Management in Organizations
Order Instructions:
In April 1994, Jean Kelly, manager of the South-Western Ontario region of Medictest Laboratories, faced a tough situation in Sarnia, Ontario. The Ontario government had imposed funding cutbacks to the Ontario Health Insurance Plan (OHIP) for all testing centres in the province, creating a severe need for cost cutting. Over the past two years, Medictest Laboratories had reduced costs by improving work-flow efficiency. However, further cost reduction was necessary and required a review of the supervisory structure. Jean had designed a new organizational structure that streamlined management and furthered the company’s objectives for augmenting employee decision-making power, but this structure would require the dismissal of five long-term supervisors. Jean wondered how to implement these changes without a negative impact on morale, productivity, and motivation.
THE INDUSTRY
The technology-based health care industry was rapidly changing. In particular, the testing laboratories industry was experiencing significant streamlining due to funding cutbacks and the impacts of new technology and automation.
Labs received testing orders from doctors, hospitals, and medical centres. Upon filling each order, the labs would bill OHIP,1 which paid a specified amount for each type of test. Labs were responsible for controlling their costs in order to achieve a profit. As the Ontario Government attempted to decrease its expenses, funding for health care came under severe pressure. The compensation provided by OHIP for testing was significantly reduced. The laboratories were faced with a 17 per cent decrease in funding for completion of the same work; this placed tremendous pressure on the profit margins. Many testing laboratories attempted to adapt by restructuring, down-sizing and streamlining. Further funding reduction was expected over the next two years. The Ontario Ministry of Health offered a restructuring credit, based on market share, for those testing centres that reduced their costs beyond industry standards and invested significantly in new technology.
1OHIP is a program, run by the Ontario government, which provides free basic health services to Canadian citizens and landed immigrants living in Ontario.
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Each medical laboratory was required by law to have a medical doctor on the Board of Directors to be accountable for medical care. Although usually not directly involved in the operation of the lab, this person approved all major decisions before they were implemented and facilitated the relationship between the for-profit labs and the public hospitals.
MEDICTEST LABORATORIES
Medictest Laboratories head office was based in London, Ontario, and operated a chain of private medical laboratories in Canada. Medictest Laboratories was comprised of labs and specimen collection centres throughout Canada. These centres determined the most appropriate tests to be performed and then executed the tests.
As stated in the 1993 annual report, the company’s commitment was:
to seize the opportunity to serve the needs of the health care marketplace, to persevere in innovation, to achieve the defined objectives and to realize the shared vision of leadership in health care.
Medictest’s future objective was to become more automated through the integration of state-of-the-art technology. In general, Medictest had a reputation for its ability to make excellent decisions. It was also known as a non-unionized, people-oriented company that truly cared for its employees and truly believed in its values (see Exhibit 1). Upon hiring dedicated and hard-working employees, Medictest was considerate and thoughtful toward them, recognizing them as a valuable resource. The company placed high priority on enabling employees to develop to their full potential and to advance within the organization. The employees were very close and tight-knit among the Ontario labs, often remaining with the company for long employment periods.
Medictest had begun to establish goals to augment empowerment, teamwork, and shared responsibility. These concepts were gradually being implemented by restructuring leadership teams and by choosing leaders who fit with these objectives. Former pyramid-style systems of authority were being replaced with new structures for decision-making. A self-directed team approach was designed to empower employees to make decisions. The intent of the restructuring program was to re-align resources in order to operate more effectively and efficiently.
Because of funding changes and the company’s goals for empowerment, head office began to review the leadership and support staff structure across Ontario. Recent changes had been made to the upper management structure, including consolidating four regional management positions into one. Medictest Sarnia was a target of consideration for restructuring because of the large size of its management team. Discussion about these changes had begun two years ago.
