The effect of institutional changes on the market orientation of
home care organizations
Master Thesis, MSc Organizational Management & Control University of Groningen, Faculty of Economics and Business
July, 1, 2014 Esther Pot S2232669 Westersingel 19a 9718 CA Groningen Tel.: + 31 06 52 45 26 87 e-mail: e.pot.3.@student.rug.nl Supervisor University E. van de Mortel Second supervisor University
W.A. Moossdorff
2
ABSTRACT
This study examines the role of institutional changes on the market oriented behavior of home care organizations. The external institutional environment is changing since new rules and regulations are introduced by the Dutch central government. Institutional theory examined organizational responses in terms of market orientation and isomorphism. Data was gathered among five home care organizations. By comparing the results of five case studies, a relationship ought to be found between institutional changes, market orientated behavior, and isomorphism. Similarities between market oriented practices of home care organizations are found. Furthermore, the results show that the external institutional environment influences each home care organization a bit different. This suggests some diversification regarding organizations as well as responses within the organizational field. Theoretical and practical implications of these results are discussed and recommendations for future research are made.
Key words: formal institutions, institutional change, market orientation, home care
3 TABLE OF CONTENTS
1. INTRODUCTION ... 5
1.1 Topical matter ...5
1.2 Research question and sub questions ...6
1.3 Academic relevance ...7
1.4 Outline of the research ...7
2.0 SECTOR DESCRIPTION ... 8
2.1 Home care organizations: past and present ...8
2.2 The external institutional environment of home care organizations ...9
2.2.1 Changing formal institutions ... 9
2.2.2 Future expected costs in healthcare sector ... 12
2.3 The changing external institutional environment of home care organizations ... 12
3.0 THEORETICAL FRAMEWORK ... 14 3.1 Institutional theories ... 14 3.1.1 Old institutionalism ... 14 3.1.2 New institutionalism ... 15 3.2 Institutions ... 16 3.3 Institutional change ... 17
3.4 Market orientation of organizations ... 18
3.4.1 Customer orientation, competitor orientation and interfunctional coordination ... 18
3.5 Isomorphism ... 20
3.5.1 Competitive and institutional isomorphism ... 20
4.0 METHODOLOGY ... 22
4.1 Research type ... 22
4.2 Research purpose ... 22
4.3 Research strategy ... 22
4.3.1 Experience based survey research ... 23
4.3.2 Case study method ... 23
4.3.3 Interview method ... 24
5.0 RESULTS ... 26
5.1 Changing institutional environment ... 26
4
5.2.1 Customer orientation ... 29
5.2.2 Competitor orientation ... 30
5.2.3 Interfunctional coordination ... 30
5.3 Findings related to institutional theory ... 31
6.0 DISCUSSION ... 35
7.0 CONCLUSION ... 37
7.1 Theoretical implications ... 37
7.2 Practical implications ... 37
7.3 Limitations and suggestions for future researchers ... 38
REFERENCES ... 39
1. INTRODUCTION
1.1 Topical matter
Everywhere in Europe, governments feel the pressure to develop an efficient, equitable, and universally accessible health care system. But reforming the health care system has shown to be a difficult undertaking (Helderman, Schut, Grinten & van de Ven, 2005). The Dutch healthcare sector faces a number of challenges. Because of an ageing population the demand for care increases, the number of people with chronic illnesses rises. Another challenge is the fact that more people continue to live in their own home as a result of changing rules and regulations. At the same time, the economic crisis plays an important role in financing the healthcare sector (Actiz). So, politicians place the issue of how to make sure that the quality of care remains up to standards high on their agenda. In order to ensure health care in the future, adjustments in the healthcare system are a necessity.
In 2007, the Dutch central government introduced the law ‘Wet Maatschappelijke Ondersteuning’ (hereafter: Wmo)1
. This law decentralized home care to municipalities. At this moment, municipalities are responsible for domestic help and some supportive and technical aids. In 2015, the central government will reform the AWBZ ‘Algemene Wet Bijzondere Ziektekosten’ (hereafter: AWBZ)2
and Wmo. More tasks from the AWBZ and the Wmo will be decentralized to municipalities. The fundamental idea of the Wmo is to prioritize individuals’ needs and capabilities (Invoeringwmo). By adapting new institutions, the central government tries to solve problems within the healthcare sector, tries to decrease costs and reacts to changes in demand. Municipalities determine the eligibility of these services and negotiate prices with home care organizations. However, through market forces, many municipalities prefer to award contracts to lower priced options above the better qualified home care organizations. Home care organizations must prioritize the balance between price and quality of its services, and need to make sure this balance is in line with the new requirements of municipalities.
As a reaction to pressures from the external institutional environment, organizations may change their organizational practices. This research considers organizational change from an institutional perspective since home care organizations act in a changing institutional
1 Social Support Act
6 environment. Key of an organization’s success is the market orientation recognized by researchers as well as managers (Becker & Homburg, 1999). Politicians and policy makers have emphasized the profits that market incentives bring about in the Dutch home care sector. However, the sociologic, public, and political field considers that the introduction of market incentives in the public sector usually causes institutional conflicts (Verhagen, 2009). This means a conflict arises between institutions and the representing parties of these institutions. Reforming the health care system is complex because the health care sector is a semi-collective good that is built on social rights. It has to overcome various technical issues as well as powers of veto (Helderman et al., 2005). Therefore, institutional theory is conducted since it combines economic, social, political, historical, and cultural dimensions in the analysis of organizational change (Greenwood & Hinings, 1996). Institutional theory assumes that firms adaptively institutionalize certain structures and practices to gain and improve their legitimacy. This process may lead to organizations becoming isomorphic (DiMaggio & Powell, 1983).
