University of Amsterdam
Master Thesis
Which roles can CEOs take to best manage external stakeholder
relationships during a merger in the health care industry?
Student: P.A. (Pepijn) van Gestel – reg. nr. 10282610 Date of submission: 15-01-2014
Supervisor: Dr. Ir. J (Jeroen) Kraaijenbrink
Abstract
Within the rapidly changing environment of the health care industry in The Netherlands, hospital CEOs are forced to make strategic choices. One of the possible solutions to survive as a hospital within these complex surroundings is to merge with another hospital. External stakeholders such as health insurance companies, local authorities and ministries are key players in this merging process.
This study focused on the force field between hospital CEOs and external stakeholders, mainly from the point of view of the CEO who needs to consider what roles to take to best manage external stakeholder relationships during a merger. Six CEOs of merging hospitals and five external stakeholders were interviewed on relevant issues regarding this topic of research.
The gathered data from the interviews was combined with existing, relevant theoretical models. This led to the conclusion that adapting the role of the vision setter (Hart & Quinn 1993) in combination with some other roles taken from the ten roles of Mintzberg (1973), works best in managing external stakeholder relationship during a merger.
The process of managing stakeholder relationships is also part of this study and of eminent interest in achieving common objectives of the merging hospitals and their external stakeholders. This thesis leads to an insight in the minds of hospital CEOs and their external stakeholders, which can help present and future hospital CEOs, facing a merger, in taking the best suitable managerial role towards external stakeholders to obtain a good business-wise relationship and achieve high results.
Acknowledgements
I would like to gratefully and sincerely thank Dr. Ir. J. Kraaijenbrink for his guidance and understanding during the writing of this thesis. He kept me sharp at all times, gave me new insights and made sure I could succeed in reaching all my deadlines. Every question was answered quickly, properly and feedback was given on a supportive though critical way.
My employer, Spaarne Ziekenhuis, made it possible for me to do this study, which I am very thankful for. In particular Yvonne Wilders, member of the Board of Directors of Spaarne Ziekenhuis, was the one who made this study possible for me. She was an enthusiastic coach during the past 3 years. Also I would like to thank Willem Schreuder, CEO of Spaarne Ziekenhuis and Maarten van der Vorst, interim member of the Board of Directors of Kennemer Gasthuis, for giving me the opportunity to use their network for this thesis.
Furthermore, I would like to thank my girlfriend Bianca Pieters in supporting me during the whole study in Master of Business Studies. Especially on the difficult moments she was the one who pulled me through. At last I would like to thank my three children Finn, Tjeu and Kate van Gestel for being a pleasant distraction after a day of studying.
TABLE OF CONTENTS
1. INTRODUCTION ... 5
1.1 RESEARCH QUESTION ... 7
2. LITERATURE REVIEW ... 8
2.1CHANGING ENVIRONMENT/ MERGERS ... 8
2.2EXTERNAL STAKEHOLDERS ... 12
2.2.1 Relationship with external stakeholders ... 12
2.2.2 Processes of managing external stakeholder relationships ... 15
2.3DIFFERENT ROLES OF CEOS ... 17
3. PROPOSITIONS ... 24
4. RESEARCH DESIGN & METHODS ... 27
4.1SAMPLE ... 27
4.2PROCEDURE &MEASUREMENTS ... 29
4.3RELIABILITY & VALIDITY ... 31
5. RESULTS ... 32
5.1DEMOGRAPHICAL INFORMATION INTERVIEWEES ... 33
5.2CHANGING ENVIRONMENT/ MERGERS ... 33
5.2.1 Reasons for merging; CEOs point of view ... 33
5.2.2 Reasons for merging; external stakeholders point of view ... 35
5.2.3 Implementation free market system ... 35
5.3RELATIONSHIP WITH EXTERNAL STAKEHOLDERS ... 36
5.3.1 The importance of a relationship with external stakeholders ... 36
5.3.2 Communication with external stakeholders ... 37
5.4PROCESSES OF MANAGING EXTERNAL STAKEHOLDER RELATIONSHIPS ... 38
5.4.1 ‘Stakeholder approach model’ ... 38
5.4.2 Contentment of process of managing relationship ... 39
5.5DIFFERENT ROLES OF CEOS ... 40
5.5.1 General described roles of CEOs ... 40
5.5.2 Theoretical roles of CEOs; Mintzberg ... 42
5.5.3 Roles of CEOs observed by subordinates ... 44
5.5.4 Roles of CEOs observed by external stakeholders ... 45
5.5.5 Theoretical roles of CEOs; Hart & Quinn (CEOs, subordinates & stakeholders) ... 46
5.6CAUSALITY ... 48 6. DISCUSSION ... 49 6.1SUB-QUESTION 1 ... 49 6.2SUB-QUESTION 2 ... 50 6.3SUB-QUESTION 3 ... 50 6.4PROPOSITIONS ... 51
6.6MAIN RESEARCH QUESTION ... 53
7. CONCLUSIONS ... 54
7.1PRACTICAL IMPLICATIONS ... 56
7.4LIMITATIONS ... 59
7.5SUGGESTIONS FOR FUTURE RESEARCH ... 60
REFERENCES ... 62
APPENDICES ... 65
A.INTERVIEW PROTOCOL CEOS ... 65
B.INTERVIEW PROTOCOL STAKEHOLDERS ... 70
C.FEEDBACK FORMS ... 75
1. INTRODUCTION
When flipping through the pages of any newspaper or magazine these days, you will find articles about the health care industry. The reason for this broad interest is that in the past years health care has transformed from a classic, static environment to a highly dynamic environment (Swayne et al., 2008). In the Netherlands the year 2006 brought up some radical changes. The Dutch government decided to build up a free-market basis within health care industry (Vaillancourt et al., 2008). Since 2006 patients are able to choose the health care insurance company they prefer and their hospital of choice for the best medical care (Vaillancourt et al., 2008).
Nowadays, the year 2013, hospitals are struggling to respond to the changes of the last years. Health insurance companies have a big influence on hospitals, patients are becoming more autonomic and acquire information about the best medical treatments across country. The Dutch government is increasingly implementing a free-market environment in order to try and stop the growing costs of health care.
Aforementioned changes cause for the need of strategic changes in order to survive. The last few years many hospitals in the Netherlands investigate mergers as a possible way to keep their head up. Mainly mergers between two or more hospitals in the same region are being effectuated or in progress. Within mergers there are specific roles for both hospitals and their stakeholders. Hospitals are generally led by a board of directors and therefore the chairman of this board, further called the CEO, has an important role in these mergers. Stakeholders are in some cases new for the merging hospitals and their CEOs, like the ACM (former NMa) and Dutch government. In other cases the CEOs are quite familiar with stakeholders like local government, health insurance companies and patient unions because of
other subjects or discussions.
