior to that all children in need of such
operations were sent abroad. Iceland’s only Neonatal Intensive Care Unit is located
within the Children’s Hospital but it is operated in close cooperation with the Obstetrics
and Gynecology Department. The department of pediatric psychiatry is located away
from the main hospital area, in a quiet and comfortable atmosphere in one of
Reykjavik’s suburbs. The unit is directed by the Division of Psychiatry but has a clinical
connection with the Children’s Hospital.
The Children’s Hospital is the main teaching center for pediatrics in Iceland. It
also serves children of the armed forces services personnel at a NATO base located near
Keflavik, Iceland, as well as acutely ill children from Greenland who are transported to
Iceland by air.
The Children’s Hospital has been located in the main hospital since it was
opened 40 years ago. It has been argued for a long time that the needs of pediatric
patients cannot be met in the current housing. Development in pediatrics has, for
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example, increasingly included the presence of the families of the children served.
There has not been enough space for parents within the Children’s Hospital and staff
members and students have also been in great need for more space. As said earlier, the
Government included in the Capital Budget a new building for pediatrics, to be
completed in the year 2002. The new building will be connected to the building of
Gynecology and Obstetrics and is nearly triple the size of the current pediatric facility.
The number of beds will be the same but their space is increased as well as the space for
outpatient services, for parents, staff and students. During the year 1998 several teams
worked with the architects of the new Children’s Hospital to give professional input into
the design.
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II. Theoretical Background
A. Overview of Performance Management
Performance Management can be viewed as a systematic and goal directed
method of developing ways to measure performance and improve performance by
rewarding good results. It is a result-oriented management system, a combination of
management methods that are based on management theories. Many of those
management methods have been used in practice for years and have demonstrated both
strengths and weaknesses. Performance Management combines the strengths of the
various management methods and tries to correct for their weaknesses. An important
feature of Performance Management is how it involves all parts of the organization with
the purpose of gaining oversight. Performance Management, therefore, combines
various management methods that support each other in striving for improved
performance in organizations.
Performance Management, as a management method, has three major
components, each of which is based on management theories. The first component is
strategic planning, involving short and long term goals and objectives, as well as
defining the mission and future vision of an organization and each of its divisions. The
second component has to do with constant measurement of variables from the various
parts of an organization. The third component is feedback. The use of teamwork is
emphasized in all three major components of Performance Management. The Goal
Setting Theory, Total Quality Management (TQM), Reinforcement Theory, and Job
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Characteristic Theory are used as theoretical bases for Performance Management. The
main emphasis in Performance Management is on direction, measures and feedback, to
redirect and/or celebrate. Goal setting provides an important basis for management
methods, such as strategic planning. Workers must know exactly what results are
expected from them and receive feedback on actual results which are based on
measurements. Strategic planning involving goal setting, both long term and short term,
a plan of how to reach the goals, measurement, and feedback are the main factors in
Performance Management.
The theories which Performance Management draws from are explained later in
this dissertation, as well as other issues that are important for the purpose of this
dissertation. The Goal Setting Theory of motivation was introduced by Edwin A. Locke
in 1968 and it provides an important basis for Performance Management (Locke, 1968).
Goal Setting Theory assumes that results are the outcome of individual goals and
intentions.
Total Quality Management (TQM) is based on the writings of W. Edward
Deming, Joseph Juran, Philip Crosby and Kaoru Ishikawa, and is the second theory
which Performance Management draws from. TQM requires new culture in
organizations. “Total quality management (TQM) has become something of a social
movement in the United States” (Hackman, Oldham, Wageman 1995:309). This
movement has also spread to other continents such as Europe. Constant improvements,
measurements and teamwork play a big role in TQM as well as in Performance
Management.
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Reinforcement Theory was presented by B.F. Skinner and is the third important
theory used in Performance Management (Skinner, 1953; Skinner, 1972). The
continuous feedback, which leads to re-direction and/or rewards in Performance
Management, is based on Skinner's Reinforcement Theory. This theory states that
behavior is a function of its consequences. Reinforcement can both be positive, trying to
strengthen behavior that provides good results, and negative reinforcement, attempting to
change undesired behavior with the goal of improving performance. Performance
Management uses Skinner's Reinforcement Theory in its feedback mechanism and
strives to reward good performance and redirect when performance is not optimal. The
Goal Setting Theory also emphasizes feedback with the purpose of evaluating set goals
and to set new goals based on the feedback.
The Job Characteristics Model (JCM) was developed by J. Richard Hackman and
Greg Oldham (Hackman & Oldham, 1975). It identifies five key job characteristics, and
how these interact and influence worker motivation, work performance, job satisfaction,
absenteeism and turnover. Those five key job characteristics are: skill variety, task
identity, task significance, autonomy and feedback. They can be combined into an
index, the Motivating Potential Score (MPS). JCM is based on J. Richard Hackman’s
and Greg Oldham’s Job Characteristics Theory, which identifies the characteristics
which influence how workers respond to job tasks. The theory recognizes critical
psychological states which influence workers’ reaction to work tasks (Hackman &
Oldham, 1975). The three critical psychological states are: experienced meaningfulness
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of the work, experienced responsibility of work outcomes and knowledge of results.
Performance Management draws from this theory, especially regarding feedback.
Performance Management in a Few Countries
Several countries have implemented results oriented management reforms.
Reports from the Organization for Economic Co-operation and Development (OECD)
about the development of public management, state that approximately two thirds of the
twenty four OECD countries have implemented some form of Performance Management
(Ministry of Finance, 1996). The purpose of using Performance Management is usually
to improve efficiency and effectiveness in public management, to gain maximum usage
of resources, and to improve the quality o f services. However, how Performance
Management is used varies between countries. It depends on several things, such as; a)
the role and initiative of the Government, the ministries, and the organizations, b) the
cooperation between ministries and organizations, c) the initiative and responsibility for
strategic planning, d) the way in which performance is measured and how those
measurements are published, e) the way customers’ needs are considered, f) the way in
which measurements are performed and evaluated, g) whether performance, as shown by
measurements, is related to salaries and the budget, and h) organizational autonomy
(Ministry of Finance, 1996).
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Performance Management in the United States
The United States has passed the Government Performance and Results Act of
1993 (GPRA), which will be implemented in steps until the year 2000 (Public Law,
1993). The objective of GPRA is to change the emphasis of management and
accountability from what federal agencies are doing to what they are accomplishing
(GAO, 1995). The GPRA is supposed to improve public management and increase
effectiveness and organizational responsibility by making performance visible. It is
expected to improve the quality of public services and increase customer satisfaction.
By making performance more visible the Congress has a better opportunity to take
performance into account in decision making. Alice Rivlin, the former Director of the
Office of Management and Budget, claims that GPRA was implemented because of the
declining trust in government and also because of the budget deficit. She states that
“now, more than ever, we must have evidence that government programs actually
produce results and accomplish goals. GPRA is a tool we need” (Rivlin, 1995: 4). The
“reinventing government” and the GPRA move into the same direction.
According to GPRA public organizations in the United States are expected to
make five year strategic plans available to Congress and the appropriate Cabinet
Departments. An exact description of the purpose and mission of each organization is
included in its strategic plan. Long and short-term goals and objectives are also included
in the plan, as well as special performance goals and how they relate to other goals and
objectives. How goals and objectives will be attained is clearly described in the strategic
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plan and how evaluations will be done. “What if’ sensitivity analysis is also provided.
This strategic plan is supposed to be reevaluated at least every three years.
A yearly performance plan is a short version of the projects and the resources
needed, for goals and objectives for that particular year to be attained. Included in the
yearly plan are the performance indicators which describe the performance each
organization is planning to reach.
The Congress is provided with a yearly report where goals are compared to real
performance. Explanations are also provided in the yearly report if goals have not been
attained. A reevaluation of the associated goals is provided. Budget requests must
accompany agencies’ annual performance goals, the steps needed to accomplish the
goals and the necessary resources to meet the goals.
Public managers can apply for increased responsibility and flexibility regarding
the management of their organization following reports that show good performance.
Performance management in Great Britain
Performance Management in Great Britain is a system that involves the
communication between the ministries and public organizations. It emphasizes the need
for ministries to observe closely what public organizations are doing. This is done by
special framework documents, in the form of five year contracts between the ministries
and the public organizations. Another five year contract is also made between directors
of each organization and the respective ministry, regarding performance and salaries of
the directors. The framework document involves the purpose of each organization, the
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main goals and the main projects, necessary resources and human resources
management plan. The responsibilities of each organization and each ministry are
clearly stated in the framework document.
The performance and strategic direction of the organization are clearly described
in a three year corporate plan. This plan also includes a SWOT analysis (strengths,
weaknesses, opportunities, and threats) as well as stating goals and objectives.
A business plan is the yearly plan describing the execution of the corporate plan
over the next year. Next year’s budget is part of the business plan. How performance
can be measured is attached to the plan.
Every three months a progress report is sent to the ministry and a yearly report is
made as well. The goals and objectives for the year are examined and compared to the
performance measurements.
Performance Management in Great Britain is in most aspects similar to
Performance Management in the United States, except that in the United States it is
bound by law but is more based on contracts in Great Britain.
Performance Management in New Zealand
A new law, implemented in 1988, required ministers and deputy directors to
make special performance agreements every year. These performance agreements are
based on long term goals determined by the Government in each area of public service.
The ministers have a formal responsibility to define the outcomes required by the
Government and are responsible for reaching those outcomes. The deputy directors are
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responsible for fulfilling the performance agreements which detail the steps necessary
for reaching the required outcomes. When the long term goals have been determined the
Government determines the budget for each project or service. Public organizations are
responsible for carrying out the projects or services and they have almost complete
autonomy in that respect. The only requirements are that the decided outcomes are
attained within the decided budget. In that respect a clear distinction is made between
political power and executive power.
A purchase agreement, which is similar to the management (service) contracts in
other countries, is made between each minister and the organizations providing services.
In those agreements the projects or services being purchased are listed, as well as the
costs, quantity and quality of service and the time requirements. It is required that
organizations make a strategic plan where intentions and goals are listed. A yearly report
is then made, which compares goals and intentions with real outcomes. Measurements
are performed regarding the quantity, costs and quality of services.
In 1990 the Government of New Zealand determined its long term goals until the
year 2010 in special areas of public service (Strategic Result Areas). The purpose of
defining strategic result areas was to support political long term planning and
prioritization in the most important public service areas and to connect it to the operation
of public organizations. Ministers and public employees negotiate the projects for each
ministry and connect the projects to the budget (Strategic Dialogue). Then certain goals
for the projects are decided (Key Result Areas) in the performance agreements between
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the ministers and the deputy directors. Usually there are approximately six goals for
each area.
Performance Management in Denmark
Performance Management in Denmark has been characterized by various
methods which emphasize organizational flexibility, encouraging public organizations to
improve their operation and the services provided. Four year service contracts or
management contracts between the ministries and public organizations are widely used.
Those contracts are extensive and describe the responsibilities and expectations of the
ministries and organizations. The contracts state the goals and objectives of the
organizations, political prioritization of the ministers and how performance can be
measured within the most important service areas. There are obligations of increased
productivity and improved quality of service for each organization. It is emphasized that
the employees of each organization participate in setting long term goals and objectives,
which should result in improved operation and service. The relevant ministry and the
Ministry of Finance in Denmark evaluate the outcomes each year. They educate public
employees on Performance Management and how it can improve public service.
Customer satisfaction surveys and the setting of certain service standards are widely used
for public service in Denmark.
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Performance management in Sweden
Performance Management has been used in Sweden for a few years to assist the
Parliament and the Government in prioritizing public service projects and connecting
those to the yearly budget. Additionally, Performance Management is intended to
improve the quality of service and the flexibility of public services. The Ministry of
Finance governs the development of Performance Management and directs the process.
Each public organization must prepare a strategic plan and detail the steps needed
to reach the plan. The Swedish organizations have autonomy in how they carry out the
plan but they are required to publish an evaluation of the plan each year. In this
evaluation the performance measurements are included as well as a comparison of the
plan with the actual performance. In addition to this yearly evaluation the ministries
formally study the performance of each public organization every three to five years and
connect the outcomes to the budget for each organization. In the year 1997 further steps
were taken in using long term goals and performance measurements in connection to the
yearly budget.
Performance Management in Iceland
In 1994 the Icelandic Government decided to apply new methods to the
management of the public sector. This was due to many factors, such as the fact that 1)
the public sector had been increasing in size, as a percentage of the total economy, 2)
budget deficit had existed for years, 3) there is an increasing global competition both in
the private sector and in the public sector, and 4) the public’s demand that they receive
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better public services for their tax money are increasing. The Icelandic Government
began looking into results oriented management reforms in other countries, reforms
which involved public organizations defining their missions and goals, measure their
progress in achieving those goals and report the progress.
As a step in that direction the Icelandic Minister of Finance established a
committee in February of 1996, whose goal was to improve performance within the
public sector. Performance Management is one form of results oriented management
which emphasizes defining the goals of the organization and demonstrating results
according to the goals and the committee was supposed to recommend how Performance
Management could be implemented in government agencies and public organizations.
The committee was directed by an Icelander who holds a doctorate in behavioral
psychology and runs her own consulting company in the United States. Other committee
members were: a congressman, a representative from the Reykjavik City Government, a
director from the Ministry of Finance, a dean of a junior college in Reykjavik, and the
author of this dissertation, at that time the Director of Planning and Economics at the
National University Hospitals in Iceland. The committee had two assigned staff
members from the Ministry of Finance. The committee completed its role and made
recommendations which were published in a special report in November of 1996. The
Icelandic Government approved those recommendations.
The recommendations emphasize the methodology of implementing Performance
Management in Iceland, both within the various ministries and public companies and
also to improve cooperation between them. They are supposed to result in better
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organization of public service and increase the autonomy and flexibility of public
companies. They should also result in better definition of mutual responsibilities, of
ministries and public organizations.
The implementation of formal management contracts between all public
organizations and the respective ministries is recommended. Those contracts should
allow public organizations to plan their long term operation. The ministries take the
long term plan into consideration and analyze the prioritization of projects, goal-setting,
etc. Public organizations make their yearly plan, which takes a closer look at the next
year but is of course in accordance with the long term plan. By the end of each year the
organizations send a yearly report to the appropriate ministry, which compares the goals