1.2 Research question and sub questions
This research is conducted among home care organizations since changing institutions are one of the biggest influences on this type of organization. The Dutch home care provides a variety of home care services. All these services are part of the transition process, which will be explained in more detail in chapter 2. The purpose of this research is to identify how home care organizations act as a result of changing institutions caused by the external institutional environment. This leads to the main problem statement:
How do institutional changes affect the market orientated behavior of home care organizations?
Several sub-questions follow in order to answer this research question:
1. What are home care organizations?
2. What is the external institutional environment of home care organizations? 3. What are institutions and how do they change?
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5. Are there similarities in the market orientated behavior of different home care organizations?
1.3 Academic relevance
The objective of this research is to make a contribution to the institutional theory in two ways. First, most research on institutional theory within the public sector has been conducted on ‘hard’ elements like performance measurement systems and savings. Due to the complexity of institutional change, it is interesting to study how home care organizations respond. Little is known about what type of responses are likely to appear in a non-competitive environment during a change process (Rautiainen & Järvenpää, 2012). Thus, this research contributes to the existing literature since it examines organizational behavior during an institutional change. Second, this research examines the market orientation, and bases its consequences on the institutional theory in terms of organizational isomorphism. Most research in semi-public and public sectors has mainly focused on the consequences of the market orientation in terms of performance (Kirca, Jayachandran & Bearden, 2005; Cervera, Molla & Sanchez, 2001). Third, the institutional changes Dutch home care organizations currently face are relatively new and have not been examined before.
1.4 Outline of the research
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2.0 SECTOR DESCRIPTION
2.1 Home care organizations: past and present
9 2.2 The external institutional environment of home care organizations
In principle, the Ministry of Health, Welfare and Sports is responsible for home care. However, decision making has been largely decentralized and steered by market forces. Home care is financed by a mix of funding mechanisms: obligatory social and private insurances and additional co-payments. Personal care, nursing, and supportive care are funded by a combination of income dependent social insurances and co-payments of clients. Domestic help and technical aid are funded by municipalities and from income-dependent co-payments. Cure (specialized nursing and medical care) is dependent of the inference of a general practitioner or specialist and is funded by compulsory health insurance (Boerma et al., 2013). This contains ‘continued hospital care’ as well. Short and long term residential care depends on ‘ZorgZwaartepakketten’ (hereafter: ZZP’s) and is funded by the AWBZ. ZZP’s consist of ten subcategories that provide intramural care for elderly, chronically ill and disabled individuals. The ZZP subcategories 1 till 4 will disappear in the coming years. This means that people who need relatively little care (1 till 4) will receive extramural care and will remain at their own home rather than move to a home care facility. As a result, residential care for the elderly will no longer by financed. Funding of ZZP’s subcategories 4 till 10 remains, including intensive 24 hours care (Invoeringwmo).
The home care system is mainly directed by regulated competition between providers of services. Specifically, home care organizations are contracted by Regional Care Purchasing Offices, municipalities, or directly by clients holding a personal budget. Commercial cleaning organizations are now allowed to join traditional home care organizations in the provision of domestic help. Municipalities set their own criteria when it comes to domestic help and supportive aid. They determine the eligibility of these services and negotiate prices with home care organizations and commercial cleaning organizations. This has resulted in financial losses for home care organization that deliver domestic help.
2.2.1 Changing formal institutions
10 in 2007 to replace the ‘Welzijnswet’3 and ‘Wet Voorzieningen Gehandicapten’4. Municipalities already carried out the ‘Welzijnswet’ and ‘Wet Voorzieningen Gehandicapten’ and were made responsible for domestic help as well. The remaining tasks are covered by the AWBZ and carried out by the central government (Invoeringwmo). The Wmo provides care for its citizens, such as the elderly, disabled individuals, or those in need of professional mental care. Its purpose is to overcome certain obstacles these individuals might face. Obstacles can be found in all daily activities like eating, washing, purchasing groceries, moving through their house and/or cleaning it. People are supported with domestic help, a taxi service, a wheelchair or meal services. Furthermore, the Wmo supports caregivers and volunteers, stimulates individuals’ involvement in neighborhoods and supports individuals through upbringing and desolation (Invoeringwmo).
The AWBZ will be restructured to reduce costs and guarantee long term care. The reformation of the AWBZ means restructuring the current Wmo and AWBZ. It leads to new institutions namely ‘Wmo 2015’, Zvw, (Zorgverzekeringswet)5
, Wlz (Wet langdurige zorg)6 and Jeugdzorg7. The purpose of the transition is that people will remain at home for a longer period, if necessary supported by the Wmo, Zvw, or Wlz. The Wlz replaces the current AWBZ. At this moment, the House of Representatives has accepted the ‘Wmo 2015’ and its commencing date is the first of January 2015. However, the House of Representatives is still pending about the Wlz and its funding (Rijksoverheid). Table 1 provides the characteristics of the WMO, Zvw, and Wlz in an overview (Rijksoverheid).
