UNIT 3 MANAGEMENT TECHNIQUES

Structure
Objectives
Introduction
The Feedback Loop
Time Series Analysis
Decision Making
Break-even Analysis
Operations Research
PERT
Strategic Planning
Forecasting
Value Analysis
Statistical Quality Control
Management by Objectives (MBO)
Quality Circles (QC)
Management Problem Solving Methods
Managerial Skills
Cost Analysis
Utilisation Management
Let Us Sum Up
Self-assessment Test
3.20

Further Readings

3.0 OBJECTIVES
After going through this unit, you should be able to:
a

understand the importance of management techniques;

critically examine the role of management techniques in day to day management of

the health-care system; and

use various management techniques explained in this unit, to streamline the systems
you are working inloperating.

3.1 INTRODUCTION
-

The main function of administrator is to take decision. Accurate data and information
are the prerequisites for arriving at the correct decision. Decision making is a vital
component of hospital managkment. There are various techniques, which are available
to the manager and these can effectively be used in the field of Hospital Management.
Hence, it is imperative that all health administrators have a conceptual knowledge of
the following managerial techniques:
The feedback loop
Time series analysis
Value analysis

Management Techniques

Break-even analysis
Operations research
PERT
Strategic planning
Forecasting
Statistical quality control
Management by Objectives
Quality Circles
Management problem solving methods
Managerial skills
Cost analysis
Utilisation management

3.2 THE FEEDBACK LOOP

The hospital, in one way, can be described as a collection of functional service units.
Each of the units perform some specialised function. The departmental organisational
structure of units like Nursing, Dietary, Radiology, Laundry etc. are in fact designed on
functional basis. In a typical hospital there may be more than twenty such functional
units. The functions of the units vary widely and these may range from removal of
waste and garhage to very specialised clinical functions. Nevertheless, from the point of
view of the hospital manager each of these units can be functionally designed as a
basic feedback loop to provide result expected information or goal achievement results
(Fig. 3.1).
PERFORMANCE
A

RESOURCES
A

SERVICE

MONITOR

EXPECTATION

MONITOR

Fig. 3.1: Multiple feedback loop

No hospital function can be effectively performed in the absence of a demand for it.
Demand in a hospital is generated by a process different from the functional services.
The adjustment is required in various individual units, if the performance is expected at
desirable level. Like a functional change of the Operation Theatre would need the back
up of CSSD, Laundry, Blood Bank etc.

41

3.3 TIME SERIES ANALYSIS

Hospital 1s a place wherc most precesses are stochastic, i.e. subject to change
variation when exact prediction is impossible. What must be substituted is
prohahihst~cprediction, given an expccted value and the probabilities of the chances
of changes of given amounts around the expected value. The opposite of stochastic is
detertnlnistic, a process which always yields its expected value and is subject to no
change fluctuation. The expected value is the mean or average of the distribution of
possible values. A series of data for several historical periods in order is called a
Time Series.

3.4 DECISION MAKING

Decision making is the essence of an administrator's job. While planning,
orpanising, coordination/controlling,implementation and evaluation are the basic
functions of management, each of these clearly involves deicisions. Decision making
is the process of choosing between alternative courses of action. Making a decision
involves four steps:
-Identifying

the central prohlem

-Analysing

the alternatives, and

-Making

the final decisions

Effective decision making requires severat dternatives to choose from. Creativity and
the effective use of groups are two important factors in developing alternatives.
Most widely used alternatives of analysis of techniques are:
Capital budgeting
Break-even analysis
Operations Research
PERT (Programme Evaluation Review Technique)
Capital budgeting is used to analyse alternative capital investments.

3.5 BREAK-EVEN ANALYSIS

Most fundamental quantitative technique available to administrators is BEA. This is
a graphic representation between revenues and costs at various levels of output. The
break-even point in the analysis is that point (level of output) at which total
revenues will equal total costs, thus resulting in neither profit nor loss for the
organisation. It indicates the quantity of output that must be achieved in order to
cover total costs of oepration and also the point in output at which profits will
begin to accrue.
Fixed Costs
Break-even point =
Price per unit - variable cost per unit
This break-even analysis can be shown graphically also (Fig. 3.2).