and objectives to the actual results and analyzes all deviations from the plan. The
ministries use the information from the yearly reports to evaluate and compare
organizations. Performance measures are to be used in public management and
evaluation of performance also. Those measures should be able to provide important
knowledge of the services within the public sector.
The first step in implementing Performance Management is for all public
organizations to work on their strategic planning. They should start by making a SWOT
analysis, analyzing strengths and weaknesses within the organization as well as
determining opportunities and threats in the environment. Based on the results of the
SWOT analysis, each organization should present clear goals in each area of the
operation. They should present the purpose of each organization and the future vision.
This should be based on the strategic direction of each field within the public sector.
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The goals must be prioritized and the steps that needs to be taken to reach the goals
should be listed and delegated to a person or a task group with an exact time period for
completing the project.
The next step is to present how performance can be measured. Usually each goal
has a measurement attached so that it is possible to find out when the goal has been
attained. The measurement system should be from all parts of the operation without
being too extensive. They could come from such areas as the costs of operation, the
inputs or the resources needed, the processes within the operation, the output, the
outcome, customer or staff satisfaction, financial performance, economy of operation,
productivity, efficiency, effectiveness, or quality of service. The special characteristics
of each organization should be evaluated when the measurement system is defined.
The final step is to implement a feedback system between employees and
management. Employees need encouragement, at least in the form of information about
performance and in the form of rewards when appropriate or support to redirect their
efforts. The processes within each organization should be reevaluated regularly to
improve performance. The theories that Performance Management is based on are
explained later in this dissertation.
It is recommended that each organization and its respective ministry sign a
management contract covering a three to five year period, during which time the ministry
purchases services from the public organization according to this contract. The budget
should be appropriate, based on the quantity and quality of service purchased and
defined in the contract.
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Each organization makes a long term plan in correspondence to the management
contract. The long term plan is based on the strategic plan and should include at least the
next three years. The long term plan is sent to the ministry for approval.
Each organization also makes a yearly plan which takes a closer look at the next
year of operation. The yearly plan is in accordance with the long term plan. Included in
the yearly plan is a list of all projects for the next year and the planned costs. The goals
which are to be attained during the year are presented in the yearly plan and the
measurement system should also be defined.
By the end of each year a yearly report is presented by all public organizations.
Included in the yearly report are the results from the measurement system and a critical
look at all goals and objectives.
It is recommended that each ministry direct the implementation of Performance
Management in all public organizations under their command. The Minister of Finance
will oversee the process and work on future development of Performance Management
in Iceland.
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B. Overview of the Steps and Interventions when Implementing Performance
Management at the Children’s Hospital
1. During the summer of 1997 the Project Manager, who is also the author of this
dissertation, planned the project. The Management of the University Hospitals, as
well as the Management of the Children’s Hospital accepted the project in June of
1997.
The Role of the Project Manager:
• Plan, direct and organize the entire project with the Steering Committee.
• Provide education for the staff, provide support and solve problems when needed.
• Organize and provide support for all teams and task groups.
• Evaluate and coordinate the recommendations from all teams and task groups.
• Organize, with the Steering Committee, the measurement and the feedback system.
• Organize and interpret all measurements.
• Make constant evaluations of the implementation process.
• Present outcomes from the measurement system and provide continuous support.
2. In August of 1997 the Performance Management Steering Committee was formed.
Meetings have been held approximately once a week from August 1997 and are still
being conducted.
Participants in the Steering Committee:
• Anna Lilja Gunnarsdottir, Director of Planning and Economics at the National
University Hospitals - Project Manager.
• Asgeir Haraldsson, Professor and Head of Pediatrics at the National University
Hospitals.
• Atli Dagbjartsson, Medical Director at the Children’s Hospital.
• Hertha W. Jonsdottir, Director of Nursing at the Children’s Hospital, retired before
the completion of the project.
• Gudrun Bjorg Sigurbjomsdottir, Director of Nursing at the Children’s Hospital
during the second half of the project.
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• Anna O. Sigurdardottir, Ward Director of Nursing at the Pediatric Surgical
Department at the Children’s Hospital.
• Bara Siguijonsdottir, RN, Project Implementation Manager.
• Leifur Bardarson, MD, Director of Quality Management at the National University
Hospitals, participated late in the process.
The obiectives of the Steering Committee:
• Organize the implementation of Performance Management at the Children’s
Hospital.
• Define activities of all teams and task groups that are working as part of the
implementation process.
• Appoint members of all teams and task groups.
• Evaluate the recommendations of all teams and task groups.
• Implement a feedback system.
• Select an appropriate system to measure performance.
• Complete and introduce strategic planning for the Children’s Hospital, including a
mission statement, short and long-term goals and objectives, a feedback system and a
measurement system.
3. Education of all employees at the Children’s Hospital about Performance
Management, its theoretical background and the implementation process. Four
sessions were held for staff members in September 1997. The Project Manager
provided all education.
4. Five teams were formed in September 1997. Each team had certain prearranged
goals and objectives and had a timeline of three weeks to complete their tasks. Each
team consisted of approximately five members, both from medicine and nursing.
The Project Manager from the Steering Committee participated in each team’s first
meeting and helped them get started and provided support to all teams when needed.
This was in line with the emphasis on teamwork in Performance Management. The
teams were:
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• SWOT, the objective of this team was to examine and state the strengths,
weaknesses, opportunities and threats at the Children’s Hospital.
• Goals, the objective of this team was to recommend long and short term goals and
objectives for the Children’s Hospital.
• Staff satisfaction and patient satisfaction, to recommend the best ways to measure
patient and staff satisfaction at the Children’s Hospital.
• Productivity and finance, to recommend the best ways to measure productivity and
finance at the Children’s Hospital.
• University functions and quality of care, to recommend the best ways to measure
effectiveness of teaching and research as well as the quality of care at the Children’s
Hospital.
5. In October of 1997 a meeting was held by the Steering Committee with the five
teams where the teams formally presented their conclusions and the
recommendations of their assigned tasks. Following that the Steering Committee
determined the purpose, mission, as well as goals and objectives of the Children's
Hospital. Those factors were determined based on the recommendations of the
teams. The employees of the Children's Hospital received a draft of the above
mentioned purpose, mission, goals and objectives following a presentation of those
factors. Employees were asked to evaluate them and provide comments to the
Steering Committee.
This was the conclusion of the first component of the implementation of
Performance Management, namely the strategic planning including short and long
term goal setting. The Steering Committee evaluated all goals and objectives i.e.
whether the right goals were set, whether they were hard enough and specific
enough.
6. Bara Siguijonsdottir, the Project Implementation Manager, frequently organized
formal and informal meetings with staff members to provide information on the
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process and to receive input from employees regarding the project. She has been
working closely with the Project Manager.
7. The Steering Committee organized a formal staff meeting in December 1997 to
provide information on the implementation status as well as general information on
key measures. The planned implementation of the special task groups was also
introduced at that time. The meeting was open to all staff. After the meeting a
celebration was held in appreciation for the good work provided by the staff as part
of the implementation process. This meeting was a part of the feedback system as a
way to give or receive information between employees and management.
8. Six task groups were formed in January of 1998. Participants were selected based on
their specialized knowledge and interest in each subject. Each group consisted of
approximately five members both from medicine and nursing. Each group was
provided with the long term goal for the assigned subject and the groups were
supposed to recommend necessary actions for the goals to be reached. The Project
Manager participated in the first meeting of all groups and provided support when
needed. The timeline given was four weeks. This is in line with the emphasis on
teamwork in Performance Management. The groups were:
• Task group on clinical services.
• Task group on human resources.
• Task group on the continuing education of staff.
• Task group on research and education.
• Task group on information management.
• Task group on finance and management.
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9. In March of 1998 a meeting was held by the Steering Committee with the six task
groups where they formally presented their recommended actions for each subject.
Following that the Steering Committee decided which projects would be carried out
and at what time.
10. In May of 1998 the study was formally completed. However, the Steering
Committee will continue its work for at least one year to follow up on the changes
that were necessary and the activities in process. The feedback system also needs
further monitoring. The Project Manager will continue to participate in the Steering
Committee as long as necessary.
11. In May of 1998, the Management of the Children’s Hospital invited all staff
members and their families on a day trip to the countryside. This was to celebrate
the conclusion of the study and to show appreciation to the staff for their
participation and good work. Buses were rented and several places were visited. The
day ended at the University Hospital’s summerhouse where games were organized
outside and a barbecue held. The weather was excellent and everyone had a special
day. This day was a part of the feedback system as a way to celebrate successes and
to show appreciation for good work.
12. In October of 1998, a general staff meeting was held again as part of the feedback
system, as a way to give and receive information and other input between employees
and management. The whole implementation process was evaluated with the staff
and a nice brochure containing the goals and objectives of the Children’s Hospital
was given to all staff members. The projects that will be initiated in the year 1999
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and in the year 2000, as a result of Performance Management, were presented.
This meeting was a part of the feedback system. Again, the meeting ended with a
celebration to reward employees for their efforts.
13. The establishment of a Home Page for the Children’s Hospital on the Internet and
Intranet was recommended to improve information management. This page was
opened in October 1998. The Home Page provides information to staff, other
professionals, patients and parents, and to the general public, about issues in
Pediatric Medicine. This was one of the projects undertaken as part of Performance
Management.
14. Several other projects have been implemented in context with the long term goals
and objectives of the Children’s Hospital. Examples of such projects are:
• The formation of multidisciplinary teams to improve services for children with
chronic diseases such as heart disease, neurological disease, kidney disease, cancer,
and neonatal diseases.
• Organizing mental and social support for patients, their families and the staff, taking
clinical services and human resource management into consideration.
• Continuing education for staff, such as a yearly CPR course for professional staff and
computer software courses.
• Starting the evaluation of patient satisfaction and staff satisfaction on a regular basis.
The above mentioned projects are only examples of some recommended projects.
Some projects have already been completed, others are being implemented, and
some will be carried out at a later date. Still others will be continuous over time.
The staff members are directly involved in carrying out the projects.
15. A Research and Education Day (RED) for the staff at the Children’s Hospital is
being planned in the spring of 2000. Such a day will be held once a year to promote
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research and to improve education and is a part of the feedback system. A great
emphasis was placed on such an event on behalf of the employees and was therefore
incorporated into the system.
16. A meeting will be held every year with all staff to provide information on all key
numbers and to discuss the operation of the Children’s Hospital. Such a meeting is
a part of the feedback system. It is important for employees to know what is
happening in the organization and for them to have the opportunity to give direct
input into decisions. This is emphasized in Performance Management.
17. An annual celebration will be held where staff members and their spouses will enjoy
good food, music, dance and various performances. This is a part of the feedback
system.
18. Regular meetings are organized within each department to provide staff with
information and for open discussion on current issues and strategic decision making.
This is a part of the feedback system where employees take direct part in the
decision making and they can both give input and receive information from
management. During those meetings the goals and objectives are evaluated and new
goals presented.
19. Data gathering of all key numbers has been arranged by the Project Manager. The
Department of Financial Accounting, Department of Planning and Economics, and
the Human Resources Management Department at the National University Hospitals
have provided the data. The staff satisfaction survey was performed in April 1997
and again in May 1999.
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As clearly can be seen above the emphasis on goal setting, team building,
participation, measurements and feedback has been leading the project at the Children's
Hospital and the guidelines of Performance Management have been followed closely.
The Accountability and Feedback System at the Children’s Hospital.
1998 -1999
• Staff appraisals done once a year with the next reporting manager. Each employee
does his/her self-assessment, with individual goals and objectives, strengths and
weaknesses, and discusses it with the next reporting manager. This applies to all
staff in the nursing department and is an adjusted version of Management By
Objectives (MBO). The staff appraisal system is connected to the clinical ladder
system which have direct effect on compensation.
• Clinical ladder system initiated for all professional staff in the nursing department.
Salaries connected to performance.
• Weekly meetings within the physician group at the Children’s Hospital, where
professional matters such as quality of service, clinical outcomes, clinical guidelines,
research and education are discussed. Open access and communication between the
Professor of Pediatrics and the Head of the Department of Pediatrics at the National
University Hospitals and all staff physicians. Informal meetings where physicians
have the opportunity to discuss their strengths, weaknesses, career plans, etc.
• Improved information interchange between managers and staff members through
regular meetings and the hospital Intranet. Annual meeting for all staff at the
Children’s Hospital. Regular meetings for all staff within each department and
within each professional group.
• Individual praise and recognition when appropriate. The importance of praise and
recognition were stressed through education seminars and will be continuously
discussed through the appraisal system and the clinical ladder system.
• Group rewards when appropriate, i.e. when projects have been successfully
completed, special clinical successes, productivity increases, etc.
• Participation in decision making by initiating committees, task groups and regular
meetings.
• Participation in setting long term and short term goals and objectives for the
Children’s Hospital as a whole as well as for individual departments within the
Children’s Hospital.
• Improved social and mental support for the staff in cooperation with the Department
of Psychiatry, the social worker at the Children’s Hospital and the clergy at the
National University Hospitals.
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• Individual support such as opportunities to do research, make clinical guidelines,
work on special projects, etc. This will be done formally in connection with the
appraisal system and informally based on individual and departmental interests.
• Improved opportunity for continuing education for staff. Some courses are
scheduled for all staff at the Children’s Hospital but each department organizes their
specialized courses. There is also continuing education within each professional
group. Annual Research and Education Day (RED) for all staff at the Children’s
Hospital where staff members present their research and discuss education and
current issues in Pediatrics.
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C. Relevant Concepts
Quality Management
It is necessary to look closely into quality management when changes in the
health care system are implemented. For the purpose of recognizing this and analyzing
ways to take quality management into consideration when the changes in the system are
reviewed, quality management will be analyzed here with a special emphasis on
structure, process and outcomes. However, for the purpose of this dissertation, a special
quality measurement is not a part of the key numbers studied because all measures must
have been performed the years 1996, 1997, 1998 and 1999 to be able to compare
changes in the key numbers before and after implementing Performance Management.
New quality measures will be incorporated into the constant measurement system that
are being selected by employees of the Children's Hospital and based on the theoretical
framework presented in this section.
Total Quality Management (TQM) will also be evaluated closely because
Performance Management takes some aspects of TQM into its theoretical base. TQM's
emphasis on constant measurements, as well as its reliance on team building, are
especially incorporated into Performance Management.
“If we are to manage government properly, then we must learn to govern
management” (Mintzberg, 1996: 76). This argument is important when quality
management is under review. Do we govern management? The Reinventing
Government approach is an attempt in that direction. A1 Gore, the Vice President of the
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United States, said when he was introducing his views, “We have customers. The