In classically organized industries like health care, CEOs of hospitals which face a strategic change like a merger, are facing a new kind of collaboration with the hospital’s stakeholders. The question is how the CEOs respond to changes, which roles do they take and are they effective in relation to the stakeholders?
There has been a lot of research about roles CEOs can take. Mintzberg (1973; 2009) for instance, described different roles CEOs can take in all different kind of environments. Also Quinn (1981) described roles CEOs can take in, for instance, changing environments at the strategic level. Even Ansoff (1965) already researched in the mid-sixties the effects of roles of CEOs on corporate strategic changes. Linking the roles of CEOs in strategic changes like (pre-) merger phases in Dutch hospitals, where the interaction and relationship with stakeholders is a crucial part in gaining optimal result, there is little known in extant literature. Therefore, a research gap definitely lies in the relationship between roles of CEOs and stakeholders, during a radical change in the health care industry in The Netherlands.
Another research gap lies in the topic about the relationship between CEOs and external stakeholders during a merger of hospitals in The Netherlands. Although Austen (2012) did execute relevant research in public hospitals, there is little known about the influence of stakeholders in decision-making situations during mergers between hospitals, and not at all about The Netherlands despite its peculiar legal situation of the free-market basis.
Because of this peculiar situation in The Netherlands, this research is interesting for both practice and theory. For practice because of the actual environment in The Netherlands around mergers of hospitals. Present CEOs considering a merger can use the gained knowledge of this research for own use. For theory because of the existing research gaps and because of linking the subjects of roles of CEOs, relationships with external stakeholders and how these relationships are managed, all in the context of a merger situation.
1.1 Research question
This research attempts to answer questions regarding the relationship between hospital CEOs and stakeholders. The main research question for this master thesis will therefore be:
‘Which roles can CEOs take to best manage external stakeholder relationships during a merger in the health care industry?’
Several sub-questions are important when researching the roles of CEOs versus external stakeholders during a merger:
• ‘Which managerial roles do CEOs in the health care industry prefer during a merger?’ • ‘To what extent does the chosen managerial role of the CEO lead to a constructive
relationship with external stakeholders?’
• ‘To what extent does the chosen managerial role of the CEO affect the process in managing the relationship with external stakeholders?’
These sub-questions will aid in an understanding of the thought processes of CEOs during a merger. They will also help in understanding the relationships CEOs and their external stakeholders have and how the process of managing the relationship with external stakeholders is organized. The main and sub-questions will form the key part of the interview protocols and the propositions of this thesis.
Within the literature review several relevant theoretical models will be presented. Based on experiences of six selected hospitals in the Netherlands, who are now facing strategic changes by example of a merger, some of these theoretical models will be researched. These hospitals are selected because they are, or have been, in a merger phase in the past two years. The CEOs of the six hospitals and the relevant stakeholders, selected by the CEOs, have been subjected to interviews in order to find out if recent and earlier literature
about roles of CEOs versus stakeholders have a match with this research in the highly dynamic, changing environment of health care in the Netherlands in the year 2013.
The master thesis is structured as followed: first, a critical review of the existing literature is outlined and brought together within a theoretical framework. The research method section will show how the CEOs and stakeholders are interviewed in this research and how findings are gathered. Subsequently, results of this research are outlined, followed by a discussion and conclusion section. In this part, the main contributions of the paper to both theory and practice are also presented as well as the limitations of this thesis and suggestions for further research.
2. LITERATURE REVIEW
When keeping the main research question in mind, ‘Which roles can CEOs take to best manage external stakeholder relationships during a merger in the health care industry?’ three theoretical constructs can be distinguished. First, the merger as a changing environment, secondly the external stakeholders who have an important function during mergers and therefore have to be managed well, and thirdly the roles CEOs can take in managing these relationships. All constructs are set within the context of the health care industry and are specifically focused on hospitals.
2.1 Changing environment/ mergers
As mentioned earlier, the past years health care has been functioning in a highly dynamic environment (Swayne et al., 2008). The industry is highly complex due to the diversity of organizations within this industry and at the same time the interaction between these organizations (Begun, 2003). The health care landscape has complicated the role of hospital governing boards. Reasons are massive changes in health care financing, the growing complexity in health care delivery and changing physician versus hospital relationships. Also
rapid technological advances, intense competitive pressures and increasing concerns about access of health care, quality, and costs, are complex issues facing hospital boards (Ford-Eickhoff et al., 2011).
Hospitals, as being part of the health care industry, have been struggling with this dynamic environment especially on subjects like cost reduction, diversifying wisely and balancing capacity and demand (Swayne et al., 2008). Due to this highly dynamic environment, health care and especially hospital’s organizations are changing very rapidly. In shaping the new, changed organization and transforming it towards this new organization there are seven change shaping levers (Schroeder, 2013). For the research on the role of CEOs in relationships with stakeholders during strategic changes, the levers of leadership and communication are most important. Leadership, as being the role of the CEO being the one who is responsible for the change and how the change is effectuated. Communication is an important lever regarding the internal and external stakeholders. They all have to be connected with the changes through thorough communication (Schroeder, 2013).
Corbett (2013) describes, in his eight guiding principles to deal with the enormous scope of changes, the essence of a leadership structure to guide the change initiatives together with a robustly engaged relationship with employees and external stakeholders. These eight guidelines start off with creation of a sense of urgency around the need for change.
The sense for urgency around the need for change is without a doubt present in the Dutch health care industry with its reorganization towards a free-market system. The system is based on regulated competition with a mandate for individuals to purchase health insurance (Vaillancourt et al., 2008). This system started off in 2006 after years of rising costs for the Dutch government. These rising costs have now become a problem for the Dutch hospitals because the national government is taking a step back in funding these costs. Hospitals must take care of their own finances and must benefit of this relative new competitive environment.
The role of the health insurance companies is quite dominant (Vaillancourt et al., 2008). From 2006 they focused mainly on price and market survival (Westert et al., 2009). During the following years, when the number of new entrants of insurance companies was stabilized, they shifted their focus more towards price and quality. This, for instance, resulted in a required minimum amount of medical interventions to ensure quality of work in hospitals. In other words a highly dynamic environment with lots of changes in a classic, reserved industry in roughly seven years.