3.6 OPERATIONS RESEARCH

Break-even analysis has been discussed in detail in Course 11: Financial Management.
Operations m a r c h is the application of scientific methods to management problems. It
refers to a set of mathematical techniques through which a variety of organisational

- -

M a m g e m m t Techniques

Totd Revenue

Total Cost
Break Even Point

/
/

( Variable Cost
Fixed Cost

Sales Volume (in thousands)

Fig. 3 3

problems can be analysed and solved. There are four steps in applying this scientific
approach:
-Formulate

and define the problem,

--Construct a mathematical model,

--Test the model and solution derived from it, and
-Put

the solution to work (implementation).

Specific OR techniques include:

1) Linear Programming: A technique for determining the optimum combination of
limited resources to obtain a desired goal. It is based upon the assumption that a
linear, or straight line, relationship exists between variables and that the limits of
variations can be determined. For example, in a production shop like laundry, the
variables may be units of output per machine in a given time, direct labour costs or
material cost per unit of output, number of operations per unit, and so forth. Most
or all of these may have linear relationship, within certain limits, and by solving
linear equations, the optimum in terms of cost, time. machine utilisation, or other
objectives can be established. Therefore, it is useful in production planning, and the
utilisation of production to acheive lowest overall costs.

2) Computer Simulation: Evaluation of alternative courses of action without direct

experimentation.
3) Inventory Modek: Problems regarding storage capacity, quantities to be ordered,
and when to be ordered can be attended by using inventov models.

4) Work study: Determining the standard time necessary to cany out an activity,
developing effective and easy methods of work.

5) Queuing Techniques (waiting times): Determining waiting time, cost of waiting

time and its reduction, identification of bottlenecks. This technique can be used to
analyse alternatives and amve at solutions to many of these problems. It is
necessary to know how often patients arrive; how long it takes to service them,
and the order in which arriving patients are served with these data the waiting time
problem can be solved.
A simple method of studying a queue line is described below:
A multiserver queue in a service area is represented.as:

Counter- 1

Amvals

-4

Counter-:!

The following observations are made at intervals of selected unit time:

Time
(hrslmin)

Unit time

Queue length
(persons waiting)

Number served
in unit time

Number of
counters open

General Management

From these observations following can be calculated

Individual service time

(i.t)

Effective service time

(e.t.) - (minutes)
N

(e.t.xc.)

Waiting time
Capacity

60 min
(C) e.t.

Those values depict the time spent by an individual at each counter and the capacity of
the service point, which are useful in making decisions regarding allocation of time,
personnel and equipment so that both idle periods and waiting time can be minimised.
They also facilitate inter-service and inter-hospital comparisons.
I(

The queueing technique can be applied in various patient care areas--Outpatient

department, Radiodiagnosis and Imaging, Operations (Surgery) etc.
A) Prevalent system in OPD:

Consultation Chamber Number:

Patients:

1
1-8

2
9-17

3
18-26

27-35

5
36-43

B) Modified system in OPD:

Consultation Chamber Number:

Patients allotted as per arrival:

6
11

Activity 1

Do a small survey of hospitals and try to study the extent of use of OR techniques in
the management of hospitals and supporting services. Prepare an evaluative document
on the topic and discuss in the peer group regarding the strengths and weaknesses of
the system.

PERT (PROGRAMMING EVALUATION REVIEW

PERT is a technique of representing a project plan in a network form. It starts with the
determination of objectives. specifying clearly as to what is to be achieved and ends
with the completion of the project. Any project, therefore, has to be analyscd in dcpth
and inter-relationships of the steps in the project determined in details. This is then
represented in a graphic form known as Network Diagram. Thus a network diagranl o f
activities is the key feature of PERT and acts as a ROAD MAP to reach the oh.jcctivcs
of the programme or project.