MEDICTEST SARNIA
The Sarnia location was a large laboratory, processing thousands of specimens daily, operating on a 24- hour basis. This testing facility served physicians, patient centres, hospitals, and other Medictest locations, handling one-third of Medictest’s testing in Ontario. Most of this testing was for South-Western Ontario, although some tests were also completed for clients in other regions. Because of the high volume of work
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?done at this location, the Sarnia lab had a great impact on the perceived quality of service provided by Medictest in general; therefore, there was significant pressure on the management at Medictest Sarnia.
Medictest Sarnia currently operated with 12 supervisors and 234 employees, many of whom had been with the subsidiary since its origin 20 years ago (see Exhibit 2). Most of the testing was completed at one main location, but there were also several smaller nearby sites that were part of the same operation.
Within the past two years, measures had been taken to improve work-flow efficiency. Six months ago, it had become evident that, although costs needed further reduction, no additional improvements were possible within the current structure.
Jean Kelly had worked for Medictest for two years. In her former position as Operations Manager, she had been responsible for all operations done by this laboratory. Recently, her position had expanded to Manager of South-Western Ontario, which also gave her the responsibility of market share and revenue generation within this region. Upon graduating from Leeds University in England with a post-graduate degree in medical micro-biology, Jean had worked for six years as a laboratory manager at Toronto East General Hospital. Over the past few years, she had taken business courses through continuing education. Jean was asked by head office to review the current supervisory structure and develop a revised one that would cut down on costs and facilitate the goals of empowerment. Jean found the ensuing changes exciting and challenging. She had been given a few months to report the structural changes to the Regional Manager.
Jean’s objectives for redesigning the current structure were to reduce costs to ensure profitability and to build a new organizational team that would support empowerment through responsibility and leadership. Although there was some teamwork already in place, the supervisory structure was so large that there was no need to be interdependent or even to meet regularly. Jean thought that a leaner management team, with different responsibilities than the existing team, would be better equipped to carry out these new interdependent roles. The revised structure had to “make sense,” by providing a logical connection among the departments. Jean also hoped to better integrate the testing facilities with client services and improve relationships with other Medictest locations. In developing a different supervisory team, Jean had to choose leaders who possessed the core technical competency and, more importantly, displayed the appropriate leadership skills to fit the new objectives.
Effects on Management
Before Jean made any changes, she gave the supervisors the option to take part in designing a new structure, either directly or indirectly. They were given three options: to be directly involved in the design; to fine-tune the structure after it had been designed; or to be told after the decisions were made. They chose to have no active involvement, reasoning that they were too close as a group, and preferred to be told about the changes once they were decided upon by upper management. Jean had expected this because the individuals would have felt that they were negotiating for each others’ jobs. Although this eliminated some valuable input, Jean believed it would be less painful for the supervisors.
While Jean analyzed the current structure, some interesting dynamics began to take place among the supervisors. Each supervisor was competent and hard working, having worked for Medictest for an average of 18 years, with minimal movement or change in responsibility or position. They knew each other well and were comfortable with their roles and work environment. They had known for the past two years that changes were going to be made. Six months ago, they became aware that these changes would be
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?structural and would affect their positions. Anxiety levels escalated. They wanted to hear about the changes as soon as possible and were uncomfortable with the delay. Although productivity was unaffected by the anxiety, some supervisors began to protect their turf, by emphasizing the size and importance of their particular unit at every opportunity.
The supervisors realized that there would be a smaller leadership team and thus began inwardly to assess their own strengths and weaknesses, reasoning whether their style of leadership would be one of those desired for the new roles. Each supervisor’s individual level of anxiety depended on his or her personal situation; most of them could determine from their own intuitive comfort level whether they would be chosen to stay.
Jean held one-on-one discussions with the supervisors. The two Supervisors of Specimen Collection began increasingly to inquire about the severance package, alternative careers, and retirement options. It appeared to Jean that they were prepared to leave Medictest.
Even those supervisors who felt strong in their role experienced high anxiety. Resumes were prepared and other job opportunities were considered. While work performance continued normally, the supervisors behaved differently. They were quieter than before and vigilant for signals of what changes would be made. Jean had to be extremely careful of her actions. For example, Jean had to occasionally delegate meetings to supervisors if she could not attend; her choice of supervisor now took on new meaning for the supervisors. Another time, when Jean discussed the severance packages with the group of supervisors, she had to be careful with whom she made eye-contact.