Keeping in mind the changes in the health care industry in The Netherlands the past years it is important to know that some CEOs are considering a merger between two or more hospitals. Because of the opening up of the markets, in The Netherlands due to the free market implementation in 2006, merger activity increases between hospitals (Canoy et al., 2009). Several mergers between hospitals have already been executed and more hospitals are now considering merging.
A hospital merger is defined as a combination of previously independent hospitals formed by either the dissolution of one hospital and its absorption by another, or the creation of a new hospital from the dissolution of all participating hospitals. Hospital mergers occur because of creating ‘critical mass’ necessary to acquire costly medical technology, attracting specialized staff or increase market share (Alexander et al., 1996). According to Connor et al. (1997) the potential benefits from mergers are very divers and partly likewise to mergers and acquisitions in other industries. The most benefits are cost savings from economies of scale, elimination of duplicative services and reduction in unused capacity through pooled staffing. Also benefits are improved management and production processes, better access to capital and quality improvements from higher volumes of specialized procedures.
Mergers can have a massive impact on organizations. Not only regarding the merging of buildings, plants and equipment but also regarding culture, people, policies and structures
(Appelbaum et al., 2000). A small side step not directly linked to this thesis but surely of importance in mergers; cultural change is the single most critical point in succession or fail of mergers (Ernst & Young, 1994). ‘Culture refers to the deep structure of organizations, which is rooted in the values, beliefs and assumptions held by organizational members’ (Denison, 1996 ).
Mergers can be divided in three stages. The pre-merger stage, the merger stage itself and the post-merger phase (Appelbaum et al., 2000). This thesis focuses on the pre-merger stage as being the strategic change for the interviewed CEOs. A pre-merger stage begins once the decision to merge is made by both parties, in this case the hospitals, but broad public announcement and all legal issues are in a preparation phase (Appelbaum et al, 2000). The stakeholders interviewed for this thesis represent the public and the legal issues. The
preparation, mainly done by CEO and human resource department, is the main aspect in this phase. Therefore, this research focuses on the process and the relationship during these preparations between CEOs and decisive stakeholders.
Regarding this relationship between CEOs and stakeholders during (pre-) mergers, Balmer & Dinnie (1998) researched why several mergers fail and that the key solution lies in the recognition of stakeholders and managing the relationship with these stakeholders.
Mergers fail due to several reasons such as; inadequate recognition of the impact of leadership issues on corporate identity and corporate communications, too little attention to cultural issues and by the failure to secure the goodwill of a wide range of stakeholder groups
common to both companies. Balmer & Dinnie (1998) suggest ‘the merger mix’ as solution to make sure a merger becomes a success. This merger mix contains of four quadrants being finance, stakeholders, corporate communications and corporate identity and it helps in
managing the process of stakeholder relationship. The emergence of the stakeholder quadrant lies in the fact that successful mergers rely on the approval of several stakeholder groups in
which the next few chapters will give more insight.
2.2 External stakeholders
When talking about ‘external stakeholders’ in this thesis it is important to distinguish the subject relationship with external stakeholders and the process of managing this relationship with external stakeholders. Therefore, the following two sub-chapters are both separately described in this literature review. The reason lies mainly in the managerial implication of both subjects. One can have a relationship with an external stakeholder because of several reasons, such as the emergence of consumers, in this case patients, or the emergence of environmental groups. Also an increase in the scope of government in his role as a watchdog can be the reason for a firm to have a relationship with external stakeholders (Freeman, 1984). Making sure that this relationship works well and leads to realization of objectives (Preble, 2005) it needs management attention. Therefore, the process of managing these relationships is an important part of this thesis. The relationship with external stakeholders and the process of managing this relationship is normally an ongoing business but in this thesis it is placed in the context of mergers, specifically merging hospitals.
2.2.1 Relationship with external stakeholders
In extant literature, Freeman (1984) is most often cited regarding the definition of a stakeholder; ‘any group or individual who can affect or is affected by the achievement of the firm’s objectives.’ Some stakeholders are internal like employees; most stakeholders are external like governments, suppliers, customers, competitors and local community organizations (Freeman, 1984).
External stakeholders are of great importance regarding the success of firm mergers, especially in health care. In the health care industry, in this thesis the merging hospitals, there is a high diversity of external stakeholders and most of them have a public function. In order to determine the influences of stakeholders, and therefore the possible importance of having a
good relationship with them, it is important to do a thorough stakeholder analysis (Austen, 2012). Austen states that strategic management in public organizations, like hospitals, is impossible without a stakeholder analysis.
This analysis of stakeholder management in public hospitals consists of three capabilities. First of all, analyze who are the stakeholders for the organization and what is their perceived share. Secondly, establish the organizational procedures and processes in a way to align with stakeholder interests. The last capability is to implement transactions with these stakeholders to eventually achieve the organizations mission (Freeman, 1984).
Preble (2005) stresses that stakeholder management is a two-way relationship, between in this case the hospital and its stakeholders. Stakeholders are able to impact the realization of firms and its manager’s objectives and therefore stakeholders should be ‘managed instrumentally’. Organizations that adopt these stakeholder management principles probably better satisfy their constituent needs and balance their interest, which results in higher capacity of goal achievement (Freeman 1984).
The concern for stakeholders is of great importance because the success of a public organization depends on the satisfaction of the expectations of the primary stakeholders (Austen, 2012). Although all relevant stakeholders are of intrinsic value, and each group merits consideration (Donaldson and Preston, 1995), they do not all need the most attention at particular points in time (Preble, 2005). Therefore, besides stakeholder identification, salience is an important part of stakeholder management. Salience is the degree to which managers, in this case CEOs, give priority to competing stakeholder claims (Preble, 2005). To determine this degree of prioritizing external stakeholders, three stakeholder attributes are often used: power, legitimacy and urgency (Mitchell et al., 1997). Power refers to the ability to influence a firm’s behavior or his CEO, for instance a health insurance company influencing a hospital by stating that this hospital must execute a minimal amount of medical interventions a year to
keep a certain status. Legitimacy refers to a claim on a firm based upon a contractual or legal obligation, or having a moral interest in the harms and interests of a company’s actions (Mitchel et al., 1997). In this case a good example is the Dutch patient federation who stands up for the interest of the patient within health care industry. They have a great moral interest and therefore influence in actions of hospitals. The last stakeholder attribute is urgency, which refers to the degree to which a stakeholder’s claim calls for immediate attention for salience in the minds of CEOs. Within hospitals, stakeholders like governmental institutions are able to address urgency when, for example, new laws have to be introduced in hospitals because of earlier incidents in other hospitals. Quality of good health care is at risk at that moment and therefore immediate attention for salience is needed.
