ORIGINAL ARTICLE
Organizational change strategies within healthcare Claudia Steinke, RN, BSc, MSc, PhD; Ali Dastmalchian, BSc, MSc, PhD; Paul Blyton, BA, PhD; Paul Hasselback, MSc, MD, FRCPC
Abstract—This study explores ways in which healthcare organizations can improve their organizational fitness for change using Beer and Nohria's framework of Theory E (concentrating on the economic value of change) and Theory O (concentrating on the organization's long-term capabilities for change). Data were collected from senior leaders/medical directors from health regions in Alberta. The results show that even though there is a tendency for reliance on Theory E change strategies, the respondents demonstrated other preferred approaches to change.
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ast year the Canadian Health Services Research Foundation produced a report that called for “more attention to change readiness and change capacity prior to initiating change that would contribute to better understanding about what strategies and approaches would help to initiate and support organizational change effectively.”1 Canada, like other developed countries, confronts significant change as it strives to address the ongoing challenges of healthcare. However, in the face of these challenges and the significant change required, Canada has a relatively weak track record for creating sustained and effective change.1,2 This paper explores ways in which healthcare organizations can improve their organizational fitness3-8 for change. The term organizational fitness indicates that success in dealing with highly demanding and rapidly changing environments is not solely about an organization aiming to align its strategy with the environment, and its design, culture, and leadership with strategy, but also about its ability to learn and adapt to changing circumstances.3,4,6 Drivers of successful and major organizational change also hold true to centre, meaning they personally create the link between the people who do the work and the performance they must deliver.9 An organization may have the right strategy in place but without the appropriate structure and capabilities, the willingness and ability to learn and adapt, and a common, shared purpose,10 it will not be able to implement strategy successfully. To examine how fit an organization is for change, managers require an analytic framework to diagnose and From the Faculties of Health Sciences and Management, University of Lethbridge, Alberta, Canada; Gustavson School of Business, University of Victoria, Victoria, British Columbia, Canada; Cardiff Business School, Cardiff University, Cardiff, Wales, United Kingdom; Vancouver Island Health Authority, Nanaimo, British Columbia, Canada. Corresponding author: Claudia Steinke, RN, BSc, MSc, PhD, Faculties of Health Sciences and Management, University of Lethbridge, 4401 University Drive, Lethbridge, Alberta, Canada, T1K 3M4. (e-mail: [email protected]) Healthcare Management Forum 2013 26:127–135 0840-4704/$ - see front matter & 2013 Canadian College of Health Leaders. Published by Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.hcmf.2013.05.002
take action.8 One such framework is Beer and Nohria's Theory E and Theory O of change.5,6 This theoretical approach is worthy of our attention as it provides a framework with which we can examine barriers to change, organizational capabilities and capacities, cultures, and values, as well as the strategic approach to change employed. Like all managerial action, these approaches are guided by very different values and assumptions about the purpose and means for change. Theory E has as its purpose the economic value of change. Theory O has as its purpose the development of the organization's long-term “human” capabilities for change. These theories view the challenge of organizational change from two distinct perspectives. Although both have validity, each also has costs, and neither one is likely to achieve all of an organization's objectives. The goal is to integrate the two theories (Theory EO) in a way that manages the tension between them (performance and people). This paper discusses a study that applied Beer and Nohria's5,6 Theory E and Theory O of change within healthcare in Alberta. The overall purpose of the study was to examine ways in which healthcare organizations can improve their organizational fitness for change. The study was conducted at a time when the province consisted of health regions. Given the recent call to focus more attention to “change readiness and change capacity,”1 the research team feels there are lessons to be learned from exploring what was, as we think about with what is, in preparation for what could be.
BACKGROUND Organizational change Organizational change may be defined as an alteration in the actions, processes, values, skills, and context that is produced by changes in choices made.4-6 According to Greenwood and Hinings,11,12 organizations are continuously evolving systems, partly in response to their environment (and the complexity of political, regulatory, and technological changes confronting most organizations) and partly because of the changes brought about by their members. The challenge of organizational change is to enhance the
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organization's ability to learn how to respond more effectively to its changing environment and its ability to shape that environment. In other words, be learning focused and failure tolerant.10 Fundamental change in any organization is not possible without a change in the norms and values held by the organization and its members. A change in beliefs as well as actions needs to occur to achieve fundamental change3,18 and the more changes that challenge the existing values and culture, the greater the difficulty in implementing change.
Organizational change strategies Research suggests there are two dramatically different approaches to change that can be identified by examining strategies for change—Theory E and Theory O of change5,6 (refer to Fig. 1). Theory E is an approach to change based on the idea that financial performance is the only legitimate measure of corporate success. Focus is on the economic value of the organization, formal systems and structures, driven from a top-down management with extensive guidance from outside consultants. Change is planned and programmatic, and usually involves economic incentives, drastic layoffs, downsizing, and restructuring. Theory O is an approach to change based on the internal dynamics and capabilities of the organization. The goal is to develop culture and human capabilities by way of individual and organizational learning. High value is placed on employee commitment and the development of a highly involved, learning-oriented culture. Consultants and incentives are relied on far less to drive change as these organizations rely heavily on their employees to shape solutions for the organization. Thus, these two theories view the challenge of organizational change from two distinct perspectives. The easiest and most natural strategy is to apply one approach over the other; however, neither approach is likely to achieve all of the organization's objectives, and each has its costs. The challenge is how to resolve the tensions between them and not sacrifice one or the other.4-6 The ideal is to integrate the two theories (Theory EO) in a mutually beneficial way. Organizations that achieve this are often referred to as high-commitment and high-performance firms and usually lead the rankings in the “Best Companies to Work For” lists.9
The often undiscussed barriers to organizational change We know that organizational fitness depends on the capacity of all leaders and members of the organization to confront and learn from internal tensions.3,6,7,13 Not doing this is the reason that approximately 70% of all change initiatives fail.14 These internal tensions are the internal barriers that everyone knows about and talks about behind closed doors, but do not confront in a way that enables the open public conversation needed to overcome them.7 Beer and Eisenstat3 and Beer and Nohria5,6 identified six internal barriers to change strategy implementation; barriers that typically appear together as a syndrome and are referred to as “silent killers”: (i) (ii) (iii) (iv) (v)
top-down senior management style, unclear strategy and conflicting priorities, ineffective senior management team, poor vertical communication, poor coordination across functions, businesses, or borders, and (vi) inadequate down-the-line leadership skills and development. These barriers represent critical organizational stress points where new capabilities are required to successfully transition to higher levels of performance, speed, and responsiveness3. The difficulty with achieving fundamental and successful change lies in the connections between management and frontline employees.3,7 The conventional wisdom is that replacing the leader will ensure that strategic and organizational issues are confronted.7 After all, these leaders command the heights and have the authority to radically change the organization. And while forming an effective new team is an essential first step, without engaging key managers throughout the organization and the frontline, the “unvarnished truths” will not come out, and the real problems will never be understood or solved.7 Norms of silence will not produce a fit organization.