American people.” Henry Mintzberg questions the need to call people customers in
order to treat them decently (Mintzberg, 1996). To call clients of public service
customers represents the business culture that is incorporated in Performance
Management. Using service contracts or management contracts, where the ministries
purchase public services from the organizations, involves incorporating business culture
into public organizations and a so-called managed competition culture is built. Public
organizations have customers that pay for the service, usually through taxes, and they
demand to receive quality service at low costs and they also demand to see the results of
public service.
However, the author of this dissertation agrees with Henry Mintzberg when he
declines the argument that government must become like business with all the market
competition and the pressure attached to that. Public services must find the golden
medium between the “direct controls of government bureaucracy and the narrow
pressures of market competition” (Mintzberg, 1996: 82). We must try to make use of
the good results that business can achieve without hurting the good things government
can provide.
GPRA, in the United States, “builds on quality management” (Rivlin, 1995: 5).
Quality management needs a suitable performance system that includes a mixture of
measures, such as input, process, output, and outcome measures. Additionally, the
measures must be from the various parts of the organization such as, finance, human
resource management, quality management, etc. This performance system that builds on
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constant measurements in Performance Management is built to a large extent on Total
Quality Management (TQM).
Definitions of Quality in Health Care
In his book from 1980, The Definition of Quality and Approaches to its
Assessment, Avedis Donabedian explores possible definitions of quality in health care.
He starts by saying that “quality is a property that medical care can have in varying
degrees” (Donabedian, 1980: 3). According to Donabedian the management of
providing health care can be divided into technical care and interpersonal care.
Technical care is the application of the science and technology of health care sciences
into the management of personal health problems. Interpersonal care is more an art than
a science, according to Donabedian. He also suggests that there is also a third element
called “amenities”, which involves factors such as pleasant waiting rooms, comfortable
examining rooms, clean facilities, telephones and television sets by the bedside, etc.
Quality can be defined as a factor of the three elements of care. The quality of
technical care is then how well science is applied to care so that it maximizes its benefits
to health. The quality of interpersonal care is more difficult to define because it is
dependent on socially defined values and norms. To what extent an interpersonal
relationship between a patient and a health care provider conforms to values, norms, and
expectations may be a way to measure the quality of interpersonal care.
It can be called an “individualized” definition of quality when quality
measurement takes into account patient’s expectations and wishes. Another term that
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must be included when defining the quality of health care, according to Donabedian, is
the “social” definition of quality. This term includes the aggregate net utility for an
entire population. Other elements, such as access to care and the subsequent use of
services, must also be taken into account when quality of care is evaluated. The
accessibility of care can be defined, according to Donabedian, as “the ease with which it
is initiated and maintained” (Donabedian, 1980: 22).
The quality of care can then be defined, according to Donabedian, as “its
expected ability to achieve the highest possible net benefit according to the valuations of
individuals and society” (Donabedian, 1980: 229). Therefore, accessibility to care and
quality of care are related but not the same. As an example, highly accessible,
unnecessary care can be called low quality care. Unnecessary or excessive care has a
negative impact on a patient’s health, reduces the available health care and increases
total health care costs, and must therefore also be included when the quality of care is
measured. This is especially important when prioritization of health care will be
necessary because of limited financial resources spent towards health care. Continuity or
co-ordination of care is also related to quality of care but is not the same, according to
Donabedian. However, these are aspects of the quality of care and can not be separated
from it. They are necessary parts or attributes of care and influence quality of care.
Clients should primarily define quality of care, both individually and collectively,
because they are the recipients of care. A client’s definition of quality gives information
on whether the provider of care meets the client’s expectations. A customer’s
satisfaction and the quality of care are therefore closely related.
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Lee and Jones, in 1933, defined quality of care as “the application of all
necessary services of modem scientific medicine to the needs of all people” (Kitson &
Giebing, 1990: 11). However, in 1958, Blue Cross defined quality of care as “the degree
to which care is available, acceptable, comprehensive, continuous and documented”
(Kitson & Giebing, 1990: 11). The Lee and Jones definition of quality of care includes
the technical aspect of care but omits the interpersonal aspects thereof, unlike the
broader Blue Cross definition. In 1974, Williamson defined quality of care as “effective
health care to improve health status and satisfaction of a population within the resources
society and individuals have chosen to spend for that care” (Kitson & Giebing, 1990:
11). The costs of care and the willingness of societies to spend for health care are
incorporated into this definition of quality care.
Donabedian’s definition says that quality of care is “the conformity between
actual care and pre-set criteria” (Donabedian, 1980: 11) which implies that quality
should be more individualized than the other definitions. The pre-set criteria can be
derived from one of three major sources: the technical, interpersonal, or organizational
aspects of the quality provided. According to Donabedian, the attributes of technical
performance are: effectiveness, expertise, capability, safety, carefulness, and indicators
of care and cure. The attributes of interpersonal care are: respect for people,
confidentiality, to provide adequate information, to establish relationships, personal
interest, client autonomy, and equality. The attributes of organizational aspects are
environmental such as: safety, comfort, equipment, continuity, and efficiency.
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Donabedian's definition of quality of health care is widely used and will be discussed in
greater detail later in this paper.
Unlike the client, the provider focuses more on the technical aspects of care.
There seem to be differences between what patients want from their providers and what
providers think their patients want from them. Most studies performed among patients
about the quality of care show that “quality is defined not in terms of the consequences
of care but in terms of attributes of the providers and of their behavior” (Donabedian,
1980: 72).
The Institute of Medicine in the United States defines quality of care as “the
degree to which health services for individuals and population increases the likelihood of
desirable health outcomes and are consistent with professional knowledge” (Labs, 1990).
Structure. Process, and Outcome.
Avedis Donabedian first used the terms structure, process, and outcome to
describe aspects of care to help evaluate the quality of health care. The structure of
health care relates to the input; the resources necessary to be able to provide quality care.
Structure relates to the conditions in which the care should be given, for example the
kind of organization, the education and qualification of the professional staff, the
availability of necessary materials and equipment, policies, and aspects of the
environment relating to safety, comfort, etc. (Donabedian, 1980). The structure of care
is, therefore, relatively stable. “It includes the human, physical, and financial resources
that are needed to provide medical care” (Donabedian, 1980: 81). Structure is an
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influencing factor of quality care. It influences the possibility of good performance.
The adequacy of the structure is directly related to the quality of health care. However,
optimal structure does not guarantee quality care. The relationship between structure
and performance is not always clear but good structure is an important indicator of
quality services.
The process of health care involves the actions undertaken when providing health
care. It involves everything that is actually done when giving and receiving care. It
includes clients’ attempts to request health care, as well as the activities of the health
care provider, such as assessment, diagnosis, planning, intervention, implementation,
patient teaching and documentation. The process of care can involve both the technical
management of care and the interpersonal aspects of care, according to Donabedian.
“Quality of the process of care is defined as normative behavior. The norms derive
either from the science of medicine or from the ethics and values of society”
(Donabedian, 1980: 80). Donabedian argues that the major weakness of using process
elements as indicators of quality care is the fact that there is no scientific basis for some
of the accepted practice. Another weakness is the difficulty in measuring the
interpersonal aspects of care. Process studies have also been widely criticized because
the outcome of health care is of the greatest concern and studies that demonstrate clearly
the relationship between process and outcome are few.
The outcome of health care is the actual output, or result, of health care
intervention. Outcome represents the effects of care on the health status of the clients. It
also includes a client’s improvement in knowledge and skills about health and self care
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as well as the actual health related behavior of clients. Donabedian also includes
patient satisfaction in the definition of outcome. All those factors are seen by
Donabedian as either “components of current health or as contributions to future health”
(Donabedian, 1980: 82). The measurement of outcome can be problematic as a measure
of quality of care because outcomes intend to serve as results of certain interventions but
other outside factors may cause changes in health status. Outcome can, therefore, only
be a measure of quality of care if previous care is truly responsible for the change in
health status. “Process elements can still be used if there is general agreement that
certain procedures are appropriate for certain situations, even though there is no
scientific proof of appropriateness” (Donabedian, 1990: 105).
Structure, process and outcome in health care are functionally related. Structure
influences the process of care and the process of care in turn influences the outcome of
care. The causal link between process and outcome is not always clear because there is
not a firm scientific foundation behind every process in health care. The measures of
processes and outcomes as indicators of quality are therefore often problematic. The
possibility that a given outcome has been caused by a certain process may be strong but
other causes are difficult to eliminate. Structure, as a measure of quality, is probably the
easiest to use if the criteria of a good quality structure have been established.
Structure is a very important factor in quality assurance and is used to a great
extent by accreditating agencies such as JCAHO (Joint Commission for the
Accreditation of Health Organizations). However, JCAHO is moving towards outcomes
when quality of care is measured. Because of the lack of knowledge about the full
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relationship between processes and outcomes and what inferences can be drawn from
studies of either process or outcome, Donabedian recommends that both process and
outcomes should be studied simultaneously whenever possible. To include the study of
outcomes will influence changes in process as a corrective action if unwanted outcomes
are realized. A multi-dimensional approach seems to be necessary when the quality of
health care is assessed. To study one of the three factors, structure, process, and
outcome, is important but not sufficient when quality of health care is evaluated in
general. The three factors are interrelated but all of them reflect a different part of care
provision. Patient satisfaction and access to care must also accompany studies of
quality.
Total Quality Management and Continuous Quality Improvement
The history behind Total Quality Management (TQM) as a management method
extends back to the middle of this century. The explosion of productivity before the
beginning of the nineteenth century made the standardization of processes very
important. All production processes became more complicated as technology improved.
Specialization and standardization were introduced as Scientific Management became
known. Quality inspection and quality control were part of the production process.
Statistical methods were increasingly used in quality inspection before the middle of the
century. During World War II the American military demanded high quality standards
from weapon manufacturers. The so-called “military standards” described quality
control methods that the military required from their suppliers.
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After 1950 Dr. W. Edward Deming started lecturing on his theories about
quality management in Japan. At that time Dr. Deming was known in his home country,
The United States, as a statistics specialist but his theories about quality management did
not reach popularity in America until around 1980. However, in the 1950s Japan’s
industrial top managers applied Deming’s TQM theories to their production process.
Japan’s business success has, to a great extent, been attributed to TQM. Quality should
be the primary perspective in all processes, according to Deming. TQM emphasizes
providing quality services but at the same time cost effective. Deming argues that 94%
of all errors are system errors, not employee errors (Lopresti and Whetstone, 1993).
Thus, his TQM concept is a system’s approach to improve the effectiveness of
operational service and reduce costs by having everyone focus on processes. Deming
has a clear focus of involving the employees in the quality improvement system. The
primary objective is to meet the needs of both the external and the internal customers.
TQM philosophy states that quality should be thought of by every member in the
organization, at all time, to prevent defects in the production. Top management must
give a clear message to every staff member about the importance of TQM.
Other theorists that argued for the importance of quality management became
known as well. One of those was Philip Crosby. His Management Maturity Grid
defines five stages that an organization must go through in the transition from quality
inspection to quality management. Those stages are: uncertainty, awakening,
enlightenment, wisdom, and certainty (Johnson, 1994). Crosby’s approach to quality
improvement is based on fourteen steps. Those steps are:
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1) management commitment,
2) quality improvement team,
3) measurement,
4) costs of quality,
5) quality awareness,
6) corrective action,
7) zero defects planning,
8) employee education,
9) zero defects,
10) goal setting,
11) error cause removal,
12) recognition,
13) quality council,
14) do it all over again (Cesta, 1993).
Crosby’s theories agree in most parts with Deming’s theories. They emphasize
both measurements and the involvement of every member o f the organization and
Crosby's quality improvement team is similar to Deming’s quality circles. Crosby’s last
point emphasizes that quality management is never finished. It is a never ending
process, a culture change in organizations.
Another well known quality management theorist is Joseph Juran. He is best
known for his “Quality Trilogy” concept. This trilogy includes; 1) quality planning,
which is the process of developing the products and processes required to meet customer
needs, 2) quality control, which is the regulation process through which actual
performance is measured and compared with standards and the difference acted upon,
and 3) quality improvement, which involves the organized creation of beneficial change
(Cesta, 1993). Juran’s model builds on using statistical quality measurements to set
priorities for quality improvements. His steps to quality improvements include:
brainstorming, team formation with the goal of solving the problems that were identified
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during the brainstorming phase, and data collection to understand the problems better.
Juran’s theories also mostly agree with Deming’s theories. He emphasizes building
quality into all processes by breaking down each part of the process to build quality into
all components. To form problem-solving teams complements Deming’s quality circles.
Today the importance of quality management is widely accepted in the Western
world. Rewards are now being awarded to companies that stand high in this era. The
Malcolm Baldrige National Quality Awards have been awarded in the United States
since 1988. Similar awards also exist in many of the European countries. In Iceland, for
example, an award for outstanding quality management has been awarded for a few
years. The National University Hospitals in Iceland received this award for the year
1995. The National University Hospitals in Iceland have been implementing their TQM
program which is based on Donabedian's theories of structure, process, and outcome and
Deming's quality management theories. TQM started in manufacturing, and the above-
mentioned theorists targeted the production process in their theories. These concepts are
now being implemented in the service industry, including health care (Weinheimer,
1993).
Hospitals, as well as most other health care organizations, are extremely complex
entities. Those complex entities are still structured, to a large extent, in a mechanical,
hierarchical, organizational structure, which was considered the most optimal structure
during the days of Max Weber and Frederick Taylor and supported by Scientific
Management. TQM requires a transition to a more organic and flexible organizational
structure, one that adjusts to a changing environment.
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Management style must change from directing and controlling to empowering
employees (Hamilton, 1993). Communication through the entire organization, as well as
with outside consumers and suppliers, is also very important. Forming teams is usually
one of the first efforts hospitals do when implementing TQM. Those teams are supposed
to improve processes in the organization. Emphasis on team building is also apparent in
Performance Management. Total quality systems involve radical changes that can take a
long time to implement. Changes such as cultural change, participative management,
extensive training, revamping of reward and salary systems, and a move towards self-
managing teams, are elements of such quality systems (Geber, 1992). Quality
improvement emphasizes the need to use measurements in all parts of the organization
and this is also emphasized in Performance Management. Processes and systems are
investigated with the goal of improving outcomes. It is argued that if quality is
emphasized all through the organization, a positive bottom line will be the result. Most
industries have reported the costs of poor quality to be in the range of 20% to 40% of
total costs (Lawrence & Early, 1992). Costs of poor quality in health care includes costs
of repeated tests and procedures, increased length of stay, infections, delays in diagnosis,
and poor patient outcomes.
The quality philosophers share common beliefs despite some differences in