Another point of view in extant literature about relationships between firms and stakeholders is by using the metaphor of a contract between the both (Jones, 1995). These so called contracts vary greatly in terms of degree of formality, some contracts are strictly formal such as between a hospital and health insurance company and others are relatively vague and informal, for example between hospital and patient federations. The most important thing about working with contracts, both formal and informal, is that both parties acknowledge they have a relationship and are both willing to put effort in this relationship.
As mentioned in the beginning, there are a lot of definitions and theories about stakeholders. The examples above show that it is easy to say that stakeholder theory is an adopted phenomenon in both literature and practice (Donaldson et al. 1995). Stakeholder theory is both instrumental as managerial in the broad sense of these terms. It goes beyond describing current situations or the prediction of cause-effect relationships; it also recommends attitudes, structures and practices that, taken all together, constitute stakeholder management (Donaldson et al., 1995). The important role of stakeholders in mergers, and therefore also the need for a good relationship with these stakeholders comes together in the
earlier mentioned merger mix by Balmer & Dennie (1999). A successful merger relies on approvals from their stakeholders. Within The Netherlands, the ACM must approve a merger because of the competition aspect within a region and what this means for the consumer, in this case the patient. Stakeholders also have to be taken into consideration since the newly merger company, i.e, hospital, will rely on the support of all parties involved (Balmer et al., 1999). In this case stakeholders like local authority and Dutch Patient Federation are these kind of long-lasting stakeholders with whom the relationship must be secured.
2.2.2 Processes of managing external stakeholder relationships
‘Managing stakeholders strategically is seen as the means for increasing the likelihood of achieving the ends of the corporation, namely, marketplace success/performance’ (Mellahi and Wood, 2003). To manage a stakeholder, a stakeholder approach in inevitable. It is instrumentally valuable because stakeholders can enhance the social and financial performance of a firm (Preble, 2005). The opposite of managing stakeholders, namely the ignorance or mismanagement of stakeholders can result in lost markets and revenues, a decline in share, possibly legal fees and a waste of management time.
For hospitals, and their CEOs in particular, ignorance of stakeholders has great impact because of the earlier mentioned public function of hospitals (Austen, 2012). Hospitals who ignore the importance of their stakeholder are at risk of becoming examined under a magnifying glass, which can cause social irresponsibleness and loss of patients coming to this hospital.
Managing relationships with stakeholders lies within hospitals mainly under the responsibility of the CEO. The leadership task of using a stakeholder approach is to understand and take into account the fact that stakeholders provide the context for managerial decisions. If the CEOs style and skills are not in line with the expectations of the stakeholder there is an equal chance of misfit (Freeman, 1984).
Preble (2005) has presented a comprehensive six-step process model, as shown in figure 1, of stakeholder management, a model that can facilitate the practice of stakeholder management within organizations such as hospitals.
Figure 1; Comprehensive Six-Step Process Model
Preble (2005) makes the statement that an organization and its managers must only start using this process when they admit to themselves that adopting a stakeholder perspective and pursuing proactive stakeholder management will advance the functioning of the organization. The comprehensive stakeholder management process model is a step-by-step process to help assure successful implementation. It starts with the identification of stakeholders and ends with monitoring and controlling the stakeholders and thus will eventually lead to positive results for the firm.
‘Managing for stakeholders’ is also a term used by Harrison et al. (2009) to describe firms that allocate both value and decision-making influence widely across their primary stakeholders. This point of view goes far beyond the stakeholder approach described earlier and is more applicable for firms who are economically depended on external stakeholders (Harrison et al., 2009). Because this is of less importance for hospitals, in this thesis the focus
Step 1 Stakeholder identification
Step 2
Determine general nature of stakeholder claims and power
implications
Step 3
Determine performance gaps
Step 4
Prioritize stakeholder demands
Step 5
Develop organizational responses on stakeholders
Step 6 Monitoring & control
is put more on stakeholder management and stakeholders approach than on managing for stakeholders.
Based on extant literature and earlier research, stakeholder relationship and the process of managing it is thus of great importance for CEOs (Austen, 2012) in hospitals, especially during mergers between hospitals.
2.3 Different roles of CEOs
Research on the role of board of directors in health care concerning strategic decision making has led to the conclusion that the wider the expertise of the board members, the more external oriented they are in reaching the goals (Ford-Eickhoff et al., 2011). External oriented goals can include increasing market share via mergers. The research of Ford-Eickhoff et al. (2011) also describes that in certain circumstances, the CEO involves greatly in decision making, more than a board should traditionally do in other industries. This implies that within health care, the role of the board of directors regarding strategic decision-making, such as mergers, is of great importance. The roles played by CEOs, in for instance mergers, are diverse and highly important. They are mostly an important predictor of firm performances (Hart and Quinn, 1993).
As described in the construct about changing environments and mergers within the health care industry, the natural linkage between (pre-) mergers and CEOs is quite logical. CEOs, in hospitals more often the chairman of the board of directors, have a dominant role in strategic choices like mergers. This dominant role was already recognized in the mid-seventies by Mintzberg (1975) who described the system as the strategic apex where at least one full-time manager oversees the complete organization. An increasing body of theoretical and empirical literature pointed out that the CEO, as the principal leader and architect of the firm, is responsible for firm strategy, the formulation of the strategy and implementation of it (Hutzschenreuter et al., 2012).
In earlier literature, the Harvard model (Andrews, 1971) and the strategic choice perspective (Child, 1972) also concluded that changing organizations, especially in the phase of shaping the organization, have to be led by a strong CEO who sets the direction. Many organizational, strategic changes, for instance mergers, fail due to neglecting the focus from the point of view of the CEO on the actual change itself or better described as the organizational transformation (Schroeder, 2013).
Strategic leadership, by most researchers defined as a CEOs primary task, is put in many perspectives. Strategic leadership is about CEOs who have overall responsibility for the organization they lead, the characteristics of the organization, what the activities are and how they are done, and most prominently how the CEO affects organizational outcomes (Finkelstein et al., 2009). Strategic leadership is also defined as being concerned with and taking responsibility for the entire scope of activities and strategic choices of the individuals at the top of the organization (Carter et al, 2013), which in this case refers to the CEO. Other perspectives of strategic leadership look more towards relational aspects of both strategic and symbolic activities (Cannella, 2001). In those perspectives effective CEOs should possess both managerial skills but also interpersonal skills (Anderson et al., 2002). They must be successful in interacting with employees, peers, other departments, internal and external stakeholders and peers.
