Public Health (1992), 106,253-269
(~ The Society of Public Health, 1992
Keeping Strategic Thinking in Strategic Planning: Macro-environmental Analysis in a State Department of Public Health P. M. Ginter, PhD 1, W. J. Duncan, PhD 2 and S. A. Capper, DrPH 3
~Professor of Management and Professor of Health Care Organization and Policy, 2professor and University Scholar in Management and Professor of Health Care Organization and Policy, and 3Associate Professor of Health Care Organization and Policy and Associate Professor of Management, University of Alabama at Birmingham, Graduate School of Management, School of Public Health, Birmingham, AL 35294, USA
This paper examined the tendency of strategic decision makers in public health to allow their strategic planning process to degenerate into short-term, operational management. The temptation is great in light of pressing current problems. However, the danger of not thinking strategically about the future and of failing to attempt to position the organization in such a way as to take advantage of its strengths and minimize the adverse consequences of its weaknesses can be catastrophic. An attempt is made to illustrate how one state department of public health attempted to ensure that strategic thinking remained a part of its strategic planning process. The process was built around the energizing of the expertise present in the department and the mobilization of resources under the direction of the State Health Officer. The process is ongoing and is constantly fine tuned. However, the procedure utilized can be adapted easily to the unique circumstances facing most public health organizations. Recent studies concerning public health practice including the Institute of Medicine's The Future of Public Health 1 and the D e p a r t m e n t of H e a l t h and H u m a n Services' Healthy People 20002 conclude that i m p r o v e d m a n a g e m e n t capabilities in public health practice are required to address a growing n u m b e r of increasingly complex and diverse issues. As a result, m a c r o - e n v i r o n m e n t a l analysis, the foundation of effective strategic planning, has been attracting the interest of leaders in public health. Public health leaders are beginning to appreciate the fact that m a c r o - e n v i r o n m e n t a l analysis forces managers to think 'strategically' rather than 'operationally'. Thus, managers must identify and consider current and emerging issues outside the organization that will shape the future of public health organizations. Ultimately, these issues are m o r e important to the success or failure of public health organizations than internal issues. The b r o a d e r focus of strategic thinking allows m a n a g e r s to manage for the future rather than the past. The importance, benefits and general m e t h o d of m a c r o - e n v i r o n m e n t a l analysis as a part of strategic planning in public health organizations have been examined. 3 H o w e v e r , even when public health d e p a r t m e n t s use m a c r o - e n v i r o n m e n t a l analysi s , the initial enthusiasm is sometimes difficult to sustain. Pressing issues of the day, week and m o n t h drive out the m o r e abstract external issues that will b e c o m e critical in the future. Well-intended strategic thinking degenerates into operational management. The p u r p o s e of this p a p e r is twofold: (1) to provide an illustration of how one
254
P . M . Ginter et al.
state department of public health keeps strategic thinking alive in its planning process, and (2) to provide a framework for macro-environmental analysis that can be easily adapted by other public agencies. The Process of Macro-environmental Analysis
In order for an organization to be effective, management must have an understanding of the external environment in which the organization operates and anticipate and respond to the significant shifts that are taking place within that environment. Organizations that are responsive and adapt to changes taking place in their environment are more likely to survive and prosper. Therefore, the introduction of an early issue recognition system to identify external opportunities and threats (strategic issues) is a major management task in today's public health organizations. This task has evolved because of the growing impact of economic factors, new technologies, increasing governmental influence on the delivery of health services, demographic shifts, changes in values and lifestyles, and increasing competition for federal, state and county resources. Clearly, these issues will affect public health organizations. Strategic issues are trends, developments, dilemmas and possible events that affect an organization as a whole and its position within its environment. How well the organization deals with these issues determines the relative success of the organization. Complicating organizational response, strategic issues are often ill-structured and ambiguous and require an interpretation effort (forecasting and assessment). 4 However, early recognition of strategic issues and the development of a plan to address key issues will help public health organizations be more effective and efficient. While macro-environmental analysis is a crucial part of systematic strategic planning, there are many frustrations in its management and few guidelines to help managers understand and use the process. 5 Generally, the process of macro-environmental analysis consists of four interrelated activities--scanning, monitoring, forecasting and assessing. More specifically, macro-environmental analysis involves: of the relevant environments in order to identify early signals of emerging change and to detect change already under way. • Monitoring--tracking the environmental issues identified in the scanning process. • Forecasting--developing plausible projections of the direction, scope, speed and intensity of environmental change. • Assessing--evaluating what the projected trend means for the organization in terms of its relationship with the external environment.6 • Scanning--surveillance
Scanning the External Environment The external environment is comprised of a number of organizations and individuals. For the purpose of analysis, it is convenient to group these organizations and individuals into two environments--the general or macro-environment and the industry or health care environment. The general environment consists of organizations and individuals that are not a part of the health care industry while the health care environment contains primary providers, secondary providers and organizations that regulate the industry. Both groups of organizations and individuals, through their normal operations and activities, generate information that may be important to the
Macro-environmental Analysis in a State Department of Public Health
255
future of other organizations. Thus, the environmental scanning process acts as a 'window' to these organizations. Through this window, managers engaged in environmental scanning carry out four functions: 1. 2. 3. 4.
view external environmental information; organize external information into several desired classifications; identify strategic issues within each information classification; and categorize strategic issues within each information classification as weak or strong and as occurring in the general environment or health care environment.