emphasis. TQM has often been viewed as a new culture or a social movement in
organizations. However, “total quality management has come to mean different things
to different people” (Hackman et al, 1995: 310). TQM strategy assumes that good
quality is more profitable than is poor quality. It also assumes that mistakes are not
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because of people but are due to the systems in organizations. To reduce mistakes
means therefore to change systems in organizations. Employees are encouraged to give
input regarding improving work processes which is often the objective of teams.
Moreover, employees must feel responsible for customer satisfaction by knowing exactly
what the customers wants. This is a shared belief by the three TQM philosophers. They
also share the belief in implementing cross-functional teams in solving problems and
emphasize measurements. Those shared beliefs build part of the theoretical framework
in Performance Management.
There is some ambivalence in some of the areas that have been associated with
good TQM practice. One of them has to do with the importance and the efficacy of goal
setting in organizations. Research has been supporting Locke's theory of goal setting;
that clear and specific goals improve performance in organizations. However, W.
Edward Deming does not agree. He cautions organizations against putting pressure on
people by giving them difficult goals. He also argues that specific goals narrow the
vision of employees and only serve to encourage employees to slow down once a goal
has been attained. On the other hand, Deming agrees on the importance of the feedback
part of goal setting (Aguayo, 1990).
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Performance
Performance plays a large role in Performance Management. Here, performance
will be defined and the factors that influence performance will be discussed.
Performance is often defined as the product of motivation and ability moderated
by situational constraints. Motivation has been defined as what “energizes, directs, and
sustains behavior” (Perry & Porter, 1982: 89). Ability is the capability of each
individual to perform certain tasks. Situational constraints refer to factors in the
environment, such as having the necessary resources, for a certain task to be performed.
Performance is therefore a function of those three factors (Perry & Porter, 1982).
Performance in health care can be analyzed from several perspectives and it is
also closely related to total quality management. It can involve the patients, their
families, the employees or even the general population as related to preventive measures.
The clinical outcome of care is usually considered the most important performance
measure within health care. However, costs of treatment, the utilization of resources and
customer and job satisfaction are also important. When resources are scarce it is
important to use resources efficiently. Job satisfaction involves staff turnover and
absenteeism, which affects the continuity of care. It is also well known, and it is logical,
that satisfied employees provide more pleasant care and thereby it is correlated with
patient satisfaction. Job satisfaction also affects productivity in providing care. The
basic assumptions of organizational theorists have been that satisfied workers are more
willing to work towards organizational goals and objectives and to perform at their best,
than workers that are not satisfied on their jobs. The dissatisfied workers are then more
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likely to reach only minimum standards and reduce the organizational productivity.
However, researchers argue about whether job satisfaction results in increased
productivity or if good performance results in job satisfaction.
The argument that satisfaction causes performance is based on the human
relations theory, which has its grounds in the Hawthorne studies (Petty, Mcgee,
Cavander, 1984). However, Lawler and Porter argued, in 1967, that performance causes
satisfaction. They based their opinion on the fact that performance may lead to rewards
and rewards lead to satisfaction. Several studies have been performed analyzing what
has effects on, or causes, improved job performance or increased worker productivity.
A meta-analysis, performed by Guzzo, Jette and Katzell in 1985, analyzing the
effects of psychologically based organizational intervention, showed that the most
powerful effects on worker productivity were intervention programs involving training
and goal setting (Guzzo, Jette, Katzell, 1985). Those results support Locke’s theory of
goal setting. It also supports the expectations of an intervention, such as implementing
Performance Management, with its emphasis on goal setting, into the Children's
Hospital.
A literature search, focusing on studies analyzing the effects of employee
participation in decision making, found that participation in decision making had modest
positive relationships with performance and satisfaction (Cotton, Vollrath, Froggatt,
Lengnick-Hall, Jennings, 1988). This finding is consistent with the argument in
Performance Management that performance will improve following its implementation,
partly because of its emphasis on employee participation. However, participation can
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exist in various forms. The study indicated that “participation is a multidimensional or
multiform concept” (Cotton et al., 1988: 431). Several models have been proposed
regarding the effects of participation on decision making. Those models have been
divided into three types; cognitive, affective and contingency types (Miller and Monge,
1986).
The cognitive models indicate that participation in decision making is important
for organizations because of the increased flow of information in organizations and
because workers usually have more knowledge about the work than managers. The
cognitive models do not suggest increase in satisfaction merely from participation in
decision making but they predict satisfaction from the feedback of results. Affective
models argue that participation in decision making fulfills high order needs of
individuals and therefore will lead to greater job satisfaction. Contingency models of
participation in decision making argue that participation will influence job satisfaction
and productivity in some individuals and that in others it will not. The correlation
between participation in goal setting and productivity was significant but low (r = .11) in
the meta-analytic study performed by Miller and Monge in 1986 (Miller & Monge,
1986). They also found support from earlier research that participation has some effect
on both satisfaction and productivity. In 1985 Erez and Kanfer studied the impact of
participation on goal acceptance and performance. They found that “as goal acceptance
increases, the influence of goal setting upon performance increases.... Participation
affects performance through its effect on goal acceptance” (Erez et al, 1985: 65).
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Most research studying the relationship between job satisfaction and
performance has found relatively low correlation (Ostroff, 1992). A meta-analysis,
performed by Iaffaldano and Muchinsky in 1985, estimated the correlation between job
satisfaction and performance to be 0.17. Most of those studies were done at the
individual level. However, Cheri Ostroff studied this relationship at the organizational
level and found a correlation of 0.28 between job satisfaction and performance. A study
performed on hospital nurses found that “employees’ perception of organizational
communication is directly related to both job satisfaction and performance” (Pincus,
1986: 412). The effect of job satisfaction on performance will be explained in more
detail in the job satisfaction section of this dissertation.
Finally, the effect of feedback on task performance has been considered
important. In 1990 Earley et al. studied the impact of process and outcome feedback on
the relation of goal setting to task performance. They found out “that both process and
outcome feedback interact with goal setting to enhance performance” (Earley,
Northcraft, Lee, Lituchy, 1990: 87). Goal setting has an important influence on
performance ( Mento, Steel, Karren, 1987) and will be explained in more detail in the
next section.
The studies mentioned above regarding the effect of employee participation in
decision making, setting goals and providing feedback support the improved
performance that is expected to be the result following the implementation of
Performance Management into the Children's Hospital.
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Job Satisfaction
Job satisfaction is an important factor in the workplace and is considered in
Performance Management a necessary variable which must be included in order to
maximize productivity and quality of service. For the purpose of this dissertation, some
theories and studies of job satisfaction, as well as an evaluation of the factors that
influence job satisfaction will be examined here.
As introduced earlier, the basic assumptions of organizational theorists have been
that satisfied workers are more willing to work towards organizational goals and
objectives and to perform at their best than workers who are not satisfied on their jobs.
Support has been found for the relationship between job satisfaction and organizational
performance, as demonstrated earlier in this dissertation. Therefore, organizations with
more satisfied employees should be more effective than organizations with less satisfied
employees. This has been the result when organizations have been studied but similar
studies, conducted on an individual level, have usually indicated a weaker relationship
between job satisfaction and performance.
Systematic studies of the nature and causes of job satisfaction did not start until
approximately seventy years ago (Locke, 1976). The Hawthorne studies, in the late
1920s, studying the effects of job conditions on worker productivity, shifted the
emphasis of research towards studying the effect of attitudes on productivity. Locke’s
definition of job satisfaction is, “. ..a pleasurable or positive emotional state resulting
from the appraisal of one’s job or job experiences” (Locke, 1976: 1300).
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Job satisfaction is one of the most studied factors in organizational behavior.
The studies have to a large extent been divided into three categories, or three approaches
(Judge, Locke, Durham, 1997). The situational or job characteristics approach is based
on the assumption that job satisfaction is caused by the nature of the job, job conditions
and the environment surrounding the job. The Job Characteristics Theory, by Hackman
and Oldham, will be described later in this dissertation but research has supported the
notion that job attributes are significantly related to job satisfaction. The dispositional
approach argues that the relatively stable individual characteristics are not influenced by
job attributes as related to job satisfaction. Job satisfaction may be more correlated with
life satisfaction, or influenced by each individual’s view of life more than any other
factor. The third approach, the interactionist approach, argues that job satisfaction
results from the interaction between the individual and the situation (Judge et al., 1997).
Edwin Locke found in his studies that praise and recognition given to employees,
especially from supervisors and colleagues, are the most frequently mentioned events
causing job satisfaction or job dissatisfaction (Locke, 1976). An important part of
recognition is that it provides workers with feedback on their performance. Workers can
then use this feedback to set future goals for themselves and therefore it relates indirectly
to their performance in the future. Locke argues that individuals with low self-esteem
are most sensitive to praise and recognition in regard to job satisfaction (Locke, 1976).
However, Locke argues further that individuals with high self-esteem experience more
pleasure in their work, other things being equal, than individuals with low self-esteem
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(Locke, 1976). In Performance Management, praise and recognition is incorporated
and is part of the feedback system.
Participation in decision making has been widely studied and has been discussed
earlier in this dissertation. A participative organizational culture has been proven to be
strongly related to job satisfaction (Miller & Monge, 1986). The quality of
communication and job satisfaction are also related to each other. Studies have
indicated that “high-quality communication is associated with relatively high levels of
job satisfaction, whereas low-quality communication is associated with relatively low
levels of job satisfaction” (Frone and Major, 1988: 333). Participation in decision
making, through task groups and meetings, was implemented as part of Performance
Management at the Children's Hospital and is a part of the feedback system.
Worker motivation and job satisfaction of hospital employees is important due to
the fact that approximately 2/3 of the total costs of hospitals in Iceland stem from
salaries. This gains additional importance when there is a shortage of staff, such as
nurses. Job satisfaction has been correlated with commitment to the organization. Job
satisfaction has frequently been divided into intrinsic satisfaction, the motivational
factors caused by the work itself; and extrinsic satisfaction, caused by external factors
(Alpander, 1990). The Job Characteristics Theory by Hackman and Oldham is based on
intrinsic satisfaction. “A job is not an entity but a complex interrelationship of tasks,
roles, responsibilities, interactions, incentives, and rewards. Thus a thorough
understanding of job attitudes requires that the job be analyzed in terms of its constituent
elements” (Locke, 1976: 1301).
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A study was performed on 242 nurses, intending to find out the influence of
nine variables on nurses’ job satisfaction. Seven of the nine variables are based on the
Price-Mueller nurse turnover model from 1981 (Agho, 1993). The seven variables were:
1) routinization (less repetitive tasks), 2) participation (autonomy in decision making), 3)
instrumental communication (information on what is expected of the nurse), 4)
integration (close friends within the work unit), 5) pay (adequate salaries), 6) distributive
justice (perception of fairness of reward and punishment policies), and 7) promotional
opportunity (opportunity for upward mobility) (Agho, 1993). The two variables that
were added to the Price-Mueller model were positive and negative affectivity. Positive
affectivity is defined as “the degree to which an individual is predisposed to be happy;
negative affectivity reflects an individual predisposition to experience discomfort”
(Agho, 1993: 452). The results were that routinization, instrumental communication and
positive and negative affectivity affect job satisfaction in nurses the most. Another
study, performed on 3,500 registered nurses in Texas, showed that while nurses believe
their job to be a meaningful part of health care delivery they report that they seldom are
asked to participate in hospital policy decisions and this produces feelings of career
stagnation (Wandelt, Pierce, Widdowson, 1981).
In Iceland there exists a database of job satisfaction results of approximately
20,000 employees in Icelandic companies which is significant due to the small
population in Iceland. The results show similar average job satisfaction in Iceland as in
the United States, or approximately 4.05 on a five point Lickert scale. However the
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correlation between job satisfaction and education is not as strong here in Iceland as it
is in the United States (PricewaterhouseCoopers in Iceland, telephone interview, 1999).
Abraham Maslow presented his Need Hierarchy Theory in the 1950s (Maslow,
1943). He proposed that the human being has five basic categories of needs. Those
categories are: physiological needs, safety needs, belongingness needs, esteem needs and
self-actualization needs. Maslow’s theory argues that those needs are placed in a
hierarchy, with the most basic need, the physiological needs, at the bottom and then one
on top of the other with the self-actualization needs at the top. The assumption behind
the effects of human needs on human motivation is that motivation is a function of
human needs. Maslow’s Hierarchy of Needs Theory is mentioned here as a suggestion
and an addition to Skinner’s Reinforcement Theory and is used in connection with
rewards as part of the feedback system in Performance Management. Maslow’s theory
suggests that when employees are given rewards the person giving the reward should
consider each employee’s special needs and select the rewards so that the perceived
value of the reward for the employee will be maximized.
Absenteeism and turnover
Research on the effects of job satisfaction on absenteeism and turnover shows
significant correlation; however usually lower than -0.40 (Locke, 1976). It is evident
that a satisfied worker is, on average, less absent from work and is less likely to quit
his/her job than a dissatisfied worker. Research on the effects of job characteristics on
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absenteeism and turnover show that absenteeism may be reduced by the development of
skill variety, autonomy and feedback (Fried and Ferris, 1987).
This factor is related to the Job Characteristics Theory, which is incorporated into
Performance Management and, according to above research, should induce lower
absenteeism at the Children's Hospital following the implementation of Performance
Management. Earlier research of job satisfaction in the National University Hospitals in
Iceland shows significant negative correlation between job satisfaction on the one hand
and absenteeism and turnover on the other hand (Bjorgvinsson, 1997).
Latham and Locke presented results from studies that showed that “absenteeism
was significantly lower in groups that set goals than in the groups who were simply
urged to do their best” (Latham and Locke, 1979: 380). Performance Management
emphasizes goal setting which, according to the above research, should affect
absenteeism at the Children's Hospital.
It is generally believed that high turnover is bad for the organizations because of
lower continuity of the work and because of the high costs of training new workers.
However, turnover may not be all bad. Some people have argued that turnover may
produce higher output in organizations, when low productivity workers are replaced by
workers who show higher productivity (Ostroff, 1992). Studies consistently show a
correlation between performance and turnover in organizations; the lower the
performance, the greater the likelihood of turnover (Jackofsky, 1984). However,
turnover may be both voluntary and involuntary. Involuntary turnover may be correlated
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to low performance in organizations and voluntary turnover may be correlated with
high performance (Jackofsky, 1984).
Several models of employee turnover have been created through the years. They
are usually based on the basic concepts proposed by March and Simon in 1958, that
“voluntary turnover is a function of two primary factors: 1) the perceived desirability of
movement from the organization and 2) the perceived ease of movement” (Jackofsky,
1984: 75). Ellen F. Jackofsky, in her turnover model, argues for the third factor; the
intention to quit. This third factor is based on the work of Edwin Locke, who argues that
the intention to quit is a necessary condition before the act occurs. It is the decision
between thinking about quitting the job and actually quitting.
It has been argued that attendance motivation and the ability to attend is a
primary factor in absenteeism in organizations. Attendance motivation is related to
voluntary absenteeism and the ability to attend is related to involuntary absenteeism
(Brooke, 1986). Absenteeism is costly for organizations because of its effect on
organizational ability to schedule work. Several factors influence absenteeism in
organizations. Paul P. Brooke, Jr., proposed a causal model of absenteeism in 1986. It
is based on the Steers and Rhodes model of employee attendance but it takes the issue a
