SHRINERS HOSPITAL CASE STUDY 5
ShrinersHospital Case Study
Decision Maker and Urgency
Theboard of directors, the board of trustees, and the medical advisoryboard are the major decision makers. The board of directors and boardof trustees comprises of volunteers who are also members of the groupthat forms the Shriners. The board of directors workS within a uniquegoverning code that had each member first elected to the lowestposition and then moved up one rank annually until they got to theleading position, the Imperial Potentate. The imperial potentateholds several positions including CEO, chairman and president. Theboard of trustees is responsible for the smooth running of the day today operations of the hospital. The board of directors approvesdecisions in regards to any strategic actions. Decision makers makethe decisions that affect the organisation’s overall strategy andfate (Walter,Kellermanns & Lechner, 2012).In this case the urgency of the situation is the sustainability ofthe hospital to prevent its closure. Following the 2008 recession,the hospital lost money to the tune of 3 billion dollars stretchingits budget dangerously. Cuts have to be made and the decision makerswill decide the extent of the measures to ensure that instead ofhaving the hospital close, changes can be made in order to sustainits operations (Rigby& Bilodeau, 2013).
Theproblem in this case is the fact that the initial plan is no longersustainable due to several reasons including, the rate at which thehospital operations grew exceeded the rate at which the funding grewresulting in operations at a loss. The organisation has beenoperating at a loss for a long time now and the recession onlyworsened the situation. They have experienced a reduction in patientvolumes, a reduction in revenues and a steady decrease in theorganisation’s endowment fund due to erosion from its daily deficitspending. Members have also decreased from about 950 thousand toabout 350 thousand placing the financial burden on fewer volunteersin spite of the growth of the organisation’s operations. The mainconcern is that, if the hospital continues to operate in the sameway, it will soon become bankrupt and crease to exist defeat thenoble purpose for which it was founded. The initial purpose which wasto treat ill children regardless of their ability to pay cannot besustained and may not be an option is something is not changeddrastically which is why this concern is very significant to theorganisation.
Underlying Issues and Root Causes
Oneof the main underlying issues is the fact that the organisation’sgrowth has been countered by the decrease in volunteer members whichhas greatly reduced the amount of funding. This means theorganisation’s current method of funding is not sustainable. Therecession cost the organisation about 3 billion dollars in marketablesecurities value which was more than 40 percent of its initial value.This has proved to be a hard blow to recover from. The currentoperations are not cost effective and are actually resulting inpersistent deficits which are causing losses. The number ofreferrals has reduced and this has reduced patient volumes which inturn has made it difficult to be cost effective through economies ofscale.
Thenumber of volunteer members over the years has reduced by more than50 percent. The recession reduced this number further and alsoaffected the remaining ones adversely in terms of contribution. Thecurrent members are continually feeling the strain of taking on sucha huge responsibility and this may discourage more of them to leavethe organisation. As it is, the organisation’s expansion requiresmuch more funding to recover from the deficit operations and toremain in operation after the recovery.
Recession ReducedNumber of volunteer members
Operationon deficit Reduced Number of patients
Oneof the strategies is to adopt a lean production and operationsprocedure. This will require cutting out a lot of indirect expenses,and may require the reduction of administrative staff (Williamson,2012). The budget will also need to be cut across the board. In orderto substitute the organisation’s loss in funding, patients withmedical cover and insurance will be allowed to pay. Since it is a notfor profit organisation, proceeds will be used to run day to dayoperations more sustainably. They also may have to find promotionalways to attract more patients in order to raise the value of theorganisation’s securities increasing value for shareholders.
Theorganisation’s vision is quite noble and as such, more efforts toattract members should be made. There are several people around theworld with the ability to support such a cause, but they need to beaware of its existence first. Reducing administrative costs andstaffing by changing some hospitals to outpatient only will also helpmaintain sustainability. Prioritizing the organisations activities todetermine which ones will continue to run and which ones will be cutwill help reduce costs too (Purce, 2014). For instance closing downthe research centres in order to keep treatment programs open is anoption.
Purce,J. (2014). The impact of corporate strategy on human resourcemanagement. New Perspectives on Human Resource Management (Routledge Revivals),67.
Rigby,D., & Bilodeau, B. (2013). Management tools & trends2013. Bain& Company.
Walter,J., Kellermanns, F. W., & Lechner, C. (2012). Decision makingwithin and between organizations rationality, politics, and allianceperformance.Journalof Management, 38(5),1582-1610.
Williamson,P. J. (2012). Strategy as options on the future. Sloanmanagement review, 40(3).