Managing Health Organizations for Quality and Performance Page 1 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. CHAPTER 3 Strategic Planning CHAPTER OBJECTIVES After reading this chapter, readers will: Identify the purposes of strategic planning. List the six steps of strategic planning. Describe the importance of a mission, vision, and values. Describe how to use analysis of strengths, weaknesses, opportunities, and threats (SWOT). Explain the strategic uses for Healthy People 2020. Describe Mobilizing for Action through Planning and Partnerships (MAPP). Chapter Summary The basic components of planning for improvement are described and reviewed. These include assessing the internal organization and the external environment, deciding on strategic priorities, and implementing the priorities through operating plans, goals and objectives, and budgets. The strategic priority document Healthy People 2020 is summarized, as well as a prominent planning model used in public health work, Mobilizing for Action through Planning and Participation (MAPP). Case Study Stan and Ollie were debating the finer points of planning. Both had been working at the health department for many years, were near retirement, and considered themselves to be experts. After all, they had been constructing plans for a long time. \"Hey fellas,\" said Brett as he approached the two men. \"Are you familiar with MAPP?\" \"Sure,\" replied Ollie. \"I carry a book in my car that is full of them.\" \"Well, in that case, you should be able to help me out. I have been assigned to design a program to improve the cardiovascular health of senior citizens.\" \"No problem,\" said Stan. \"Let me get my triangle and T-square and we can draw up plans for some exercise equipment.\" Sensing a problem, Brett calmly asked, \"Can we resume this conversation after lunch? I did not have breakfast.\" \"All right,\" agreed Ollie. \"The schools must not teach mechanical drawing anymore. Good thing we are here to help out with planning,\" said Stan. Could you help Brett? What would you say to him? INTRODUCTION Strategic planning is a discipline that is well understood and used in many businesses and competitive health care organizations. However, strategic planning is not as widely used in many nonprofit and public health organizations. This is unfortunate because nonprofit and public health organizations, like other health organizations, can benefit https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 2 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. significantly from the strategic planning process. All health organizations face competition for limited resources, and all have the capability to make better use of those resources and produce more quality and value for consumers and the public. Strategic planning helps an organization develop an overall sense of direction for the future. This is essential because an organization that does not identify and make strategic choices loses opportunities to learn about its market and its capabilities to serve and endangers fulfillment of its organizational mission. Strategic planning is an important competency for managers because it stimulates new ideas and emphasizes continuous improvement in quality and value relative to alternative or competing organizations. STRATEGIC PLANNING Two definitions are necessary to understand strategic planning. Strategy addresses the question of how to position an organization in its environment. A strategy is a major course of action an organization uses to pursue its mission and vision. Strategic planning is the process of developing strategies. As a result of conducting a strategic planning process, an organization will make significant, nonrecurring decisions about its nature and the directions it will take in the future. As a first step, an organization must first clearly articulate its mission. Mission An organization's mission statement delineates its purpose and reason for existence. It establishes boundaries for the organization's activities, programs, and services. It creates focus, assuring that the organization does not attempt to be all things to all people. Mission statements are as important for what they exclude as for what they include. A mission statement is typically brief, usually not exceeding two or three sentences. It communicates the current intentions of the organization. Mission statements are often accompanied by statements of vision and values. Vision and Values Decision makers in many organizations develop a targeted description of the future outcomes expected if the organization is successful. This description is called a vision. Visions are somewhat idealistic because they are intended to motivate people and enroll the hearts, as well as the minds, of organizational stakeholders. Many organizations also produce a written statement of the values upon which an organization is built. This is especially true in organizations with a religious affiliation or foundation. They may rely on explicit values to a greater degree than their secular counterparts. Strategic planning activities are based on the mission, vision, and values of the organization. Guiding statements (the mission, vision, and values documents) from two different organizations provide useful examples. Fairview Health Services (FHS) is a large, nonprofit integrated health delivery system in Minnesota. FHS is comprised of 7 hospitals, has over 2000 employed and affiliated physicians, and is supported by more than 21,000 staff. The mission of FHS is to improve the health of the community and support research and education efforts (Fairview Health Services 2010). The vision of FHS is to be the best health care delivery system in America. The values of FHSdignity, integrity, service, and compassionreflect beliefs regarding ways to serve individuals. A second example of a guiding statement comes from Healthy People 2020, which