Change in Alberta's healthcare sector When we talk about organizational fitness and the silent killers of change strategy implementation, it is interesting to think of these things within the context of public sector
Figure 1. Strategic Approaches to Organizational Change (Theory E, O, EO)
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healthcare. If we look to the province of Alberta, we see large-scale and significant organizational change that has occurred over the past 18 years. These changes are the result of mounting expenditures, growing government deficit, an aging population, challenges in the area of recruitment, and retention of healthcare providers, advances in technology, and innovation. For example, in 1995 a fundamental restructuring of Alberta's health system occurred whereby 17 health regions and two provincial boards (the Alberta Mental Health Board and the Alberta Cancer Board) replaced more than 200 community hospital boards and administrators that managed healthcare in the province.15,16 This meant significant change that affected all aspects of healthcare. Although the strongest impetus for change was financially and politically driven, there was also need for more effective utilization of resources. In subsequent years, those 17 health regions and two provincial boards were reduced to nine regional health authorities and three provincial agencies (the Alberta Mental Health Board, Alberta Cancer Board, and Alberta Alcohol and Drug Abuse Commission), each organization was responsible for the operations of every hospital, continuing care facility, community health centre, and public health programs within their outlined demographic area. In 2008, further restructuring occurred where the nine regional health authorities and three provincial agencies were abolished to create one large provincial health entity known as Alberta Health Services.17 Alberta Health Services operates at present and is responsible for delivering health services to 3.5 million people in the province. It is governed by a board that reports to the Minster of Health and Wellness, and led by a Chief Executive Officer with a workforce of 100,000 staff and physicians.18 The rationale for creating this province-wide entity was to “make Alberta's publicly funded healthcare system more effective and efficient,” to “illustrate a move to the 21st century healthcare,” and also “move money out of administration into healthcare delivery.”19 The plan was to create “one coordinated and unified approach to healthcare that integrates health services across the province and standardizes care so that all patients receive the same quality of care.”20 Although the change was a bold move,21 some question the planning and effectiveness of it.22,23 In 2009, Alberta Health Services restructured further by organizing itself into five zones (eg, North Zone, Edmonton Zone, Central Zone, Calgary Zone, and South Zone) so that “communities could be more directly connected to their local health systems and decisions can be made closer to where care is provided.”24,25 In 2011, Alberta Health Services announced a realignment of the organization's leadership structure to transfer more decision making to its five zones, hospitals, and community care centres, and to increase direct physician engagement in planning and service delivery.26 This brief history informs as to some of the significant structural changes that have occurred within the Alberta
healthcare system over the past 18 years. Given this history, we present to you the findings of a study that was conducted when the province's health system was much more decentralized than it is today. We feel that the findings offer some important insight for the health leaders across Canada, and for those interested in conducting future research in this area.
Research objective The overall purpose of the study was to examine ways in which healthcare organizations can improve their organizational fitness for change. Specifically, the study examined the organizational capabilities in place and required for dealing with change within healthcare in Alberta by applying Beer and Nohria's framework of Theory E and Theory O.5,6 The goal was to test the following proposition: In the health regions under study, there is a significant and positive relationship between the use of a combined Theory EO approach to change and the success of change efforts.
METHODS Setting The study was conducted in Alberta in 2001 at a time when the province consisted of 17 health regions and two provincial boards (refer to the map of Health Region Boundaries and the summary descriptions of the health regions provided in Fig. 1 in Appendix C in the Supplementary material). During this time, the health system was being heavily scrutinized both federally and provincially. For example, in the spring of 2000, a 12-member panel led by the former Deputy Prime Minister Don Mazankowski (under former Premier Ralph Klein) was formed to find ways to reduce the cost of the healthcare system in Alberta. His widely discussed report became known as The Mazankowski Report27 and produced 44 recommended changes to the province's healthcare system. Also around this time Roy Romanow (former NDP Premier of Saskatchewan), headed a Commission to examine the future of healthcare in Canada. The commission's mandate was to engage Canadians in a national dialogue on the future of heathcare and to make recommendations to preserve the long-term sustainability of Canada's universally accessible, publicly funded healthcare system. The Romanow Report28 provided 47 detailed recommendations for reform.
Recruitment and sample Subjects were contacted by way of the Provincial Health Authorities of Alberta, which represented all health regions in the province. The Provincial Health Authorities of Alberta provided the research team with a compiled list of all those involved in the management structure of each health region (n ¼ 319). The list contained the names and contact information of those in senior management,
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middle management, and supervisory and administrative support positions. The Council of Medical Directors was contacted to provide for a list of the Medical Directors for each region (n ¼ 19). The total population being N ¼ 338 potential participants. At the time of the study, members from all 17 health regions and the two provincial boards (referred to this point forward as 19 health regions) were approached to participate.
Ethics
The capacity to change and learn (seven items)
The University of Lethbridge Human Subject Research Committee approved the study.
Instrument and measures An on-line, web-based survey was used as the means for data collection. This survey was originally developed and tested by Harvard University professors Beeret al.29 and refined by Beer and Nohria.5,6 The model and survey is a licensed consulting tool and permission was obtained from Professor Beer to use the survey and modify some wording as needed to better suit public sector healthcare. For example, the word “customer” was replaced with “client.” A sample of the survey questions is provided in the Appendices in the Supplementary material. The survey consisted of 46 questions measuring organizational dimensions of change and organizational strategies for change as per Theory E and O.5,6 The instrument also included demographic and control variables, which are described later. The following is a description of measures used and their reliability coefficients (Cronbach α):
The previously mentioned six measures (40 items) were assessed on a seven-point Likert-type scale (strongly agree ¼ 1…strongly disagree ¼ 5; don't know ¼ 6; not applicable ¼ 7).
Organizational strategies of change (Theory E and Theory O) Theory E and O (six items) measured the relative emphasis of the health regions in terms of the following six organizational aspects of the concept. These are as follows:
Goals and purpose: ranging from emphasis on financial
Organizational dimensions of change
The following six dimensions of organizational change were assessed as follows:
Environment (four items) assessing the change and
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instability of the environment; and need for flexibility and innovation (α ¼ 0.70). Performance of the organization (four items) that pertained to the financial and human resource performance; clients' commitment; and the overall position relative to other health organizations in the province (α ¼ 0.73). Capabilities and characteristics of the organization (12 items) that measured technical, functional, leadership, and interpersonal skills; coordination and communication across levels; culture and values; the allocation of supply of human and financial resources; and the human resource management processes (α ¼ 0.88). Levers for change (11 items) measured the effectiveness, values, principles, and emphasis of the top team; the structures and the control systems; and the organization's approach and philosophy regarding staff recruitment and retention (α ¼ 0.86).
related to management's ability to effectively assess the environment and formulate strategies; the eagerness of the top team to learn from their colleagues and share ideas; openness in communicating strengths and weaknesses; the cohesiveness across levels; and the adaptability of the organization (α ¼ 0.90). Management (two items) measured whether the practices and behaviours of top and middle management enhances the effectiveness of the organization (α ¼ 0.80).
performance (scoring 5) to emphasis on developing internal capabilities (scoring 1); Leadership style: ranging from top-down style (scoring 5) to highly participative (scoring 1); Focus: ranging from “hardware,” systems, and structures (scoring 5) to “software,” culture and behaviours (scoring 1); Process: ranging from highly planned (scoring 5) to highly evolutionary (scoring 1); Reward system: from strong use of financial rewards (scoring 5) to strong use of intrinsic rewards (scoring 1); and Use of consultants: relying heavily on consultants (scoring 5) to relying on our employees to shape our solutions (scoring 1).
Demographic variables The demographic variables were gender (female ¼ 1, male ¼ 2), seniority of level in organization (senior management ¼ 1, others ¼ 0), supervision—whether they supervise others (yes ¼ 1, no ¼ 0), and tenure in present position (we used logarithm of the number of years). The demographic variables were used for comparison measures between the health regions.
Analysis Analysis of the data was performed using the Statistical Package of the Social Sciences. Descriptive statistics were computed to summarize the data and produce aggregate measures. Reliability measures were used to assess internal consistency. Correlations were used to assess relationships between Theories E, O, and EO and the organizational
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dimensions of change. Factor analysis and one-way Analysis of Variance (ANOVA) were used to examine relationships. Although the data were analyzed at both the individual (eg, the response of individuals across the province) and organizational (eg, the response of individuals according to their health region) levels of analyses, only the organizational-level data are presented here and not all of the statistical computations are presented in this paper.
RESULTS Sample At the time of the study, all 19 health regions were approached to participate. One health region declined making the total organizations from which data were collected n ¼ 18. A brief description of the health regions as they existed in 2001 in terms of their mandate and strategic role in the province is provided in the Appendices in the Supplementary material. These were compiled from written documents and annual reports obtained from each as well as our discussions and interviews with health officials as part of our preparation for the study. Of the total 338 potential survey participants, 103 provided useable responses (n ¼ 103), providing for a response rate of 30%. Of the people that responded, 55% claimed to be in a senior management position, 38% of respondents worked in the area of human resources, respondent's had worked for their health region an average of seven years and been in their current position an average of four years. These 103 survey participants represented 18 of 19 health regions across the province. The number of respondents from each health region ranged from two to 11 (mean respondents 5.42 per organization). It should be noted that many potential participants (eg, medical directors, supervisors, and administrative support) contacted the research team to inform that they would not be completing the survey owing to the questions being geared towards organizational-level information. This essentially reduced the original 338 surveys to about 200. Thus a more realistic estimate of the response rate would be about 51%. These response rates are found to be in line with a recent review conducted by Baruch and Holtom30 of survey response rates levels and trends. This review found that studies conducted at the organizational level seeking responses from organizational representatives or top executives are likely to experience lower response rates. Recently published research suggests a benchmark of approximately 35%-40%. At the individual level, response rates averaged around 50%.