Effects on the Staff
Great lengths had been taken by management to prevent the staff members in Sarnia from knowing about the pending structural changes, in order to keep the situation manageable for the supervisors. Within the past few weeks, the staff members had found out that a review of the supervisory structure was taking place. They were anxious about the effect these changes would have on them and were concerned that the “right” supervisors be chosen to stay. Several employees, who were fond of their supervisors, discreetly approached Jean, encouraging her to “bear in mind the right person for the job.”
Additionally, the staff were aware that the largest laboratory, located in London, was expanding due to automation. This knowledge created the fear that the lab in Sarnia would be closed, because of its proximity to London.
DEVELOPING A REVISED STRUCTURE
Jean saw several opportunities for effective change to the current structure at Medictest Sarnia.
The Lab Service Representative was basically responsible for new business, while the Client Service Representative was in charge of keeping current business. Jean decided that these positions could be consolidated due to market place changes.
The Courier Supervisor had taken early retirement in January 1994 with a separation package. His position had not been filled since his departure, and this had not created any problems. There was some apparent overlap and excess supervision of the Specimen Collection Centres and Courier operations. Jean concluded that the courier and collection centres staff could be streamlined under one supervisor, instead of the
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?previous four. However, this would require a strong, energetic supervisor who was capable of handling the increased responsibility.
The supervisors of Testing Centres 1 and 2 currently shared the same staff; Jean decided their positions could be merged into one with few problems.
Testing Centre 3 was highly complex and completed 80 per cent of the tests. It currently had a strong supervisor with potential for inter-regional liaison with other Medictest locations.
Testing Centre 5 was of low complexity but of high importance and was highly interdependent with Testing Centre 4. These centres could logically be merged.
The Customer Service Department dealt with customer requests and communicated testing solutions to customers. This department operated within a vacuum, separate from testing. The lack of communication regarding customer requests negatively affected the level of service provided to the customers. Jean saw the opportunity to address this concern by linking it with Testing Centres 1 and 2, under one supervisor.
Billing was closely audited by OHIP every two years. OHIP subtracted a percentage from revenue for each minor error found. Each billing form had to contain specific and correct information (e.g., the ordering doctor’s name) in order to prevent this direct loss of revenue. Because of the high cost of error, it was important that this department be well managed. The current supervisor had high expertise in this function. This expertise could be utilized throughout the region. By separating billing from customer service, this supervisor could focus externally on the reduction of error rates throughout the specimen collection centres in various locations.
Based on the above observations, Jean developed a new structure that reduced the number of supervisory positions by five (see Exhibit 3). Working closely with Helen Hoi, the head office Director of Human Resources, Jean now had to evaluate the current supervisors. Helen had previously been a manager at Medictest Sarnia and had worked with these supervisors several years ago.
The best candidates had to be chosen for these new positions. Jean would need leaders who would be willing and able to move forward with twice as many staff members as before. Because of the closeness of the group and the desire for any rumour possible, it was difficult to evaluate the supervisors without disclosing any information. After a thorough evaluation of the current supervisors, their skills, assurance, and ability to take on increased responsibility, Jean and Helen developed a list of six supervisors to form the revised leadership team.
THE NEXT CHALLENGE
Head office and the Medical Director agreed to the structural changes. The next challenge Jean faced was the communication of the decisions and the logistics involved in that process. How should the changes be conveyed to the supervisors leaving, to those supervisors staying, and to the staff? Where should the discussions be held? Who should communicate the decisions? In what sequence? What should the physical set-up be? How should head office be involved? There were many questions that would have to be thoroughly addressed before the plan was implemented. Jean wanted to develop a clear, specific plan that would maintain employee morale, enable the operations to continue, maintain self-confidence in those chosen to stay, and redirect those not chosen in such a way that their dignity would be preserved. Jean wondered what reactions to expect from the supervisors and the staff. She wanted to effect the changes within the next month. It was important for this process to be recognized in the future as a natural change effect, instead of a “Black Day.”