lists strategic priorities for national health promotion and disease prevention efforts to improve the health of people in the United States by 2020. It is used as a tool for strategic planning by all levels of government and the health system to prioritize targets and to measure progress for health issues in specific populations (US Department of Health and Human Services 2010). The mission of Healthy People 2020 is to identify priorities for improving health nationwide and engage multiple sectors to take health actions based on scientific evidence. The vision of Healthy People 2020 is to help promote a society in which all people live long, healthy lives. The values of Healthy People 2020 are embedded in its overarching goalsthe values emphasize a desire to improve community health, nurture healthy behaviors, and eliminate health disparities. https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 3 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. Both guiding statements (FHS and Healthy People 2020) set stretch goalsbecoming the best health care delivery system in America (FHS) and creating a society where all people live long, healthy lives (Healthy People 2020). Stretch goals are important to the improvement process because they challenge employees and stakeholders to perform at even higher levels. The mission, vision, and values of each organization create the foundation for aspirations and strategic plans of the organization. Strategic Planning Steps The strategic planning process is depicted in Figure 3-1 and consists of six steps that proceed from the mission, vision, and values. Note that the mission, vision, and values have two roles in the strategic planning process. First, they form the foundation of the planning efforts. Second, the results of the planning effort should serve to validate the continuation of the mission. The mission of the organization (and more rarely, the vision or values) is occasionally changed as a result of the strategic planning process, as shown by the feedback loop in Figure 3-1. Although not a common occurrence, it is important for an organization to alter its mission when the environment, the people, or the community it serves changes, or when it undergoes a major transformation. The six steps of strategic planning include the following: 1a. Analyze the internal organization 1b. Analyze the external environment 2a. Analyze internal strengths and weaknesses 2b. Analyze external opportunities and threats 3. Identify and evaluate strategic issues and options 4. Select strategic priorities FIGURE 3-1 The Strategic Planning Process Although the steps in the process are presented in a linear fashion for simplicity, in reality, they are interdependent. Identification of key strategic issues can result in a reassessment of external opportunities and threats, for example. A https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 4 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. selection of priorities can mean changes in internal operations that alter the internal strengths and weaknesses of the organization. The strategic planning process is more realistically described as an interdependent cycle than a series of discrete steps (Begun and Heatwole 1999). Steps 1a and 1b: Analyze the Internal Organization and the External Environment Strategic planning begins with an analysis of the internal environment of the organization and the external environment in which the organization operates. Because the internal and external environments of organizations are constantly changing, regular review is essential in order to identify and assess the impact of changes and how they affect an organization. Factors that typically are reviewed to assess changes include laws, regulations, payment mechanisms, competitors, workforce supply, trends in quality and safety, demography of the service area, and customer or client satisfaction. An internal organizational analysis consists of a review of the health organization's resources and performance. An internal analysis typically includes measures of productivity, staffing ratios compared to industry standards, key financial ratios, patient and client satisfaction rates, employee morale, and other performance measures. An external environmental analysis looks at the key factors outside the organization such as economic, political, and legal trends that affect the service area and the health care organization. It is also important to examine the demographics and disease risks in the community carefully. Conducting an external environmental analysis is an extensive activity undertaken to gain a complete understanding of relevant external forces affecting the organization. At a minimum, this component of the environmental audit should include key demographic trends, employment data, poverty data, workforce supply, and health status of the community. It also should include characteristics of the client or customer populations served by the organization, where they come from, and market penetration trends. Steps 2a and 2b: Analyze Internal Strengths and Weaknesses and External Opportunities and Threats (SWOT Analysis) The analysis of the internal and external environments forms the basis for determining the organization's internal strengths and weaknesses as well as external threats and opportunities. Taken together, these two steps are often referred to as SWOT analysis. This acronym refers to the Strengths and Weaknesses inside the organization and the Opportunities and Threats outside the organization. A SWOT analysis uses the findings from the environmental audit to perform a critical self-assessment of the organization. Step 2a analyzes the list of factors identified in the internal organizational assessment performed in Step 1a, identifying those factors that represent strengths of the organization (what the organization does well) or weaknesses of the organization (what the organization does not do well). For example, strengths of a health organization may include the high quality of services it delivers to its constituents, a highly committed staff, and low staff turnover. In contrast, weaknesses may include productivity problems, financial difficulties, falling client base, and aging physical plant. Step 2b analyzes the list of factors identified in the external environmental assessment, identifying those factors that represent opportunities for the organization (favorable trends outside the organization) and threats to the organization (unfavorable trends outside the organization). For example, opportunities for a health organization may include improving community economic growth, increased governmental funding, and grant opportunities. In contrast, threats may include potential funding decreases, the opening of a new organization that serves the same needs and may encroach on the organization's activities, or deteriorating socioeconomic trends in the constituent group. Step 3: Identify and Evaluate Strategic Issues and Options https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 5 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. Analyzing the internal and external environments of a health care organization in terms of the strengths, weaknesses, opportunities, and threats (SWOT) enables the organization to recognize specific areas where improvement is necessary and development is possible. The fifth component of the strategic planning model (Step 3) is to identify and evaluate major strategic issues and choices. Managers of health organizations have the responsibility to understand all the issues facing their organization completely in order to prioritize their importance and make decisions to address the priority issues adequately. This process of prioritizing is essential for health organizations, which often have limited resources to meet the seemingly unlimited needs of their stakeholders. The strategic issues must be monitored continually and choices must be identified so that the organization stays responsive to the patients and population it serves. An organization that tries to do everything will end up doing nothing. Once the most important issues facing a health organization are identified, strategic choices must be made to guide the organization's attempts to address them adequately. First, the SWOT analysis can be used to identify strategies to (1) take advantage of strengths and to maximize opportunities (max-max strategies); (2) take advantage of strengths to reduce vulnerability to threats (max-min strategies); (3) minimize weaknesses by taking advantage of opportunities (min-max strategies); and (4) minimize weaknesses and avoid threats (min-min or defensive strategies). Strategies in the first category, which draw on strengths and opportunities, are ideal and usually involve growth and expansion. Strategies in the last category, which address weaknesses and threats, often involve downsizing and retrenching. Two other techniques assist in the process of making strategic choices: key issue analysis and forecasting. These techniques help an organization analyze its priorities in the context of the changing external environment to make useful strategic choices for the future. Key Issue Analysis A key issue is an event that, if it occurs or does not occur, will have an important impact on the organization. In a strategic planning process, it is important to identify and prioritize all key issues in the context of the internal and external environment of the organization, which is constantly changing. For example, emergency preparedness is often identified as a key issue for public health departments. Until September 11, 2001, however, concerns regarding emergency preparedness would normally have received a low priority in an issue analysis. Today, it receives a much higher priority. Among hospitals, implementation of the Affordable Care Act of 2010 is a key current issue. Assumptions are often made when identifying key issues. An assumption is an estimate of an important future event over which an organization has little or no control. For example, as a result of the economic downturn that began in 2008, state and local governments face substantial problems in balancing governmental budgets. Assumptions need to be made by publicly funded health organizations regarding the impact of these budget reductions on health programming. Identifying how changing external circumstances and events will influence or alter the priority issues of health organizations in the future is an important component of key issue analysis. Forecasting Forecasting consists of predicting or estimating future events in the environment. Forecasting is usually based on extrapolation of past or present trends into the future. Many trends in public health are readily subject to forecasting techniques. This includes forecasts of population trends, death rates and their causes, health behaviors and risk factors, and economic predictors. However, forecasting trends can also be inexact and elusive. Some events are the result of discontinuities or turbulent developments in the environment and may not be identified through a forecast of past trends. For example, the outbreak of an epidemic or an unexplained plant closure of a major employer in a community is an event not likely to be anticipated or included in a forecasting exercise. https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 6 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. Step 4: Selecting Strategic Priorities The last activity of the strategic planning model (Step 4) is selecting strategic priorities, in which managers decide what an organization must do in order to capitalize on strengths and opportunities, improve areas of weakness, and respond to threats. As a result of the environmental audit, the SWOT analysis, and evaluating major strategic issues, the organization makes strategic choices. Building on the priority issues identified in step 3 of the strategic planning process, decision makers select strategies to address these priorities and provide a focus for the organization. The resulting strategic priorities should answer three essential questions: 1. Where is the health organization at present? 