3 Welfare Law 4
National Act on Provisions for Disabled
5 Health insurance act 6 Long term care act 7
11
Institution Characteristics Home care services
WMO 2015
Support to live independently and participate in society
Assisted living Accommodation
Support for informal caregivers and their clients
Supportive care (personal support, home based guidance and daytime activities)
Domestic help Technical aid
Information for caregivers and their clients
Zvw
District nursing Personal care
Long term mental health care with cure
Cure
Extramural palliative/terminal care Intensive childcare
District nursing Personal care
Cure (specialized and medical nursing care) Palliative/terminal care Intensive childcare Wlz Intramural care Permanent monitoring
24 Hour care for the most vulnerable citizens
Nursing homes Homes for the elderly
Youth-care Nearly all types of childcare until the
age of 18
Information provider
Table 1: Description of Wmo 2015, Zvw, and Wlz
Table 2: Funding of home care services before and after the transition
Home care service Current law Future law
District nursing AWBZ Zvw
Personal care AWBZ Zvw
Supportive care AWBZ Zvw
Domestic help Wmo Wmo
Cure
- Medical care
- Specialized nursing care
AWBZ AWBZ
Zvw Zvw
Short term residential care AWBZ Wmo
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2.2.2 Future expected costs in healthcare sector
In January 2013, the Netherlands counted around 2.8 million people aged 65 years or older, which accounts for 16.8% of the total Dutch population. Of this population group, 702,829 individuals were 80 years or older. These numbers will grow in the coming years. According to propositions, 4.7 million individuals in the Dutch population will be aged 65 years or older by the year 2040, which is 26% of the total population (CBS). These increasing numbers imply that the number of individuals eligible for home care services is growing rapidly. This results in an enormous increase for future health care costs. Specifically, the AWBZ funds considering nursing homes and homes for elderly are expected to increase with € 9 billion. The AWBZ finances home care with € 3.4 billion intended for personal support, personal care, and nursing. Specifically, personal support accounts for approximately € 1 billion of the budget, personal care for around € 2 billion and nursing accounts for the remaining part. The Wmo finances domestic help with € 1.3 billion. Last, individuals pay income- and service dependent co-payments (Actiz). With the introduction of the revised Wmo in 2015, the budget will be cut by 40% for domestic help, and 25% for supportive care compared to 2014 (Rijksoverheid).
2.3 The changing external institutional environment of home care organizations
Paragraphs 2.1 and 2.2 describe the changing external institutional environment of home care organizations. Several changes that may have an influence on home care organizations can be distinguished.
13 organizations dealt with one formal framework in the past. However, bringing these changes together means that home care organizations will have to deal with several, localized, and tailored frameworks in the future.
Another important pressure on home care organizations is the cut in healthcare budgets. Supportive care will be economized by 25% and domestic help by 40%. For the other home care services exact percentages of budget cuts still remain unknown. In general, the budgets for the Wmo 2015, Zvw and Wlz will be reduced. Municipalities, Regional Purchasing Care Offices and health insurance agencies must respond to this. To meet the modified financial targets, home care organizations are required to work in a more effective and efficient manner. For instance, municipalities are obliged to write a tender for the procurement of home care. Additionally, home care organizations have seen an internal shift in their primary focus. They are moving away from being primarily focused on service orientation, toward a more market oriented focus.
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3.0 THEORETICAL FRAMEWORK
This section proposes the institutional theory and its institutions building up the theoretical framework informing this analysis. Home care organizations face changing institutions exerted by the central government. This is considered a process of changing formal institutions from the external institutional environment, clarifying the use of institutional theories and formal institutions in paragraphs 3.1, 3.2, and 3.3. Home care organizations may react to these external pressures by adjusting their internal environment. The process of changing informal intuitions will be analyzed with the market orientation of organizations, as described in paragraph 3.4. The interaction between changing formal and informal institutions will be described in combination with the theory of isomorphism in paragraph 3.5.
3.1 Institutional theories
According to Scott (1987, p. 493) “.. the beginning of wisdom in approaching institutional
theory is to recognize at the outset that there is not one but several variants.” When
examining institutional theory, various disciplines exists. Two main trends in institutional theory can be distinguished namely ‘Old institutionalism’ and ‘New institutionalism’. All types of institutional theory acknowledge that in order to understand organizational practices, the institutional environment has to be considered. Each type of institutional theory defines institutions differently, resulting in different perspectives (Varoutsa & Scapens, 2010). The main principle of institutionalism encompass institutions, habits, rules and their evolution. Essential differences between Old institutionalism and New institutionalism are difficult to define, since there is no unanimity on what precisely has to be included in New institutionalism (Hodgson, 1998).
3.1.1 Old institutionalism
15 with maximizing behavior. NIE focuses on efficiency and optimal behavior within the limits of rationality and opportunism (Williamson, 1998). In addition, organizations and its actors try to act as optimal and efficient as possible within the constraints imposed by the external environment.
