Subject: Current Issues In

Subject: Current Issues in

Health Services Management (MM566)

GroupReport

Managing SARS Outbreaks

–the Stakeholders Model

Lecturer:Prof. Peter YUEN

Group Members:

CHOW Ching Man, Norita (Student no. : 01416967G)

LAI Mei Ha, Melissa (Student no. : 03417124G,)

LAW Mei Sze, Regina (Student no: 02414020G)

LEE Kwun Yin, ,Daniel (Student No. : 03409505G)

LEUNG Shun Wah, Ava (Student no. : 03400105G)

Date of Submission: 3 May 2004

INTRODUCTION

This study uses the Stakeholders Model to evaluate the management of the SARS outbreak in Hong Kong in 2003. Stakeholders are identified from the Hospital Authority Head Office Senior Management’s perspective. Comparisons of the performance of similar authority in Canada and Singapore in engaging their stakeholders in the SARS outbreak management have been made where appropriate, with the objectives to learn from the common mistakes and good performance of others, and make recommendations for management of future outbreaks of similar nature.

STAKEHOLDERS MODEL

Stakeholders Theory

Stakeholders are those individuals or groups who depend on the organization to fulfill their own goals and on whom, in turn, the organization depends. In the other words, any constituency in the environment that is affected by an organization’s decisions and policies and that can influence the organization. Influence is likely to occur only because individuals share expectations with others by being a part of a stakeholder group. Individuals tend to identify themselves with the aims and ideals of stakeholder groups, which may occur within departments, geographical locations, different levels in the hierarchy, etc. Also important are external stakeholders of the organization, typically financial institutions, customers, suppliers, shareholders and unions. They may seek to influence company strategy through their links with internal stakeholders. For example, customers may pressurize sales managers to represent their interests within the company. Even if external stakeholders are passive, they may represent real constraints on the development of new strategies.

Individuals may belong to more than one stakeholder group and stakeholder groups will ‘line up’ differently depending on the issue or strategy in hand. For example, marketing and production departments might be united in the face of proposals to drop certain product lines, whilst being in fierce opposition regarding plans to buy in new items to the product range. Often it is specific strategies that trigger off the formation of stakeholder groups. For these reasons, the stakeholder concept is valuable when trying to understand the political context within which specific strategic developments would take place (Johnson & Scholes, 2002).

Identifying the stakeholders

An organization’s mission and objectives need to be developed bearing in mind two sets of interests:

1. the interests of those who have to carry them out e.g. the managers and employers - Internal stakeholders;
2. the interests of those who have a stake in the outcome e.g. the shareholders, government, customers, suppliers and other interested parties - External stakeholders

Together these groups form the stakeholders – the individuals and groups who have an interest in the organization and may therefore wish to influence its purpose, mission and objectives.

The organization’s mission may take months of debate and consultation within the organization. When its implications are clearly set out for the directors, managers and employees, they may not necessarily accept the mission without question: there may be objections as it is realized that individuals will have to work harder, undertake new tasks, or face the prospect of leaving the company. The individuals and groups affected may want to debate the matter further. Such individuals and groups have a stakeholding in the organization and therefore wish to influence its mission.

This concept of stakeholding extends those working in the organization. Shareholders in a public company, banks which have loaned the organization money, governments concerned about employment, investment and trade may also have legitimate stakeholdings in the company. Customers and suppliers will also have an interest in the organization. They may be informal, such as government involvement in a private company, or formal, such as through a shareholding in the company. All can be expected to be interested in and possibly wish to influence the future direction of the organization (Lynch, 2003).

Inputs to the development of the company mission:

External Stakeholders
Customers
Suppliers
Creditors
Governments
Unions
Competitors
General public
Internal Stakeholders
Executive officers
Board of directors
Stockholders
Employees
Company
Mission

Stakeholder analysis

Stakeholder analysis provides a link between internal analysis and external analysis. Internal stakeholders are the management, the different departments within the organization and its employees. The needs, wants and motivating factors for each of these groups are different. What may please management could cause unease among the workforce. On their own, no one group is able to completely influence the direction and activities of the organization. There are groups, however, who posses greater power than others. Stakeholder analysis seeks to identify these.

External stakeholders cannot simply be identified or listed; they differ between organizations and industries. However, external stakeholders may be grouped into segments which are frequently involved in the organization’s activities: owners (shareholders), suppliers, customers and financiers. Other groups which could also have stakeholder status for an organization are the government (central and local), guilds and associations, and pressure groups who may or may not have an interest in the success of an organization with its present or future activities (Cook & Farqularson, 1998).

There are various ways in which stakeholder analysis is performed to measurer the relative power of different groups and individuals. These techniques typically utilize a mapping or matrix approach.

1. Relative power matrix - The relative interests on the part of each group in the organization’s proposed activity are given numerical values. The total for each group is then analyzed to assess their power.
2. Power/interest matrix - The power/interest matrix seeks to describe the political context within which an individual strategy would be pursued by classifying stakeholders in relation to the power they hold and the extent to which they are likely to show interest in supporting or opposing a particular strategy.