2. Where does it want to go? 3. What actions must take place to achieve the goal from the previous question? OPERATIONAL PLANNING As shown in Figure 3-1, the strategic planning process is followed by planning at the operational level of the organization. Operational planning requires setting goals and objectives at the tactical level, usually the departmental and subunit levels, for carrying out the organization's strategies. Plans of the operating units of the organization then form the basis of the goals and objectives of the operating units and the workforce of the operating units. Operational plans typically are revised annually, whereas strategic plans have a longer shelf life, usually 2 to 5 years. A business plan is a common type of operational plan. Business plans describe new services, products, or programs and their markets and make projections concerning the personnel and other resources needed to implement the new items. A key element is the financial analysis, which often includes projected expenditures and revenues and a breakeven analysis (analysis of volume required so that the new service does not lose money for the organization). Ideally, departmental goals and objectives are also translated into individual employee objectives by managers and workers as part of the employee performance evaluation process. With evaluation of results and continuous feedback to the strategic planning process, individual and departmental goals and objectives may be incrementally adjusted but still are expected to maintain consistency with the organization's strategy. BUDGET PLANNING Finally, as depicted in Figure 3-1, operational plans require funding. Budget plans, in the form of a capital budget for major purchases, an operating budget for annual revenues and expenses, and a cash budget to predict the inflow and outflow of cash, are common planning mechanisms in organizations. Budgeting is covered in more detail later in this book. STRATEGIC PLANNING FOR COMMUNITY HEALTH: MOBILIZING FOR ACTION THROUGH PLANNING AND PARTNERSHIPS Mobilizing for Action through Planning and Partnerships (MAPP) is a strategic planning process for improving public health services and outcomes in local communities. Similar to the organizational strategic planning model in Figure 3 -1, MAPP is a community-wide strategic planning tool developed specifically for public health by the National Association of County and City Health Officials (NACCHO) and the Centers for Disease Control and Prevention (CDC). A work group of local health officials, CDC representatives, community representatives, and public health experts developed MAPP between 1997 and 2000. MAPP \"helps communities improve health and quality of life by identifying and using their resources wisely, taking into account their unique circumstances and needs, and forming effective partnerships for strategic action\" (NACCHO 2010). https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 7 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. The MAPP process assesses all levels of organizations, including public, private, and voluntary organizations, as well as individuals, involved in public health activities in the community. This assessment creates a complete picture of the resources available to the local public system. MAPP is based on a community-driven and community-owned approach designed to assess and enhance a community's strengths, needs, and desires, which will in turn drive the strategic process (NACCHO 2010). Compared to the strategic planning steps outlined in this chapter, the MAPP model places a greater emphasis on the external environmental assessment in order to identify opportunities for public health organizations to more effectively secure resources, align needs and assets, respond to external circumstances, anticipate and manage change, and establish a long-term direction for improving the health of the community. MAPP uses assessment tools to determine the health status and community perceptions of health needs. MAPP Process The MAPP process includes six steps (NACCHO 2010): 1. Organizing for Success: This step involves organizing the planning process and developing partnerships. 2. Visioning: The visioning step engages stakeholders in a collaborative, creative process of developing a shared community vision with common values. 3. Conducting Community Assessments: Four community assessments provide information about internal and external environmental trends relevant to the community: Community Themes and Strengths Assessment: Identifies local community interests, perceptions about quality of life, and assets. Local Public Health System Assessment: Appraises the capacity of the local public health system to conduct essential public health services. Community Health Status Assessment: Analyzes data about health status, quality of life, and risk factors. Forces of Change Assessment: Identifies changing external forces and dynamics of the community and the local public health system. 4. Identifying Strategic Issues: Similar to the \"identification and evaluation of major strategic issues and options\" step in the planning model presented earlier, in this step, participants develop a prioritized list of the most important issues facing the community based on the results of the four MAPP assessments and the shared community vision. 5. Formulating Goals and Strategies: In this step, participants take the strategic issues identified in the previous phase and formulate goal statements and broad strategies for addressing issues, resulting in the development and adoption of an interrelated set of strategy statements. 