The scanning function, conceptualized in Figure 1, serves as the organization's 'window' or 'lens' on the external world. The scanning function is a process of moving the lens across the array of external organizations in search of current and emerging patterns of information. Using the lens, the viewer can focus on diverse and unorganized information generated by external organizations and individuals and compile and organize it into meaningful classifications. Thus, information generated in the external environment is organized in the scanning process. Prior to this interpretation process, information is diverse, unorganized, sporadic, mixed and has General Environment
Health Care Environment
Before tr Function • Diverse • Unorga • Sporad • Unevak • Uncate!
• Evaluated
Figure 1
256
P.M. Ginter et al.
not been assessed. The scanning process classifies, organizes, accumulates and, to some extent, evaluates this information. Organized information is then used in the monitoring function.
Information classification In order to monitor and further analyse the information, it must be 'lumped together' in some logical classes. Classification not only aids in tracking but also facilitates the later assessment of the impact of the information. The classifications typically used to group information are: (1) technological, (2) social, (3) political, (4) regulatory, (5) economic, and (6) competitive. These streams of information may be assessed and their impact incorporated into the strategy of the organization. Scanning requires surveying available sources of information in order to detect 'signals' of change or the emergence of an issue. Some signals may be quite weak and only suggest a possible issue or hint at a possible impact on the department of health. Over time several weak signals may be pieced together to provide stronger evidence of an important issue. In other cases, documentation of a significant issue may be relatively easy with a number of sources providing evidence. There are a variety of sources for environmental information. Although organizations create change, they are often difficult to monitor directly. However, there are a variety of secondary sources (published information) that are readily available to most investigators to assist them to scan and monitor other organizations. Essentially, people and publications both outside and inside the organization serve as the lens to the external world. For most organizations, personal sources greatly exceed impersonal sources in importance. Within the organization, there is typically a variety of experts who may be familiar with information created outside the organization and may be the greatest single source of such information. Outside the public health organization, non-members and patients may be considered important personal sources. Impersonal sources are largely accounted for by publications such as newspapers and journals, television, libraries and public and private databases.
Categorization of issues For each broad classification of information (technological, social, political, and so on) specific issues will be identified. These issues may be categorized as being supported by 'weak' signals or 'strong' signals. In addition, within the classification of information, strategic issues may also be categorized as general (affecting all industries) or industry specific (health care related). For each information classification, issues may then be plotted on a two-by-two matrix. This process provides a clear conceptual framework for the processes of monitoring, forecasting and assessing. An issue matrix for each information classification should be developed. An example of an issue matrix is presented in Figure 2. Likely migration of issues is shown by the arrows. Issues that are supported by few or weak signals and will affect a broad range of industries are categorized as general/weak. (G/W). The privatization of public services continues to be a general (broader than health care) issue that constitutes at least a weak signal of potential change for public sector decision makers.7 As the signals become stronger it becomes apparent that the issue is real and may have significant impact as it migrates to the
Macro-environmental Analysis in a State Department of Public Health
257
Environment General
General/Weak [G/W]
Health Care
Health Care/Weak [He/W]
Weak
Signals
r
r
Strong
General/Strong [G/S]
Health Care/Strong [HC/S]
Figure 2
general/strong quadrant (G/W to G/S). A few states, for example, have begun to contract with private firms to 'manage' their corrections system, thus constituting much stonger signals that private companies are competing for traditional 'public sector services'. It is also possible that the health care industry will be affected early in the process (G/W to HC/W). Thus, the issue may become industry specific (migrate to the health care/weak quadrant). For example, regarding privatization, some influential policy makers may question why public health needs to be involved in pharmacy services when we already have a 'drug store' on every corner. There remains the question of whether or not outsourcing pharmacy services might result in operating efficiencies. In addition, once a general issue is well documented and acknowledged, it likely will affect the industry (G/S to HC/S) and special care should be taken to assess its possible impact on the organization. (For example, when an influential public health department actually agrees that it should get out of the 'pharmacy business' and begin developing alliances with the private sector.) Of course, some issues will not migrate from weak to strong or general to industry. In some cases management will have misinterpreted the weak signals or issues may never develop as expected or may be defused earl~/.
258
P.M. Ginter et ah
In a similar fashion, industry-specific issues that are initially supported by weak signals may migrate to the health care/strong quadrant as more evidence is accumulated (HC/W to HC/S). Thus, it is important to identify and understand the impact of industry/weak issues as soon as possible. As suggested by the arrows in Figure 2, these issues are also likely to affect the general environment (HC/V¢ to G/W). At the same time, some weak industry issues may not enter the industry/strong quadrant and never need to be explicitly addressed by the organization. An important function of monitoring is to keep abreast of the speed and direction of all the strong and weak signals.