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?Quality
Exhibit 1
THE VALUES OF MEDICTEST
Doing the right things the right way;
Competence
Having the appropriate attitudes and abilities;
Caring
Showing genuine concern for others;
Respect for the Individual
Treating people as individuals, with the same understanding and appreciation we seek for ourselves;
Mutual Trust and Openness
Having confidence enough to rely on others and to be open to new and different people and ideas;
Integrity
Being reliable and accountable in word and behaviour;
Teamwork
Accepting a “hierarchy of roles with equality of persons” willing to work together as “we;”
Communication
Listening is the key;
Balance
Keeping home and work in perspective, recognizing that one helps the other;
Simplicity
Maintaining humility, humour, and a common-sense approach to work and life;
What is expected of all individuals can be summarized as Competence and Mutual Trust.
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Exhibit 2
CURRENT STRUCTURE — SARNIA
Regional Manager
Manager
South Western Ontario
Technical Supervisor
Lab Service Representative
Client Service Representative
Supervisor Specimen Collection Centres (Sarnia)
Supervisor Specimen Collection Centres (Other areas)
Supervisor Courier Service
Supervisor Testing 1 (special chemistry)
Supervisor Testing 2 (serology)
Supervisor Testing 3 (hematology)
Supervisor Testing 4 (micro- cytology)
Supervisor Testing 5 (sample sorting)
Supervisor Customer Service & Billing
29.5 FTE1 26.5 FTE 12 FTE 13 FTE 10 FTE2 31 FTE
1FTE = full-time equivalent
2Note: Testing centers 1 and 2 share the same staff
Exhibit 3
PROPOSED STRUCTURE — SARNIA
30 FTE
21 FTE
12.5 FTE
?Regional Manager
??Manager,
South Western Ontario
Lab Service Rep
Supervisor of Specimen Collection Centres & Couriers
Supervisor of Testing 1 & 2 and Customer Service
Supervisor of Testing 3
Supervisor of Testing 4 & 5
Supervisor of Billing
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SAMPLE ANSWER
Management in Organizations
It is common for managers to face tough decisions as they exercise their roles. It is a good characteristic of managers to be able to make the most appropriate decisions from such situation. Implementation of changes could lead to adversities in business organizations and the process should be carried out carefully. In the case of Medictest Laboratories, Jean is forced by shortage of funds to cut off some of the staff. Among them are five supervisors, all noted to have helped the company prosper in their respective departments. Definitely, the situation is not favorable for the supervisors. Jean has to implement changes in such a way that the company retains a good reputation of being considerate on the matters relating to its employees. In addition, it is hard to ensure that the changes would not be accompanied with decline in Mediclabs’ economic achievements. The supervisors had been competent in their work and their departure is likely to severely affect productivity.
Being at the top management position, Jean has the responsibility to chair a meeting where the communication would be made to all members of the staff. As Lipman wrote, a good manager should communicate to the juniors confidently (2014, Pg. 2). In the communication, Jean should first seek the understanding of all the members and therefore requires usingconvictive language. It is likely that after all members have understood the situation, Jean would not hurt their dignity in the implementation of the changes. Again, jean should recognize the great contributions made by the entire staff and purposely emphasize on those of the leaving supervisors. The retained staff should be encouraged to continue delivering and be advised to get prepared to take extra responsibilities. By making an intelligent communication, Jean would enabled Medictest retain its high-earned reputation of being people friendly and concerned with its employee’s welfare.
The manager should however, avoid any implication that the six selected supervisors were the best as it would receive a bad response especially from the leaving group. Managers are required to be intelligent when making critical communications.
Reference
LIPMAN, V. (2014).6 Fundamentals that can make you a Better Manager. Retrieve May 12, 2015 from http://www.forbes.com/sites/victorlipman/2014/01/01/6-fundamentals-that-can-make-you-a-better-manager-in-2014/2/
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