Distribution of the data In analyzing the data, the first thing we did was assess whether respondents viewed their health regions as employing a Theory E, O, or EO approach to organizational change. The majority of respondents (44.7%) rated their
health region as utilizing an integrated combined theoretical approach to change (EO) where a balance between financial performance and organizational capabilities (people) was achieved, followed by Theory O (32%) and then Theory E (22.3%).
Approach to change employed (E, O, or EO) and organizational dimensions of change Next, we focused our attention on the relationship between the approach to change employed Theory E, O, or EO and the six organizational dimensions of change (environment, performance, capabilities and characteristics, levers for change, capacity to change and learn, and management). We used ANOVA to examine where there were significant differences between the emphases on these indices across the three approaches (E, O, and EO). In terms of the relationship between the three approaches to change (E, O, and EO) and perceptions of environment (eg, stability of the environment), there were no significant differences between any of the approaches in the evaluation of the environment (F[2, 101] ¼ 0.81, p 4 .10). Subsequent post hoc comparisons were calculated using the Scheffé test and no significant differences were noted. Regarding performance (eg, employee commitment, client commitment, and financial performance) those that subscribed to Theory E rated the performance of their health regions to be higher than those that subscribed to Theory O or the ideal combined approach of EO. An integrated or balanced approach to change (EO) did not produce a higher level of performance. There were significant differences noted between the three groups in the evaluation of performance (F[2, 101] ¼ 4.45, p ¼ .01). A post hoc comparison using the Scheffé test showed that significant differences in performance were observed only between Theory E and the other two categories (p ≤ .05). There were no significant differences noted between Theory EO and Theory O subscribers and perceptions of performance. In terms of organizational capabilities, the ANOVA results showed an interaction effect between the three approaches to change and perceptions of the capabilities and characteristics of the health regions (F[2, 101] ¼ 24.1, p o .01). Those that subscribed to Theory E perceived their capabilities and characteristics (eg, leadership, decision making, goals, skills, interaction, freedom of expression, control, and allocation of resources) to be greater than those who subscribed to Theory O or EO. Subsequent post hoc comparisons were calculated using the Scheffé test and significant differences were observed between the three approaches to change (E, EO, and O) in evaluating organizational capabilities (p o .01). An interaction effect was also noted between levers for change (eg, leadership, structure, and systems of the organizations) and the approach to change employed
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(F[2, 101] ¼ 19.4, p o .01). Those that subscribe to a Theory E approach perceived their levers to be high and very effective; they felt they had stronger levers (eg, better systems, structures, and leadership) for their workplaces than those who subscribed to Theory O or EO. Significant differences were observed for levers for change across the three approaches (p ≤ .01). A significant relationship was noted between capacity to change and learn (eg, cohesiveness and a well-developed, team-oriented environment) and the approach to change employed (F[2, 101] ¼26.7, p o .01). Those health regions that subscribed to Theory E in their approach to change perceived themselves as possessing a higher capacity to change and learn in comparison with those that subscribe to Theory O or EO. Theory O subscribers perceived themselves to have the lower capacity of all the three groups. Subsequent Scheffé test also showed that significant differences were observed between all three categories (p ≤ .01). As for perceptions of the effectiveness of the management teams (ie, whether management's actions enhance organizational change and effectiveness), a positive relationship existed between Theory E subscribers and the perceived effectiveness of the top and middle management teams (F[2, 101] ¼ 6.23, p o .01). Those that subscribed to the integrated Theory EO approach perceived themselves as having more effective management teams than Theory O subscribers, however, not quite as effective as Theory E subscribers. The Scheffé test indicated that such differences were attributed only to the difference between Theory E and the other two categories (p ≤ .05). From here, we created a composite measure of “organizational fitness,” which included the organizational dimensions of change (eg, environment, performance, capabilities and characteristics, levers for change, the capacity to change and learn, and management). Significance was noted when examining the differences among the theoretical approaches to change (E, O, and EO) and ratings of organizational fitness. The health regions that subscribed to a Theory E approach rated themselves as having a higher levels of organizational fitness than those that subscribed to Theory O or EO (F ¼ 18.9, p o .01). Using post hoc tests, such as the Scheffé test, significant differences were noted between all three groups (E, EO, and O) (p o .01). The findings reveal that significant differences do exist between the theoretical approach to change employed and perceptions of organizational fitness (ie, how fit the organization is and able to successfully manage change).
Testing of the proposition In light of the findings, there is a lack of support for the proposition. Within the industry of public sector healthcare in Alberta, an integrated or balanced approach to change 132
(EO) does not produce a more fit organization in terms of the organizational dimensions of change. The results showed that even though there is a reliance on Theory E change strategies within healthcare in Alberta, the respondents demonstrated other preferred approaches to change. In other words, the majority of respondents like to view their health regions as applying a Theory EO approach to change, an approach that balanced the needs of financial performance and people. However, when questioned about certain dimensions of change, a Theory E orientation was shown to produce greater organizational fitness, hence effectiveness with change, within the context of healthcare in Alberta.
An organizational-level examination of Theory E and Theory O As a final analysis, we looked at the organizational-level data by aggregating the individual-level data for each of the 18 health regions under study. The number of respondents from the organizations ranged from 2-11 (mean respondents 5.42 per organization). The purpose of aggregation was to look at the responses at the organizational level and compare attributes of the ones that identify high Theory E or high Theory O change strategies. To test for the level of agreements among the respondents from each organization, we used within-unit agreement coefficient or intraclass correlation coefficient31 for selected key variables. The intraclass correlation coefficient for EO variables was 0.73, which is acceptable. The agreement coefficients for the six organizational change dimensions were lower with an average of 0.306. However, as EO variables are the ones we intend to aggregate, it was deemed appropriate to do so. Fig. 2 shows the plot of the Theory E and Theory O scores for the 18 health regions. A brief description of each of the health regions in terms of their mandate and strategic role in the province during the time the study was conducted is also provided. These were compiled from written documents and annual reports obtained from each, as well as our discussions and interviews with health officials as part of the preparation for the study. As shown in Fig. 2, four organizations fell in the top right quadrant (high on both E and O). As can be seen from the figure, these four health regions (referred to as CHI; PALL; DATHO. and MIST in Fig. 2) were all relatively smaller units with clear foci on the issues of their regions. The descriptions all point to a clear mandate, strong cultures and capabilities and able and strong leadership in these four effective health regions. These brief descriptions together with the data presented earlier show the kinds of organizational systems, structures, cultures, values, and dynamics that exist in organizations that combine Theory E and Theory O simultaneously (Theory EO) to improve the their state of organizational fitness and thereby their chances of success in organizational change.