Scanning importance Environmental scanning is perhaps the most important part of environmental analysis because it forms the basis for the other processes. It is from this beginning that a database for decision making will be built. In light of the importance of this process the following scanning guidelines have been suggested: 1. The purpose of the scanning process is to plot the issues which are likely to have an impact on the organization and with which the organization must be prepared to cope when they arise. 2. Scanning needs to consider all the possible influences upon an organization. Only after all issues have been considered should the refining process and setting of priorities take place. 3. The results of environmental scanning should be a proactive rather than a reactive stance by the organization toward its environment. 4. It is not sufficient for managers to accept the plan that results from the environmental scan; it is crucial that they understand the thinking that has led to the development and selection of strategic and tactical issues from among those identified in the scanning process. It is therefore advantageous if as many managers as possible take part at some level in the scanning process. 5. An important aspect of environmental scanning is that it focuses managers' attention on what lies outside the organization and allows them to create an organization which can adapt to and learn from that environment. 8
Scanning in a State Department of Public Health In order to engage in environmental analysis as an input to the strategic planning process, the Alabama Department of Public Health formed a Strategic Thinking Task Force. The task force was made up of the directors of disease control and rehabilitative services, environmental and health service standards, family health services, vital records and health statistics, office of administrative services, office of management services, the state epidemiologist, a local health officer, and the state health officer. After considerable debate, the group identified seven key information classes from both the general and health care environments that should be scanned. These information classes were (1) economic; (2) technological; (3) political/regulatory; (4) social; (5) demographic; (6) medical/disease; and (7) local health concerns/ issues. Each task force member became the 'in-house expert' on one of these seven areas. The director of management services served as a resource to all members and the
Macro-environmental Analysis in a State Department of Public Health
259
state health officer did not participate directly in the scanning process. It was the responsibility of each expert to scan continuously their particular information classification in order to identify and document weak and strong signals of current and emerging issues. Before the scanning was initiated the group carefully discussed each of the information classifications and proposed a set of assumptions about each that would be used conducting the scanning process. The final assumptions that surfaced about each classification are listed in Table I. Strategic issues identified by the experts for each information classification are presented in Table II. These issues were then plotted on issue matrices (one for each information classification). The issue matrix for the economic information classification is presented in Figure 3. Monitoring the External Environment The monitoring function is the tracking of trends, issues and possible events identified in the scanning process. Monitoring accomplishes five important functions: 1. researches and identifies additional sources of information (inside and outside the organization) for issues delineated in the scanning process; 2. adds to the environmental database; 3. attempts to confirm or disprove issues (trends, developments, dilemmas and the possibility of events); 4. attempts to establish movement of issues (stronger/weaker and general/industry); and 5. attempts to determine the rate of change (speed of movement) of issues.
Monitoring process and function The monitoring process investigates the sources of information obtained in the scanning process and attempts to identify the organizations creating change and the sources reporting change. Once the organizations creating change and the publications or other information sources reporting change have been identified for an organization, special attention may be given to these sources. The monitoring function has a much narrower focus than scanning; the objective is to accumulate a database around the identified issue. The database will be used to confirm or disconfirm the trend, development, dilemma or possibility of an event; determine if signals are getting stronger or weaker; and to establish the rate of change taking place relative to the issue. The key to the monitoring process is to establish whether issues are migrating from one quadrant to another. This movement is significant because as issues move from one quadrant to another, their criticality to the organizations changes. The intensity of monitoring is reflected in management's understanding of the issue. When managers believe they understand the issue well, less monitoring will be done. However, when environmental issues are emerging, appear ill-structured, vague, or complex, issues will require a large amount of data to arrive at an interpretation. 4 Monitoring in a State Department of Public Health After issues for each information classification were identified, additional information concerning each issue was accumulated and judgements made by the information
P. M. Ginter et al.
260 Table I
Strategic thinking assumptions: state health department
Political/regulatory: 1. Public concern will increase along with demands that government become more aggressive relative to public health issues 2. Additional pressing environmental issues will emerge as well as an evolution of existing ones
3. 4. 5.
The increasing cost of compliance to regulations will necessitate better assessment of risks and trade-offs of costs vs benefits Agencies will have to set priorities and assign resources accordingly. We cannot continue to be everything to everybody Agencies (federal and state) will skirmish to determine who gets authority and resources to address a variety of public health problems
Economic: 1. Health care financing will move more to fee-for-services with corresponding difficulty in justifying programmes that do not generate revenues 2. Increasing trend toward bundling of services 3. Federal funds will be increasingly difficult to obtain Social values: 1. There will continue to be less than adequate public will for universal access to health care. There will be years of debate between provider groups and government leaders over the solution to access to care issues 2. The social tone will continue to be one of individualism and a lack of genuine appreciation of our critical interdependence 3. There will be no universal will to embrace prevention 4. Lip-service will continue to be given to the elderly but there will be no change in our attitude of simply separating ourselves from this increasingly large portion of our population 5. There will continue to be major problems with youth and specifically infant health (many of these problems will relate to substance abuse). Need to deal with the reality of problems resulting from surrogate parents Demographic: 1. Ageing trend will continue as forecasted at the national and state levels 2. Increasing minority population, although the actual groups may vary somewhat in the state 3. Income changes will be i m p o r t a n t - - m o r e people with lower incomes 4. Movement of population to urban areas will continue and there will be a continuing decline of small towns 5. Changes in family structure to smaller families and more single-parent families Technological: 1. Many health department functions will become more technologically dependent or intertwined 2. The health department will not invent or refine technologic advances but will rather be: (1) an occasional evaluator, and (2) a common user of new technologies 3. Acquisition of technological advances will be costly and costs will frequently not be recoverable 4. Decisions to invest in technologies will be decentralized and 'empiric' 5. The principal arenas for technologic growth will be communications, data processing, information storage/retrieval, and laboratory services 6. Increased data provided by technologic advances will impose: (1) a need for expanded analytic capacity and (2) increased political and communicative demands 7. Training needs to utilize technology fully will increase
Macro-environmental Analysis in a State Department of Public Health Table I
261
Strategic thinking assumptions: state health department (continued)
Specific disease-related issues: 1. There will be new infectious disease of consequence over the next 5-10 years 2. HIV/AIDS will dominate public health and require new expenditures without corresponding increases in resources 3. Chronic diseases will become more important because of the ageing population 4. Environmental issues will continue to increase in importance Local concerns/issues: 1. Medicaid expansions for prenatal care and children 2. Problems of real and perceived competition between public health and private sector 3. New laboratory services regulations will accentuate existing shortages in allied health personnel 4. Ageing trend will demand more home care and alternative living arrangements 5. More need for emphasis on health promotion (health lifestyle, nutrition and reaching the poor) 6. Increased interest in the environment, health education and occupational health 7. Loss of local funding in many counties and cities. Problem complicated by recessionary economic conditions 8. New diseases and old diseases with new problems 9. Negative image of health clinics 10. Increasing information needs and pressure for measurable outcomes
classification experts (usually including discussion with the Strategic Thinking Task Force). For each issue, sources of information were identified and specific indicators of change (signals) were delineated. In addition, judgements were made concerning the validity of the issue (confirmation that the issue was real), as to whether the issues were moving from one quadrant to another, and the relative speed of change in the issue. This information was documented on an Issue Signal Record similar to the one used for the social environment information classification shown in Table III.
