PART V. Human Resource Management and Organizational Dynamics

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1 PART V Human Resource Management and Organizational Dynamics

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3 23 TEACHING NOTE Santorini Hospital Can Cultural Change Save It? Ronnie Rodrigo Boongaling and Robert C. Myrtle OVERVIEW This case shows how a series of missteps at Santorini Hospital led to the ousting of the CEO as well as half of the board of directors. In addition, this case shows how the new CEO attempted to quell the unrest brought about by the conflict between Santorini s administration and its various stakeholders. Santorini Hospital is the sole hospital in the city of Athens. It is the hub of the medical community. Nancy Jankowski came to the hospital after a much-touted national search for the best CEO in the country. The board of trustees had much to prove given the hospital s strained relationship with its employees and the physicians. Alex Roth was the former CEO. He had also been the chief operations officer (COO) for many years. In that role, he had been tasked with cutting expenses at a time when the hospital was in extreme financial hardship. Roth slashed jobs, many of which had been held by prominent people who had clout in the community. The residents of Athens had never before seen the loss of jobs at this scale. Eliminating so many jobs earned Roth the reputation of being a heartless leader, which ultimately led to his downfall when he became CEO. Many factors led to the ousting of Roth as CEO and the general decline of Santorini Hospital, including the following: Roth already had a negative reputation in the community as a COO. Even though he was instrumental in bringing the hospital back to financial viability, he could not shake the reputation of being an uncaring job slasher. When Roth became CEO, the employees and the residents of Athens expected a shakeup on a grander This case is based on actual events. The organization, its location, and the names of people have been disguised. 151

4 152 Human Resource Management scale. The community viewed Roth s refusal to recognize a union of the hospital s service employees as his attempt to gain more power, and many in the community resisted this. Santorini Hospital s administration underestimated the value of its stakeholders and their intra-relationships. By not recognizing the union of service employees, a union that had been validated by the courts, the residents of Athens viewed Santorini Hospital as a bully. The union got the support of a prominent local university professor, which led to support from more teachers, nurses, and physicians. The physicians, taking advantage of a weakened Roth, gave him a resounding vote of no confidence. This eventually led to Roth s resignation, along with about half of the board of trustees. Nancy Jankowski was familiar with the type of environment she was walking into. She came to Santorini Hospital from another troubled hospital that she had been able to turn around. Her background as a registered nurse gave her considerable credibility. She recognized the service employees union and began negotiating with them. She set in motion initiatives designed to enhance the relationships among the workforce, the physicians, and the community. She openly declared that her first task was to change Santorini Hospital s culture. In her view, that began with her and her management team. CASE OBJECTIVES The following are the objectives of this case: 1. Illustrate the importance of valuing each of an organization s stakeholders, regardless of where the stakeholders fall in the organizational chart. 2. Portray how ignoring a problem brought about by an often-invisible part of the workforce (the service employees) can lead to much larger problems. 3. Recognize the role of an organization in its community and the power that the community has in shaping the organization. 4. Show how a novel strategy such as a hospital expansion can be hindered by power, politics, and organizational change. 5. Show how an organization s administration cannot operate in a vacuum. APPLICATION This case was developed for use in advanced graduate-level courses and would best be incorporated in the middle of a course. Students evaluating the case should be able to do the following: 1. Apply a strengths, weaknesses, opportunities, and threats (SWOT) analysis. 2. Offer alternative approaches to what should have been done to avoid Santorini s most serious problems. 3. Evaluate the new CEO s actions in moving the organization forward and offer alternative actions. 4. Apply strategic management and organizational behavior principles in how to rebuild stakeholder relationships and in how to move the expansion project forward.

5 Santorini Hospital 153 PROBLEMS AND ISSUES PRESENTED This case emphasizes the value of an organization s stakeholders, as well as the following other key points: 1. Alex Roth carried his reputation of not caring for employees from the COO to the CEO position. Many of his actions were met with suspicion. Knowing this, Roth should have taken steps to repair his reputation by being more transparent and communicating more. He should not have picked a fight with the service employees union as one of his first acts as the new CEO. 2. Roth failed to recognize the value of the service employees. He consistently refused to recognize their union, even though it had been validated by the courts and was accepted by influential segments of the community. Instead of openly talking with the service employees, Roth decided to appeal the court s decision to even higher courts and sought to break up the union. 3. Roth underestimated the strength of the relationship between the service employees, university, nurses, physicians, and community as a whole. 4. Jankowski needed to restore the confidence of Santorini Hospital s workforce. She faced a number of difficult challenges and problems. Among them, the service employees union was unrecognized, the anesthesia group was fragmented, the Department of Health Services often conducted unannounced audits, the sheriff s department was investigating a suspicious death, and there was an exodus of physicians in several specialties. 5. If the hospital was to survive, Jankowski needed to change the culture at Santorini Hospital. Among the steps she needed to take were to develop and implement protocols, establish transparency, recognize the value and importance of all stakeholders, and transform the management team so that it would be compatible with the desired change in culture. SUGGESTIONS FOR ADDRESSING THE CHALLENGES AND PROBLEMS This case clearly illustrates how an organization can go awry very quickly when its administration ignores the suggestions and grievances of its stakeholders. The turmoil at Santorini Hospital began with an attempt by the service employees to unionize. Instead of acknowledging the union and bargaining in good faith, Santorini Hospital s administration used the hospital s clout and fought back hard. The community response was swift, beginning with support for the plight of the service employees from associations that represented teachers and nurses. When other stakeholders, such as the RNs and physicians, brought forward their grievances as well, Santorini s administration was faced with and needed to manage crises on many fronts. Local analysts suggested that financial mismanagement, greed, a good-old-boy mentality, and incompetence were possible causes of Santorini Hospital s demise. Many of the prominent leaders of Athens, the hospital s board of trustees, as well as the local newspapers did not recognize Santorini Hospital s root problem the hospital administration s failure to recognize the service employees. When Santorini Hospital fought hard against a fledgling union, the community saw Roth s tactics as bullying. In response, many in the community did what communities often do they sought to protect the vulnerable service workers. Jankowski s actions, which were intended to change the culture at Santorini Hospital, appear to be working. There are several pieces of evidence to support this

6 154 Human Resource Management conclusion. Negative news about the hospital and missteps by its leaders are less prominent in the local newspapers. There is more news about the hospital administration s proactiveness, transparency, and renewed sense of cooperation. There is less discussion among service employees and RNs about how unpleasant the working environment is at Santorini Hospital. The regulatory agencies have backed off for now. Healing has started. More RNs are applying for work. Physicians are engaging Santorini Hospital in more positive ways at their medical staff meetings. In spite of these positive steps, however, the difficulties that arose between Roth and the service employees continue, at least to some extent. Jankowski knows she will also have to bargain with the RNs. Some of the vacant physician positions still exist. Physician recruitment is challenging for a hospital in the midst of a recovery. The pressure is growing to complete the expansion project in the middle of a down economy. Jankowski wonders if she can do more to speed the day when Santorini Hospital is indeed a great hospital. This question gives students an opportunity to consider the ways in which she might better manage the culture change. Instructor s Manual for Cases in Health Services Management, fifth edition, by Rakich, Longest, and Darr. Copyright 2010, Rakich, Longest, and Darr.