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Figure 2. Scatterplot of Theories E and O scores for the Health Regions
In contrast, those health regions that are located in the lower left quadrant in Fig. 2, the ones that are low on both Theory E and O scores demonstrated somewhat different qualitative and quantitative properties. Two of these units, WV and XRD, were health regions that were located close to a major metropolitan area and thus were preoccupied with survival (ie, not being taken over by the much larger and more influential metropolitan health organization) rather than being strategically inclined to improve their capabilities for successful change. KLAKE, the third smallest health provider in the province, had a somewhat different situation where it appeared to be too isolated with a steady, but small, commuter population to serve but not subject to competition or influence from any other health regions. Thus, it remained, as an organization, fairly complacent and nonstrategic and as a result its management team appeared less interested in thinking about and framing their strategy in light of the ideas of Theory E or O. Two other organizations in this quadrant (AMHB and PEA) had some similarities in terms of their context and approach. A third, LAND, had by far the lowest score on Theory O (not shown in Fig. 2 as it is off the range shown in the table). These all had the reputation of being conservative and not interested in change. They survived by preserving their position and maintaining the status quo owing to their location and history. Those units high on Theory E (upper left quadrant) that emphasized economic gains and aspects of systems and structure in their attempt to change and improve seemed to have a number of contextual variables in common. The one
we have referred to as “number 5” was a health authority with weak financial security and mostly primary care services. A comment within the industry was that they had not even bothered to select an appropriate name for themselves because of lack of change-oriented leadership and also because it would have cost the organization! Another unit in this quadrant, LIGHTS, which was also the region in our sample with the highest aggregate score on Theory E, had the reputation of being preoccupied with cost containment. It was geographically spread over a very large territory with a small population and had been suffering for a long period from an inability to keep its people, which forced them to rely heavily on transient medical professionals to deliver essential services. The preoccupation with economic issues, systems, structures, and what Beer and Nohria5,6 term “hard” approaches to change was also evident in the other two organizations in this quadrant. Moving to the high Theory O units in our sample (bottom right quadrant), the context and priorities of these organizations seemed to be quite different. Two of the units in this quadrant (CAL and PITAL) were the largest and the most influential health regions in the province. They had been through major change and learned to develop their capacity for change and develop the “softer” approaches that allowed them to have sustainable fitness for change. The other two organizations (HEADW and ASP) were ones that lived in the shadows of the larger health regions (CAL and PITAL) but maintained a reputation as places that develop their people and their abilities and skills. They did this over a sustained period of time as a way of attracting and retaining scarce healthcare professionals very successfully.
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SUMMARY AND CONCLUSION This study was designed to explore ways in which health organizations can improve their organizational fitness for change, hence success at organizational change efforts. Using the framework developed by Beer and Nohria5,6 we applied it to public sector healthcare in Alberta. The data for the study were collected from 103 senior managers and medical directors from 18, out of the population of 19, health regions in the province. The findings shed light on the practice of organizational change strategies and the importance of developing the capabilities required to achieve lasting and meaningful change. The results have shown that even though there is a tendency for reliance on Theory E change strategies among healthcare organizations in Alberta, organizational decision makers do have a variety of other preferred approaches and strategies for change (O and EO). When we looked at the actual distribution of the Theory E and O scores and related them to the organizational change dimensions, the health regions that subscribed to a Theory E approach rated themselves as having a higher levels of organizational fitness than those that subscribed to Theory O or EO. This was interpreted to reflect the predominant paradigm in healthcare (particularly in Canada) in that the issue of economics of change and associated features are constantly being emphasized and highlighted by the political system and the media. Top management has been honed to focus on financial performance and rate their performance by way of tangible performance indicators. All of these activities are important but measurement and reporting alone will not improve the quality and sustainability of the system. When we turned our attention to examining the placement of the health regions based on their ratings of Theory E, O, and EO change strategies, and where the deliberate emphasis is placed, we learned that the existence of organizational levers for change and capacity to learn and change had a positive effect on the choice of Theory O strategies. The hallmark of O-driven change strategies is the focus on learning, values, behaviour, and the commitment to a shared purpose.9,35 The emphasis on values is intended to create emotional attachment, which is vital to commitment and essential in developing the culture of the organization. People need to be engaged emotionally to find moral meaning in the systems and structures of their organization. As for a combined Theory EO strategy—the position advocated by the framework—we found that organizational features promoting better connections to the outside environment, more flexibility, more openness to new ideas and to creativity, and emphasis on partnerships and team development for better learning all contribute to a situation where organizations adopt strategies that emphasize both Theory E and O strategies simultaneously, leading to more effective change. Even with the limitations of the present study (eg, crosssectional design; lower than anticipated individual 134
response rate; and data from one Canadian province), the results have shown one key paradigm within the Alberta healthcare sector—namely an overemphasis on Theory E in the approach to change employed. Given the system-wide restructuring of the many Canadian health jurisdictions, including Alberta, the implications of this study for improving the healthcare organizations' ability to continuously change and learn and to remain fit for change are critical. The role of organizational fitness (eg, organizational readiness) for change in managing successful organizational transformations has been emphasized by many researchers in both public and private sectors.32-34 The results of this study open opportunities for researchers with particular interest in health management to explore and develop ways in which organizational fitness for change and effective organizational conditions can improve the ability to change and the success of change efforts. The results also speak to the context of healthcare in Alberta, which offers important insight for leaders across Canada. Given the period of the study (2001) —if we are to compare the status of healthcare and healthcare policy during that time with what we are facing today, would the findings be any different? The province has gone through substantial, bold, and radical change, which Downes and Nunes refer to as “big bang disruption.”21 But when we look at the changes that have taken place, they are largely structural (Theory E) changes. If we are genuinely to improve healthcare, for the sake of the people, greater emphasis needs to be placed on nurturing the people and the human capability within.
APPENDICES:
SUPPLEMENTARY INFORMATION
Supplementary data associated with this article can be found in the on-line version at http://dx.doi.org/10.1016/ j.hcmf.2013.05.002.
REFERENCES 1. Dickson G, Lindstrom R, Black C, Van der Gucht D. Evidenceinformed change management in canadian healthcare organizations. Canadian Health Services Research Foundation. Retrieved from: 〈http://www.cfhi-fcass.ca/Libraries/Commissio ned_Research_Reports/Dickson-EN.sflb.ashx〉; 2012. 2. Bégin H, Eggertson L, Macdonald N. A country of perpetual pilot projects. Can Med Assoc J 2009;180(12):1185–1185. 3. Beer M, Eisenstat R. The silent killers of strategy implementation and learning. Sloan Manag Rev 2000;14(4):29–40. 4. Beer M, Voelpel S, Leibold M, Tekie E. Strategic management as organizational learning: developing fit and alignment through a disciplined process. Long Range Plan 2005;38(5): 445–465. 5. Beer M, Nohria N. Breaking the Code of Change. Boston, MA: Harvard Business School Press; 2000. 6. Beer M, Nohria N. Cracking the code of change. Harv Bus Rev 2000;78(3):133–141.
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7. Beer M. Building organizational fitness in the 21st century. Harv Bus Rev. Retrieved from: 〈http://www.hbs.edu/faculty/ Publication%20Files/02-044_73165235-abd3-4160-9077-766a6 ce55b18.pdf〉; 2000. 8. Voelpel S, Leibold M, Mahmoud K. The organizational fitness navigator: enabling and measuring organizational fitness for rapid change. J Change Manage 2004;4(2):123–140. 9. Eisenstat R, Beer M, Foote N, Fredberg T, Norrgren F. The uncompromising leader. Harv Bus Rev 2008:51–57. 10. Anthony S. The new corporate garage. Harv Bus Rev 2012: 45–53. 11. Greenwood R, Hinings C. Understanding radical organizational change: bringing together the old and the new institutionalism. Acad Manage Rev 1996;21(4):1022–1045. 12. Greenwood R, Hinings C. Understanding strategic change: the contribution of archetypes. Acad Manage J 1993;35(5):1052–1081. 13. Prahalad C, Bettis R. The dominant logic: a new linkage between diversity and performance. Strateg Manage J 1986;7(6):485–501. 14. Kotter J. Leading Change. Boston, MA: Harvard Business School Press; 1996. 15. Alberta Government. News Release: Health Minister Releases Map of 15 Proposed Health Regions for Alberta [Press release March 31]; 1994. 16. Reay T, Hinings C. The re-composition of an organizational field: health care in Alberta. Organ Stud 2005;26(3):351–384. 17. Alberta Health Services. Alberta Health Services: Our History. Retrieved from: 〈http://www.albertahealthservices.ca/191.asp〉; 2010. 18. Alberta Health Services. Alberta Health Services: Corporate Organization. Retrieved from: 〈http://www.albertahealthservi ces.ca/204.asp〉; 2013. 19. Alberta Health and Wellness. Vision 2020: The Future of Health Care in Alberta (Phase One). Retrieved from: 〈http:// www.health.alberta.ca/documents/Vision-2020-Phase-1-2008. pdf〉; 2008 December. 20. Alberta Health Services. News Release: Alberta Health Services Moves Towards One Provincial Health System to Increase Patient Access and Enhance Care [Press release July 8]; 2008. 21. Downes L, Nunes P. The big idea: Big Bang disruption. Harv Bus Rev 2013:44–56. 22. Donaldson C. Fire, aim … ready? Alberta's big bang approach to healthcare disintegration. Healthc Policy 2010;6(1):22–31.