Forecasting Environmental Change Forecasting environmental change is a process of extending the trends, developments, dilemmas and events that the organization is monitoring. The forecasting function attempts to answer the question: 'If these trends continue, or issues accelerate at their present rate, or if this event occurs, what will the issues and trends "look like" in the future?'
Purpose of forecasting Forecasting involves prediction concerning the migration of issues from weak to strong (G/~N to G/S and H C / W to HC/S) and from general to industry (G/NV to H C / W and G/S to HC/S). More specifically, there are two processes involved in the forecasting function. These processes are: 1. extending the trends, developments, dilemmas or occurrences of an event for each environment (migrate issues to next logical quadrant); and 2. identifying the interrelationships between the issues and environmental categories.
262
P. M. Ginter et al.
Table II Strategic issues by information classification Economic: 1. Erosion of state tax base 2. Difficulty attracting qualified personnel to public health 3. Federal government deficit 4. Cost containment and fiscal accountability 5. Privatization of public health services 6. Competition with private sector and other state agencies Technological: 1. Automated patient data systems Diagnostic information systems Geographic information systems 2. Industrial pollution 3. Cost of advanced medical technology 4. Need to ensure an adequately trained public health work-force to deal with advancing technology Regulatory/Political: 1. Litigious society 2. Access to health care in rural areas 3. Quality assurance 4. Regulation of previously unregulated activities (abortion clinics, etc.) Social: 1. Fitness/wellness trends 2. Changing patterns of high-risk lifestyles 3. Need for additional day care facilities 4. Illegal drug and substance abuse 5. Relating to special interest groups Demographic: 1. Ageing of population 2. Decreasing family size 3. Increasing minority population 4. Larger percentage of total population in lower socio-economic status 5. Urbanization of the population Medical/Disease: 1. Appearance of new infectious diseases 2. Increasing focus on chronic diseases Local Health Concerns/Issues: 1. Loss of local funding sources 2. New problems with old diseases 3. Image of public health at local level 4. Focus on measurable outcomes
In order to forecast the future situation facing the health department, for each information classification issues may be moved (1) from the general/strong to the health care/strong quadrant; (2) from the health care/weak to the health care/strong quadrant; and (3) from the general/weak to the general/strong and general/weak to health care/weak quadrants. This process provides a logical extension of the issues and suggests a realistic picture for the future.
Macro-environmental Analysis in a State Department of Public Health
263
Economic envi r onment General
Health Care
General/Weak [G/W]
Health Care/Weak [HC/W]
Weak
Pdvatizatlon of Public Health Services Compet~t{onwJth Pdvate Sector
& Other Agencies
Signals D[fficulty
Attracting
Qgalifled Personnel Erosion of
State Tax Base Cost Containment & Fiscal Accountability
Strong Federal Government Deficit
General/Strong [G/S]
Health Care/Strong [HC/S]
Figure 3
Forecasting in a State Department of Public Health Each of the seven information classifications identified by the department of public health issues were migrated from one quadrant to another based on the best judgement of the experts responsible for the classification and open discussion within the Strategic Thinking Task Force. This process provides a likely picture of each information classification for the foreseeable future. The economic environment forecast is illustrated in Figure 4. For the economic environment, the Strategic Thinking Task Force determined that the well-documented erosion of the state tax base would have a significant affect on the department of health (G/S to HC/S). Therefore, there would be less funding from state appropriations and strategies would have to be developed to identify additional federal funding sources and enhance fee-for-service sources (Medicare and Medicaid). In addition, a better job would have to be done in 'selling' the state legislature on the needs of public health (vis-g~-vis other state agencies). It was also determined that the difficulty of attracting qualified personnel to public health would become even more of a problem. Therefore, strategies would have to be developed to train employees better and to provide additional benefits.
P . M . Ginter e t al.