little further. The Steers and Rhodes model of attendance is based, to a large extent, on
job satisfaction but they show that the link between job satisfaction and attendance is
complex. The model proposed by Brooke Jr. suggests that routinization, centralization
and pay influence job satisfaction, which affect commitment that in turn affects
absenteeism. The model also proposes that distributive justice influences job
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satisfaction and commitment, which in turn affect absenteeism. Role ambiguity, role
conflict and role overload influence job satisfaction, health status and alcohol
involvement, which further affect absenteeism. Moreover, work involvement affects job
involvement, which both directly and indirectly affects absenteeism. Two factors are
also included in the model; organizational permissiveness, that refers to the degree that
absenteeism is permitted in the organization and kinship responsibility, which refers to
the involvement in kinship groups within the local community, that directly affect
absenteeism (Brooke, 1986).
Performance Management draws from theories which promote job satisfaction,
which in turn should lower absenteeism and turnover, according to the above-mentioned
models.
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D. Characteristics of Performance Management and its link to theories
The following table presents the three main factors in Performance Management
and their possible impact on the five outcomes in the table. The link between those
factors and their derived outcomes are the following theories that build the theoretical
framework of Performance Management.
Table 1 indicates how the three main factors in Performance Management affects
the key measures.
Table 1. The Main Factors in Performance Management and the Derived Outcomes
Performance Job sat. Turnover Absenteeism Productivity Costs
Management
3oal setting X X X X X
Measurement X
Feedback X X X X X
Goal Setting
Edwin A. Locke proposed in 1968 a theory of task motivation and incentives
(Locke, 1968). This theory was based on research on the relationship between conscious
goals and intentions and task performance. The basic assumption behind his research
was that “an individual’s conscious ideas regulate his actions” (Locke, 1968: 157). A
goal is defined as “what an individual is trying to accomplish; it is the object or aim of
an action. The concept is similar in meaning to the concepts of purpose and intent”
(Locke, Saari, Shaw, Latham, 1981: 126). The definition of a task is “ a piece of work to
be accomplished.. ..Since a goal is the object or aim of an action, it is possible for the
completion of a task to be a goal” (Locke et al. 1981: 126).
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Goal setting is primarily viewed as a motivational mechanism. Studies behind
the theory of task motivation and incentives indicate that; a) hard goals produce a higher
level of performance than easy goals, b) specific hard goals produce a higher level output
than a goal of “do your best”, and c) behavioral intentions regulate choice behavior.
Additional studies indicate that monetary incentives, time limits and knowledge of
results do not affect performance level independent of the individual’s goals and
intentions (Locke, 1968). It had been argued that knowledge of results, instead of goal
setting, produced significant increase in performance but later studies confirmed Locke’s
argument that the knowledge of results only lead to improved performance if it was used
by the individual to set higher goals (Latham & Baldes, 1975). Therefore, as in
Performance Management, goal setting and knowledge of results are used in connection
with one another.
Locke argued that the earlier studies, concerning the effect of participation in
decision making, job enrichment, behavior modification and organizational
development, point to their influence on motivation through goal setting (Latham and
Locke, 1979). The increase in productivity was to a large extent associated with whether
goals were set or not, but not how goals were set. However, it was acknowledged that
the employee input into decision making often leads to better decisions and higher goals.
Additionally, participation in setting goals often leads to improved goal acceptance with
the result of improved performance. Participation may therefore improve performance
informally through goal acceptance. Participation in goal setting may also be used as a
strategy to overcome resistance for implementing change. When Performance
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Management was implemented at the Children's Hospital in Iceland, employees
participated in setting goals for the organization through participation in teams.
Later studies have confirmed Locke’s theory (Tubbs, 1986). “The setting of a
goal that is both specific and challenging leads to an increase in performance because it
makes clear to the individual what he is supposed to do. This in turn may provide the
worker with a sense of achievement, recognition and commitment allowing him/her to
compare how well he/she is doing now versus how well he/she has done in the past and
in some instances, how well he/she has done in comparison to others” (Latham and
Baldes, 1975: 124).
A meta-analysis performed on both laboratory and field studies between the
years 1969 and 1980, on the effects of setting goals when performing a task, found that
in 90% of the studies (99 out of 110 studies) specific and challenging goals lead to
higher performance than easy goals, “do your best” goals, or no goals (Locke et al.,
1981).
Goals affect performance by directing attention, mobilizing effort, increasing
persistence, and motivating strategy development. Goal setting is most likely
to improve task performance when the goals are specific and sufficiently
challenging, the subjects have sufficient ability, feedback is provided to show
progress in relation to the goal, rewards, such as money are given for goal
attainment, the experimenter or manager is supportive, and assigned goals are
accepted by the individual” (Locke et al., 1981: 125).
The result of the meta-analysis, as it relates to the knowledge of results, indicates
that both goals and knowledge of results are necessary for performance to be improved.
When Performance Management was implemented at the Children's Hospital knowledge
of results, following group level goal setting, was presented to the staff during the
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regular meetings. Knowledge of the results of specific and hard goals shows
performance in relation to the goals. The meta-analysis conclusion, regarding
participation in setting goals, was that it can lead to the setting of higher goals and could
lead to greater goal acceptance or commitment than if the goals were primarily assigned.
In a research article, written by Locke and Latham in the year 1990, they state
that over 400 studies have confirmed that specific, difficult goals lead to better
performance than specific, easy goals, vague goals such as “do your best” or no goals.
These findings appear at the individual, group, or organizational level of analysis. In
fact, some theorists have argued in favor of group goal setting due to the probability of
improved team spirit and cooperation (Latham and Locke, 1979). Group incentives may
advocate goal acceptance, especially when considerable cooperation is required.
Feedback has generally been found to increase the effectiveness of goal setting.
However, strong support has not been generally found for participation in goal setting
leading to more commitment and performance than having assigned goals. The effect of
goal difficulty on job satisfaction shows that easy goals produce more satisfaction than
difficult goals but difficult goals result in higher performance than easy goals (Locke &
Latham, 1990). A study performed by Pritchard, Jones, Stuebing and Ekeberg in 1988
found that group-level goal setting and feedback increased productivity significantly.
Their conclusion was that the principles of goal setting, which had been proven useful
for individual performance, also hold for group performance. Locke’s theory also argues
that goals should be challenging but that they have to be reachable. If challenging goals
are accepted they lead to better performance. However, if the goals are perceived to be
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unreachable, workers will not accept them and they will not lead to improved
performance, or they may even decrease performance. Managerial support for reaching
goals is also critical for goal acceptance. Employees must receive the necessary
resources, such as money, equipment or time, to be able to reach the goals. Goal setting
sometimes leads to informal or formal competition between workers. This competition
can result in the setting of higher goals but managers must be certain that workers will
not place individual goals ahead of company goals, which in turn may lead to decreased
organizational performance even though some individuals may improve their
performance. Additionally, care must be taken regarding the setting of high quantity
goals; that they will not result in unsatisfactory quality. Goals must be presented in a
clear and specific manner and the overall organizational performance must be
considered.
As can be seen by the theoretical framework presented here, the group level goal
setting, with the participation and evaluation of the Steering Committee (management of
the Children's Hospital takes part in the Steering Committee), which was done when
Performance Management was implemented at the Children's Hospital, should both
improve performance and increase job satisfaction which again affect absenteeism and
turnover. Group level rewards were used when appropriate.
Measurement and feedback
Performance Management draws its measurement component mostly from TQM
that was discussed in detail earlier in this dissertation. Constant measurements are
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necessary prerequisite for feedback. The feedback component has its theoretical base
from the Job Characteristics Theory and the Reinforcement Theory.
Job Characteristics Theory:
The emphasis on job design started in scientific management in the early 1900s.
Even though scientific management improved productivity it was found that other things
than those noted in scientific management had a major impact on productivity and
performance. Job enrichment and job enlargement around the middle of this century
changed the focus of studies of performance and job satisfaction. Task attributes of
many kinds proved to affect performance in a different manner. Hackman and Oldham
presented their Job Characteristics Theory, which was based on those factors. This
theory has gained wide support and the job characteristics model was developed from the
theory.
The job characteristics model identifies five key job characteristics, their
interrelationship and predicted influence on employee productivity, motivation and job
satisfaction. The five key job characteristics are: skill variety, task identity, task
significance, autonomy and feedback. Skill variety has been explained as the job
requirement of different activities, the need for workers to use different skills and talents.
Task identity has been explained as the degree of a whole and identifiable piece of work.
Task significance shows the impact of the job on the lives or work of other people.
Autonomy means the independence of carrying out work. Feedback indicates to what
extent the worker gets information on the results o f the job.
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Hackman and Oldham based their Job Characteristics Theory on a variety of
research, such as that showing that routine and simple jobs often lead to high employee
dissatisfaction, increased absenteeism and turnover as well as difficulties in management
(Hackman and Lawler, 1971). Considerable research has also been performed on the
impact of autonomy and feedback. Hackman and Lawler argue in their theory that
positive personal and work outcomes are attained when three “critical psychological
states” are present. They are: 1) Experienced meaningfulness of the work, which
involves the three first-mentioned core job dimensions; skill variety, task identity and
task significance. This represents how the employee experiences the job to be
meaningful, valuable and worthwhile. 2) Experienced responsibility for outcomes of the
work, which involves the autonomy in the model. This represents how the employee
feels personally accountable and responsible for the results of the work. 3) The third
“critical psychological state” is the knowledge of the actual results of the work activities,
which involves the feedback dimension of the model. This represents how the employee
knows and understands, on a continuing basis, his/her performance on the job. The
model argues that if a job is high in all those dimensions it will create high internal
motivation, high quality work performance, high satisfaction with the work and low
absenteeism and turnover. (Hackman and Oldham, 1975). The model has gained wide
support through various research.
Performance Management has incorporated the Job Characteristics Theory into
its theoretical base, especially the feedback factor. Continuous feedback is provided at
the Children's Hospital, through staff appraisals and formal and informal meetings.
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Reinforcement Theory:
B.F. Skinner introduced his Reinforcement Theory around the middle of this
century (Skinner, 1953). Reinforcement Theory argues, in its simplest form, that
behavior is a function of its consequences. This means that individuals will look at the
consequences of each act and if they believe the consequences to be pleasant they are
more likely to repeat that act but if the consequences are believed to be unpleasant the
act will most likely not be repeated. Employees will therefore explore different behavior
at their work, such as effort, absenteeism, etc., and the likely consequences for their
work, and they will most likely act in a manner which ensures the most desirable
outcomes for them. The theory has three key variables, stimulus, response, and reward.
Stimulus is a variable which causes a behavioral response. The response variable, such
as performance, follows the stimulus variable. Following a response comes the reward
variable, which influences future behavioral response.
The consequences of behavior are also called reinforcement. Positive
reinforcement involves giving some kind of a reward, following a behavior that is
considered desirable. This reward is given because it increases the possibility that this
desirable behavior will be repeated in the future, or even to increase the frequency of the
desired behavior. The reward can be in the form of monetary reward, promotion, praise
or recognition, or something else that is of value to the employee. Negative
reinforcement, also called avoidance, also involves the attempt to increase the frequency
of a desirable behavior. This kind of a reinforcement involves giving the employee an
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opportunity to avoid unpleasant consequences. Extinction is a type of reinforcement
which involves withdrawing, or at least decreasing the frequency of rewarding, of a
special behavior. The result will most likely be that the frequency of a certain behavior
will decrease or even stop. This type of reinforcement may be used when a behavior
which was considered desirable earlier is no longer considered as such. Punishment is
another reinforcement that will most likely result in the decline of undesirable behavior.
Reinforcement may be given continuously, with fixed or variable intervals, or
with fixed or variable ratio. Continuous reinforcement rewards desirable behaviors
every time they occur. Fixed interval reinforcement rewards desirable behaviors
according to a predetermined schedule but variable interval reinforcement rewards in
some instances following a desirable behavior. Fixed ratio reinforcement rewards
following a number of desirable behaviors but variable rate reinforcement rewards
following a variable number of desirable behaviors.
More recent research shows that Reinforcement Theory influences behavior at
the workplace in the manner stated by the theory. However, Reinforcement Theory
focuses on the individual but for the cause of this dissertation it is assumed to work for
groups also.
Performance Management draws important factors from Reinforcement Theory.
It emphasizes measuring performance and rewarding for good performance or
redirecting based on measurements and feedback.
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E. Hypotheses
1. Job satisfaction will improve, following the implementation of Performance
Management.
Performance Management draws from several theories and incorporates them
into its theoretical background. These theories were discussed in detail earlier in this
dissertation. One of those theories is the Job Characteristics Theory by Hackman
and Oldham (Hackman & Oldham, 1975). The Job Characteristics Model (JCM) by
J. Richard Hackman and Greg Oldham is built on the theory. The model identifies
certain job characteristics which can predict worker motivation, work performance,
job satisfaction, absenteeism and turnover. Performance Management uses several
parts of the model, especially feedback, that is expected to lead to better
performance, increased job satisfaction, lower absenteeism and lower staff turnover.
The JCM provides theoretical support for the hypothesis.
The Reinforcement Theory also argues for effective feedback to provide
employees with positive or negative reinforcements that may lead to rewards that
may again improve job satisfaction (Skinner, 1953).
The Goal Setting Theory argues for effective feedback in connection with goal
setting. Participation in goal setting is an important factor for improved job
satisfaction (Locke, 1968).
When implementing Performance Management at the Children's Hospital,
feedback was involved in all parts of the accountability system as demonstrated by
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such factors as staff appraisals as well as formal and informal meetings where
feedback is provided on a regular basis. The accountability system may lead to
rewards that again may cause improved job satisfaction.
Other factors such as praise, recognition, participation in decision making and
instrumental communication are also positively correlated with job satisfaction and
those factors are all parts o f the Performance Management system at the Children's
Hospital.
2. Staff turnover will decrease following the implementation of Performance
Management due to the relationship between job satisfaction and turnover.
Job satisfaction is negatively correlated with turnover in organizations.
Performance Management puts emphasis on factors which have been shown to
improve job satisfaction as demonstrated earlier in this dissertation.
The Goal Setting Theory, the Job Characteristics Theory and the Reinforcement
Theory all promote giving feedback which is correlated with improved job
satisfaction that is further correlated with decreases in absenteeism and turnover.
Former research at the National University Hospitals in Iceland shows a significant
negative correlation between job satisfaction and turnover (Bjorgvinsson, 1997).
3. Absenteeism will decrease following the implementation of Performance
Management due to the relationship between job satisfaction and absenteeism.
Job satisfaction is also negatively correlated with absenteeism in organizations.
The Steers and Rhodes model of attendance is based to a large extent on job
satisfaction as was demonstrated earlier in this dissertation. Former research at the
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National University Hospitals in Iceland show significant negative correlation
between job satisfaction and absenteeism.
4. Organizational effectiveness, in the form of increased number of patients being
served, will improve following the implementation of Performance Management.
As mentioned earlier, Performance Management draws from several theories.
Among those are Locke's Goal Setting Theory, Skinner's Reinforcement Theory,
Hackman and Oldham's Job Characteristics Theory, and TQM. Those four theories
demonstrate ways to improve performance and they provide theoretical support for
the hypothesis. They were closely examined earlier in this dissertation. When