23. Wood J: AHS bosses face looming wage freeze, cost cutting. Edmonton J. Retrieved from: 〈http://www.edmontonjournal. com/news/alberta/〉; 2013. 24. Alberta Health Services. AHS on my zone. Retrieved from: 〈http://www.albertahealthservices.ca/zones.asp〉; 2013. 25. Government of Alberta. Alberta Health Services. Retrieved from: 〈http://www.health.alberta.ca/services/Alberta-HealthServices.html〉; 2013. 26. Alberta Health Services. News Release: Local decision-making, physician engagement, patient care pathways drive realignment. [Press release May 3]. Retrieved from: 〈http://www. albertahealthservices.ca/4623.asp〉; 2011. 27. Premier's Advisory Council on Health. A framework for reform: Report of the Premier's Advisory Council on Health. Retrieved from: 〈http://www.health.alberta.ca/documents/MazankowskiReport-2001.pdf〉; 2001. 28. Commission on the Future of Health Care in Canada. Building on values: The future of health care in Canada. Retrieved from: 〈http://publications.gc.ca/collections/Collection/CP32-852002E.pdf〉; 2002. 29. Beer M, Eisenstat R, Biggadike R. Developing an organization capable of strategy implementation and reformulation: a preliminary test. In: Moingeon B, Edmondson A, eds. Organizational Learning and Competitive Advantage. London, UK: Sage; 1996:165–184. 30. Baruch Y, Holtom B. Survey response rate levels and trends in organizational research. Hum Relations 2008;61(8):1139–1160. 31. Shrout P, Fleiss J. Intraclass correlations: uses in assessing rater reliability. Psychol Bull 1979;2:420–428. 32. Holt D, Armenakis A, Field H, Harris S. Readiness for organizational change: the systematic development of a scale. J Appl Behav Sci 2007;43(92):232–255. 33. Jones R, Jimmieson N, Griffith. The impact of organizational culture and reshaping capabilities on change implementation: the mediating role of readiness for change. J Manage Stud 2005;42(2):361–386. 34. Cunningham C, Woodward C, Shannon H, et al. Readiness for organizational change: a longitudinal study of workplace, psychological and behavioural correlates. J Occup Organ Psychol 2002;75:377–392. 35. Miller P, Wedell-Wedellsborg T. The case for stealth innovation. Harv Bus Rev 2013:91–97.
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Organizational change strategies within healthcare Claudia Steinke, RN, BSc, MSc, PhD; Ali Dastmalchian, BSc, MSc, PhD; Paul Blyton, BA, PhD; Paul Hasselback, MSc, MD, FRCPC
Abstract—This study explores ways in which healthcare organizations can improve their organizational fitness for change using Beer and Nohria's framework of Theory E (concentrating on the economic value of change) and Theory O (concentrating on the organization's long-term capabilities for change). Data were collected from senior leaders/medical directors from health regions in Alberta. The results show that even though there is a tendency for reliance on Theory E change strategies, the respondents demonstrated other preferred approaches to change.
L
ast year the Canadian Health Services Research Foundation produced a report that called for “more attention to change readiness and change capacity prior to initiating change that would contribute to better understanding about what strategies and approaches would help to initiate and support organizational change effectively.”1 Canada, like other developed countries, confronts significant change as it strives to address the ongoing challenges of healthcare. However, in the face of these challenges and the significant change required, Canada has a relatively weak track record for creating sustained and effective change.1,2 This paper explores ways in which healthcare organizations can improve their organizational fitness3-8 for change. The term organizational fitness indicates that success in dealing with highly demanding and rapidly changing environments is not solely about an organization aiming to align its strategy with the environment, and its design, culture, and leadership with strategy, but also about its ability to learn and adapt to changing circumstances.3,4,6 Drivers of successful and major organizational change also hold true to centre, meaning they personally create the link between the people who do the work and the performance they must deliver.9 An organization may have the right strategy in place but without the appropriate structure and capabilities, the willingness and ability to learn and adapt, and a common, shared purpose,10 it will not be able to implement strategy successfully. To examine how fit an organization is for change, managers require an analytic framework to diagnose and From the Faculties of Health Sciences and Management, University of Lethbridge, Alberta, Canada; Gustavson School of Business, University of Victoria, Victoria, British Columbia, Canada; Cardiff Business School, Cardiff University, Cardiff, Wales, United Kingdom; Vancouver Island Health Authority, Nanaimo, British Columbia, Canada. Corresponding author: Claudia Steinke, RN, BSc, MSc, PhD, Faculties of Health Sciences and Management, University of Lethbridge, 4401 University Drive, Lethbridge, Alberta, Canada, T1K 3M4. (e-mail: [email protected]) Healthcare Management Forum 2013 26:127–135 0840-4704/$ - see front matter & 2013 Canadian College of Health Leaders. Published by Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.hcmf.2013.05.002
take action.8 One such framework is Beer and Nohria's Theory E and Theory O of change.5,6 This theoretical approach is worthy of our attention as it provides a framework with which we can examine barriers to change, organizational capabilities and capacities, cultures, and values, as well as the strategic approach to change employed. Like all managerial action, these approaches are guided by very different values and assumptions about the purpose and means for change. Theory E has as its purpose the economic value of change. Theory O has as its purpose the development of the organization's long-term “human” capabilities for change. These theories view the challenge of organizational change from two distinct perspectives. Although both have validity, each also has costs, and neither one is likely to achieve all of an organization's objectives. The goal is to integrate the two theories (Theory EO) in a way that manages the tension between them (performance and people). This paper discusses a study that applied Beer and Nohria's5,6 Theory E and Theory O of change within healthcare in Alberta. The overall purpose of the study was to examine ways in which healthcare organizations can improve their organizational fitness for change. The study was conducted at a time when the province consisted of health regions. Given the recent call to focus more attention to “change readiness and change capacity,”1 the research team feels there are lessons to be learned from exploring what was, as we think about with what is, in preparation for what could be.
BACKGROUND Organizational change Organizational change may be defined as an alteration in the actions, processes, values, skills, and context that is produced by changes in choices made.4-6 According to Greenwood and Hinings,11,12 organizations are continuously evolving systems, partly in response to their environment (and the complexity of political, regulatory, and technological changes confronting most organizations) and partly because of the changes brought about by their members. The challenge of organizational change is to enhance the
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organization's ability to learn how to respond more effectively to its changing environment and its ability to shape that environment. In other words, be learning focused and failure tolerant.10 Fundamental change in any organization is not possible without a change in the norms and values held by the organization and its members. A change in beliefs as well as actions needs to occur to achieve fundamental change3,18 and the more changes that challenge the existing values and culture, the greater the difficulty in implementing change.