264
0
0
0 0
©
a:
:4
1'
"1"
1"
:=
1"
'1' :1::
~0
o
7
g =~
g
~-
~
e
.o
=
=
~
k
co
o
~
< ~
(~ The Society of Public Health, 1992
Keeping Strategic Thinking in Strategic Planning: Macro-environmental Analysis in a State Department of Public Health P. M. Ginter, PhD 1, W. J. Duncan, PhD 2 and S. A. Capper, DrPH 3
~Professor of Management and Professor of Health Care Organization and Policy, 2professor and University Scholar in Management and Professor of Health Care Organization and Policy, and 3Associate Professor of Health Care Organization and Policy and Associate Professor of Management, University of Alabama at Birmingham, Graduate School of Management, School of Public Health, Birmingham, AL 35294, USA
This paper examined the tendency of strategic decision makers in public health to allow their strategic planning process to degenerate into short-term, operational management. The temptation is great in light of pressing current problems. However, the danger of not thinking strategically about the future and of failing to attempt to position the organization in such a way as to take advantage of its strengths and minimize the adverse consequences of its weaknesses can be catastrophic. An attempt is made to illustrate how one state department of public health attempted to ensure that strategic thinking remained a part of its strategic planning process. The process was built around the energizing of the expertise present in the department and the mobilization of resources under the direction of the State Health Officer. The process is ongoing and is constantly fine tuned. However, the procedure utilized can be adapted easily to the unique circumstances facing most public health organizations. Recent studies concerning public health practice including the Institute of Medicine's The Future of Public Health 1 and the D e p a r t m e n t of H e a l t h and H u m a n Services' Healthy People 20002 conclude that i m p r o v e d m a n a g e m e n t capabilities in public health practice are required to address a growing n u m b e r of increasingly complex and diverse issues. As a result, m a c r o - e n v i r o n m e n t a l analysis, the foundation of effective strategic planning, has been attracting the interest of leaders in public health. Public health leaders are beginning to appreciate the fact that m a c r o - e n v i r o n m e n t a l analysis forces managers to think 'strategically' rather than 'operationally'. Thus, managers must identify and consider current and emerging issues outside the organization that will shape the future of public health organizations. Ultimately, these issues are m o r e important to the success or failure of public health organizations than internal issues. The b r o a d e r focus of strategic thinking allows m a n a g e r s to manage for the future rather than the past. The importance, benefits and general m e t h o d of m a c r o - e n v i r o n m e n t a l analysis as a part of strategic planning in public health organizations have been examined. 3 H o w e v e r , even when public health d e p a r t m e n t s use m a c r o - e n v i r o n m e n t a l analysi s , the initial enthusiasm is sometimes difficult to sustain. Pressing issues of the day, week and m o n t h drive out the m o r e abstract external issues that will b e c o m e critical in the future. Well-intended strategic thinking degenerates into operational management. The p u r p o s e of this p a p e r is twofold: (1) to provide an illustration of how one
254
P . M . Ginter et al.
state department of public health keeps strategic thinking alive in its planning process, and (2) to provide a framework for macro-environmental analysis that can be easily adapted by other public agencies. The Process of Macro-environmental Analysis
In order for an organization to be effective, management must have an understanding of the external environment in which the organization operates and anticipate and respond to the significant shifts that are taking place within that environment. Organizations that are responsive and adapt to changes taking place in their environment are more likely to survive and prosper. Therefore, the introduction of an early issue recognition system to identify external opportunities and threats (strategic issues) is a major management task in today's public health organizations. This task has evolved because of the growing impact of economic factors, new technologies, increasing governmental influence on the delivery of health services, demographic shifts, changes in values and lifestyles, and increasing competition for federal, state and county resources. Clearly, these issues will affect public health organizations. Strategic issues are trends, developments, dilemmas and possible events that affect an organization as a whole and its position within its environment. How well the organization deals with these issues determines the relative success of the organization. Complicating organizational response, strategic issues are often ill-structured and ambiguous and require an interpretation effort (forecasting and assessment). 4 However, early recognition of strategic issues and the development of a plan to address key issues will help public health organizations be more effective and efficient. While macro-environmental analysis is a crucial part of systematic strategic planning, there are many frustrations in its management and few guidelines to help managers understand and use the process. 5 Generally, the process of macro-environmental analysis consists of four interrelated activities--scanning, monitoring, forecasting and assessing. More specifically, macro-environmental analysis involves: of the relevant environments in order to identify early signals of emerging change and to detect change already under way. • Monitoring--tracking the environmental issues identified in the scanning process. • Forecasting--developing plausible projections of the direction, scope, speed and intensity of environmental change. • Assessing--evaluating what the projected trend means for the organization in terms of its relationship with the external environment.6 • Scanning--surveillance
Scanning the External Environment The external environment is comprised of a number of organizations and individuals. For the purpose of analysis, it is convenient to group these organizations and individuals into two environments--the general or macro-environment and the industry or health care environment. The general environment consists of organizations and individuals that are not a part of the health care industry while the health care environment contains primary providers, secondary providers and organizations that regulate the industry. Both groups of organizations and individuals, through their normal operations and activities, generate information that may be important to the
Macro-environmental Analysis in a State Department of Public Health
255
future of other organizations. Thus, the environmental scanning process acts as a 'window' to these organizations. Through this window, managers engaged in environmental scanning carry out four functions: 1. 2. 3. 4.
view external environmental information; organize external information into several desired classifications; identify strategic issues within each information classification; and categorize strategic issues within each information classification as weak or strong and as occurring in the general environment or health care environment.