Performance Management was implemented at the Children's Hospital, those
theories were all incorporated into the system and should therefore result favorably
as stated in the hypothesis.
The meta-analyses that were mentioned earlier in this dissertation indicate
improved performance if certain conditions are present. As an example one meta
analysis which studied the effects of psychologically-based organizational
intervention, showed that the most powerful effects on worker productivity were
intervention programs involving training and goal setting (Guzzo et al., 1985). This
supports positive results from such an intervention as implementing Performance
Management with its heavy emphasis on goal setting.
A literature search, focusing on studies analyzing the effects of employee
participation in decision making, found that participation in decision making had
modest positive relationships with performance and satisfaction (Cotton et al., 1988).
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Employee participation is of high value in Performance Management and was used
to a great extent at the Children's Hospital.
Earley et al., in 1990, studied the impact of process and outcome feedback on the
relation of goal setting to task performance. They found out “that both process and
outcome feedback interact with goal setting to enhance performance” (Earley et al,
1990: 87).
When Performance Management was implemented at the Children's Hospital the
above-mentioned factors were all incorporated into the system and should therefore
be expected to result in improved performance.
5. Total operational costs will decrease more, or increase less, when compared to the
costs of the control departments, following the implementation of Performance
Management.
When performance improves, as argued by the theories that Performance
Management is based on, productivity should increase, with more patients being
served. It is argued here that fixed costs are used more effectively following the
implementation of Performance Management. However, the total costs might
increase due to increased productivity but the control departments, where
Performance Management was not implemented in, should not show as favorable
changes in hospital costs.
Additionally, Performance Management builds on TQM regarding continuous
measurements and teamwork that will lead to improved performance, according to
the theoretical framework of TQM.
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III. Methods
A study of the implementation process of Performance Management at the
Children’s Hospital and its influence on key measures account for the core methodology
of this dissertation.
Subjects
The subjects are four clinical departments at the Children’s Hospital. They are:
the surgical unit, the medical unit, the neonatal intensive care unit and the unit for
children under the age of two. There are 51 hospital beds in those four units and the
total full time equivalent positions (FTE) are approximately 100. The fifth unit at the
Children’s Hospital is the day care unit. This unit differs greatly from the other units and
therefore it was decided not to include it in this study. Three hospital departments, one
adult surgical unit and two adult medical units, serve as control departments. One other
surgical department was included as a control unit during the early stages of the process,
however, it was excluded from the study when it became known that there is another
experiment taking place there, with the goal of improving job satisfaction. There are
approximately 65 beds in those three control units and approximately 90 FTE's.
Procedure
Performance Management was implemented at the Children’s Hospital starting in
October of 1997 and the implementation phase lasted for 7 months, until end of April of
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1998. An exact description of the implementation process was provided earlier in this
dissertation. Key operational numbers were gathered monthly for the years 1996,1997,
1998 and from January to April of 1999. Those numbers were therefore studied for 21
months prior to the implementation of Performance Management, 7 months during the
implementation phase and for 12 months following implementation, a total of 40
months. The same key numbers were measured in the four departments at the Children’s
Hospital and in the three control departments. The changes from the time period prior to
implementing Performance Management to the time period after the implementation was
completed were analyzed and compared. To analyze and control for the seasonal effects
an additional statistical analysis was performed but this time the same 12 months prior to
implementing Performance Management were compared to the 12 months following the
implementation, instead of the 21 months pre and 12 months post implementation. The
results of this analysis is provided in the results section of this paper.
The study started by measuring job satisfaction through a survey performed in all
departments of the hospital in April of 1997. Job satisfaction was measured again, using
the same questionnaire, two years later, in May of 1999. Minor changes were done on
the questionnaire in 1999, based on the experience from 1997. Better explanations were
provided regarding the definitions of words and the questionnaire was simplified to
some extent. However, the questions which were under study regarding job satisfaction
were not changed. The second time the questionnaire was used, it involved only the
seven departments under study; the four departments at the Children’s Hospital and the
three control departments. In 1997 all 3,000 employees of the hospital received the
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questionnaire. A similar study is planned for the year 2000, again involving all
employees. A comparison was done between the results of the two surveys in the
experimental and control units, before and after implementing Performance
Management.
The questionnaire measured several variables but due to the emphasis of this
dissertation only the job satisfaction variable was used. The other variables were:
procedural justice, unit-esteem, teamwork, trust in management, stress, organizational
identification and organization-based self-esteem. A few questions were added to the
1999 questionnaire, which specifically evaluated employees’ perception of some aspects
of Performance Management, i.e. whether praise and recognition is offered from
managers following a job well done, if the employee perceives himself/herself important
at the workplace, the employee is asked if he/she can influence decision making within
his/her department and if employees have the opportunity to provide comments before
changes are implemented at their workplace. Those questions, among the other
questions, assist in evaluating the effectiveness of the program. These results will be
presented in the results section of this paper.
Job satisfaction was measured using five items selected from the Hackman and
Oldham (1975) scale. The questionnaire was translated into Icelandic by a professional
translator and then translated back to English by another professional translator to be
able to evaluate the translation. Coefficient alpha for the overall scale used in the study
was .71, which is considered good. Respondents indicated their answers on a seven-
point scale ranging from “strongly disagree” (1) to “strongly agree” (7). The
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questionnaire is analyzed as a cardinal measure because on this seven-point scale the
attempt has been made to have the same distance between each of the seven units within
the scale. However, even though this frequently used scale is usually handled as a
cardinal measure it can never be exactly the same distance between each point within the
scale. It can only provide an approximation of the mean numbers. The scores for
questions number 2 and 5 were reversed before they were included for the statistical
analysis. The questions were:
• Generally speaking, I am very satisfied with this job.
• I frequently think of quitting this job.
• I am generally satisfied with the kind of work I do in this job.
• Most people on this job are very satisfied with the job.
• People on this job often think of quitting.
Those five questions when analyzed together provide the overall job satisfaction score
that serves to give answers to hypothesis 1. Additional analysis was performed on the
effect of profession and age on job satisfaction.
Staff turnover and absenteeism were collected from the Human Resources
Department and financial and patient related measures from the Financial Department.
The measures regarding acuity were accumulated from Nursing Administration. The
measures were accumulated monthly for each of the four departments at the Children’s
Hospital and the three control departments:
• Financial measures for all seven departments:
Total cost of operation, in thousand Icelandic Kronas. The total cost measure was
presented at a fixed price index by incorporating the change in the price index
into each months costs.
• Process and output measures for all seven departments:
Total number of patients, per month per department.
Total number of bed days, per month per department.
Length of stay (LOS), per month per department.
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Acuity level on an index of 1-4, per month per department.
• Measures regarding the employees for all seven departments:
Total number of staff per month per department.
Absenteeism, in hours absent per month per department.
Staff turnover, in FTE’s per month per department.
Job satisfaction on a scale 1 -7, per individual per department.
However, as said earlier, job satisfaction was only measured prior to implementing
Performance Management and again one year after the implementation was completed.
The N for the job satisfaction variable represents the number of individuals that
answered the questionnaire. However, the Ns for the other four variables were
calculated from the number of months times the number of experimental units and
control units.
Patient acuity is based on a patient classification system, which has been used at
the National University Hospitals in Iceland for the past ten years and for a longer period
in the United States. Every patient is classified daily into one out of four classes. The
classification is based on 32 factors concerning the care needs for each patient
(Giovannetti, 1974). Registered nurses evaluate daily the care needs of their patients and
they fill out the 32 factors before noon. Those 32 factors, when added together, provide
a number that classifies each patient into one out of four groups. Following that the
score is transferred into a database that includes every patient in the hospital, except
psychiatry wards. From the database the mean numbers for each ward is retrieved daily,
weekly, monthly and yearly. The mean acuity number, for each month per each
department under study, is included here as a control variable, with the purpose of
evaluating the difference in the severity of illness for the patients served. Patients with
higher acuity need more care and is therefore directly related to costs. It is used for
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staffing purposes by the professional nursing staff within the hospital and as a factor in
explaining differences in costs between time periods and departments. “Patient acuity,
enables us to recognize severity variance among different patients, as well as with the
same patient among different hospital days” (Van Slyck, 1991: 23). Within the goals
and objectives at the Children's Hospital there are factors that are expected to increase
the acuity level when more children receive care in the outpatient units and only the most
severe cases are admitted to the Children's Hospital. It is used here as a cardinal
variable because studies of the measure show that within the index on a scale from 1 to 4
there is similar difference in patient care needs, as measured in nursing hours, from 1 to
2, from 2 to 3, and from 3 to 4 within the scale. Acuity is used as a control variable in
this study when the number of patient and total costs variables are under study..
Key measures were selected, derived from the above numbers. Key measures are
used for the purpose of analysis and serve to provide answers to the hypotheses.
The key measures are:
1. Job satisfaction. Job satisfaction is measured through a survey on a scale from 1-7.
2. Absenteeism. Absenteeism is operationalized here in terms of sick leave usage and
short leave due to sick children which only accounts for a small part of total sick
leave. Sick leave for a period longer than 90 days is omitted in order to leave out
absenteeism due to pregnancy.
3. Turnover. Turnover is measured by the number of employees (FTE's) that quit.
Students doing internships and summer hiring is omitted.
4. Total number of patients served. This variable measures the total number of
patients admitted.
5. Total operational costs. This variable measures the total operational costs in
Icelandic Kronas (1$ is approximately 72 Icelandic Kronas).
The variables that are not directly related to the hypotheses serve here as either control
variables or to assist in explaining variations in the key measures. Those variables are:
total number of bed days, average length of stay, acuity, and total number of staff.
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Calculations
Statistical analysis of the measurements were performed using SPSS 8.0
software. This analysis is provided in the results section of this paper. Interpretation of
the findings and their implication is provided in the discussion section of the paper.
T-tests of the means for the key measures, before implementing Performance
Management and after the implementation had been completed, were performed in SPSS
and its statistical significance calculated. The t-test analysis was performed as the first
step in analyzing the numbers and it provides a good knowledge of the changes in the
mean numbers between time periods. However, it is used as a secondary analysis in this
study. This analysis is provided in the results section.
A two way ANOVA was performed with each of the key measures, job
satisfaction, turnover, absenteeism, total number o f patients and the total costs, as the
dependent variable. The pre/post variable is presented in the two way ANOVA as a
fixed factor to account for the time factor in the analysis and the treatment factor is
presented as a fixed factor as well, to count for the effect of the treatment itself on the
dependent variables. The treatment variable includes the effects of the theoretical
framework of Performance Management, goal setting, participation, teamwork, feedback
and reinforcement. Its influence on the dependent variable therefore reflects the impact
of Performance Management on the dependent variable. The interaction effect between
the time factor and the treatment factor was examined as well in the two way ANOVA
analysis. The acuity variable is used as a co-variate in the two way ANOVA for the
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number of patient and the total costs variables to try to account for the difference
severity of illness. The two way ANOVA is the primary analysis in this study.
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IV. Results
The results from the statistical analysis will be presented on the following pages
in connection with each hypothesis. The statistical output is used with the purpose of
evaluating whether each hypothesis is accepted or rejected.
The results from the t-test analysis are presented in table 4 for job satisfaction and in
table 5 for the other four key measures. The t-test is used here to provide additional
analysis. However, it is solely used as a secondary analysis. The results from the two
way ANOVA serve as the primary analysis and the conclusions are drawn based on that
analysis.
The results from the two way ANOVA analysis of all the five key variables, that
serve to provide answers to the five hypotheses, are presented in the following table 2
but the results will be further discussed in connection with each hypothesis and again
further in the discussion section of this paper. Notice should be taken that the N for job
satisfaction stands for number of individuals that answered the questionnaire but the Ns
for all the other four variables stand for the number of months in the four experimental
units and the three control units.
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Table 2. Two Way ANOVA Results of the Key Measures
Key measures________ Source___________ F___________ Sig.______
Job satisfaction Time 1.964 .162
N = 243 Program .297 .586
Time x Program 1.904 .169
Turnover Time 4.386 .037*
N = 211 Program 6.523 .011*
Time x Program .858 .355
Absenteeism Time 5.217 .023*
N = 197 Program 4.451 .036*
Time x Program .020 .888
Number of patients Time .079 .778
N = 170 Program 1.917 .168
Acuity 14.546 .000*
Total costs Time x Program .044 .834
N = 171 Time .067 .796
Program 40.227 .000*
Acuity 101.25 .000*
Time x Program 1.389 .240
*p<. 05
The two way ANOVA in table 2 presents whether the time factor, the treatment
factor or the interaction between time and treatment show statistically significant
changes during the study with p < .05. From the table it can be seen that neither time nor
treatment did have statistically significant influence on job satisfaction but both time and
treatment influenced turnover and absenteeism. However, the interaction between time
and treatment is not statistically significant. The acuity factor, here used as a co-variate,
shows statistically significant influence on total number of patients but time, treatment
and the interaction between time and treatment are not statistically significant. The
acuity factor also shows statistically significant effect on total costs. The treatment
factor is statistically significant also. Those results will be discussed further in
connection with each hypothesis and in the discussion section.
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Hypothesis 1.
Job satisfaction will improve, following the implementation of Performance
Management.
All of the approximately 3,000 employees at the National University Hospitals
received the job satisfaction questionnaire in 1997. However, for the purpose of this
study, only the respondents from the seven departments were analyzed from the 1997
survey. The response rate in 1997 was 51,5%. In 1999, only the 228 employees of the
seven departments received the questionnaire. There were 126 returned questionnaires,
which is approximately 55,3%. Out of those 126 returned questionnaires 6 were not
filled out. Table 3 shows the number, profession, and age division of the respondents in
the 1997 and the 1999 surveys.
It can be seen in table 3 that registered nurses represent more than 50% of all the
respondents in the study and the largest age group is 30 - 44 years. However, more
respondents are below 30 years of age in 1999 than in 1997.
The relatively low response rate, both in 1997 and in 1999, can be partially
explained by three factors. One is that employees with no professional education show
very low response rate both in 1997 and in 1999. Only 3.0% of the respondents in 1997
were from employees without any professional education and 4.4% in 1999.
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Table 3. Respondents from the Job Satisfaction Survey______
1997 Freauencv Percent
Total respondents 128 51.5%
Experiment 72
Control 56
Reg. Nurses 67 52.3%
Lie. Pract. nurses 30 23.4%
Physicians 12 9.4%
Other 19 14.8%
Younger than 30 16 12.5%
30 - 44 years 66 51.5%
45 - 59 years 34 26.5%
60 years or older 12 9.5%
1999 Freauencv Percent
Total respondents 126 55.3%
Experiment 65
Control 55
Not filled out 6
Reg. Nurses 63 52.5%
Lie. Pract. nurses 34 28.5%
Physicians 16 13.5%
Other 7 5.5%
Younger than 30 31 25.8%
30 - 44 years 51 42.6%
45 - 59 years 31 25.8%
60 years or older 7 5.8%
Another factor is that the summer vacation time in Iceland starts in May and this
could have influenced the response rate. The third reason could be that students from the
University of Iceland are doing their final projects in April and May of each year and
several of those projects involve surveys among employees at the various departments of
the National University Hospitals. The author of this dissertation was contacted by one
unit manager who was worried about the response rate because the staff of that particular
unit had received four different surveys that particular week.