Extant literature shows us that there are many theories about these skills, mostly described as different roles of CEOs. Mintzberg’s ‘The Nature of Managerial Work’, was one of the first to describe CEO roles. He divided three different categories of roles: interpersonal roles, informational roles and decisional roles (Mintzberg, 1973). Within these three roles there are sub-roles defined. In the interpersonal roles a prominent one is the manager as a leader. In this leader role the manager, for this thesis the CEO, defines the whole atmosphere in which the organization will work. Besides the leader role, the figurehead role and the
manager as liaison are part of the interpersonal roles. The manager as liaison is an interesting role in relation to the main research question of this thesis. ‘The liaison role deals with the significant web of relationships that the manager maintains with numerous individuals and groups outside the organization that he leads (Mintzberg, 1973).’ External stakeholders are an example for this liaison role as in maintaining the relationship with these external parties. The theoretical model of Mintzberg in the year 1973, later adjusted by Mintzberg’s book Managing (2009), continues with the informational roles which contain the manager as monitor, the manager as disseminator and the manager as spokesman. All roles concern with the receiving and transmitting of information. The last set of roles, the decisional roles, are in a naturally, logical way more linked to the things CEOs do. They involve the making of significant decisions, problem handling, strategy making and, also important for this thesis, negotiating with other organizations, for instance external stakeholders. Explicit roles within the decisional roles are the manager as an entrepreneur, the manager as a disturbance handler, the manager as a resource allocator and the manager as negotiator. In the negotiator role the CEO is responsible for representing the organization at major negotiations, mostly with external parties.
As presented earlier, one of the main responsibilities for a CEO is the outcome, the firm performance. In order to test CEO roles with firm performance, Hart and Quinn (1993) researched the “paradox” and “complexity” perspectives specifically to the roles of CEOs. I find this paper of great importance for this thesis because of its theoretical framework, the competing values framework (Quinn, 1981), which combines the different CEO roles and, among other subjects, the role towards external stakeholders and eventually the firm performance.
The competing values framework is a framework, which contains four quadrants. The vertical axis ranges from flexibility/spontaneity to predictability/structure, the horizontal axis
from internal to external focus, as shown in figure 2 on page 21. The four quadrants represent the human relations model, the open systems model, the rational goal model and the internal process model. The HR model contains criteria such as cohesion and morale, participation and HR development as where the open systems model is more about innovation, growth, acquisition and external support. The rational goal model contains more aspects like productivity, goal setting and accomplishment where the internal process model stresses information management, efficiency, stability and control.
On top of these quadrants Hart & Quinn (1993) placed the corresponding roles for CEOs or, in their words, top management. The HR model corresponds with the motivator role. This role is fundamentally one of management with a meaning. For the firm it must create a certain sense of urgency or a “cause worth fighting for” (Hart and Quinn, 1993). The motivator involves translating vision and strategy of the firm into a set of concepts and priorities, which infuses and mobilizes the entire organization. The CEOs focuses in this role on the internal organization challenging people to gain, for instance, new competencies and thereby achieve higher levels of performance.
The open system model corresponds with the role of the vision setter. The vision setter role is important for the creation of the identity and mission, the firm’s basis purpose and future direction. In this role the CEO must spend much of his time monitoring trends. Trends on the social, economic and technological perspective, in order to secure the firm’s future. The vision setter must also continuously analyze the internal and external environment in the industry. Therefore, informal contacts, both internal and external, are crucial to sense emerging trends.
Figure 2; Comprehensive Values Framework (Quinn, 1989)
External stakeholders are part of this external environment and therefore important for this thesis. The rational goal model of Hart and Quinn (1993) corresponds with the task manager role. This role is more at the level of firm performance and results. The task manager must serve the full range of external stakeholders that can be associated with the organization. Therefore, the task manager must not only influence decisions made at lower levels but also put priorities in the right places with regards to trade-off decisions and resource allocation. The task manager is a “hands-on” manager who strongly focuses on results and “getting the job done”. The last quadrant, the internal process model, corresponds with the analyzer role. This role is internally focused on the efficient management of the internal operating system. The CEO in this role sets the context and shapes the decisions made by the operating system.
Flexibility
Predictability Internal
focus
External focus
Role: The Motivator
Role: The Analyzer
Role: The Vision Setter
Role: The Task Master
HUMAN RELATIONS MODEL
Commitment, Morale
Participation, Openness
INTERNAL PROCESS MODEL
Documentation, Information Management
Stability, Control
OPEN SYSTEMS MODEL Innovation, Adaption Growth, Resource Acquisition, External Support
RATIONAL GOAL MODEL
Productivity, Accomplishment
Analyzers must be critical in reviews and evaluations of proposed projects and programs. CEOs in analyzer roles must have the ability to integrate conflicting perspectives in the interest of the total organization.
The ten roles of Mintzberg (1973), as described earlier in the theoretical background, can be integrated within the competing values framework (Hart and Quinn, 1993) as shown in figure 3. In the quadrant the leadership models, like the entrepreneur or the figurehead, are plotted on the framework. This makes the understanding of the framework more understandable and easier to link to CEO behavior and the described roles of Hart and Quinn. The ten roles of Mintzberg are described in table 1. To make these ten roles livelier, especially for the interviewed CEOs and stakeholders of this thesis, I adjusted the description of these ten roles by these other researchers: Hart & Quinn (1993) and Grover (1993).
Figure 3
Flexibility
Predictability
Internal
focus External focus
Role: The Motivator
Role: The Analyzer
Role: The Vision Setter
Role: The Task Master Disseminator (M*) Liaison (M) Entrepreneur (M) Monitor (M) Spokesman (M) Liaison (M) Leader (M) Figurehead (M) Disturbance Handler (M) Resource Allocator (M) Negotiator (M) * ‘M’: Mintzberg (1973)
Role Mintzberg (1973, 1990) Hart & Quinn (1993) Sharpe (1993)
Figurehead • CEO as a symbol
• Performing ceremonial duties of a legal or social nature
• Interpersonal activities
Ceremonial Duties Performs some duties of a ceremonial nature. Examples: greeting visitors; attending the wedding of a subordinate.
Leader • CEO is responsible for the work atmosphere of
the employees, the leader role by formal authority • Directly leadership; f.i. hiring and training new
staff
• Indirectly leadership; f.i. motivating and encouraging employees to reach goals
Formal Authority, informal influence
Responsible for motivation of subordinates and for staffing and training. Example: most activities involving subordinates.
Liaison • Focus on “exchange” relationships with peers
outside the vertical chain of command • Connects own organization with external
environment
• Uses external environment to further the intelligence and position of own organization
Networking with internal and
external contacts Establishes his/her web of external relationships. Example: Attending conferences.