The scanning function, conceptualized in Figure 1, serves as the organization's 'window' or 'lens' on the external world. The scanning function is a process of moving the lens across the array of external organizations in search of current and emerging patterns of information. Using the lens, the viewer can focus on diverse and unorganized information generated by external organizations and individuals and compile and organize it into meaningful classifications. Thus, information generated in the external environment is organized in the scanning process. Prior to this interpretation process, information is diverse, unorganized, sporadic, mixed and has General Environment
Health Care Environment
Before tr Function • Diverse • Unorga • Sporad • Unevak • Uncate!
• Evaluated
Figure 1
256
P.M. Ginter et al.
not been assessed. The scanning process classifies, organizes, accumulates and, to some extent, evaluates this information. Organized information is then used in the monitoring function.
Information classification In order to monitor and further analyse the information, it must be 'lumped together' in some logical classes. Classification not only aids in tracking but also facilitates the later assessment of the impact of the information. The classifications typically used to group information are: (1) technological, (2) social, (3) political, (4) regulatory, (5) economic, and (6) competitive. These streams of information may be assessed and their impact incorporated into the strategy of the organization. Scanning requires surveying available sources of information in order to detect 'signals' of change or the emergence of an issue. Some signals may be quite weak and only suggest a possible issue or hint at a possible impact on the department of health. Over time several weak signals may be pieced together to provide stronger evidence of an important issue. In other cases, documentation of a significant issue may be relatively easy with a number of sources providing evidence. There are a variety of sources for environmental information. Although organizations create change, they are often difficult to monitor directly. However, there are a variety of secondary sources (published information) that are readily available to most investigators to assist them to scan and monitor other organizations. Essentially, people and publications both outside and inside the organization serve as the lens to the external world. For most organizations, personal sources greatly exceed impersonal sources in importance. Within the organization, there is typically a variety of experts who may be familiar with information created outside the organization and may be the greatest single source of such information. Outside the public health organization, non-members and patients may be considered important personal sources. Impersonal sources are largely accounted for by publications such as newspapers and journals, television, libraries and public and private databases.
Categorization of issues For each broad classification of information (technological, social, political, and so on) specific issues will be identified. These issues may be categorized as being supported by 'weak' signals or 'strong' signals. In addition, within the classification of information, strategic issues may also be categorized as general (affecting all industries) or industry specific (health care related). For each information classification, issues may then be plotted on a two-by-two matrix. This process provides a clear conceptual framework for the processes of monitoring, forecasting and assessing. An issue matrix for each information classification should be developed. An example of an issue matrix is presented in Figure 2. Likely migration of issues is shown by the arrows. Issues that are supported by few or weak signals and will affect a broad range of industries are categorized as general/weak. (G/W). The privatization of public services continues to be a general (broader than health care) issue that constitutes at least a weak signal of potential change for public sector decision makers.7 As the signals become stronger it becomes apparent that the issue is real and may have significant impact as it migrates to the
Macro-environmental Analysis in a State Department of Public Health
257
Environment General
General/Weak [G/W]
Health Care
Health Care/Weak [He/W]
Weak
Signals
r
r
Strong
General/Strong [G/S]
Health Care/Strong [HC/S]
Figure 2
general/strong quadrant (G/W to G/S). A few states, for example, have begun to contract with private firms to 'manage' their corrections system, thus constituting much stonger signals that private companies are competing for traditional 'public sector services'. It is also possible that the health care industry will be affected early in the process (G/W to HC/W). Thus, the issue may become industry specific (migrate to the health care/weak quadrant). For example, regarding privatization, some influential policy makers may question why public health needs to be involved in pharmacy services when we already have a 'drug store' on every corner. There remains the question of whether or not outsourcing pharmacy services might result in operating efficiencies. In addition, once a general issue is well documented and acknowledged, it likely will affect the industry (G/S to HC/S) and special care should be taken to assess its possible impact on the organization. (For example, when an influential public health department actually agrees that it should get out of the 'pharmacy business' and begin developing alliances with the private sector.) Of course, some issues will not migrate from weak to strong or general to industry. In some cases management will have misinterpreted the weak signals or issues may never develop as expected or may be defused earl~/.
258
P.M. Ginter et ah
In a similar fashion, industry-specific issues that are initially supported by weak signals may migrate to the health care/strong quadrant as more evidence is accumulated (HC/W to HC/S). Thus, it is important to identify and understand the impact of industry/weak issues as soon as possible. As suggested by the arrows in Figure 2, these issues are also likely to affect the general environment (HC/V¢ to G/W). At the same time, some weak industry issues may not enter the industry/strong quadrant and never need to be explicitly addressed by the organization. An important function of monitoring is to keep abreast of the speed and direction of all the strong and weak signals.