3.1.2 New institutionalism
New institutionalism attempts to explain the emergence of institutions. These theories consider individuals’ purposes and preferences as molded by social and economic environmental conditions. Thus, New institutional theories facilitate in the understanding of how actors respond to pressures and how they make sense of the social and institutional aspects of changing institutions. Therefore, New institutional theories will be applied because they provide a comprehensive but complex understanding of the mechanisms influencing changing organizational behavior (Dacin, Goodstein & Scott, 2002). New Institutionalism primarily focuses on legitimacy as a driving force of organizational actors. It relies on the assumption that organizations adaptively institutionalize certain structures in order to gain and improve their legitimacy. From this perspective, formal organizational structures adaptively respond to environmental influences(Selznick, 1996).
New Institutional Sociology (hereafter: NIS) is in line with New institutionalism since it
considers the influence of external environmental pressures. NIS emphasizes the expectations from the environment and its relation with organizational behavior and practices. NIS proposes that organizations are likely to increase their legitimacy and political power. They protect their resources and customers to comply with what is expected and what is valued by the environment (DiMaggio & Powell, 1991; Scapens, 2006). From this perspective, institutions are defined as “those social patterns that, when chronically reproduced, owe their
survival to relatively self-activating social processes” (Jepperson, 1991, p. 145). An external
institution is formal such as the government. An internal institution is informal and encompasses norms, values, and ideas. In addition, internal organizational structures may reflect what is perceived as legitimate and valued by the society (Burns et al., 2006).
Old Institutional Economics (hereafter: OIE) considers the role of internal institutions. It
16 institutional change: a change in the taken for granted assumptions that underpins the behaviors of people (Burns & Scapens, 2000). OIE defines institutions as “a way of thought
or action of some prevalence and permanence, which is embedded in the habits of a group or the customs of a people” (Hamilton, 1932 cited in Varoutsa & Scapens, 2010). Hodgson (2000) mentions five characteristics of OIE defined by Hamilton, of which two characteristics are particularly relevant. First, the economy is an open system influenced by technological changes and social, cultural, political, and power factors. Second, the consideration of the interacting individual that forms institutions: the individual is a producer as well as a product of the environment.
Taking NIE and NIS in mind too, the economy as an open system is consistent with NIS and OIE but contradicts NIE. The latter considers the economic environment as a closed system. OIE acknowledges individuals’ influencing and maintaining role on institutions. Here, it contradicts the perspectives of NIE and NIS. In organizational theory, NIS has been used to study collaborations and relationships between organizations. NIS questions how organizations are influenced by the institutions in their environment. Thus, organizations are shaped by external institutional forces. On the other hand, OIE focuses on internal institutions that shape the day-to-day activities and behaviors of organizations. Accordingly, the primary focus of OIE is on internal institutions, the taken for granted assumptions, where NIS concentrates on institutions in the broader environment. Taking the role of society with its changing institutions on governmental organizations into account, NIS and OIE will both contribute within this context. So, combining NIS and OIE includes the influence of external and internal pressures and constraints on organizational forms and behavior. These factors might be of importance for securing the continuity of an organization, even as inducing change (Ter Bogt, 2008).
3.2 Institutions
“Institutions are the rules of the game of the society”, according to North (1971, p. 122).
17 sufficiently solve exchange problems. Informal constraints are embedded in routines, customs, traditions, and culture (North, 1990). Further, institutions are a source of stability because they create expectations of others’ behavior. In addition, it structures thoughts, expectations and actions that enables form and consistency on human behavior. So, institutions constrain and enable certain behavior (Hodgson, 2006). An important distinction between formal rules and informal constraints is that formal rules can be changed by the polity, whereas informal constraints change in a slow manner. Informal constraints restrict people from going beyond the established regulations. A common feature of institutions is the subjective nature resulting from human’s perceptions of the external environment. Over time, institutions are considered as ‘taken for granted’ and taken together with people’s subjective perceptions. North (1990) emphasizes the difference between institutions and organizations. Institutions and organizations both support human interaction but are not similar. As mentioned, institutions are the ‘rules of the game’, whereas organizations are ‘the players of the game’.
3.3 Institutional change
18 3.4 Market orientation of organizations
Fundamental for achieving organizational goals is to be more effective and efficient than competitors are in identifying and fulfilling needs of customers (Day, 1994). In the last two decades, many public sectors have been pressured to increase their efficiency as well as customer satisfaction (Kok & Driesen, 2012). As a result, public organizations have been forced to become more market oriented (Box, 1999; Jas & Skelcher, 2005). The market orientation aims to strategically align the organization with the external environment. It increases the customer orientation and proactivity (Harris, 2001). The market orientation involves learning about the external environment, and based on this learning, to manage that environment (Grewal & Tansuhay, 2001). In addition, the market orientation can be defined as an “organizational culture that most effectively and efficiently creates superior value for
customers” (Narver & Slater, 1990, p. 20). Essentially, the market orientation consists of customer orientation, competitor orientation, and interfunctional orientation (Narver & Slater, 1990). Many public organizations are organized and managed by these principles of market orientation (OECD 2005). Public organizations have noticed the importance of performance; achieving acceptable levels of performance in the eyes of key stakeholders, i.e. citizens, government, and staff. The objective of profitability for nonprofit organizations is survival: earning sufficient revenues to cover long term expenses and/or satisfying all key stakeholders in the long run (Kotler & Andreasen, 1987, as cited in Narver & Slater, 1990).