Monitor • Perpetually seeking for information to understand
own organization and external environment • Seeks information to detect changes, identify
problems and opportunities
• CEO receives a wide variety of information from a wide variety of sources such as gossip, hearsay and speculation
Scanning the environment Seeks and receives information to understand organization and environment. Example: reading periodicals and reports.
Disseminator • CEO sends external information into organization
and internal information from one subordinate to another (internally); outside-in
• CEO receives much factual information to determine its correctness or incorrectness • CEO receives much value information to
determine the preferences
Information transfer Transmits information to other organization members. Examples: Forwarding reports and memos; making phone calls to relay information; holding informational meetings.
Spokesman • CEO transmits information out to the external
environment; inside-out
• Speaks on behalf of organization; also by lobbying, PR or as an expert
• CEO must inform board of directors as key influencer and the organization’s ‘public’
Communication to outside
parties Involves the communication of information or ideas. Examples: speaking to the board of directors and top management.
Entrepreneur • CEO acts as initiator for new ideas in order to
improve the organization, to adapt to changing conditions in the environment
• CEO acts as designer of much of the controlled change in the organization
• Lots of improvement projects initiated by CEO
Initiating new ideas or programs
Acts as initiator and designer of much of the controlled change in his/her organization. Example: developing an improvement project.
Disturbance
Handler • • CEO deals with involuntary situations Change is partially beyond CEOs control • CEO acts because he must; a disturbance occurs, a
correction is necessary
Crisis Manager Responsible for corrective action when the organization faces un- expected crises. Example: settling disagreements between subordinates.
Resource
Allocator • CEO in the heart of the organization’s strategy making
• CEO oversees the system by which organizational resources are allocated;
• Scheduling of time, programming of work, authorizing of actions
Time, people and dollars Responsible for allocation of human, financial, material, and other resources. Examples: working on budget; deploying staff.
Negotiator • Representing the organization at major
negotiations
• CEO leads the contingent from organization
Conflict resolver Responsible for representing the organization in negotiations. Example: negotiating a new stock issue with the financial community. Table 1; Ten Roles of Mintzberg (1973)
Carter et al. (2013) address the leadership style responsible leadership as very relevant for strategic leadership. This style has emerged from the ethics literature and views leadership as a leader-stakeholder interaction. It does not view leadership effectiveness in terms of financial
performance but more towards gaining the best results for all affected parties. A central theme within this leadership style is to balance the needs of stakeholders and it has an extremely high level of stakeholder approach (Carter et al., 2013). Because of its presence in more ethical environments such as human rights or labor standards, this theoretical design of leadership is less applicable for this thesis.
3. PROPOSITIONS
Looking back at the theoretical constructs; changing environment/ mergers, roles of CEOs, the relationship with stakeholders and the process of managing these relationships, a next step is to define propositions to be examined among hospital CEOs and their stakeholders. The theory of Hart and Quinn (1993) gives a broad insight in the different roles CEOs can take without being too explicit. Mintzberg’s roles describe quite accurate what is meant by its ten managerial roles like the negotiator or the spokesman.
To get an optimal insight on the roles taken by hospital CEOs who are all in a merger situation it is important to not narrow it down to specific roles like Mintzberg roles. Therefore, the propositions for this research will be linked to the theory of Hart and Quinn (1993) in combination with the relationships with external stakeholders and the effect of these roles on the process in managing external stakeholders.
Hart and Quinn (1993) described the four quadrants of the competing values framework. The monitor and the analyzer being focused internally; the task manager and the vision setter are the two roles who have their focus externally. The vision setter and the motivator are, besides the external focus, also focused on flexibility whereas the task manager and the analyzer are more predictable oriented. Since all these roles are usable for top-managers, especially for CEOs, it lies within expectation that bringing one or more of these four roles into action leads to a positive relationship between CEOs and external stakeholders.
And that by putting one or more of the four roles into action will affect the process of managing external stakeholders in a positive manner. Therefore the first two propositions are:
Proposition 1: During mergers in health care, bringing one or more of the four CEO roles described by Hart & Quinn (1993) into action, will lead to a positive relationship between CEO and external stakeholders.
Proposition 2: During mergers in health care, bringing one or more of the four CEO roles described by Hart & Quinn (1993), will affect the process of managing external stakeholder relationship in a positive manner.
In relationships with external stakeholders, especially in a changing environment such as a hospital merger, flexibility and external focus are important aspects of the role to be taken by the CEO (Hart and Quinn, 1993). Looking at the basic assumptions of the vision setter, one of the four roles in the competing values framework, literature shows that the vision setter is closely related to strategy and the making of strategic decisions. Ansoff (1965) stated that within the whole hierarchal line of management, strategic decisions are made by the CEOs. Top managers, in this research CEOs, must be able to articulate an ‘emotionally meaningful vision or mission (Katz and Kahn, 1978).’
Hart & Quinn (1993) describe the role as vision setter as one of creating a sense of identity, mission and collective purpose. Because of this last part, creating a collective purpose, it is important to be in contact with the external environment; the external stakeholders. Concerning to Ansoff (1965), the CEO is the principal agent who creates the vision of a firm, the identity, the mission and the collective purpose and is therefore directly involved with the external stakeholders.
Therefore it is assumable that the role of the vision setter is most appropriate in the relationship between CEOs and stakeholders and in the process of the CEO managing the stakeholder relationships. It lies in the line of expectations that taking the role of vision setter will lead to the most positive relationship between CEO and external stakeholder and it will affect the process of managing this relationship in the most positive way;
Proposition 3: During mergers in health care the CEO role of ‘The Vision Setter’ (Hart & Quinn, 1993), will lead to the most positive relationship between CEO and external stakeholders.
Proposition 4: During mergers in health care the CEO role of ‘The Vision Setter’ (Hart & Quinn, 1993), will affect the process of managing external stakeholder relationship in the most positive way.
These propositions lead to the following theoretical framework, figure 4:
+ or - + or - + or - + or - One or more of
the four CEO roles Stakeholder relationships in mergers Process of managing stakeholder relationships in mergers
Independent Variable Dependent Variable
Figure 4; Theoretical Framework Thesis
Role of Vision Setter
4. RESEARCH DESIGN & METHODS
Considering the propositions of this thesis and the environment in which the research is to be conducted, it is important to determine the right research philosophy. The link between the development of the gained knowledge, through the literature review, and the nature of that gained knowledge (Saunders et al., 2012) versus the conducted research are of high influence on the results of this thesis. To determine which research philosophy is most appropriate, the setting of the research will first be illustrated.