Organizational change strategies Research suggests there are two dramatically different approaches to change that can be identified by examining strategies for change—Theory E and Theory O of change5,6 (refer to Fig. 1). Theory E is an approach to change based on the idea that financial performance is the only legitimate measure of corporate success. Focus is on the economic value of the organization, formal systems and structures, driven from a top-down management with extensive guidance from outside consultants. Change is planned and programmatic, and usually involves economic incentives, drastic layoffs, downsizing, and restructuring. Theory O is an approach to change based on the internal dynamics and capabilities of the organization. The goal is to develop culture and human capabilities by way of individual and organizational learning. High value is placed on employee commitment and the development of a highly involved, learning-oriented culture. Consultants and incentives are relied on far less to drive change as these organizations rely heavily on their employees to shape solutions for the organization. Thus, these two theories view the challenge of organizational change from two distinct perspectives. The easiest and most natural strategy is to apply one approach over the other; however, neither approach is likely to achieve all of the organization's objectives, and each has its costs. The challenge is how to resolve the tensions between them and not sacrifice one or the other.4-6 The ideal is to integrate the two theories (Theory EO) in a mutually beneficial way. Organizations that achieve this are often referred to as high-commitment and high-performance firms and usually lead the rankings in the “Best Companies to Work For” lists.9
The often undiscussed barriers to organizational change We know that organizational fitness depends on the capacity of all leaders and members of the organization to confront and learn from internal tensions.3,6,7,13 Not doing this is the reason that approximately 70% of all change initiatives fail.14 These internal tensions are the internal barriers that everyone knows about and talks about behind closed doors, but do not confront in a way that enables the open public conversation needed to overcome them.7 Beer and Eisenstat3 and Beer and Nohria5,6 identified six internal barriers to change strategy implementation; barriers that typically appear together as a syndrome and are referred to as “silent killers”: (i) (ii) (iii) (iv) (v)
top-down senior management style, unclear strategy and conflicting priorities, ineffective senior management team, poor vertical communication, poor coordination across functions, businesses, or borders, and (vi) inadequate down-the-line leadership skills and development. These barriers represent critical organizational stress points where new capabilities are required to successfully transition to higher levels of performance, speed, and responsiveness3. The difficulty with achieving fundamental and successful change lies in the connections between management and frontline employees.3,7 The conventional wisdom is that replacing the leader will ensure that strategic and organizational issues are confronted.7 After all, these leaders command the heights and have the authority to radically change the organization. And while forming an effective new team is an essential first step, without engaging key managers throughout the organization and the frontline, the “unvarnished truths” will not come out, and the real problems will never be understood or solved.7 Norms of silence will not produce a fit organization.
Change in Alberta's healthcare sector When we talk about organizational fitness and the silent killers of change strategy implementation, it is interesting to think of these things within the context of public sector
Figure 1. Strategic Approaches to Organizational Change (Theory E, O, EO)
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healthcare. If we look to the province of Alberta, we see large-scale and significant organizational change that has occurred over the past 18 years. These changes are the result of mounting expenditures, growing government deficit, an aging population, challenges in the area of recruitment, and retention of healthcare providers, advances in technology, and innovation. For example, in 1995 a fundamental restructuring of Alberta's health system occurred whereby 17 health regions and two provincial boards (the Alberta Mental Health Board and the Alberta Cancer Board) replaced more than 200 community hospital boards and administrators that managed healthcare in the province.15,16 This meant significant change that affected all aspects of healthcare. Although the strongest impetus for change was financially and politically driven, there was also need for more effective utilization of resources. In subsequent years, those 17 health regions and two provincial boards were reduced to nine regional health authorities and three provincial agencies (the Alberta Mental Health Board, Alberta Cancer Board, and Alberta Alcohol and Drug Abuse Commission), each organization was responsible for the operations of every hospital, continuing care facility, community health centre, and public health programs within their outlined demographic area. In 2008, further restructuring occurred where the nine regional health authorities and three provincial agencies were abolished to create one large provincial health entity known as Alberta Health Services.17 Alberta Health Services operates at present and is responsible for delivering health services to 3.5 million people in the province. It is governed by a board that reports to the Minster of Health and Wellness, and led by a Chief Executive Officer with a workforce of 100,000 staff and physicians.18 The rationale for creating this province-wide entity was to “make Alberta's publicly funded healthcare system more effective and efficient,” to “illustrate a move to the 21st century healthcare,” and also “move money out of administration into healthcare delivery.”19 The plan was to create “one coordinated and unified approach to healthcare that integrates health services across the province and standardizes care so that all patients receive the same quality of care.”20 Although the change was a bold move,21 some question the planning and effectiveness of it.22,23 In 2009, Alberta Health Services restructured further by organizing itself into five zones (eg, North Zone, Edmonton Zone, Central Zone, Calgary Zone, and South Zone) so that “communities could be more directly connected to their local health systems and decisions can be made closer to where care is provided.”24,25 In 2011, Alberta Health Services announced a realignment of the organization's leadership structure to transfer more decision making to its five zones, hospitals, and community care centres, and to increase direct physician engagement in planning and service delivery.26 This brief history informs as to some of the significant structural changes that have occurred within the Alberta
healthcare system over the past 18 years. Given this history, we present to you the findings of a study that was conducted when the province's health system was much more decentralized than it is today. We feel that the findings offer some important insight for the health leaders across Canada, and for those interested in conducting future research in this area.
Research objective The overall purpose of the study was to examine ways in which healthcare organizations can improve their organizational fitness for change. Specifically, the study examined the organizational capabilities in place and required for dealing with change within healthcare in Alberta by applying Beer and Nohria's framework of Theory E and Theory O.5,6 The goal was to test the following proposition: In the health regions under study, there is a significant and positive relationship between the use of a combined Theory EO approach to change and the success of change efforts.
METHODS Setting The study was conducted in Alberta in 2001 at a time when the province consisted of 17 health regions and two provincial boards (refer to the map of Health Region Boundaries and the summary descriptions of the health regions provided in Fig. 1 in Appendix C in the Supplementary material). During this time, the health system was being heavily scrutinized both federally and provincially. For example, in the spring of 2000, a 12-member panel led by the former Deputy Prime Minister Don Mazankowski (under former Premier Ralph Klein) was formed to find ways to reduce the cost of the healthcare system in Alberta. His widely discussed report became known as The Mazankowski Report27 and produced 44 recommended changes to the province's healthcare system. Also around this time Roy Romanow (former NDP Premier of Saskatchewan), headed a Commission to examine the future of healthcare in Canada. The commission's mandate was to engage Canadians in a national dialogue on the future of heathcare and to make recommendations to preserve the long-term sustainability of Canada's universally accessible, publicly funded healthcare system. The Romanow Report28 provided 47 detailed recommendations for reform.
Recruitment and sample Subjects were contacted by way of the Provincial Health Authorities of Alberta, which represented all health regions in the province. The Provincial Health Authorities of Alberta provided the research team with a compiled list of all those involved in the management structure of each health region (n ¼ 319). The list contained the names and contact information of those in senior management,
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middle management, and supervisory and administrative support positions. The Council of Medical Directors was contacted to provide for a list of the Medical Directors for each region (n ¼ 19). The total population being N ¼ 338 potential participants. At the time of the study, members from all 17 health regions and the two provincial boards (referred to this point forward as 19 health regions) were approached to participate.
Ethics
The capacity to change and learn (seven items)
The University of Lethbridge Human Subject Research Committee approved the study.
Instrument and measures An on-line, web-based survey was used as the means for data collection. This survey was originally developed and tested by Harvard University professors Beeret al.29 and refined by Beer and Nohria.5,6 The model and survey is a licensed consulting tool and permission was obtained from Professor Beer to use the survey and modify some wording as needed to better suit public sector healthcare. For example, the word “customer” was replaced with “client.” A sample of the survey questions is provided in the Appendices in the Supplementary material. The survey consisted of 46 questions measuring organizational dimensions of change and organizational strategies for change as per Theory E and O.5,6 The instrument also included demographic and control variables, which are described later. The following is a description of measures used and their reliability coefficients (Cronbach α):
The previously mentioned six measures (40 items) were assessed on a seven-point Likert-type scale (strongly agree ¼ 1…strongly disagree ¼ 5; don't know ¼ 6; not applicable ¼ 7).