PERT llelps in:

I)

Defining clear cut objectives

2) Aniilysis of the strategy

3) Preparation of a detailed plan of action

4) Sequencing of events

5) Focussing on more important activities

6) Planning for time schedules

7) Continuous monitoring of the progress.

Example
Activity

Event

A-Prepare

patient

Patient prepared

B - G i v e Anaesthesia

Anaesthesia given

C-Prepare

Instrument trolley laid

instrument trolly

%Perform
Prepare patient

operation

Anaesthesia

Operation performed.
Operate

Fig. 33: PERT Activity Analysis

3.8 STRATEGIC PLANNING

Planning provides direction and a sense of purpose for the organisation. It also provides
a unifying frame work of decision (-) making throughout the organisation. Planning
helps to reveal future opportunities and threats and also facilitates control.
Planning usually involves at least two phases-Strategic Planning (aimed at developing
the organisation's basic long-term plan, or strategy, and Action Planning (Short term
objectives are developed for each department, short run forecasts are made, alternative
action plans are developed and analysed, and specific ones are chosen).
Steps in developing a strategic plan include:
--Clarify the organisation's domain, in terms of services it offers and to whom,
-Make

a strategic forecast

Man

-Determine

current strengths and weaknesses

-Develop alternatives and analyse each in terms of organisation's strengths,

weaknesses, threats and opportunities.
-Set

specifie objectives, commence action planning.

The strategies of a hospital need to be well conceived, practical and commitment

oriented. Strategic planning will help administrator to develop a better image for the
hospital and that the hospital services will achieve the desired results for the
community.

3.9 FORECASTING
It is a service whose purpose is to offer the best available basis for management
expectations of the future and to help management understand the implications for
alternative courses of action. Forecasting provides the basic premises or assumptions on
which objectives, strategies and plans are built.
Forecasting techniques include:

e Economic forecasting
e Time series (exponential smoothing)
e Casual
-multiple

linear regression

--econometrics
Qualitative

d e l p h i method (technological forecasting research

Activity 2

Please visit atleast two hospitals within your reach (one private and one public1
government) and try to find out what kind of forecasting is being practiced at the
organisational level. Prepare a brief critical paper on the topic.

3.10 VALUE ANALYSIS

Value analysis is a technique tc provide various types of models to management for
taking decision as to which service a hospital can offer and at what cost, and thus it
helps in making decision regarding planning the facilities and services the hospital will
offer. The hospital funds can be effectively allocated and better utilised for those
services that can satisfy many patients with marginal change.

3.11 STATISTICAL QUALITY CONTROL

Hospital can generate a large number of individual statistics where each statistics is a
mcnsure of some limited aspect of quality or efficiency of the total process. An
affective information-handling system must be able to process the incoming statistics.
Alrnost any complex process will have some variability in the degree to which it
achieve its goal. Thus, there should be three or more observations in each set. For each
of these sets, the mean and standard deviation can be estimated according to the usual
formula
The end product of the hospital is "Patient Care" and the product being intangible does
not lend itself to measurement easily. Lately, four criteria have been developed which
are used for measurement:
Parient Care

Number
Number
Number
Number

Quality

Patients cured
Improved
Infection/Complication

of
of
of
of

OPD Cases
admissions
operations
tests

Per day per patient

(in-patient/out-patient)
Patients satisfaction

Random patient opinionlsurvey staff satisfaction

etc.

Activity 3
Taking cue from the above illustration, conduct a small study of a hospital and examine
the I'our group of services referred above regarding their quality control.

MANAGEMENT BY OBJECTIVES (MBO)

MBO is a process whereby the superior and the subordinate managers of an
organisation jointly identify its common goals, define each individual's major areas
of responsibility in terms of the results expected of him, and use these measures as
guides for operating the unit and assessing the contributions of each of its
members.