3.4.1 Customer orientation, competitor orientation and interfunctional coordination
Customer orientation means that organizations understand their customers and are able to
19 create superior customer value, the interfunctional coordination is focused on the entire business. The organization must align its entire human- and other capital resources.
The concept of customer orientation for public organizations is broader than for private organizations, since it includes the complex relationship between the state and its citizens, both as customers. Further, there is a basic distinction between those who consume the services and those who provide the resources that are used in that production (Lovelock & Weinberg, 1989). Considering the concept of competitor orientation, public organizations operate in highly competitive environments. Specifically, within the public sector as well as across public-, private-, and nonprofit organizations. Internal competition is caused by competition for internal budgets whereas external competition is caused by privatization, contracting, outsourcing, and competitive tendering. Competition is high and ongoing since budgets are reformulated, contracts are renewed and policies change (Walker, Brewer, Boyne & Avellaneda, 2011). The concept of interfunctional coordination comprises appropriate use of customer- and competitor information. Public organizations try to accomplish this with the use of performance management and target setting. To compete in the market, public organizations have to systematically collect evidence on that market. This can be done to define customer needs and solutions. Customer needs and solutions can be categorized in two ways, expressed and latent (Narver, Slater & MacLachlan, 2004). Expressed needs and solutions appear when customers are aware of their needs and solutions and express them. In contrast, latent needs and solutions exist when customers are unaware and not able to express them. Expressed and latent perspectives lead to either a responsive or proactive market orientation. The responsive market orientation attempts to understand and fulfill customers’ expressed needs. Thus, organizations respond to market trends. Whereas a proactive market orientation tries to understand and fulfill the latent needs of customers (Narver et al., 2004; Kohli & Jovarski, 1990).
20 must develop strategies and behaviors that allow them to succeed, with regard to the previously mentioned challenges. In order to understand this phenomenon, the following hypothesis is of interest. Hypothesis 1: ‘Through changing institutions, home care
organizations become more market oriented’.
3.5 Isomorphism
New institutionalism flourished in the mid-seventies based on the work of Meyer and Rowan (1977), and Salancik and Pfeffer (1978). These two articles form the basis for the development of DiMaggio and Powell’s (1983) theory of institutional isomorphism. Organizations are dependent on phenomena from their external environment. They are structured by the external environment and tend to become isomorphic with this environment (Meyer & Rowan, 1977). If organizations belong to the same business and are structured in a certain field through competition, the state, or its profession, powerful forces arise that make these organizations more similar. This concept of homogenization of organizations is called isomorphism. According to Hawley (1968 cited in Meyer & Rowan, 1983), isomorphism can be described as a constraining process of one actor that forces others in the same set of environmental circumstances, to resemble their act. In addition, it explains the process of external institutions that shape organizational systems (DiMaggio & Powell, 1983). Although organizations show the willingness and intention to change, the external environment constrains their ability to do just that (DiMaggio & Powell, 1983). An organization may design a formal structure conforming to the descriptions of the external institutional environment. This way, the organization demonstrates that it acts as desired. Thus, the organization becomes legitimate and uses this legitimacy to strengthen support and secure survival (Meyer and Rowan, 1977).
3.5.1 Competitive and institutional isomorphism
21
Formal institutions
adopt external or ceremonial assessment criteria that conform to formal institutions, in order to maintain organizational stability and reduce turbulence.
Three mechanisms of isomorphic change can be analyzed: coercive, mimetic, and normative (DiMaggio & Powell, 1983). First, coercive isomorphism concerns both formal and informal influences that are exerted on organizations by other organizations on which they are dependent. Mimetic isomorphism occurs when organizations face uncertainty and adapt to practices performed by other organizations that society perceives as legitimate and successful. Normative isomorphism appears when organizational practices reflect professionalization, shaped by universities (formal education) and professional training centers (professional networks). These three mechanisms may overlap and can be combined. Conceptualized, only coercive isomorphism is linked to the external organizational environment. Mimetic and normative isomorphism are related to the internal organizational field and consider the spread of roles and structures (Frumkin & Galaskiewicz, 2004).
Within this context, home care organizations are subject to institutional isomorphism. They strive to conform to be legitimate with their changing external institutional environment. These pressures are initiated by the state. At the same time, home care organizations compete in a relatively free market with private and semi-public organizations for budgets. Competition within the field is illustrated by market oriented behavior. As a result, home care organizations are in some extent subject to competitive isomorphism. Taking institutional changes and institutional theory, together with its pressures for conformity, the following hypothesis is of interest:
Hypothesis 2: ‘Through an increase in the market orientation, home care organizations
become more similar to each other’.
Figure 1: Conceptual Model
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4.0 METHODOLOGY
4.1 Research type
The main goal of this research is to answer the research question ‘how do institutional
changes affect the market oriented behavior of home care organizations’. This research can
be typified as a qualitative research method since it attempts to examine the meaning, definition or mechanism of things (Blumberg, Cooper & Schindler, 2008). “Quality research refers to the what, how, when, and where of a thing its essence and ambience” (Berg, 2004, p. 3). The choice for qualitative research is made to address a system, as it matches with the research question based on the institutional theory. Institutional theory attends to the process of structures, that form authoritative guidelines for social behavior (Scott, 2004). The subjective nature of a qualitative method enables to investigate on the ‘how’ and ‘why’ elements of research. In addition, it helps to understand the relationship between changing institutions and a market orientation, as well as the influencing role that market orientation has on home care organizations in general.