Scanning importance Environmental scanning is perhaps the most important part of environmental analysis because it forms the basis for the other processes. It is from this beginning that a database for decision making will be built. In light of the importance of this process the following scanning guidelines have been suggested: 1. The purpose of the scanning process is to plot the issues which are likely to have an impact on the organization and with which the organization must be prepared to cope when they arise. 2. Scanning needs to consider all the possible influences upon an organization. Only after all issues have been considered should the refining process and setting of priorities take place. 3. The results of environmental scanning should be a proactive rather than a reactive stance by the organization toward its environment. 4. It is not sufficient for managers to accept the plan that results from the environmental scan; it is crucial that they understand the thinking that has led to the development and selection of strategic and tactical issues from among those identified in the scanning process. It is therefore advantageous if as many managers as possible take part at some level in the scanning process. 5. An important aspect of environmental scanning is that it focuses managers' attention on what lies outside the organization and allows them to create an organization which can adapt to and learn from that environment. 8
Scanning in a State Department of Public Health In order to engage in environmental analysis as an input to the strategic planning process, the Alabama Department of Public Health formed a Strategic Thinking Task Force. The task force was made up of the directors of disease control and rehabilitative services, environmental and health service standards, family health services, vital records and health statistics, office of administrative services, office of management services, the state epidemiologist, a local health officer, and the state health officer. After considerable debate, the group identified seven key information classes from both the general and health care environments that should be scanned. These information classes were (1) economic; (2) technological; (3) political/regulatory; (4) social; (5) demographic; (6) medical/disease; and (7) local health concerns/ issues. Each task force member became the 'in-house expert' on one of these seven areas. The director of management services served as a resource to all members and the
Macro-environmental Analysis in a State Department of Public Health
259
state health officer did not participate directly in the scanning process. It was the responsibility of each expert to scan continuously their particular information classification in order to identify and document weak and strong signals of current and emerging issues. Before the scanning was initiated the group carefully discussed each of the information classifications and proposed a set of assumptions about each that would be used conducting the scanning process. The final assumptions that surfaced about each classification are listed in Table I. Strategic issues identified by the experts for each information classification are presented in Table II. These issues were then plotted on issue matrices (one for each information classification). The issue matrix for the economic information classification is presented in Figure 3. Monitoring the External Environment The monitoring function is the tracking of trends, issues and possible events identified in the scanning process. Monitoring accomplishes five important functions: 1. researches and identifies additional sources of information (inside and outside the organization) for issues delineated in the scanning process; 2. adds to the environmental database; 3. attempts to confirm or disprove issues (trends, developments, dilemmas and the possibility of events); 4. attempts to establish movement of issues (stronger/weaker and general/industry); and 5. attempts to determine the rate of change (speed of movement) of issues.
Monitoring process and function The monitoring process investigates the sources of information obtained in the scanning process and attempts to identify the organizations creating change and the sources reporting change. Once the organizations creating change and the publications or other information sources reporting change have been identified for an organization, special attention may be given to these sources. The monitoring function has a much narrower focus than scanning; the objective is to accumulate a database around the identified issue. The database will be used to confirm or disconfirm the trend, development, dilemma or possibility of an event; determine if signals are getting stronger or weaker; and to establish the rate of change taking place relative to the issue. The key to the monitoring process is to establish whether issues are migrating from one quadrant to another. This movement is significant because as issues move from one quadrant to another, their criticality to the organizations changes. The intensity of monitoring is reflected in management's understanding of the issue. When managers believe they understand the issue well, less monitoring will be done. However, when environmental issues are emerging, appear ill-structured, vague, or complex, issues will require a large amount of data to arrive at an interpretation. 4 Monitoring in a State Department of Public Health After issues for each information classification were identified, additional information concerning each issue was accumulated and judgements made by the information
P. M. Ginter et al.
260 Table I
Strategic thinking assumptions: state health department
Political/regulatory: 1. Public concern will increase along with demands that government become more aggressive relative to public health issues 2. Additional pressing environmental issues will emerge as well as an evolution of existing ones
3. 4. 5.
The increasing cost of compliance to regulations will necessitate better assessment of risks and trade-offs of costs vs benefits Agencies will have to set priorities and assign resources accordingly. We cannot continue to be everything to everybody Agencies (federal and state) will skirmish to determine who gets authority and resources to address a variety of public health problems
Economic: 1. Health care financing will move more to fee-for-services with corresponding difficulty in justifying programmes that do not generate revenues 2. Increasing trend toward bundling of services 3. Federal funds will be increasingly difficult to obtain Social values: 1. There will continue to be less than adequate public will for universal access to health care. There will be years of debate between provider groups and government leaders over the solution to access to care issues 2. The social tone will continue to be one of individualism and a lack of genuine appreciation of our critical interdependence 3. There will be no universal will to embrace prevention 4. Lip-service will continue to be given to the elderly but there will be no change in our attitude of simply separating ourselves from this increasingly large portion of our population 5. There will continue to be major problems with youth and specifically infant health (many of these problems will relate to substance abuse). Need to deal with the reality of problems resulting from surrogate parents Demographic: 1. Ageing trend will continue as forecasted at the national and state levels 2. Increasing minority population, although the actual groups may vary somewhat in the state 3. Income changes will be i m p o r t a n t - - m o r e people with lower incomes 4. Movement of population to urban areas will continue and there will be a continuing decline of small towns 5. Changes in family structure to smaller families and more single-parent families Technological: 1. Many health department functions will become more technologically dependent or intertwined 2. The health department will not invent or refine technologic advances but will rather be: (1) an occasional evaluator, and (2) a common user of new technologies 3. Acquisition of technological advances will be costly and costs will frequently not be recoverable 4. Decisions to invest in technologies will be decentralized and 'empiric' 5. The principal arenas for technologic growth will be communications, data processing, information storage/retrieval, and laboratory services 6. Increased data provided by technologic advances will impose: (1) a need for expanded analytic capacity and (2) increased political and communicative demands 7. Training needs to utilize technology fully will increase
Macro-environmental Analysis in a State Department of Public Health Table I
261
Strategic thinking assumptions: state health department (continued)
Specific disease-related issues: 1. There will be new infectious disease of consequence over the next 5-10 years 2. HIV/AIDS will dominate public health and require new expenditures without corresponding increases in resources 3. Chronic diseases will become more important because of the ageing population 4. Environmental issues will continue to increase in importance Local concerns/issues: 1. Medicaid expansions for prenatal care and children 2. Problems of real and perceived competition between public health and private sector 3. New laboratory services regulations will accentuate existing shortages in allied health personnel 4. Ageing trend will demand more home care and alternative living arrangements 5. More need for emphasis on health promotion (health lifestyle, nutrition and reaching the poor) 6. Increased interest in the environment, health education and occupational health 7. Loss of local funding in many counties and cities. Problem complicated by recessionary economic conditions 8. New diseases and old diseases with new problems 9. Negative image of health clinics 10. Increasing information needs and pressure for measurable outcomes
classification experts (usually including discussion with the Strategic Thinking Task Force). For each issue, sources of information were identified and specific indicators of change (signals) were delineated. In addition, judgements were made concerning the validity of the issue (confirmation that the issue was real), as to whether the issues were moving from one quadrant to another, and the relative speed of change in the issue. This information was documented on an Issue Signal Record similar to the one used for the social environment information classification shown in Table III.