Organizational strategies of change (Theory E and Theory O) Theory E and O (six items) measured the relative emphasis of the health regions in terms of the following six organizational aspects of the concept. These are as follows:
Goals and purpose: ranging from emphasis on financial
Organizational dimensions of change
The following six dimensions of organizational change were assessed as follows:
Environment (four items) assessing the change and
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instability of the environment; and need for flexibility and innovation (α ¼ 0.70). Performance of the organization (four items) that pertained to the financial and human resource performance; clients' commitment; and the overall position relative to other health organizations in the province (α ¼ 0.73). Capabilities and characteristics of the organization (12 items) that measured technical, functional, leadership, and interpersonal skills; coordination and communication across levels; culture and values; the allocation of supply of human and financial resources; and the human resource management processes (α ¼ 0.88). Levers for change (11 items) measured the effectiveness, values, principles, and emphasis of the top team; the structures and the control systems; and the organization's approach and philosophy regarding staff recruitment and retention (α ¼ 0.86).
related to management's ability to effectively assess the environment and formulate strategies; the eagerness of the top team to learn from their colleagues and share ideas; openness in communicating strengths and weaknesses; the cohesiveness across levels; and the adaptability of the organization (α ¼ 0.90). Management (two items) measured whether the practices and behaviours of top and middle management enhances the effectiveness of the organization (α ¼ 0.80).
performance (scoring 5) to emphasis on developing internal capabilities (scoring 1); Leadership style: ranging from top-down style (scoring 5) to highly participative (scoring 1); Focus: ranging from “hardware,” systems, and structures (scoring 5) to “software,” culture and behaviours (scoring 1); Process: ranging from highly planned (scoring 5) to highly evolutionary (scoring 1); Reward system: from strong use of financial rewards (scoring 5) to strong use of intrinsic rewards (scoring 1); and Use of consultants: relying heavily on consultants (scoring 5) to relying on our employees to shape our solutions (scoring 1).
Demographic variables The demographic variables were gender (female ¼ 1, male ¼ 2), seniority of level in organization (senior management ¼ 1, others ¼ 0), supervision—whether they supervise others (yes ¼ 1, no ¼ 0), and tenure in present position (we used logarithm of the number of years). The demographic variables were used for comparison measures between the health regions.
Analysis Analysis of the data was performed using the Statistical Package of the Social Sciences. Descriptive statistics were computed to summarize the data and produce aggregate measures. Reliability measures were used to assess internal consistency. Correlations were used to assess relationships between Theories E, O, and EO and the organizational
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dimensions of change. Factor analysis and one-way Analysis of Variance (ANOVA) were used to examine relationships. Although the data were analyzed at both the individual (eg, the response of individuals across the province) and organizational (eg, the response of individuals according to their health region) levels of analyses, only the organizational-level data are presented here and not all of the statistical computations are presented in this paper.
RESULTS Sample At the time of the study, all 19 health regions were approached to participate. One health region declined making the total organizations from which data were collected n ¼ 18. A brief description of the health regions as they existed in 2001 in terms of their mandate and strategic role in the province is provided in the Appendices in the Supplementary material. These were compiled from written documents and annual reports obtained from each as well as our discussions and interviews with health officials as part of our preparation for the study. Of the total 338 potential survey participants, 103 provided useable responses (n ¼ 103), providing for a response rate of 30%. Of the people that responded, 55% claimed to be in a senior management position, 38% of respondents worked in the area of human resources, respondent's had worked for their health region an average of seven years and been in their current position an average of four years. These 103 survey participants represented 18 of 19 health regions across the province. The number of respondents from each health region ranged from two to 11 (mean respondents 5.42 per organization). It should be noted that many potential participants (eg, medical directors, supervisors, and administrative support) contacted the research team to inform that they would not be completing the survey owing to the questions being geared towards organizational-level information. This essentially reduced the original 338 surveys to about 200. Thus a more realistic estimate of the response rate would be about 51%. These response rates are found to be in line with a recent review conducted by Baruch and Holtom30 of survey response rates levels and trends. This review found that studies conducted at the organizational level seeking responses from organizational representatives or top executives are likely to experience lower response rates. Recently published research suggests a benchmark of approximately 35%-40%. At the individual level, response rates averaged around 50%.
Distribution of the data In analyzing the data, the first thing we did was assess whether respondents viewed their health regions as employing a Theory E, O, or EO approach to organizational change. The majority of respondents (44.7%) rated their
health region as utilizing an integrated combined theoretical approach to change (EO) where a balance between financial performance and organizational capabilities (people) was achieved, followed by Theory O (32%) and then Theory E (22.3%).
Approach to change employed (E, O, or EO) and organizational dimensions of change Next, we focused our attention on the relationship between the approach to change employed Theory E, O, or EO and the six organizational dimensions of change (environment, performance, capabilities and characteristics, levers for change, capacity to change and learn, and management). We used ANOVA to examine where there were significant differences between the emphases on these indices across the three approaches (E, O, and EO). In terms of the relationship between the three approaches to change (E, O, and EO) and perceptions of environment (eg, stability of the environment), there were no significant differences between any of the approaches in the evaluation of the environment (F[2, 101] ¼ 0.81, p 4 .10). Subsequent post hoc comparisons were calculated using the Scheffé test and no significant differences were noted. Regarding performance (eg, employee commitment, client commitment, and financial performance) those that subscribed to Theory E rated the performance of their health regions to be higher than those that subscribed to Theory O or the ideal combined approach of EO. An integrated or balanced approach to change (EO) did not produce a higher level of performance. There were significant differences noted between the three groups in the evaluation of performance (F[2, 101] ¼ 4.45, p ¼ .01). A post hoc comparison using the Scheffé test showed that significant differences in performance were observed only between Theory E and the other two categories (p ≤ .05). There were no significant differences noted between Theory EO and Theory O subscribers and perceptions of performance. In terms of organizational capabilities, the ANOVA results showed an interaction effect between the three approaches to change and perceptions of the capabilities and characteristics of the health regions (F[2, 101] ¼ 24.1, p o .01). Those that subscribed to Theory E perceived their capabilities and characteristics (eg, leadership, decision making, goals, skills, interaction, freedom of expression, control, and allocation of resources) to be greater than those who subscribed to Theory O or EO. Subsequent post hoc comparisons were calculated using the Scheffé test and significant differences were observed between the three approaches to change (E, EO, and O) in evaluating organizational capabilities (p o .01). An interaction effect was also noted between levers for change (eg, leadership, structure, and systems of the organizations) and the approach to change employed
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(F[2, 101] ¼ 19.4, p o .01). Those that subscribe to a Theory E approach perceived their levers to be high and very effective; they felt they had stronger levers (eg, better systems, structures, and leadership) for their workplaces than those who subscribed to Theory O or EO. Significant differences were observed for levers for change across the three approaches (p ≤ .01). A significant relationship was noted between capacity to change and learn (eg, cohesiveness and a well-developed, team-oriented environment) and the approach to change employed (F[2, 101] ¼26.7, p o .01). Those health regions that subscribed to Theory E in their approach to change perceived themselves as possessing a higher capacity to change and learn in comparison with those that subscribe to Theory O or EO. Theory O subscribers perceived themselves to have the lower capacity of all the three groups. Subsequent Scheffé test also showed that significant differences were observed between all three categories (p ≤ .01). As for perceptions of the effectiveness of the management teams (ie, whether management's actions enhance organizational change and effectiveness), a positive relationship existed between Theory E subscribers and the perceived effectiveness of the top and middle management teams (F[2, 101] ¼ 6.23, p o .01). Those that subscribed to the integrated Theory EO approach perceived themselves as having more effective management teams than Theory O subscribers, however, not quite as effective as Theory E subscribers. The Scheffé test indicated that such differences were attributed only to the difference between Theory E and the other two categories (p ≤ .05). From here, we created a composite measure of “organizational fitness,” which included the organizational dimensions of change (eg, environment, performance, capabilities and characteristics, levers for change, the capacity to change and learn, and management). Significance was noted when examining the differences among the theoretical approaches to change (E, O, and EO) and ratings of organizational fitness. The health regions that subscribed to a Theory E approach rated themselves as having a higher levels of organizational fitness than those that subscribed to Theory O or EO (F ¼ 18.9, p o .01). Using post hoc tests, such as the Scheffé test, significant differences were noted between all three groups (E, EO, and O) (p o .01). The findings reveal that significant differences do exist between the theoretical approach to change employed and perceptions of organizational fitness (ie, how fit the organization is and able to successfully manage change).