4.2 Research purpose
Babbie (2010) distinguishes three purposes of research namely exploration, description, and an explanatory purpose. Within this setting, an exploratory purpose is useful to explore a relatively new subject in such a way that the researcher becomes more familiar with, and strengthens its understanding of, the concept. The role of changing institutions on organizational practices has been widely examined in research (Zucker, 1987; Oliver, 1991; Campbell, 2007). Due to the ongoing process of changing institutions within this specific setting, empirical research in this setting is scarce; I categorize this study as primarily explorative.
4.3 Research strategy
23 the research is to examine organizations’ ideas on changing institutions and market oriented work practices, and reveal if home care organizations are influencing each other. Blumberg et al., (2008) state that interviewees should have relevant knowledge with regard to the topic of interest and that the research method should be flexible, such that the researcher may explore different but related elements that might appear during the interview.
4.3.1 Experience based survey research
Experience based survey research has certain advantages. The presence of the interviewer stimulates higher response rates and encourages more accurate answers. It enables the observation of nonverbal communication displayed by the interviewee, and provides the opportunity to clarify any misinterpretations regarding questions during the interview. On the other hand, social reality distortion may appear since interviewees tend to respond with socially desirable answers (Eisenhardt & Greabner, 2007). Further, Yin (2009) states that this research strategy is an appropriate tool to examine the ‘how’ and ‘why’ questions because it focuses on contemporary events. The research requires no control of actual behavioral events. Interview questions are used to guide in-depth information and are developed from the topics on the basis of theory.
4.3.2 Case study method
A case study method involves investigating one or more situations in which the phenomenon of interest occurs or is present. Yin (2009) categorizes four types of case study research design, with a major distinction between single and multiple case study design.
The multiple case study design is of particular interest in this study since various cases are
24 to 15 interviews is suitable according to the law of diminishing returns (Kvale, 1996).
Several home care organizations were approached both by telephone and e-mail. The topic of this research was introduced and several home care organizations responded with interest. The final sample survey consists of five originally traditional home care organizations, in the sense they had a relatively high number of managers, exist for many years and were once restructured. In the past years, these home care organizations were restructured and had introduced self-directing teams. The size of these home care organizations varied from 125 to 6000 employees: two small, one mid-sized, and two large-sized organizations.
4.3.3 Interview method
In light of a case study design, four types of interview methods can be distinguished: face to face, telephone, online chat, and e-mail (Opdenakker, 2006). Face to face and telephone interviews seem to be the most appropriate methods, since these encourage accurate answers, identify nonverbal communication and provide the ability to clarify any misinterpretations. If geographical accessibility of the participants is limited, the telephone approach will provide an appropriate alternative to the face to face approach. In total, nine interviews were conducted with managing directors, team leaders, and advisors on company policy. An overview of the conducted interviews can be found in Table 3.
25 the latter includes items on the market orientation of organizations. The interview guide was used to give structure and increase the reliability of this research. The interview guide enables the interviewer to ask all interviewees the same questions and thereby contributes to the replication of the interview process and data gathering in a consistent manner. Reliability is needed to reduce interviewer bias to enhance the overall reliability of the findings.
Table 3: Interview schedule
Date Research method Organization Position
30/4/2014 Face to face UMCGroningen Thuis Team leader
30/4/2014 Face to face Icare Team leader
02/05/2014 Face to face Carinova Team leader
06/05/2014 Face to face ZZWD Policy advisor
07/05/2014 Face to face Icare Policy advisor
08/-5/2014 Face to face ZZWD Team leader
08/05/2014 Face to face Carinova Managing director
08/05/2014 Telephonic ZZWD Team leader
26
5.0 RESULTS
This chapter will represent data from a multiple case study among home care organizations in order to analyze how institutional changes affect the market orientation of home care organizations. The conceptual framework guides the reports of the nine semi-structured interviews that were held. First, the findings on the changing external institutional environment of each home care organization will be presented in paragraph 5.1. Second, the characteristics of the market orientation of each home care organization will be presented in paragraph 5.2. These findings represent a summarized output of the detailed analysis of the interviews. Subsequently, an overall analysis will be conducted to examine the extent to which the findings on the changing external institutional environment and the market orientation match with institutional theory. Some additional elements of importance will be conducted.
5.1 Changing institutional environment
27 Zvw: personal care, district nursing, specialized nursing and medical care, intensive
childcare, and palliative/terminal care.
Wmo: domestic help, supportive care, and youth-care. Supportive care includes personal support, home based guidance, and daytime activities.
Wlz: unknown.
The funding of home care services (in italics) that are unknown: night care, nursing homes, intensive child care, and hospice.
28 Organization A B C D E Number of employees 125 6000 4000 400 2200 Wmo N.A. Youth-care
Home based guidance
Domestic help Home based guidance
Domestic help Domestic help Home based guidance
AWBZ
Intensive childcare Personal care and
nursing
Specialized nursing care Personal support
Palliative/terminal care Night care
Personal care and nursing
Specialized nursing care Palliative/terminal care Night care
Medical care
Home based guidance Homes for the elderly Nursing homes Hospice
Personal care and nursing
Specialized nursing care Palliative/terminal care Night care
Home based guidance Daytime activities Homes for the elderly Nursing homes Hospice
Personal care and nursing
Personal support Daytime activities Homes for the elderly Nursing homes
Personal care and nursing
Specialized nursing care Palliative/terminal care Night care
Home based guidance, Homes for the elderly Nursing homes Hospice
Zvw Intensive childcare
Medical care
Specialized nursing care Medical care
Specialized nursing care
Medical care N.A.
