What would be the best decision?

Scenario: John is the Director of a large ancillary service department in a 400 bed

metropolitan medical center. He is responsible for 4 cost centers with two supervisors

(Jane and George) overseeing daily operations within the cost centers. His department

is a primary revenue producer among the various ancillary services. The department

currently has two open positions, both in the same cost center. Budget cuts over the

past several years have made it difficult to handle the patient load at times and

recruitment of new staff has been increasingly competitive and difficult. Patients and

physicians are mostly satisfied with services although John knows that quality and

timeliness of many services has been hurt by low staffing, reduced resources and

outdated equipment.

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expenses and as much as 20% below budget on revenues in some departments.

Mary: "I'm afraid the overall budget is not looking good this year and all

departments are being asked to cut costs by 5% for the remainder of the year. For you

that means about $120,000 in the last 4 months of the year."

John: "But I'm not over budget on expenses and our revenue is right on target."

Mary (with some defensiveness): *I am aware of your budget figures and

appreciate the job you've done; however, we all have to do our part. All departments

are being asked to do this and my division will do its share.

John: "Are you asking me to lay off staff? I'm concerned about increasing

workload on staff that are already stretched to the limit on busy days. And the

physicians are not going to be happy if we start rushing exams and treatments any

faster than we already are.

Mary: "I'm asking you to cut expenses by 4%. How you do it is up to you.*

John (frustrated): What would you suggest?'

Mary: That you do your job and figure it out yourself. You know your

department better than anyone else and you know what the doctors will tolerate.*

John: -Yes, but....

Mary: "John, you know how competitive the environment is right now. You also

know that several options for restructuring operations are under discussion.

Department managers who rise to the task on this one will be the first in line for slots in

the new organizational chart. Those that don't may find themselves out of a job. I'll

expect your preliminary recommendations and projections by Monday.*

John leaves Mary's office determined to accomplish the goal of an 5% reduction.

He makes a list of his options. Although he can squeeze small savings in several

places, he is still faced with two very difficult choices if he is to make his target.

Options:

Cut staff

Not replace the two open positions and layoff the most recent hire in each cost

Center Delegate the responsibility of cutting 6 positions to the two cost center

supervisors who know their areas and their people. Allow them to remove

problem employees with the minimum steps needed to satisfy the human

resource department.

Cut non-personnel costs

Return to a vendor who had favorable prices but lower quality materials and

some safety issues.

Cancel equipment upgrades planned to improve the clinical and administrative

effectiveness of several services

He also sees two additional options - neither of which is likely to result in the full

$120,000 savings.

3.

Present the problem to the entire department staff, remind them of the

department's mission and how well they have adjusted to difficult situations in the

past, and ask for suggestions and a volunteer task force to help implement the

cuts.

Prepare a recommendation based on the small savings he has identified and is

comfortable with, and refuse to make significant cuts to staff or supply expenses

on the basis of patient safety and quality of care. He has a good relationship with

the COO and could try going over Mary's head if he needed to.

Analyze the situation from the following perspectives:

Identify the various types of power throughout the case presentation. Include

both personal and situational/structural power. Formulate questions about the

appropriateness of the use of power in each example.

Sample:

Mary is exercising legitimate power in assigning responsibility to

John to reduce costs.

Is it appropriate for someone in Mary's position to direct someone

in John's position to cut costs?

2.

Identify ethical issues throughout the case presentation. Formulate questions that

apply the ethical criteria presented in the lecture to each issue

Sample:

John's department is being asked to cut costs at the same level as

other departments even though they are already controlling costs

and meeting revenue targets.

Is this equitable and fair?