4.1 Sample
The research has been conducted in the health care industry in The Netherlands, mainly because of its changing environment the past years after the Dutch government decided to build up a free-market basis (Vaillancourt et al., 2008). For this research the health care industry is narrowed down to hospitals in The Netherlands, specifically hospitals who are in a merger situation. Of course not all hospitals are considering or processing a merger at this very moment so a purposive sample selection, interviewing ‘experts’ in this subject (Saunders & Lewis, 2011), is made. This leads to six hospitals who were all in a merger phase in the past two years, at present time or in the coming year. They are presented, anonymously due to privacy regulations, in table 2.
Visited Hospitals
Name1 Number of beds2 Annual turnover FTE’s Number of DOT’s3 City Area Hospital 551 179 million 1851 186.000
Flower Area Hospital 540 154 million 1443 194.000 Sea Coast Area Hospital 486 211 million 2007 215.000 Mountain Area Hospital 425 351 million4 1466 n.a.5
Regional Area Hospital6 651 259 million 2809 261.000
Border Area Hospital 555 236 million 3404 103.000 Table 2; Overview of visited hospitals
1 Names are anonymised because of privacy issues. 2 2011
3 DOT systematics is the declaration system for hospitals in the Netherlands, each DOT is one medical act 4 Total turnover Mountain Area hospital, included several other care institutions
5 Number of DOT registrations is not available due to change of registration method in 2011 in this hospital 6 Figures Regional Area Hospital over the year 2010
Since the research question and the propositions are focused on CEOs, the six CEOs of these hospitals are interviewed, as presented in table 3 below.
Interviewees Hospitals
Name Hospital Function Background Years in function Specialization
City Area Hospital CEO Medical; Gynecologist 8 years Strategy, Strategy mapping, External contacts and Quality
Flower Area Hospital CEO Medical; Internist 5 years Strategy, General Management, External Contacts and Quality
Coast Area Hospital CEO Medical; Pulmonologist 3 years Medical management, and Strategy Mountain Area Hospital CEO Medical (Chemical
Technologist) and Business Management
5 years Medical management, HR, external contacts and quality
Regional Area Hospital CEO Business Management 2 years Medical Management, Stakeholder Management, Real Estate
Border Area Hospital CEO Medical; general practitioner and Management
9 years Medical Management, Quality and External Contacts
Table 3; Overview of interviewed CEO’s
The other part of the research question, and the propositions, represent the external stakeholders. In mergers between hospitals in The Netherlands, a CEO pointed out during a preliminary interview, there are five critical external stakeholders. These stakeholders, presented in table 4, are critical because they have decisive power in accepting the merger or not. For instance, if the ACM, ‘Autoriteit Consument & Markt’, decides that there is a loss of competition in the region of the merging hospitals which causes less choice of different hospitals for patients in that region, they can block the planned merger.
Interviewees Stakeholders
Organization Function Background Role i.r.t. CEOs ACM
(Independent Regulatory body)
Member Board of
Directors Econometrist, former director of governmental departments
Interlocutor as leader of the team that approves the merger. Ministry of health care,
well-being and sports (government)
Top Management Business, highly divers work experience within governmental departments
Advising and informing function, partly compelling in direction of hospitals
NPCF
(National federation for advocacy of Dutch health care patients)
Top Management Psychologist, nurse, highly divers work experience in health care industry
Advising and informing function
Local Authority Sheriff Business, b2b and c2b experience.
Advising and informing function
Health insurance company
Director Register Accountant & MBA. Former CEO in hospital and former accountant
Advising, consulting, informing and guiding function.
Table 4; Overview of interviewed external stakeholders
The research is conducted within the six organizations to find out what is going on at board level, what their ideas are and how it is related to each other. Since the propositions are
practical and of direct influence for managers, the interpretivist perspective is highly relevant, particularly in this field of organizational behavior. The situations presented in the research are not only complex but also unique and therefore create a unique social phenomenon, which is an important criterion for the interpretivist research method.
This thesis is based on a deductive research approach. A key characteristic of deduction is to explain causal relationships between variables. The research question is defined from a general theory that already exists. The extant literature and theories of Mintzberg (1979) and Hart & Quinn (1993) are at the base of the research combined with the comprehensive model of stakeholder management by Preble (2005). All four propositions, which follow from the literature and the research questions, are then researched by means of interviews before drawing conclusion at the end, in a typical deductive way of doing research.
Since the population of this research, six CEOs and five external stakeholders, does not represent the total population of hospital CEOs worldwide or even in The Netherlands, this research gives an indication of social and economic ‘life’ by means of a snapshot survey (Saunders et al., 2012). The data collected from the interviewees reflects a single moment in time, a so-called ‘snapshot’.
As mentioned earlier, the hospital CEOs that have agreed to participate in this research are at this very moment leading a merger. A merger taking place, for example, ten years from now can be completely different because of a changing environment at that time. Therefore, this research is a cross-sectional research given the ‘snapshot’ character.
4.2 Procedure & Measurements
The research strategy, the survey, involves a structured data collection from the six CEOs and five stakeholders with mixed-methods being both interviews and short feedback questionnaires. The qualitative interviews are non-standardized face-to-face, mainly because of the opportunity to interview dominant, key figures in the health care industry of The
Netherlands.
The interviews are set up semi-structured and divided into five themes with relevant questions for each theme. The themes are demographical facts, changing environment, roles CEOs can take, stakeholder relationship and the process of managing stakeholder relationships (appendix A & B). Within the demographical theme, questions are asked about the background of the interviewee regarding education and work experience. In addition, questions are asked about the relationship they have with either the stakeholder or the CEO and what their role was during the (pre-) merger phase.
In the theme about changing environment/ mergers, both open and closed questions are asked. Open questions might be about the interviewee’s opinion on the most specific reason why hospitals consider merging. In this part the CEOs also are asked to describe generally their role as CEO during organizational changes. The closed questions, roughly based on a Likert scale (Saunders et al., 2012), mostly regard interviewee opinions on whether or not a merger is a change of strategy and if mergers of hospitals are a result of the new free-market law in The Netherlands.
Within the theme of CEO roles, both open and closed questions are asked and are basically about managerial roles CEOs can take towards stakeholders. Vice versa, the stakeholders are asked about their observations regarding these taken roles. Within this theme about CEO roles the interviewees will be presented certain existing models; the ten roles of Henry Mintzberg (1973) and the quadrant of Hart & Quinn (1993). Both models give insight in which kind of managerial roles CEOs can take. The information that comes out of the combination of both models helps to eventually determine which role CEOs can best take to manage external stakeholders during a merger.