The matrix indicates the type of relationship which organizations typically might establish with stakeholder groups in the different quadrants.

Level of Interest
Power / Low / High
Low / A Minimal effort / B Keep informed
High / C Keep satisfied / D Key players

Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on Information Systems, Cambridge, MA, 1991.

Clearly, the acceptability of strategies to key players (segment D) is of major importance. Often the most difficult issues relate to stakeholders in segment C (institutional shareholders often fall into this category). Although these stakeholders might, in general, be relatively passive, a disastrous situation can arise when their level of interest is underrated and they suddenly reposition to Segment D and frustrate the adoption of a new strategy. A view might be taken that it is a responsibility of strategists or managers to raise the level of interest of powerful stakeholders (such as institutional shareholders), so that they can better fulfill their expected role within the corporate governance framework. Also, this could be concerned with how non-executive directors could be assisted in fulfilling their role, say, through food information and briefing.

Similarly, organizations might address the expectations of stakeholders in segment B through information – for example, to community groups. These stakeholders can be crucially important “allies’ in influencing the attitudes of more powerful stakeholders: for example, through lobbying.

Stakeholder mapping might help in understanding better some of the following issues:

1. Whether the levels of interest and power of stakeholders properly reflect the corporate governance framework within which the organization is operating, as in the examples above (non-executive directors, community groups).
2. Who are likely to be the key blockers and facilitators of a strategy and how this could be responded to – for example, in terms of education or persuasion?
3. Whether organizations should seek to reposition certain stakeholders. This could be to lessen the influence of a key player or, in certain instances, to ensure that there are more key players who will champion the strategy (this is often critical in the public sector context).
4. The extent to which stakeholders may need to be assisted or encouraged to maintain their level of interest or power. For example, public ‘endorsement’ by powerful suppliers or customers may be critical to the success of a strategy. Equally, it may necessary to discourage some stakeholders from repositioning themselves. This is what is meant by keep satisfied in relation to stakeholders in segment C, and to a lesser extent keep informed for those in segment B (Johnson & Scholes, 2002).

Stakeholder Relationship Management

Stakeholder relationships management is important as it can lead to other organizational outcomes such as improved predictability of environmental changes, more successful, innovations, greater degrees of trust among stakeholders, and greater organizational flexibility to reduce the impact of change. In turn it affects the organizational performance to a higher extent.

Stakeholder relationships can be managed in four steps. The first step is identifying who the organization’s stakeholders. The second step is for managers to determine what particular interests or concerns these stakeholders might have – product quality, financial issues, safety of working conditions, environmental protection, and so forth. Next managers must decide how critical each stakeholder is to the organization’s decisions and actions. The final step is determining what specific approach they should use to manage the external stakeholder relationships. This decision depends on how critical the external stakeholder is to the organization and how uncertain the environment is. The more critical the stakeholder and the more uncertain the environment, the more that managers need to rely on establishing explicit stakeholder partnerships.

The various approaches to managing stakeholder Relationships:

Stakeholder Importance
Environmental
Uncertainty / Critically Importance / Important
but Not Critical
High
Uncertainty / Stakeholder
Partnerships / Boundary
Spanning
Low
Uncertainty / Stakeholder
Management / Scanning and
Monitoring the
Environment

When external stakeholders are important but not critical and environmental uncertainty is low, managers usually rely on simply scanning and monitoring the environment for trends and forces that may be changing. In this situation, it’s not necessary for managers to take specific actions to manage stakeholders. They just need to stay informed about what’s happening with them, what concerns they might have, and whether these concerns are changing.

When the stakeholder is important but not critical and environmental uncertainty is high, managers need to be more proactive in their efforts to manage the stakeholder relationships. They can do this by using boundary spanning, which involves interacting in more specific ways with various external stakeholders to gather and disseminate important information. In boundary spanning, organizational members move freely between the organization and external stakeholders. The boundaries of the organization become more flexile and permeable. Boundary spanners are often said to have their feet in multiple settings – that is, they span the organizational boundaries. For instance, individuals who interact day in and day out with external stakeholders as they do their jobs – such as a salesperson for pharmaceutical company who interacts with doctors and health care professionals, a public relations manager who talks with newspaper and television reporters – would establish closer and more explicit relationships with the various stakeholders. It’s a step beyond just simply scanning and monitoring the environment because boundary spanners actively interact with stakeholders as they gather and disseminate information.

When the stakeholder is critical and environmental uncertainty is low, managers can use more direct stakeholder management efforts such as conducting customer marketing research, encouraging competition among suppliers, establishing governmental relations departments or lobbying efforts, initiating public relations connections with public pressure groups, and so forth.

Finally, when the stakeholder is critical and environmental uncertainty is high, managers should use stakeholder partnerships, which are proactive arrangements between an organization and a stakeholder to pursue common goals. These types of partnering activities allow organizations to build bridges – organization-supplier, organization-customer, organization-local communities, organization-competitor, and so forth – to their stakeholders. Stakeholder partnerships involve significant levels of commitment among the partners to be more interdependent rather than independent (Robbins & Coulter, 2002).

