Leadership and Management Models in Healthcare Settings

Introduction to Healthcare Leadership and Management

As with modern organizational structures generally, management and leadership play a central role in healthcare contexts — specifically in relation to reform initiatives, types of services offered, quality of care, and capital use. As with other sectors, there is no universal formula for effective management and leadership; contextual factors such as political systems and socioeconomic conditions play a substantial part in determining outcomes.

In basic terms, a healthcare system must accomplish two fundamental objectives (adapted from Dorros, 2006):

First, it must improve the health condition of the population in accordance with specific requirements and targets. Second, it must deliver services in the most efficient manner possible in order to achieve the first objective.

Furthermore, regardless of a nation's economic condition, when attempting to reform healthcare systems, governments must ask themselves three fundamental questions: Who pays for care (and how much)? Who receives care (what kind, when, and from whom)? Who is compensated, how much, and for doing what?

With these questions in mind, a healthcare system is undeniably affected — in reaching those objectives — by both factors mentioned above. In this sense, significant problems are triggered by a profound lack of understanding of the direct link between the absence of strong management capabilities at all levels and inadequate health system outcomes.

Historical Phases of Healthcare Management

Management has been a vital element of healthcare for more than a century, evolving through several distinct phases of development (Ross et al., 2002, pp. 4–5):

Preliminary organization and structure — 1910 to 1935: This was the infancy phase of healthcare organizations, with legal structures, the creation of facilities, and methods of operation being the primary concerns.

Efficiency — 1935 to 1955: This period introduced scientific management principles to healthcare, with mechanization and standardization of internal processes as the major focus. Integrated care emerged as a growing and vital phenomenon.

Systems movement and administrative control — 1955 to 1970: Technology assumed a more important role in delivering better and more varied services. The efficiency of services offered became a central concern.

System networking — 1970 to 1980: The defining characteristic of this period was the tendency to develop links and networks of healthcare services. Economic recession required systems to adapt, making more effective and rational use of available resources. It also meant joining forces toward a common objective — better health. Private healthcare organizations also began forming partnerships during this era.

The new competition — 1980 to 1995: The most significant change during this period was the introduction of competition into healthcare services. A shortage of resources relative to ever-growing needs and new health threats meant that traditional organizational structures had to change. Innovation became recognized as essential for sustainability, and technology assumed a major role.

Reinvention — 1995 to the present: Rising expectations and new developments in medicine created a more dynamic environment. Leaders and managers face an increasing number of novel circumstances where old policies no longer apply, creating a demand for new executive competencies to improve the quality of decision-making.

In this context, healthcare reform over the past two decades has been particularly focused on decentralizing services and scaling down healthcare structures (Dorros, 2006, p. 7), bringing services closer to local community needs and granting greater decision-making power to regional managers. The expected benefits include improved effectiveness, equity, and community participation in health service delivery (Mills et al., 1990).

Dorros (2006) argues that in this complex and constantly changing environment, a new approach is genuinely needed — management supported by a strong leadership orientation. The implementation of reform policies, within the constraints of limited resources and shifting health contexts, requires both leadership and managerial competency at all levels, and especially at the decentralized level of the health system (Dorros, 2006, p. 8).

In Australia, one of the most significant components of reform was the decentralization of the system. Initial changes began in the early 1990s, moving from a centralized healthcare model to a social insurance model. Insurance coverage became mandatory, and a single fund was established to cover costs. The most recent major changes occurred in 2006, including the introduction of the Hospital Manager — the head of each healthcare facility — who holds a direct agreement with the Ministry of Health while maintaining a considerable degree of autonomy. The agreement includes performance indicators, and based on an annual review, it is either extended or terminated.

Acquiring Skills and Competencies for Effective Management

Healthcare organizations can benefit from the example of other successful enterprises. In Built to Last (Collins and Porras, 1997), a study of successful business practices concludes that leadership continuity and ongoing management development contribute substantially to organizational success. Organizations and their stakeholders benefit when employees are trained to manage time, information, personnel, change, revenue and expenses, information technology, and equipment.

In the follow-up work Good to Great, Collins (2001) describes a Level 5 leader as one who builds enduring greatness through a combination of personal humility and professional will — coaching others to do the right thing, taking responsibility for failures while attributing success to others, and relying on high standards to motivate those around them. Collins identifies Level 5 leadership as one of the key determinants of organizational greatness. The essence of truly effective leadership involves managing oneself and others in response to a wide range of circumstances. It is therefore important that leaders understand how to manage their emotional responses to varied situations and to the actions of others.

How employees perceive Australian nurse-managers matters greatly for recruitment and retention. Wieck et al. (2002) identify areas for improving both existing and future leaders, finding that both established and emerging workers desire leaders who demonstrate honesty, integrity, and optimism. Employees want strong communicators who are responsive, inspirational, fair, approachable, and empowering (Wieck et al., 2002).

Managing Time

Effective leaders employ systematic approaches to time management. Leaders often allow valuable time to be lost on non-essential tasks such as sorting mail, filing, and responding to non-critical requests. Effective leaders apply self-discipline to organize these tasks and assign priority to activities that produce meaningful results (Contino, 2004).

Managing Human Resources

A significant portion of the nurse-leader's role involves the management of personnel, particularly nursing staff. Considerable attention must be paid to understanding individuals, because — much as with clinical diagnosis — interventions are easier to design when the underlying issue has been clearly identified. Geddes et al. (1999) conclude that there is a need for financial accountability, quality-enhancing management practices, and effective personnel management.

Managing Change

Healthcare leaders must respond to new policies, changing financial conditions, consolidations, and facility closures. Given the rapidly changing external environment, understanding how leaders anticipate and implement change has become increasingly important (Simpson, 1996). Nurse leaders exert considerable influence over the change process (Mathena, 2002).

Managing Revenue and Expenses

International research indicates a widespread need for financial education among nurse-leaders (Mark and Critten, 1998; Courtney et al., 2002; Contino, 2001). Courtney et al. (2002) identify financial management as one of the three leading areas where development is most urgently needed. Australian nurse-managers must possess a foundational understanding of financial management. Interpreting financial statements, understanding efficiency ratios, and recognizing the time value of money are essential when financial projections and cost implications for business plans are being estimated. Understanding cash flow from the point of patient registration through to the collection of the patient's account assists in designing efficient processes.

Managing Technology and Equipment

A basic understanding of information technology is essential for effective healthcare leaders. Today's information-rich environment requires leaders to understand how a hospital's information systems function and how to use technology to make processes and operations more efficient. Legislation such as the Health Insurance Portability and Accountability Act of 1996 directly affects computerized nursing documentation systems and the protection of patient information (Contino, 2004).