Within Mintzberg’s model, the six CEOs must point out which roles they applied during their contacts with the external stakeholders. The five stakeholders must point out
which roles they observed during their contacts with the CEOs. Within the quadrant of Hart & Quinn the six CEOs must position themselves as taken role towards the external stakeholders during the strategic change, the (pre-) merger. The five stakeholders must position the roles of the CEOs they observed in their contacts with them during the (pre-) merger. In addition, the stakeholders are asked to point out which roles could be most successfully put in action by the CEO when having contact with the stakeholder in order to reach common goals.
In the last two themes open and closed questions are asked about the relationship between CEO and stakeholder and how this relationship is managed; described as the process of managing these stakeholders. With these questions a third theoretical model is presented, the stakeholder approach of Preble (2005). The questions are about how important the interviewee thinks a good relationship is and what their opinion is about the relationship during the contacts in the (pre-) merger phase.
4.3 Reliability & validity
To make sure the answers of the CEOs are valuable, six direct subordinates of the CEOs have filled in a short questionnaire in which they also point out the observed roles of Mintzberg and position the CEOs in Hart & Quinn’s quadrant. This group of six, as presented in table 5, is called the ‘subordinates’, which in fact triangulate the answers of the CEOs. The group of six subordinates is the third group of interviewees.
Name Hospital Function Background Role during (Pre-)merger
City Area Hospital Manager Business Advising Board of Directors during the merger
Flower Area Hospital Manager of Staff Bureau
Business Management
Secretary role in preparation of the merger, directly reporting to the Board of Directors
Coast Area Hospital Secretary of the Board of Directors
Legal Secretary, legal, role in preparation of the merger, directly reporting to the Board of Directors.
Mountain Area Hospital Secretary of the Board of Directors
Business and legal Head of project management group of merger and advising Board of Directors Regional Area Hospital Manager of Staff
Bureau
Business Management
Advising Board of Directors during the merger
Border Area Hospital Manager Medical and business
Advising Board of Directors during the merger on relevant issues
The eleven interviews with CEOs and external stakeholders are audio recorded and written out in transcripts (appendix D). It is also important to note that all participants are made anonymous. To make sure that the interviews contained reliable data, the interviews were held in the offices of the participants so that they felt more convenient.
The main goal of this research is to see which role can best be taken by the CEOs to manage relationships with stakeholders. As mentioned earlier, the defined roles of Hart and Quinn in their competing values framework (1993) in combination with the plotted ten roles of Mintzberg (1973) will be used to determine which of the roles is most appropriate.
All the interviewees, both CEOs and stakeholders, have very recent knowledge about the research question and therefore we can assume that the internal validity is high. To ensure that the internal validity is reliable, triangulation is used by sending questionnaires to a lower echelon of the CEOs about with likewise questions. A contribution to the reliability of internal validity in this research is given by my personal experience as a team member of a merge team, working in two of the hospitals participating in this research.
The generalizability of the results/findings is assumable applicable for hospitals undergoing a merger. The six hospitals represent six percent of the Dutch hospitals and give therefore a good insight in this practical theme, which is researched. There is a possibility that other firms can use the results and findings as well when facing big changes like a merger, although this is not the main aim for this research. Concluding, this means that the external validity is high regarding hospitals and low for other industries.
5. RESULTS
The below mentioned results are described in the same four parts used in the literature review, preceded by a short result section on the demographical facts of the interviewees. First the changing environment/ merger, then the roles CEOs can take towards external stakeholders
and finally how this affect external stakeholder relationship and the process of managing these external stakeholders relationships are presented.
The results are based on the eleven interviews and six feedback questionnaires, all based on the main research question ‘which roles CEOs can take to best manage external stakeholder relationships during a merger in health care industry?’ The results of each subject are specified in whether they come from the CEOs or from the stakeholders. In some cases the results from the subordinate questionnaires are described, although these are mainly used within this thesis to triangulate the answers given by the CEOs.
5.1 Demographical information interviewees
The six CEOs have been in function for two to nine years. Four out of six have a strictly medical background and are a medical specialist. One primarily is a business manager and one CEO has combined medical experience with business management experience. Three of the six CEOs have, within the board of directors, the explicit task to develop strategy. Five out of six focus on external contacts/stakeholder within their task description. All hospitals are of mediocre size in annual turnover, number of FTE’s and number of beds.
The interviewed stakeholders all have a hierarchical high position within the company they work for, from director to top management functions. Their background is business oriented, from econometrist to register accountant. The roles towards CEOs of hospitals is mainly advising and consulting. One stakeholder functions as interlocutor towards the CEOs.
5.2 Changing environment/ mergers
5.2.1 Reasons for merging; CEOs point of view
As written earlier in the introduction part and literature review, there are many reasons for hospitals to merge with each other. The six CEOs are quite unanimous about the reasons they are considering, or already have effectuated, a merger. They all (six out of six) consider
‘quality’ aspects as one of the most important reasons to merge. ‘Quality’ as in giving the best medical care possible in the region of the hospitals. Patients are more demanding and medical care is therefore changing rapidly. This changing, demanding environment requires for medical specialists to constantly develop their own specialization to keep up with quality demands, according to the CEO of City Area Hospital. This CEO says that these days there is not only basic surgery but also vascular surgery, trauma surgery, etcetera. Doing the right things and doing it well at a superb quality level, is what the CEO of Flower Area Hospitals gives for a reason.
‘Scale size’ or ‘volume’ is the other unanimous reason among CEOs to merge. Health care insurance companies apply certain norms of, for instance, minimum amounts of medical interventions a year. They apply these norms to make sure that knowledge of medical specialists is up to date and patient safety is therefore secured. Most hospitals do not have enough accretion from certain patients in their own hospital to meet this minimum amount of certain medical interventions, says the CEO of the Flower Area Hospital. But in a situation of a merger both hospitals can add up the amount of patients and therefore will meet these norms, a sort of increase of scale.
Four out of six CEOs also mention the ‘ambition level’ to be an important drive to merge. The ambition to become a top five hospital in the Netherlands, according to the CEO of the Sea Cost Hospital, is an important aspect. A subject closely related to quality, scale size and ambition is also the obligation that CEOs feel to offer health care in the region they are situated.
Five out of six CEOs state that this socially aspect is also a major reason to merge. Flower Area Hospital CEO states that a hospital has a role within the community to offer health care as a kind of materialized welfare. When a single hospital comes into financial problems this might affect its important role within the community.