The concept rests on a philosophy of management that emphasizes an integration

between 'external control (by managers) and self-control (by subordinates).
The goals are jointly established and agreed upon in advance. This is then followed by
a review of subordinated performance in relation to accepted goals at the end of the
time period. Both superior and subordinate participate in this review.

Management Techniques

3.13 QUALITY CIRCLES (QC)

QC is a people building philosophy capable of providing astonishing results. Q C is a
small group of people doing similar or related work who meet regularly to identify,
analyse and solve quality, productivity, cost-reduction, safety and other problems in
their work area, leading to improvement in their performance and enrichment of their
worklife. Membership is voluntary (6-12 members) who meet on an average one hour
once a week.

Objectives
- C o s t reduction
-Reducing

employee turnover

-Improving

employee morale

--Greater efficiency of operations

-More

effective scheduling

-Reduced

absenteeism

-Improve

nurse-clinician relations

-More

accurate cost-allocations

Significance of QC's lies in utilising the education, experience and creativity of the
staff in hospital problem solving and decision making. QC is an integrated programme
made up of:
-The

members themselves

-Circle leaders'
-The

facilitater

-The

Co-ordinator

-Steering committee (group of key individuals selected from management, circle

leaders and members of all major functional areas).

Process
-Problem

identification

-Problem

selection

-Problem

analysis

-Implementation

and recommendation to the management

Implementation
-Establish

atmosphere

--Obtain commitment
-Select

objectives

-Inform
-Voluntary
-Training
-Be

open and positive

The key to success is a good implementation plan

The concept of Q C envisages participatory management style with a "Bottom Up"
approach.

Management Techniques

Activity 4
As a professional i n the health care management system, have you ever come across a
quality circle. If yes, please evaluate critically its functioning and discuss in the
professional group you belong to and prepare a short note.

3.14 MANAGEMENT PROBLEM SOLVING METHODS

The organisational ability can be improved by the use of Management Problem Solving
Methods (MAPS). The problem solving, the case study approach, involving actual or
contingency situations is suitable for all management levels.

Units of Analysis:
1) Overall organisation

2) Resources flow

-Information

flow

-Types of patients
(infection rates, medication errors, patient waiting tlmes)

3) Work group

4) Organisational environment
(Including social, economic and technological factors)
With the analysis of data provided in these categories the organisation unit has available
performance criteria which can be used to illustrate its percentage success in providing
a service to the
This will show how efficiently organised the hospital is in
providing a service to the patient. MAPS can be applied to organise hospital equiphent
maintenance.

3.15 MANAGERIAL SKILLS

There are three general categories of skills that managers must possess: technical skills,
human skills, and conceptual skills.
Technical skill: Ability to use knowledge, methods techniques and 'equipment necessay
for the performance of specific tasks acquired from experience, education and training.

Human skill: Ability and judgement in working with and through people, including an
understanding of motivation and an application of effective leadership.
Conceptual skill: Ability to understand the complexities of the overall organisation and
49

where one's own oepration fits in the organisation. This knowiedge permits one to act
according to the objectives of the total organisation rather than only on the basis of the
goals and needs of one's own immediate group.
Research has shown that managers at different levels require varying amounts of technical
and conceptual skills in order to carry out their responsibilities effectively. Human skills
are a constant at all levels and occupy the greater part of the management function.

3.16 COST ANALYSIS

The growing complexity of hospital operation both in size and volume, increase in
demand for high standard of medical care services requires systematic use of hospital
accounting system in general and cost accounting in particular (Fig. 3.4).

COST

COST

MATERIAL

I.