Conflicts of Interests/ Expectations amongst stakeholders

The key issue with regard to stakeholders is that the organization needs to take them into account in formulating its mission and objectives. If it does not, they may object and cause real problems for the organization. Since the interests/ expectations of stakeholder groups will differ, it is quite normal for conflict to exist regarding the importance or desirability of many aspects of strategy.

The typical stakeholder expectations include the conflicts between growth and profitability; growth and control/ independence; cost efficiency and jobs; volume/ mass provision and quality/ specialization; and the problems of sub-optimization, where the development of one part of an organization may be at the expense of another (Lynch, 2003).

Consequently, the organization will need to resolve which stakeholders have priority: stakeholder power needs to be analyzed.

Analyzing and Applying Stakeholder Power

Power is the ability of individuals or groups to persuade induce or coerce others into following certain courses of action. Sources of power within organizations are hierarchy (formal power) e.g. autocratic decision making, influence (informal power) e.g. charismatic leadership, control of strategic resources e.g. strategic products, possession of knowledge and skills e.g. computer specialists, control of the environment e.g. negotiating skills and involvement in strategy implementation e.g. by exercising discretion. For external stakeholders, the sources of power are control of strategic resources e.g. materials, involvement in strategy implementation e.g. distribution outlets, possession of knowledge (skills) e.g. subcontractors and through internal links e.g. informal influence.

As part of the analysis stakeholder power, some explicit investigation needs to be undertaken of the sanctions available against specific stakeholder groups. These might be used to ensure that, which conflict exists between stakeholder groups, some resolution is achieved. Such analysis may be the beginning of a bargaining process between the various groups. This is likely to involve compromise, depending on the power of groups of stakeholders and their willingness to agree. It may also involve the use of sanctions to bring pressure to bear on particularly difficult groups.The following are the six major steps of stakeholders power study:

1. Identify the major stakeholders.
2. Establish their interests and claims on the organization, especially as new strategy initiatives are developed.
3. Determine the degree of power that each group holds through its ability to force or influence change as new strategies are developed.
4. Development of mission, objectives and strategy, possibly prioritized to minimize power clashes.
5. Consider how to divert trouble before it starts, possibly by negotiating with key groups.
6. Identify the sanctions available and, if necessary, apply them to ensure that the purpose is formulated and any compromise reached (Lynch, 2003).

To summarize, stakeholding is an integral part of the different sectors of the economy and a part of risk management. Stakeholding creates potential business links worth encouraging and taking up. If stakeholding is not handled suitably, it may have the power to bring an organization to its knees and causes a lot of damages to the organization.

In the following sections, the stakeholders of the Hospital Authority (HA) in managing the SARS outbreak are identified from the perspectives of the Senior Executives in the Head Office (HO). The performance of the HAHO in engaging the various stakeholders in managing the SARS outbreak are evaluated. References to overseas practice in Canada and Singapore are made where appropriate and how the stakeholders can be better engaged in future outbreak of similar nature are recommended.

STAKEHOLDERS OF THE HAHO SENIOR MANAGEMENT

The proper containment and control of the outbreak of the fatal infectious disease SARS was the prime objective of the HAHO. It was also the objectives of all involved in the public health management system including the Health, Welfare and Food Bureau, the Department of Health, the HA Board, the Hospital Governing Committees and the Cluster Management, the private health sector including the private hospitals, and general practitioners. It is also of great concerns to the insurance companies; the private and voluntary sectors including the suppliers, the nursing homes and the academic and research professionals, the health care workers directly involved in the frontline to combat the deadly disease and their professional associations and unions and the patients whether or not contracted the SARS. Last but not least would be the media and the public at large. All of them are stakeholders to HAHO in the SARS outbreak management.

Health, Welfare and Food Bureau (HWFB)

The HWFB is the policy bureau which has the overall policy responsibility for all matters relating to health. It is supposed to match out the strategy for managing and controlling the epidemic, co-ordinate the efforts in the health sector to combat the disease. It also oversees Hong Kong’s emergency response. It monitors the performance of HA and at the same time controls and approves funding for HA. With the above mentioned high interests and high power over the public health policies and the performance of HA, the HWFB is definitely one of the most important key players amongst the various stakeholders of the HAHO Senior Management according to the stakeholders interest / power mapping theory.

Department of Health (DH)

The DH is the Government’s Health Advisor and the executive arm of the government in the health legislation and policy. It is also the health advocate of the community. During the SARS epidemic, it liaised with HA on public health functions of disease surveillance, contact tracing and collaborated with World Health Organization (WHO) and international health agencies and authorities in giving information and communicating warning of the highly communicable SARS disease. With the high interests and high power in the public health system, the DH is another key player to the HAHO Senior Management to be heavily and tactfully engaged in order to combat the SARS and control the outbreak effectively.