Testing of the proposition In light of the findings, there is a lack of support for the proposition. Within the industry of public sector healthcare in Alberta, an integrated or balanced approach to change 132
(EO) does not produce a more fit organization in terms of the organizational dimensions of change. The results showed that even though there is a reliance on Theory E change strategies within healthcare in Alberta, the respondents demonstrated other preferred approaches to change. In other words, the majority of respondents like to view their health regions as applying a Theory EO approach to change, an approach that balanced the needs of financial performance and people. However, when questioned about certain dimensions of change, a Theory E orientation was shown to produce greater organizational fitness, hence effectiveness with change, within the context of healthcare in Alberta.
An organizational-level examination of Theory E and Theory O As a final analysis, we looked at the organizational-level data by aggregating the individual-level data for each of the 18 health regions under study. The number of respondents from the organizations ranged from 2-11 (mean respondents 5.42 per organization). The purpose of aggregation was to look at the responses at the organizational level and compare attributes of the ones that identify high Theory E or high Theory O change strategies. To test for the level of agreements among the respondents from each organization, we used within-unit agreement coefficient or intraclass correlation coefficient31 for selected key variables. The intraclass correlation coefficient for EO variables was 0.73, which is acceptable. The agreement coefficients for the six organizational change dimensions were lower with an average of 0.306. However, as EO variables are the ones we intend to aggregate, it was deemed appropriate to do so. Fig. 2 shows the plot of the Theory E and Theory O scores for the 18 health regions. A brief description of each of the health regions in terms of their mandate and strategic role in the province during the time the study was conducted is also provided. These were compiled from written documents and annual reports obtained from each, as well as our discussions and interviews with health officials as part of the preparation for the study. As shown in Fig. 2, four organizations fell in the top right quadrant (high on both E and O). As can be seen from the figure, these four health regions (referred to as CHI; PALL; DATHO. and MIST in Fig. 2) were all relatively smaller units with clear foci on the issues of their regions. The descriptions all point to a clear mandate, strong cultures and capabilities and able and strong leadership in these four effective health regions. These brief descriptions together with the data presented earlier show the kinds of organizational systems, structures, cultures, values, and dynamics that exist in organizations that combine Theory E and Theory O simultaneously (Theory EO) to improve the their state of organizational fitness and thereby their chances of success in organizational change.
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Figure 2. Scatterplot of Theories E and O scores for the Health Regions
In contrast, those health regions that are located in the lower left quadrant in Fig. 2, the ones that are low on both Theory E and O scores demonstrated somewhat different qualitative and quantitative properties. Two of these units, WV and XRD, were health regions that were located close to a major metropolitan area and thus were preoccupied with survival (ie, not being taken over by the much larger and more influential metropolitan health organization) rather than being strategically inclined to improve their capabilities for successful change. KLAKE, the third smallest health provider in the province, had a somewhat different situation where it appeared to be too isolated with a steady, but small, commuter population to serve but not subject to competition or influence from any other health regions. Thus, it remained, as an organization, fairly complacent and nonstrategic and as a result its management team appeared less interested in thinking about and framing their strategy in light of the ideas of Theory E or O. Two other organizations in this quadrant (AMHB and PEA) had some similarities in terms of their context and approach. A third, LAND, had by far the lowest score on Theory O (not shown in Fig. 2 as it is off the range shown in the table). These all had the reputation of being conservative and not interested in change. They survived by preserving their position and maintaining the status quo owing to their location and history. Those units high on Theory E (upper left quadrant) that emphasized economic gains and aspects of systems and structure in their attempt to change and improve seemed to have a number of contextual variables in common. The one
we have referred to as “number 5” was a health authority with weak financial security and mostly primary care services. A comment within the industry was that they had not even bothered to select an appropriate name for themselves because of lack of change-oriented leadership and also because it would have cost the organization! Another unit in this quadrant, LIGHTS, which was also the region in our sample with the highest aggregate score on Theory E, had the reputation of being preoccupied with cost containment. It was geographically spread over a very large territory with a small population and had been suffering for a long period from an inability to keep its people, which forced them to rely heavily on transient medical professionals to deliver essential services. The preoccupation with economic issues, systems, structures, and what Beer and Nohria5,6 term “hard” approaches to change was also evident in the other two organizations in this quadrant. Moving to the high Theory O units in our sample (bottom right quadrant), the context and priorities of these organizations seemed to be quite different. Two of the units in this quadrant (CAL and PITAL) were the largest and the most influential health regions in the province. They had been through major change and learned to develop their capacity for change and develop the “softer” approaches that allowed them to have sustainable fitness for change. The other two organizations (HEADW and ASP) were ones that lived in the shadows of the larger health regions (CAL and PITAL) but maintained a reputation as places that develop their people and their abilities and skills. They did this over a sustained period of time as a way of attracting and retaining scarce healthcare professionals very successfully.
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SUMMARY AND CONCLUSION This study was designed to explore ways in which health organizations can improve their organizational fitness for change, hence success at organizational change efforts. Using the framework developed by Beer and Nohria5,6 we applied it to public sector healthcare in Alberta. The data for the study were collected from 103 senior managers and medical directors from 18, out of the population of 19, health regions in the province. The findings shed light on the practice of organizational change strategies and the importance of developing the capabilities required to achieve lasting and meaningful change. The results have shown that even though there is a tendency for reliance on Theory E change strategies among healthcare organizations in Alberta, organizational decision makers do have a variety of other preferred approaches and strategies for change (O and EO). When we looked at the actual distribution of the Theory E and O scores and related them to the organizational change dimensions, the health regions that subscribed to a Theory E approach rated themselves as having a higher levels of organizational fitness than those that subscribed to Theory O or EO. This was interpreted to reflect the predominant paradigm in healthcare (particularly in Canada) in that the issue of economics of change and associated features are constantly being emphasized and highlighted by the political system and the media. Top management has been honed to focus on financial performance and rate their performance by way of tangible performance indicators. All of these activities are important but measurement and reporting alone will not improve the quality and sustainability of the system. When we turned our attention to examining the placement of the health regions based on their ratings of Theory E, O, and EO change strategies, and where the deliberate emphasis is placed, we learned that the existence of organizational levers for change and capacity to learn and change had a positive effect on the choice of Theory O strategies. The hallmark of O-driven change strategies is the focus on learning, values, behaviour, and the commitment to a shared purpose.9,35 The emphasis on values is intended to create emotional attachment, which is vital to commitment and essential in developing the culture of the organization. People need to be engaged emotionally to find moral meaning in the systems and structures of their organization. As for a combined Theory EO strategy—the position advocated by the framework—we found that organizational features promoting better connections to the outside environment, more flexibility, more openness to new ideas and to creativity, and emphasis on partnerships and team development for better learning all contribute to a situation where organizations adopt strategies that emphasize both Theory E and O strategies simultaneously, leading to more effective change. Even with the limitations of the present study (eg, crosssectional design; lower than anticipated individual 134
response rate; and data from one Canadian province), the results have shown one key paradigm within the Alberta healthcare sector—namely an overemphasis on Theory E in the approach to change employed. Given the system-wide restructuring of the many Canadian health jurisdictions, including Alberta, the implications of this study for improving the healthcare organizations' ability to continuously change and learn and to remain fit for change are critical. The role of organizational fitness (eg, organizational readiness) for change in managing successful organizational transformations has been emphasized by many researchers in both public and private sectors.32-34 The results of this study open opportunities for researchers with particular interest in health management to explore and develop ways in which organizational fitness for change and effective organizational conditions can improve the ability to change and the success of change efforts. The results also speak to the context of healthcare in Alberta, which offers important insight for leaders across Canada. Given the period of the study (2001) —if we are to compare the status of healthcare and healthcare policy during that time with what we are facing today, would the findings be any different? The province has gone through substantial, bold, and radical change, which Downes and Nunes refer to as “big bang disruption.”21 But when we look at the changes that have taken place, they are largely structural (Theory E) changes. If we are genuinely to improve healthcare, for the sake of the people, greater emphasis needs to be placed on nurturing the people and the human capability within.
APPENDICES:
SUPPLEMENTARY INFORMATION
Supplementary data associated with this article can be found in the on-line version at http://dx.doi.org/10.1016/ j.hcmf.2013.05.002.
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