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T-tests were performed on each of the five questions from the Hackman and
Oldham scale and also the overall score resulting from the five items analyzed together.
The results from the t-test analysis are presented in table 4. The results from the two-
way ANOVA analysis were presented in table 2.
Table 4. T - T ests A nalysis o f the Jo b Satisfaction Survey
Quest. Group Year N Mean Stddev t Sig.
1. Exper. 1997 69 5,46 1,16
1999 65 5,69 1,04 -1.197 .233
1. Control 1997 54 5,65 1,17
1999 55 5,49 1,33 0.655 .514
2. Exper. 1997 71 3,15 1,81
1999 65 2,85 1,91 0.969 .334
2. Control 1997 55 2,89 1,88
1999 55 3,13 1,80 -0.674 .502
3. Exper. 1997 71 5,75 1,09
1999 65 5,49 1,29 1.244 .216
3 Control 1997 55 5,65 0,97
1999 55 5,65 1,00 0.000 1.000
4. Exper. 1997 66 4,80 1,26
1999 66 4,60 1,34 0.894 .373
4. Control 1997 55 5,04 1,39
1999 55 4,64 1,08 1.689 .094
5. Exper. 1997 66 4,14 1,79
1999 65 4,06 1,91 0.231 .817
5. Control 1997 55 3,51 1,87
1999 55 4,31 1,57 -2.424 .017*
Job. Sat. Exper. 1997 64 4,98 0,98
1999 65 4,98 1,04 0.015 .988
Job. Sat Control 1997 54 5,20 1,09
1999 55 4,87 0,88 1.743 .084
*p< .05
The t-test analysis performed on the results from the job satisfaction survey show
statistically significant increase within the control group, from the survey in 1997 to the
1999 survey, regarding the perception that employees within their job environment are
thinking about quitting their jobs, t(2,l 08) = -2.424; p < .05. This is the result of
question number 5, “People on this job often think of quitting.” The other questions,
except question 3, indicate more favorable results for the experimental group than the
control group, even though they are not statistically significant with p < .05.
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A two way ANOVA was performed also on the results of each individual
question and the interaction between the time and the treatment factors show statistically
significant results on the same question, F(1,243) = 4.719; p < .05. The results of the
other questions do not show statistically significant results. The questions generally
show more favorable results in the experimental group than in the control group in the t-
test analysis, even though only one of the results shows statistically significant changes.
Those results provide indication of more favorable conditions in the experimental group
than in the control group.
The two way ANOVA analysis in table 2 shows that the overall job satisfaction
did not increase statistically significantly withp < .05. Neither the time factor nor the
treatment factor is statistically significant. The interaction between time and treatment is
not significant either. The conclusion is therefore that there is no significant difference
between 1997 and 1999.
The fact that the job satisfaction survey did not show significant improvement
between the year 1997 and the year 1999 can have various reasons. Those reasons will
be discussed in detail in the discussion section of this dissertation. However, those
possible reasons will be briefly mentioned here. One reason is the unstable condition for
registered nurses in Iceland, during part of the observation period in 1997 until 1999,
with them having fought a battle for improved salaries. In the Spring of 1998,
approximately 2/3 of all registered nurses at the two large hospitals in Reykjavik
resigned in order to fight for better salaries. The evening before the resignation was to
take place, the nurses and the administration of the two hospitals made an agreement for
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somewhat better salaries and more expected increases in connection with the
implementation of a clinical ladder system which had not been used before in Iceland.
Approximately 95% of the nurses who had resigned withdrew their resignations.
However, they were not totally happy about the new agreement although they placed
great hope on the new clinical ladder system. This system was built during the
remaining months of 1998 and in January of 1999 the new system was introduced.
Nurses did not think the new system lived up to their hopes and still were not satisfied.
And as stated before, registered nurses represent over 50% of the respondents in the
survey.
When the results are analyzed specially for registered nurses it can be seen that
the job satisfaction score decreases only minimally from the 1997 survey to the 1999
survey. The mean score for job satisfaction was 4,84 in 1997 but it was 4,80 in 1999.
However, they report more frequently their intention of quitting their jobs. Similar
results are observed for licensed practical nurses with the job satisfaction score being
5,44 in 1997 and 4,89 in 1999. However, physicians show increased job satisfaction
between the year 1997 and 1999 and they are less likely to quit their jobs. For
physicians the job satisfaction score was 5,20 in 1997 and 5,49 in 1999. None of those
changes in the job satisfaction score is statistically significant wit /?<.05). When age
groups are analyzed it can be seen that the youngest group, below the age of thirty,
shows decrease in job satisfaction between the year 1997 and 1999.
The seven departments were also analyzed specially. One department in the
Children’s Hospital shows significant decrease job satisfaction score when the other
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three show either no change or show increased job satisfaction between the two
surveys. The job satisfaction score for the Neonatal Intensive Care unit was 5,12 in 1997
but it was 4,79 in 1999. However, the changes are not statistically significant with
p<.05. The Neonatal Intensive Care unit is located in a different building within the
National University Hospital, but not within the Children's Hospital. Due to the distance
from the main pediatric center, the Neonatal Intensive Care unit has not participated
fully in the implementation process of Performance Management. All the three control
units show decreased job satisfaction score between 1997 and 1999.
The unstable condition within the health care community has been exaggerated
by the increasing competition on the market for health care professionals, including
physicians and nurses. Other countries, such as Norway and Great Britain, have been
offering Icelandic health professionals good salaries within their health care systems.
Additionally, due to the low unemployment rate, which is approximately 2.5% in
Iceland, job opportunities have been opening in other industries, such as in the
biochemical industry. Some health care professionals have already quit their jobs and
many are evaluating new job opportunities.
This can clearly be seen in the results of this survey. The employees are
relatively satisfied on their jobs, however they are still thinking of quitting. However,
due to the fact that the changes in the overall job satisfaction score was not statistically
significant the hypothesis can not be accepted.
Other key numbers and hypotheses.
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The other key numbers were measured monthly for each of the seven
departments for the total of 40 months. There were 21 months prior to implementing
Performance Management, 7 months during the implementation, and 12 months
following implementation. There were more variables gathered than just the key
numbers. Those numbers serve when explanations are sought for the changes in the
variables. They were also gathered monthly for each of the seven departments. They
are: total number of bed days, average length of stay (ALOS), average acuity level on a
scale of 1-4, and total number of staff. Turnover is presented in full time equivalents
(FTE) and absenteeism is presented in number of hours.
A t-test was performed, before and after the implementation of Performance
Management, of the key variables. A two way ANOVA was performed as well to
provide answers to the hypotheses. The results from the two way ANOVA analysis are
presented in table 2. The results from the t -test analysis are presented in table 5.
Table 5. T — Test Analysis of the Key Variables
Variable G toud Studv N M ean Stddev t Sj&
Turn-over Exper. Pre 77 .290 .526
Post 48 .391 .656 -0.949 .345
Tum-over Control Pre 51 .430 .581
Post 36 .692 .728 -1.859 .066
Absenteeism Exper. Pre 77 260.0 177.0
Post 46 212.7 135.6 1.559 .122
Absenteeism Control Pre 42 216.4 104.0
Post 33 164.6 96.7 2.211 .030*
# of patient Exper. Pre 77 75.4 103.0
Post 46 56.1 73.3 1.115 .267
# of patient Control Pre 62 91.6 25.1
Post 32 89.4 34.3 0.355 .723
Costs Exper. Pre 77 8.635 3.320
Post 45 9.997 3.825 -2.067 .041*
Costs Control Pre 63 8.786 1.380
Post 35 10.708 3.829 -3.597 .001*
* p<. 05
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Hypothesis 2.
Turnover will decrease following the implementation of Performance Management due
to the relationship between job satisfaction and turnover.
The data for turnover was obtained from the Human Resources Management
Department. It is presented as a number of FTEs per month for each of the seven
departments. Summer hiring and students doing internships are omitted. The results
from the t-test are presented in table 5 and the results from the two-way ANOVA are
presented in table 2.
Turnover increased both in the experimental group and in the control group as
can be seen in the t-test in table 5. The increase in turnover is not statistically significant
forp < .05. When 12 months are analyzed and compared with the same 12 months
following the implementation it can bee seen that turnover increased statistically
significant for both the experimental group and the control group.
A two-way ANOVA analysis was performed to examine the separate effect of the
treatment when the time factor has been accounted for. It can be seen in table 2 that
both time and treatment have influence on turnover. The two way ANOVA in table 2
demonstrates a significant effect of the treatment by itself on turnover F(1,211) = 6.523;
p <.05 and the time factor also has statistically significant influence on turnover F(1,211)
= 4.386; p<.05.
Due to the above statistical analysis, the hypothesis is not accepted because
turnover increased instead of the predicted decrease in turnover. The two way ANOVA
analysis provides support for that analysis.
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Hypothesis 3.
Absenteeism will decrease following the implementation of Performance Management
due to the relationship between job satisfaction and absenteeism.
The data for absenteeism was obtained from the Human Resources Management
Department. It is presented as a number of hours absent from work per month due to
sick leave or because of sick children. Sick leaves for a longer time period than 90 days
was omitted from this analysis. Absenteeism was tabulated for each of the seven
departments. The results from the t-test are presented in table 5.
Absenteeism decreased both in the experimental group and in the control group
as the t-test demonstrates in the table above. When 12 months prior to implementing
Performance Management are compared with the same 12 months after the
implementation the same results are observed.
A two way ANOVA analysis was performed to examine the separate effect of the
treatment when the time factor has been accounted for. It shows a statistically
significant changes both for the time factor and the treatment factor. The two way
ANOVA in table 2 demonstrates a significant effect of the treatment by itself on
turnover F(l,197) = 4.451; p<.05 and the effect of the time factor also F(l,197) = 5.217;
p < .05. This analysis provides support for the hypothesis.
As a result of the above statistical analysis, the hypothesis is accepted.
Absenteeism decreased significantly and the two way ANOVA analysis shows the
treatment factor to be statistically significant. Those results are interesting when the
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question about stress is considered. The question is “Do you realize stress at your job.”
The score for this question was very high for the experimental group. It was 5.38 but the
score was 4.84 for the control group. There is a significant correlation between stress at
the workplace and absenteeism (PriceWaterhouseCoopers, 1999), which makes this
decrease in absenteeism even more important when the Performance Management
program is evaluated.
Hypothesis 4.
Organizational effectiveness will improve following the implementation of Performance
Management as demonstrated by an increased number of patients being served.
The data for the total number of patients served was obtained from the
Department of Finance. It is presented as the number of patients served per month for
each of the seven departments. The result from the t-test is presented in table 5.
There was no statistically significant change in total number of patients served
for neither the experimental group nor the control group as the t-tests in the table above
show. When the 12 months prior to the implementation are compared with the same 12
months after the implementation was completed the results did not change.
Those results are interesting when the average acuity level for the two groups is
analyzed. The average acuity level for the experimental group increased from 2.64, on
the acuity index 1-4, to 2.95 This represents an increased acuity of 11.7% for the
experimental group. When the average acuity level increases in a hospital unit, the total
number of patients served are expected to decrease due to the higher acuity level. But
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there is not a statistically significant change in the total number of patients for the
experimental group. However, the average acuity level for the control group decreased
from 1.80, on the acuity index, to 1.70, or a decreased acuity of 5.8%. When the acuity
level decreases, the number of patients are expected to increase if other factors, such as
the FTEs are constant. But there was no statistically significant change, as said before.
A two way ANOVA analysis was performed to examine the separate effect of the
treatment when the time factor has been accounted for. To try to account for the
difference in the severity of illness the acuity variable is used as a co-variate in the two
way ANOVA. The two way ANOVA in table 2 demonstrates a significant effect of the
acuity variable by itself on number of patients F(l,170) = 14.546; p<. 05. However,
neither the time nor the treatment variables had significant values.
Due to the above statistical analysis, the hypothesis is not accepted.
Hypothesis 5.
Total operational costs will decrease more, or increase less, when compared to the costs
of the control departments, following the implementation of Performance Management.
The data for the total operational costs was obtained from the Department of
Finance. It is presented as the total operational costs per month per each department in
Icelandic Kronas.
The total costs increased both in the experimental group and in the control group
as the t-tests show in table 5 above. The increase in total operational costs is statistically
significant for both the experimental and the control units *(2,120) = -2.067; p < .05 for
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the experimental group and /(2,96) = -3.597; p < .05 for the control group. When the
12 months prior to implementing Performance Management were compared to the same
12 months following the implementation the same results occurred.
Those results are interesting when the decreased average acuity level is
considered. However, it is also important to evaluate other factors, such as total bed
days, the average length of stay (ALOS) and the total number of staff (FTE). There is a
decrease in total bed days for both groups and the number of staff is relatively consistent
between 1997 and 1999.
A two way ANOVA analysis was performed to examine the separate effect of the
treatment when the time factor has been accounted for. To try to account for severity of
illness the acuity variable is used as a co-variate in the two way ANOVA analysis. The
two way ANOVA in table 2 demonstrates a significant effect of the acuity factor
F(1.171) =101.250; /?<.001. The treatment factor shows statistically significant effect on
the dependent variable F(l,171);/?<.001. However, the two way ANOVA does not show
statistically significant effect of the time factor. The interaction between time and
treatment is not statistically significant either. The total cost measure was presented at a
fixed price index by incorporating the change in the price index into each months costs.
A t-test analysis was also performed to see if a cost per patient variable, when the acuity
variable had been incorporated into the analysis, would show statistically significant
changes from before the implementation of Performance Management until after the
implementation was completed. The t-test analysis for the cost per patient variable
showed a significant t value t= -2.549; p <.05 for the control group. No significance was
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noted for the experimental group for the cost per patient variables in the t-test analysis.
As a result of the above ANOVA analysis, the hypothesis is accepted. Total
costs increased both in the experimental group and in the control group but after
incorporating the acuity measure into the analysis it can be seen, in the two way
ANOVA analysis, that the program variable had statistically significant effect on the cost
variable.
Other questions from the questionnaire.
Some of the questions in the questionnaire provide further indication of whether
the implementation of the Performance Management program was successful. Those
questions were especially designed in the latter questionnaire for this purpose. However,
there is no comparison from the time period before Performance Management was
implemented because those questions were not a part of the 1997 questionnaire. Still
they can provide some indication. A question, “I am important at my workplace,” scored
5.58 within the experimental group but 5.45 in the control group. This difference did
not show statistical significance when t- test was performed. Another question, “I can
have influence at my workplace,” scored 4.95 within the experimental group but 4.73
within the control group. This difference was not statistically significant either.
However, the third question, “The employees have the opportunity to provide their
comments before changes are implemented" did show statistical significance, t = 2.520;
p < .05. The experimental group scored 3.78 on this question but the score was 2.78 for
the control group which demonstrates a large difference. An interesting score was
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experienced on the question, “Do you realize stress at jour job”. The experimental
group scored 5.38 but the control group scored 4.84, which demonstrates high pressure
from stress in the experimental group which again has been correlated with high
absenteeism and high turnover (PriceWaterhouseCoopers, 1999). This question did not
show statistical significance withp < .5. However, t = 1.948; p < .10. Still those
variables are lower within the experimental group than the control group, which provides
further support for a successful program. One question which is considered important in
Performance Management surprisingly enough received a lower score within the
experimental group than within the control group. This question is, “I receive praise and
recognition from my superior after a job well done”. The score was 4.75 for the
experimental group but 5.02 for the control group which was not statistically significant.
However, this score points to the need for further monitoring or education on the
importance of praise and recognition in the experimental units.
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V. Discussion
A. Interpretation of findings
The results generally indicate more favorable changes in the experimental group
than in the control group which support the predicted outcomes of the Performance
Management program. Two hypotheses were accepted. Absenteeism decreased both in
the experimental group and in the control group. However, the decrease in absenteeism
is statistically significant in the two way ANOVA analysis for the treatment variable that
represents the Performance Management program. Total operational costs increased
both in the experimental group and in the control group. However, it increased less in
