The service sector

Mercy Hospital is a private hospital within the service sector, traditionally 101 years old and state driven the Hospital has reacted to the change in the market place that drives the way they provide for their patients, and how efficient they are in its present form. This is largely due to the hospital industry becoming increasingly competitive, as many states were forced to reduce restrictions on offering new services. Health care competition has put a lot of pressure on Mercy Hospital to make changes to either add services, or provide additional services that other hospitals already had. As a result this has made Mercy Hospital become much more productive in providing and offering services on a comparative level with their competitors.

An organisations structure sets out the formal framework of relationships within an organisation, the grouping together of its activities, its lines of communication and it hierarchy. Within this framework the control and co-ordination of activities can take place. The former structure of Mercy Hospital can be described as a ‘tall hierarchical structure’ with a very bureaucratic format. Mercy Hospital used to operate within very wide and several departments, this included many layers from President, to Vice President, to several Directors, to several managers, to supervisors and finally down to the grass roots staff level.

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The ‘scalar chain’ refers to the number of different levels in the structure of an organisation and the chain of hierarchical command. In the case of Mercy Hospital they operated within ‘narrower spans of control’ and more levels of authority. With the span of control being narrow, this presents a problem of co-ordination and consistency in decision making, therefore hindering effective communication.

This leads to additional levels of authority in the organisation, creating an unnecessarily long scalar chain with overlapping areas of authority. As mentioned in the video “a simple procedure such as a chest x-ray to be taken can take up to sixty four steps, only 7 of those steps have anything to do with the x-ray, the rest are the infra-structure that we’ve built to support them. The simplest of tasks led to a profusion of paperwork and even worse a patient staying four to five days having seen several dozen members of staff asking repeated questions”.

The new approach being implemented at Mercy Hospital is a ‘team approach’. The ‘activation team’ decided that this form of approach would be more efficient resulting in creating a more pleasant environment for their stakeholders – ‘The Patient’. This strategy reflected both the medical mission and competition – “to fill beds”. In the new design of using a ‘team approach’ the first step involved interviewing patients, to learn what they valued most. The results showed that patients required ‘Caring and concerned people taking care of them’ and ‘easy to get around, wanted to be more focussed on them and not the department’. With this at the forefront of the design of the new approach, the following procedure began to take place.

The care of each patient is delivered by one team which consists of four members, all located within the same floor of a particular department. The emphasis is clearly teamwork driven, with all members of the team receiving basic medical training and being encouraged to learn new skills, to enable them to work across departmental lines, in order for other roles to be covered. If we take a look at the role of the Pharmacist, in their former structure the Pharmacist would have no contact with staff or patients. Now they are on the same floor talking to patients, physicians, staff etc all utilising and freely communicating their expert knowledge.

This ensures that whichever member of staff is in the room with the patient, they will be able to answer their question. This, in turn assists with the overall well being and customer satisfaction of the patient, reducing the duration of their stay within the Hospital. This key function of Mercy’s design is the distribution of authority to the staff who has a lot closer contact with the patient, therefore making it possible to simplify the administrative bureaucracy.

Although this new approach has been implemented, it still does not eliminate traces of the old design. The expertise is still maintained within central departments of Mercy Hospital and the chain of command who contribute to a constructive role, and provide a back-up for more difficult decisions that can not be made by the ‘team’. The ‘team approach’ ensures consistency and co-ordination of activities and decision making, within fewer levels of authority and wider spans of control. The new approach has enabled Mercy Hospital to merge seventy departments into fifty, with a view to reducing this by half in the near future. This is an ambitious way of working seeking the best of both worlds in terms of operating a ‘flat and tall hierarchical structure’. This allows for good communication and co-ordination, as well as effective resource allocation and low cost, allowing managers to utilise their time more effectively on important tasks. This requires great skill amongst all team members.

The new structure forced upon Fluor Daniels’ was as a result of the original company -Fluor losing 633 million dollars when oil prices plummeted in the early 1980’s. They were forced to restructure and merged with Daniels’ offering diversification, the opportunity to sell products to a wider range of clients and industries. To implement its diversification strategy Fluor Daniels’ adopted the organisation of buying separate business units with a wide variety of engineering and construction markets. Twenty-four business units were created to cover twenty-four lines such as oil, water, paper, biotech etc. The emphasis was for them to be a small company with access to a large global company offering additional strength and support.

A ‘Network Structure’ and move to ‘Decentralisation’ was introduced to allow this to happen, to centralise policy making decisions and decentralise policy executing decisions The need for decentralisation in the case of Fluor Daniels’ had its advantages in moving the company forward; it enabled decisions to be made closer to the operational level of work, with an increased responsiveness to local circumstances. This provided fewer layers of bureaucracy creating a design contrast with mechanistic organic ones. Mechanistic design depends on centralised authority, many layers of bureaucracy. Organic design decentralises authority and enables companies to respond to change by having fewer roles, more flexible job design and a greater and effective flow of information being communicated throughout the company.

This in turn led to an improved level of customer service, as support services such as administration are more likely to be effective if provided as close as possible to the activities they are intended to serve. The move to decentralisation also provided their employees improved opportunities for training in management, as well as an encouraging effect on employee motivation and morale. In the case of Fluor Daniel’s’ they became more flexible to meet changes happening in the environment around them, in order for them to remain viable they implemented new strategies and new structures taking into account customer needs and demands, which has resulted in encouraging success for the company. The main strategy being diversification.

The ‘network structure’ enables Flour Daniels’ to stretch their structure and enable the company to implement strategic plans in the ever-changing business environment in which they compete. The more flexible the structure and the emphasis on strategic plans in place allows Flour Daniel’s’ to respond to change effectively allowing them to capitalise on it, as they are backed by the resources of the entire company to remain successful. A message of commitment, trust and teamwork has contributed to their current success, learning from mistakes they have encountered previously in their hierarchical and matrix structure.

They concentrated on interrelationships of levels and dependency; this enabled them to perform effectively with clear objectives, designed structure, and good upward and downward communication throughout the different levels of the organisation. As with Mercy Hospital some of the traces from these designs still exist, just managed in an improved effective and flexible way -“Diversification is the name of the game”.

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