6. Action Cycle: In this final step, the local public health system develops and implements an action plan for addressing priority goals and objectives. The plans are implemented and evaluated, with ensuing adjustments in the earlier steps as necessary. The final step in the MAPP process is similar to operations planning and implementation in an organization. CONCLUSION Strategic planning is a formal process used to establish an organization's goals and the strategies for achieving them. Strategic planning involves an assessment of an organization's status, a definition of where it wants to be, and a definition of the set of actions needed to implement change (or maintain its current position). Organizational missions or visions should create stretch goals for organizations to significantly improve the quality of their outputs and/or their performance. The strategic choices made by a health organization must be consistent with its mission, vision, and values. Once the strategic choices are made, they become the basis upon which to develop operational plans. As a result of the strategic planning process, strategies are developed to ensure that all of the efforts of the health organization and its resources are aligned to serve the identified needs. Healthy People 2020 helps public health organizations align their strategic priorities with those of the US government. MAPP is one strategic approach that is useful in public health planning at the community level. https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 8 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. Systems Thinking about Strategic Planning Strategic planning can work well when the future is somewhat predictable. What about when the environment is so complex or dynamic that managers are unable to see very far down the road? Under such conditions, strategic planning in its traditional form may not be useful, but organizations are not helpless. To the extent that the future is emergent rather than predictable, McDaniel, Jordan, and Fleeman (2003) urge that organizations cultivate creativity and learning. To do so, scenario planning is one popular technique. Scenario planning means imagining a range of different futures that are plausible and thinking through strategic responses to them. Although each scenario is plausible, no single specific scenario is actually likely to ensue. However, the scenario planning process alerts the organization to build flexibility into its strategic actions. Another useful management style in uncertain environments is mindfulness. Mindfulness means paying close attention to the way that events are noticed and interpreted as well as being open to new information and ways to notice and interpret. Encouraging an open system and listening to feedback from stakeholders, including employees and customers, are ways for managers to be more mindful of change in their organizational environments. Case Study Resolution Brett skipped lunch. Instead, he made a telephone call to a Dr. Lombard. Dr. Lombard's Internet biography said that he directed the public health program at the university and was an expert in planning. After exchanging pleasantries, Brett asked Dr. Lombard the same question that he had posed to Stan and Ollie. The response he received was quite different. Dr. Lombard explained the MAPP process and its applications. He invited Brett to come to his office to discuss how to use MAPP for designing his cardiovascular health program. After spending the afternoon with Dr. Lombard, Brett returned to his office. He met Stan and Ollie in the hall. \"How was your lunch?\" asked Ollie as he left the building to go home. That night, Brett started his application for admission to Dr. Lombard's public health program. REFERENCES Begun, J. W., and K. B. Heatwole. 1999. Strategic cycling: Shaking complacency in healthcare strategic planning. Journal of Healthcare Management 44 (5): 339-51. Fairview Health Services. 2010. Our mission, vision, and values. http://www.fairview.org/About/Missionvisionvalues/index.htm (accessed December 6, 2010). McDaniel, R. R., M. E. Jordan, and B. F. Fleeman. 2003. Surprise, surprise, surprise! A complexity science view of the unexpected. Health Care Management Review 28 (3): 266-78. NACCHO. 2010. MAPP basics: Introduction to the MAPP process. http://www.naccho.org/topics/infrastructure/mapp/framework/mappbasics.cfm (accessed November 24, 2010). US Department of Health and Human Services. 2010. Healthy People 2020 brochure. http://www.healthypeople.gov/2020/TopicsObjectives2020/pdfs/HP2020_brochure.pdf (accessed December 6, 2010). RESOURCES Periodicals https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016 Managing Health Organizations for Quality and Performance Page 9 of 9 PRINTED BY: maria.isabel.sierra@us.army.mil. Printing is for personal, private use only. No part of this book may be reproduced or transmitted without publisher's prior permission. Violators will be prosecuted. Begun, J. W., and A. A. Kaissi. 2005. An exploratory study of healthcare strategic planning in two metropolitan areas. Journal of Healthcare Management 50 (4): 265-74. Ginter, P. M., W. J. Duncan, and S. A. Capper. 1991. Strategic planning for public health practice using macroenvironmental analysis. Public Health Reports 106 (2): 134-41. Ginter, P. M., and L. E. Swayne. 2006. Moving toward strategic planning unique to healthcare. Frontiers of Health Services Management 23 (2): 33-7. Kaissi, A. A., and J. W. Begun. 2008. Strategic planning processes and hospital financial performance. Journal of Healthcare Management 53 (3): 197-208. Zuckerman, A. M. 2006. Advancing the state of the art in healthcare strategic planning. Frontiers of Health Services Management 23 (2): 3-15. https://jigsaw.vitalsource.com/api/v0/books/9781284028850/print?from=29&to=41 7/25/2016