the experimental group. Three hypotheses were not accepted. However, in all the three
hypotheses there was a trend in the predicted direction. Job satisfaction increased more
in the experimental group, turnover increased in both groups but it increased less in the
experimental group, and the total number of patients decreased in both group.
The job satisfaction survey demonstrated a trend in the predicted direction even
though it failed to attain statistical significance. One question did attain statistical
significance for the control group and it was the perception that people on this job often
think of quitting their jobs. Those results envoke worries for the National University
Hospitals because the employees are the most valuable asset for the hospital. The health
care environment in Iceland, as well as the human resources environment within the
hospital, must be analyzed in order to find the possible cause for this trend.
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The job satisfaction survey demonstrates that the employees are relatively
satisfied on their jobs but they are still thinking of quitting. The experimental group
shows less intention of quitting and they are more satisfied on their jobs than the
employees in the control group. However, the predicted trend in job satisfaction is lower
than expected and it is not statistically significant. The Performance Management
program, therefore, demonstrates a success regarding job satisfaction because the trend
in the experimental group is more favorable than in the control group even though it
failed to attain statistical significance.
When the possible causes are analyzed, regarding the survey results that
employees are relatively satisfied with their jobs but are still thinking about quitting, the
health care environment in Iceland comes first in mind. One reason is the unstable
condition for registered nurses in Iceland. The Union of Registered Nurses in Iceland had
been bargaining with the Government for a new contract in behalf of nurses for most of
the year 1997. The bargaining ended with a contract in November of 1997 that was
based on a completely new salary system for most of public workers in Iceland. This
new salary system is in the spirit of Performance Management that allows for individual
discrepancies within the system. The earlier salary system was rigid and only based on
tenure and age of each individual. Performance on the job was not a part of the earlier
system, which did not motivate employees to do well because they received the same
salaries whether they performed at their best or if they performed less.
The new system is based partly on performance, according to an appraisal system
and a clinical ladder that was initiated into the system, and partly on tenure and age.
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Additionally, the new contract is between registered nurses in each organization and the
organization where they work instead of the former centralized contract for all nurses
and all health care organizations. However, this new contract puts a lot of work on the
organizations themselves and they were not ready for the quick change that was expected
in the contract. The contract was supposed to be fulfilled by February 1st of 1998. Not
much happened and the new system was not ready in time and April 1st registered nurses
resigned in large groups. At the University Hospitals in Iceland, approximately 2/3 of
the nurses resigned and their last day of work was June 30th. During those months the
stress level of nurses was high and they were not happy with the effort of the
organization. A new contract was finally signed a few hours before the resignations
were supposed to take place and around 95% of those that resigned actually withdrew
the resignation. Some of the nurses that did not withdraw their resignations went to
work in the small country hospitals and health centers, some went to Norway or Great
Britain where salaries are significantly higher for nurses, and still others went into
different professions.
Most registered nurses placed a great hope on the new clinical ladder system
which was finally implemented during the beginning months of 1999. However, nurses
did not think the system lived up to their hopes. The atmosphere is still shaky, both
because of the unhappiness with the new system and also because of a nursing shortage
due to the fact that the vacant positions are not yet filled, but the system is slowly
reaching a state of equilibrium.
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Another possible reason for the survey results is the increasingly competitive
job market that surrounds health care. Some countries, such as the other Nordic
countries and Great Britain have been practicing recruiting efforts for Icelandic health
care professionals, especially registered nurses and physicians. Those countries are
offering better salaries within their health care organizations. Additionally, because of
the low unemployment rate and the good economic condition in Iceland, job
opportunities in other industries, such as the biochemical industry, have been opening.
This environment will most likely influence health care professionals in Iceland to
reevaluate their current job situation and have their eyes open for other job opportunities,
perhaps even though they are not dissatisfied on their jobs.
As demonstrated earlier, turnover increased both in the experimental group and
in the control group. Those results need serious attention by the management of the
hospital due to the critical consequences that could happen if many specially trained
employees will actually quit.
A program, such as Performance Management, if implemented in the whole
hospital should be expected to improve the situation regarding job satisfaction and the
intention to quit as the trend demonstrates in this dissertation.
Absenteeism decreased both in the experimental group and in the control group
following the implementation of Performance Management. However, the decrease was
only statistically significant for the experimental group which demonstrates an important
outcome of the program. The decrease in absenteeism is even more important when the
question about stress is considered where the experimental group scored high. Earlier
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studies have demonstrated a significant correlation between stress at the workplace and
absenteeism (PriceWaterhouseCoopers, 1999). Absenteeism is expensive for
organizations and it does influence the continuity of care within the hospital. The
indication that Performance Management does affect absenteeism at the workplace is
therefore both interesting and important.
The results about the number of patients served and total operational costs
following the implementation of Performance Management are very interesting. The
number of patients served at the inpatient units have been decreasing in the hospital as a
whole because of the increasing number of patients served in the outpatient units.
Inpatient beds have been decreasing and outpatient beds have been increasing as a result
of this change. Data for outpatient units is not a part of this dissertation so the decreased
number of patients served in the inpatient units could be expected if the actual number of
beds have decreased which was not the case in the seven departments under study. If the
acuity level increases the number of patients would be expected to decrease if the
staffing level is the same. And because the patients are only hospitalized during the
most acute period of their illness, the average acuity level should increase. This was
exactly the case for the experimental group with an 11.7% increase in the average acuity
level. However, the acuity level in the control group decreased by 5.8% during the same
time period. The LOS increased in the experimental group which indicates that patients
with more severe illness, and therefore more costly, were admitted into the Children's
Hospital. That could explain the increased acuity, the increased LOS and increased
costs. During the same time period the number of staff at the experimental units stayed
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approximately the same and the total operational costs increased. The recent contract
between Greenland and Iceland, about the Icelandic health care system admitting
patients from Greenland, could have influenced this trend.
The results for the control imits can not be as easily explained. The average
acuity level decreased, the LOS decreased and the number of staff decreased. Still the
total operational costs increased more for the control group than it did for the
experimental group. In fact, the total operational costs increased statistically significant
for the control group.
When all the above mentioned factors are considered, it is evident that the
productivity and total operational costs are reflecting more favorable trend in the
experimental group than for the control group. This indicates further support for the
success of the Performance Management program that must be closely evaluated by the
management of the hospital. However, the Performance Management program must be
further monitored and studied. The questions that were added to the second
questionnaire with the purpose of evaluating the implementation of the program indicate
that some aspects of the Performance Management method need further follow up. The
praise and recognition factor that is of high importance in Performance Management
seems to be ignored in practice to some extent. However, the lower score within the
experimental group could also indicate that the employees within those units are
expecting more praise and recognition than before because they were all educated about
Performance Management in the beginning of the implementation phase. Regretibly,
there is not a comparison of this factor between the 1997 and 1999 questionnaires.
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Other factors, such as if the employees perceive themselves to be important at the
workplace, if they can have influence at the workplace, and if they have the opportunity
to provide comments before changes are implemented, all received more favorable
scores within the experimental group than the control group. Those factors are all
considered of importance in Performance Management.
It will be interesting to follow the data for a longer period to evaluate the long
term effect of the Performance Management program. It is also of interest to do a
similar study in other public organizations to evaluate the influence of Performance
Management in other area of public management. It is also important to keep in mind
that the three phases of the implementation process provide an important preparation for
the making of a management contract between the management of the Children's
Hospital and the CEO and the Board of Directors for the hospital as a whole. The
strategic direction with the goals and objectives attached, the performance measurement
system and the feedback system are necessary factors in such a management contract.
The CEO and the Board of Directors of the National University Hospitals will have
important information as well and a necessary bases for signing a management contract,
between the hospital as a whole and the Ministiy of Health and Social Security, if it has
already made management contracts with all the specialty areas within the hospital
system.
Donabedian’s theories about structure, process, and outcome are the basis for
quality in health care and some care delivery methods are built on those theories.
Structure, process, and outcome are interrelated and must serve together to build a
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system that provides quality health care. Patient satisfaction reflects the success of all
the three factors and is widely used as a measure of quality. Patient satisfaction is a part
of outcome of health care. Patient satisfaction is at the core of TQM and must be
considered as a future performance measure for the National University Hospitals.
Quality must be involved at all times, by every person in the organization, in all
aspects of the services provided. Quality improvements must be a top priority in health
care and requires a culture change in organizations. Even though outcomes of medical
interactions will always be the top priority in health care, customer satisfaction must also
be strived for. Quality of health care services, as defined by the patient, does not
necessarily show the same priorities as defined by health professionals. A medical
outcome does not involve how long a person can be kept alive with technology. It
involves the quality of life the medical service is able to provide for their customers.
The weaknesses of this study:
The environment around the job market in health care in Iceland during the year
1998 and the bargaining for improved salaries for registered nurses is the first weakness
of this study as demonstrated earlier in this dissertation.
Another weakness of this study is the new Children’s Hospital that is being built.
During the implementation process the Government of Iceland agreed to finance a new
Children’s Hospital that would be ready for operation in the year 2002. This put an end
to some of the frustration that had been built up due to the insufficient housing condition
for children within the National University Hospitals in Iceland. However, professionals
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in pediatrics did not agree on the size and interior of the new building. The next
months were used to try to find a compromise within the community around pediatrics.
This time period was stressful despite the satisfaction with the agreement on improving
the situation for pediatrics in Iceland. The current situation in this matter in February of
1999 is that the contractors started on the building in October 1998 but in January 1999
it was stopped due to the protest of the neighboring community who argue that the
building is too large for the lot. It is likely that the contractors will start again within a
few months after legal matters have been cleared. All those matters regarding the new
Children's Hospital could influence other factors such as the stress level, job
satisfaction, turnover and absenteeism.
The third weakness of this study is the small population under study. The four
departments of the Children’s Hospital and the three comparison departments do not
provide large sample. Some of the changes in the key numbers before and after
implementing Performance management could therefore be too small to attain statistical
significance. They can perhaps only indicate influence without providing statistical
significance. This can be corrected at a later date with following those numbers for a
longer period of time, which is exactly the intention of the researcher.
The fourth weakness involves the changes other than mentioned above to the
population that occur through time. Medical technology is always changing, and usually
in the direction towards increased possibility of medical interventions into diseases that
improve prognosis, and also towards improved diagnostic probability. In this research
40 months are under study. During those 40 months the acuity of patients within the
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Children’s Hospital has increased 11.7%. This is a significant increase which means
that patients of the Children’s Hospital are on average sicker and need more care which
in turn will cost more. The acuity level at the comparison departments has decreased
5.8% for the same time period. A side effect of this change in acuity is its influence on
the number of patient served at those departments and total operational costs. Another
effect of an acuity increase is its possible impact on employees’ stress level. However,
to control for the change due to time the two way ANOVA incorporates the time factor
as an independent variable.
The fifth weakness of this study involves other factors. One of those factors is the
relatively low response rate with the job satisfaction questionnaire. Another factor
concerns the limitations of using questionnaires. Individuals do not have the same
vision of what the numbers in the questionnaire mean and the may even score them
differently between days. However, questionnaires are frequently used and they often
are the only method available for some studies. In this particular study a questionnaire
was used as a tool for one hypothesis which in fact was not accepted. However, the
results provide indication for a trend in the predicted direction. Another weakness is that
the total number for turnover is presented in FTEs and it is a low number because the
total number of staff is low in each department. A resignation of only one FTE does
therefore make a difference in those numbers.
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B. Implications
The next years will be extremely important for the development of Western
welfare states. The large role of government in many European countries has been
greatly criticized during the recession years of the 1980s. If Europe is going to be able to
continue its emphasis on the welfare state, the European countries must improve
performance in government and public agencies as well as developing measurement
tools that demonstrate results. But as Henry Mintzberg says” business is not all good,
government is not all bad” (Mintzberg, 1996: 82). European countries will most likely
continue to offer health care as a public service. The European public is demanding
better public service without having to pay higher taxes and governments try to
strengthen the economy by limiting the tax rate. This means that the performance of
public service has to improve. Performance Management is a management method that
strives to improve performance. The National Performance Review in the United States
strongly supported the GPRA . They strongly urged public companies in the United
States to begin integrating strategic planning and performance measurements into their
operation (National Performance Review, 1993).
A close observation of the implementation of Performance Management in a
health care organization in Iceland is influential for both policy-formulation and policy-
implementation in Iceland and other Western countries in the future. This dissertation
provides the evaluation of the theoretical background for Performance Management, the
preparation, actual implementation process, and evaluation of the results of applying
Performance Management in a publicly run health care organization in Iceland. And it
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indicates a success of such an intervention as implementing Performance Management,
as described in this dissertation, in a public organization in Iceland. It will be most
interesting to follow the key variables for a longer period to be able to see the long term
effect of Performance Management on those variables.
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VI. Bibliography
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Aguayo, R. 1990. Dr. Deming. the American who taught the Japanese about
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Alpander, Guvenc G. 1990. Relationship Between Commitment to Hospital
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Bjorgvinsson, Svali H. 1997. The Importance of Justice: Exploring the
Relationships between Procedural Justice and Nine Outcome Variables Following
Organizational Change. Unpublished Master’s Thesis at the New York University.
September.
Brooke, Paul P. Jr. 1986. Beyond the Steers and Rhodes Model of Employee
Attendance. Academy of Management Review. Vol. 11, No. 2, 345-361.
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Asset Metadata

Creator Gunnarsdottir, Anna Lilja (author)

Core Title Performance management in health care in Iceland

Degree Doctor of Philosophy

Degree Program Public Administration

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag health sciences, health care management,OAI-PMH Harvest,political science, public administration

Language English

Contributor Digitized by ProQuest (provenance)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c16-174230

Unique identifier UC11339192

Identifier 3054874.pdf (filename),usctheses-c16-174230 (legacy record id)

Legacy Identifier 3054874.pdf

Dmrecord 174230

Document Type Dissertation

Rights Gunnarsdottir, Anna Lilja

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

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