Specialized nursing care Medical care
Other
services N.A.
Personal alarm Alpha workers Personal alarm
Meal service Restaurant
Alpha workers Personal alarm
29 5.2 Market orientation
When analyzing the market orientation of home care organizations many similarities can be found. These characteristics are provided in Table 5 and explained in more detail below.
5.2.1 Customer orientation
30 5.2.2 Competitor orientation
In the organizational field, home care organizations are each other’s main competitors. However, all organizations state they have good relationships with other home care organizations. They have meetings, brainstorm with each other, and share common problems. All home care organizations have subcontracts with other home care organizations so they formally work together. From the interviews it becomes clear home care organizations keep an eye one each other and look at other’s work practices. As said, they want to be inspired and learn of the decisions others made. One organization belongs to the best 15 home care organizations in the Netherlands and holds congresses to share its mission and vision. Another organization acts more competitive, looks closely at its environment, and tries to distinguish itself from other organizations. It seems that some home care organizations rely on their status, or as they state in the interviews ‘other home care organizations can come to us’. Moreover, all organizations have well established relationships with health insurance agencies and municipalities, it seems that they rely on this. When asked how organizations distinguish themselves from others, a common answer was; differentiation through services, self-managing teams, being client-oriented, and having a regional function. As is mentioned in the interviews, differentiation is limited since all organizations have the same collective labor agreement, quality and safety requirements and target group. The organizational strategies vary from ‘surviving 2015’, ‘maintaining the current position’ or ‘to grow’. Home care organizations lobby with municipalities. They provide information, show their work activities, discuss, and try to convince or work together with them. They are actively approaching them. It should be noted that many municipalities are still in an orientation phase and do not have a clear and well established demand. Concluding, the findings implicate that competition between home care organizations is more or less implicit and its competitive behavior varies to some extent. Further, it seems that home care organizations try to gain a favorable position towards municipalities and health insurance agencies. They compete indirectly with other home care organizations for budgets.
5.2.3 Interfunctional coordination
31 resources. All home care organizations decentralized or are decentralizing their organizational processes through the use of self-managing teams. The decentralization of the team, centralizes the client and its autonomy at the same time. Simultaneously, increasing clients’ autonomy increases employees’ efficiency, resulting in less working hours. All organizations introduced lean working and implemented better IT systems, cut down overhead, simplified work processes, and introduced self-managing teams. Further, all home care organizations introduced a policy that assigns temporary labor contract to its employees. Using temporary contracts enables organizations to respond flexibly to changes in demand. In addition, the introduction of lean working has been an important tool. Lean working encompasses a broad range of strategies to improve organizational processes and to increase efficiency and effectiveness. The decentralization of the organization has been widely implemented and its success has been proven.
5.3 Findings related to institutional theory
The changing external institutional environment of home care organizations influences their market oriented behavior in terms of customer orientation, competitor orientation and interfunctional coordination. The external institutional environment influences each home care organization in a slightly different manner since its services vary. As a result, these differences have an influence on the market orientation. In addition, home care organizations increase market orientated behavior by strengthening their networks, being visible in the environment, adjusting services, decentralizing organizational processes, centralizing the client, introducing lean working, and investing in education. Concluding, hypothesis 1:
‘through changing institutions home care organizations become more market oriented’ is
confirmed. As become clear, home care organizations have good relationships with other home care organizations. Home care organizations differ in their rivalry and strategy, it varies from some explicit forms to more implicit activities. Implicit activities can be found in the search for knowledge on how other home care organizations act and are trying to get favors of municipalities and health insurance agencies. Second, when comparing the market orientation of home care organizations, many similarities in the three facets of the market orientation can be found. Therefore, hypothesis 2: ‘through an increase in the market orientation, home care
organizations become more similar to each other’ is confirmed. Concluding, the external
33
Organization B C D E
Type of organization
(Specialized) personal care and nursing No domestic help
Broad range of products (Specialized) personal
care and nursing Large scaled domestic
help
Domestic help Personal care and
nursing
Regional function
(Specialized) personal care and nursing Small scaled domestic
help
Customer orientation
No new services added Ended daytime
activities and intensive home care Some increase in PR Visibility in the environment Increases independency of client
Well known with, Regional Care
Purchasing Offices and health insure agencies Qualitative/expensive
services
No new services added or ended
Lower priced domestic help Some increase in PR Visibility in the environment Increases autonomy of client
Well known with Regional Care
Purchasing Offices, and health insure agencies Qualitative/expensive
services
Increases education
New services added Ended some products Substantial increase in PR Visibility in the environment Increases autonomy of client Increases education Quality/expensive services
New target market Customization Quotations
Add small scaled housing facilities and domestic help in two municipalities PR is somewhat
decreased
34
Table 5: The market orientation of each home care organization categorized in customer-, competitor orientation and interfunctional coordination Interfunctional coordination Lean working Decentralization through self-managing teams Temporary contracts Use of IT Lean working Decentralization by self-managing teams Temporary contracts Use of IT Lean working Decentralization by self-managing teams Temporary contracts Use of IT Lean working Decentralization by self-managing teams Temporary contracts Use of IT Competitor orientation
Networking with third parties