COST

BASIS
Fig. 3.4: Framework of the Cost Analysis

The process of cost analysis has become a resource tool for financial management in
hospitals. The cost of operating different services are allocated to different cost centres.
Costing also helps to assess the efficiency and effectiveness of functions and their cost
implications with a view to contain cost. The exercise of unit costing involves the
determination of the cost of single unit of any product or service. The approaches to
unit costing are:
a)

Standard costs (gives an estimate of what the costs should be i.e. it accumulates
the costs incurred for all material and labour component of a product/service and
provides allowance for any normal wastage. Scientific methods like time and
motion studies can be used to compute the cost).

b) Average costs (indicates the actual average cost of providing one unit of service. This
is a top down approach, where the total costs of the service centre are determined
and divided in a rotational proportion among the different services offered--thereby
deducing the cost of providing a unit of service. The wastage component cannot be
determined by this method and hence there is no comparison standard).

3.17 UTILISATION MANAGEMENT

It is a hospital-wide multidisciplinary programme which helps a hospital to achieve its
objectives for cost control and overall institutional management. It is a catalyst for
coordinating quality assurance, utilisation review and risk management activities. Costeffectiveness is accomplished through the judicious use of resources to control
inappropriate in-patient admissions, length of stay and use of ancillary.
Utilisation review is the process of assessing medical care to ensure its quality, medical
necessity, and appropriateness in terms of level of care and treatment setting. It has
emerged as a key feature of cost management.

LET US SUM UP
Health care professionals must become effective managers and leaders in order to fulfil
their responsibilities to themselves, to their patients, and to the professions. Existing
environments, roles, educational programmes are expanding. In the changing
environment hospital administrators will be called upon for creative strategies,
disciplined and cost-controlled programmes, improving the quality, raising the st'andards,
and the abilities to direct research and analyse systems critically, and chart growth.
Contents In this unit focus on increasing organisational effectiveness in service and
practice by applying modern technique in hospital management. The educational process
attends to the unique individual learner. A satisfied manager has a high probability of
having staff members who are also satisfied; satisfied staff members have a high
probability of having satisfied patients; a satisfied patient has a high probability of
reaching full health potential.

SELF-ASSESSMENT TEST
Having gone through this unit, you should talk to some of your professional colleagues
who are operating their own health care organisations and find out the following:
Do they know about the management techniques, which we have talked about in
this unit?
2) In case they know, how useful are they in their day to day management'?
3) What else would they like to know about management techniques'?
or
What are their needs and work out yourself as to what more do they require to
know'?
I)

Prepare a brief account of your findings and discuss among peers, either in classroom
situation or at professional gathering.

3.20 FURTHER READINGS

Abel-Smith, Brian (1994), An Introduction to Health, Policy, Planning and Financing,
Longman Publishing: New York.
Barnum, H. (1993), Public Hospitals in Developing Countries: Resource, Use Cost,
Financing, The Johns Hopkins University Press: Baltimore, USA.
Koontz, Harold (1990), Essentials of Management, 5th ed. McGraw-Hill series in
Management: Singapore.
La Monica EL, Margan P.I. (1994), Management in Health Care: A Theoretical and
Experiential Approach, The Macmillan Press Ltd.: London.
Macaulay, S.H.M.C.: Hospital Plunning and Administration; WHO.
Monograph Series No. 54 (1964), World Health Organisation: Geneva.
Morgan, C., Murgatroyd S. (1995), Total Quality Management in the Public Sector: An
International Perspective, Open University Press: Buckingham, UK.
Norman, Vetter (1996), The Hospital : From Centre of Excellence to Community
Support, Champan & Hall: London.
Paul, Hersey and Kenneth H. Blanchard (1992), Management of Organisational
Behaviour: Utilising Human Resources, 5th ed., Prentice Hall Pvt. Ltd.
Rowland, H.S., Rowland, B.L. (1984), Hospital Administration Handbook, An Aspen
Publication: Maryland, USA.
Schulz, R., Johnson A.C. (1989), Management of Hospitals, 3rd ed. McGraw-Hill Book
Co.: New York.
World Health Organisation (1974), Modern Management Methods and the Organisation
of Health Services, Public Health Papers No. 55, WHO: Geneva.

Management Techniques