Forecasting Environmental Change Forecasting environmental change is a process of extending the trends, developments, dilemmas and events that the organization is monitoring. The forecasting function attempts to answer the question: 'If these trends continue, or issues accelerate at their present rate, or if this event occurs, what will the issues and trends "look like" in the future?'
Purpose of forecasting Forecasting involves prediction concerning the migration of issues from weak to strong (G/~N to G/S and H C / W to HC/S) and from general to industry (G/NV to H C / W and G/S to HC/S). More specifically, there are two processes involved in the forecasting function. These processes are: 1. extending the trends, developments, dilemmas or occurrences of an event for each environment (migrate issues to next logical quadrant); and 2. identifying the interrelationships between the issues and environmental categories.
262
P. M. Ginter et al.
Table II Strategic issues by information classification Economic: 1. Erosion of state tax base 2. Difficulty attracting qualified personnel to public health 3. Federal government deficit 4. Cost containment and fiscal accountability 5. Privatization of public health services 6. Competition with private sector and other state agencies Technological: 1. Automated patient data systems Diagnostic information systems Geographic information systems 2. Industrial pollution 3. Cost of advanced medical technology 4. Need to ensure an adequately trained public health work-force to deal with advancing technology Regulatory/Political: 1. Litigious society 2. Access to health care in rural areas 3. Quality assurance 4. Regulation of previously unregulated activities (abortion clinics, etc.) Social: 1. Fitness/wellness trends 2. Changing patterns of high-risk lifestyles 3. Need for additional day care facilities 4. Illegal drug and substance abuse 5. Relating to special interest groups Demographic: 1. Ageing of population 2. Decreasing family size 3. Increasing minority population 4. Larger percentage of total population in lower socio-economic status 5. Urbanization of the population Medical/Disease: 1. Appearance of new infectious diseases 2. Increasing focus on chronic diseases Local Health Concerns/Issues: 1. Loss of local funding sources 2. New problems with old diseases 3. Image of public health at local level 4. Focus on measurable outcomes
In order to forecast the future situation facing the health department, for each information classification issues may be moved (1) from the general/strong to the health care/strong quadrant; (2) from the health care/weak to the health care/strong quadrant; and (3) from the general/weak to the general/strong and general/weak to health care/weak quadrants. This process provides a logical extension of the issues and suggests a realistic picture for the future.
Macro-environmental Analysis in a State Department of Public Health
263
Economic envi r onment General
Health Care
General/Weak [G/W]
Health Care/Weak [HC/W]
Weak
Pdvatizatlon of Public Health Services Compet~t{onwJth Pdvate Sector
& Other Agencies
Signals D[fficulty
Attracting
Qgalifled Personnel Erosion of
State Tax Base Cost Containment & Fiscal Accountability
Strong Federal Government Deficit
General/Strong [G/S]
Health Care/Strong [HC/S]
Figure 3
Forecasting in a State Department of Public Health Each of the seven information classifications identified by the department of public health issues were migrated from one quadrant to another based on the best judgement of the experts responsible for the classification and open discussion within the Strategic Thinking Task Force. This process provides a likely picture of each information classification for the foreseeable future. The economic environment forecast is illustrated in Figure 4. For the economic environment, the Strategic Thinking Task Force determined that the well-documented erosion of the state tax base would have a significant affect on the department of health (G/S to HC/S). Therefore, there would be less funding from state appropriations and strategies would have to be developed to identify additional federal funding sources and enhance fee-for-service sources (Medicare and Medicaid). In addition, a better job would have to be done in 'selling' the state legislature on the needs of public health (vis-g~-vis other state agencies). It was also determined that the difficulty of attracting qualified personnel to public health would become even more of a problem. Therefore, strategies would have to be developed to train employees better and to provide additional benefits.
P . M . Ginter e t al.
264
0
0
0 0
©
a:
:4
1'
"1"
1"
:=
1"
'1' :1::
~0
o
7
g =~
g
~-
~
e
.o
=
=
~
k
co
o
~
< ~