Lobbying with municipalities
Good relationships with home care organizations Distinguished by small
scaled teams and broad, specialized range of products
Goal is to survive in 2015
Networking with third parties
Lobbying with municipalities
Good relationships with home care organizations Look at other home care
organizations
Distinguished by broad range of products Goal is to survive 2015
Networking with third parties
Lobbying with municipalities
Good relationships with home care organizations Distinguished by
combining intramural and extramural services and regional function Focus on
organizational growth
Networking with third parties
Lobbying with municipalities
Good relationships with home care organizations (congresses)
Do not want to compete Distinguished by lower
35
6.0 DISCUSSION
Institutional theory considers how organizations respond to pressures from the external institutional environment and how they make sense of it. Specifically, how do institutional changes affect the market oriented behavior of home care organizations. Hypotheses 1 and 2 structure the research question and examine how home care organizations act. Home care organizations try to make sense of their institutional environment; they understand the need for changing institutions. Although, current rules and regulations are too expensive, the cut down of budgets is large and uncertainty is high. The interviewees showed energy and strength while their positions, or those of peers, will be redundant in the future. As said, home care organizations must be critical, creative and are forced to improve organizational processes. Home care organizations increase their market orientation as a response to changing rules and regulations. The market orientation causes internal pressures for conformity in the sense of changing internal rules, routines, and institutions. This shows organizations’ conformity to the internal and external institutional environment. Further, coercive and mimetic pressures seem to cause institutional isomorphism. Home care organizations must conform to expectations of the central government and municipalities to guarantee their right to exist. They emphasize experiences of uncertainty and look at other home care organizations to learn from them. Thus, when home care organizations want to conform to their external institutional environment, the market orientation is an enabling factor that results in relatively similar organizational practices. Further, the apparently similar formal institutions, influence each home care organization a bit differently.
36 organizational behavior. Taking this finding in a broader perspective, the evolution of health care in the Netherlands has not faced any radical changes. Specifically, incremental change characterizes the Dutch health care sector when organizations’ conformance is of importance (Helderman et., 2005). The authors state that these incremental changes are typified by reconstructing the institutional rules of the game, according to North (1971). It is a strategic process that attempts to redesign the external institutional environment in which interaction between policy making actors takes place. However, many organizations wait for the new institutional realities to become well defined (Peng, 2000). In this research, home care organizations initiate market oriented practices while they perceive high uncertainty. So, we have to be careful when considering organizational behavior since there is a thin line between being a cautious or a reluctant reformer (Peng, 2000).
37
7.0 CONCLUSION
7.1 Theoretical implications
The findings of institutional theory examined within home care organizations are in line with expectations of isomorphism. Home care organizations respond in a relatively similar manner to institutional changes. Although, it is important to understand organizations within the same organizational field may differ, and are less similar than expected beforehand. These variation in organizations provide insight into the institutional theory. Institutions influence organizations differently such that isomorphism is probably less likely than expected. Further, no multiple case studies have been done regarding Dutch home care organizations to study isomorphism.
The effects of market orientation in the private sector is widely examined. However, research in semi-public organizations and their market orientation is limited (Vázguez, Álvarez & Santos, 2002). Some authors found that semi-public organizations have changes incentives and structures to increase market orientation (Cuervo & Villalonga; Zahra, Ireland, Gutierrez & Hit, 2000). This research examines the market orientation within an institutional setting, and bases its consequences on isomorphism. So, it clarifies our understanding of the interaction between institutional theory and market oriented behavior. Furthermore, many researchers in the public sector emphasize customer orientation rather than the competitor orientation, as competitors are not present in the public market. On the contrary, this research completed the market orientation and included the competitor orientation with collaborating partners, as Vázguaz et al., (2002) did.
7.2 Practical implications
38 is to anticipate on changes and react quickly to them. The best managers expect strategy to shift over time by continuously identifying and interpreting changes in a broader context. Organizations that fail to realize this are likely to fall behind or go out of business (Peng, 2000).
7.3 Limitations and suggestions for future researchers
This study has several limitations, each of which presents an opportunity for future researchers. First, although home care organizations in the Netherlands are representative for the context of semi-public organizations, the generalizability of these findings may be limited. Research across other organizations within the semi-public sector is a necessity. Second, personal interviews are the main source of information in this research. A known drawback of personal interviews is the possibility of bias of the interviewer and interviewee. The interviewer may steer the conversation into a certain direction, and the interviewee may give socially desirable answers. Third, the complexity within home care organizations is quite high. Due to changing rules and regulations, the uncertainty new rules and regulations bring about, and the variety of home care services each with its own source of funding. The uncertainty and ambiguity of the central government played a major role. In 2007, home care organizations changed due to pressures from their external institutional environment. In 2015, this pattern of decentralization will occur again. The current initiatives to prepare the organization for 2015 are intertwined with the organizational changes in 2007. This makes it more complicated to draw conclusions on how home care organizations prepare themselves for 2015. For future researchers it might be interesting to examine home care organizations’ behavior after the actual transition in 2015.
39
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