THE FIT OF STRATEGIC HUMAN RESOURCE MANAGEMENT IN HOSPITALS

Hsin-Chih Kuo Department of Health Management, I-Shou University 1, Sec. 1, Syuecheng Rd., Dashu Township, Kaohsiung County 840, Taiwan, ROC e-mail: simon@isu.edu.tw Chi-Hsing Tseng Department of Marketing and Logistics Management, National Pingtung Institute of Commerce, 51, Min Sheng E. Rd., Pingtung 900, Taiwan, ROC e-mail: tseng@npic.edu.tw ABSTRACT This study applies both resource-based view and strategic human management theory to explore two kinds of fit in strategic human resource management for Taiwanese hospitals. The strategic human resource management can be divided into two kinds of fit: vertical and horizontal. To explore the vertical and horizontal fit of human resource management practices, this study adopted an embedded case study design and treated individual department as analysis unit. After interviewing several medical and administrative department leaders, this research finds that the combination of resources will influence the human resource management practices. This research also finds that medical and administrative departments have different human resource management practices in the same hospital. In other words, though departments are belonging to the same hospital, these departments seem to adopt different human resource architectures. Keywords: strategic human resource management, vertical fit, horizontal fit, hospital INTRODUCTION In 2002, the Bureau of National Health Insurance (NHI) implemented Global Budget Payment System to control increasing medical expenditure and to monitor medical quality. Hospitals are then facing the challenge of cost saving and quality improvement. To overcome the challenge, Taiwanese hospitals should rely more heavily on human resources to improve efficiency and quality. Therefore, the fit of strategic human resource management has been the concerned focus of hospital practitioner. In order to explore the vertical and horizontal fits of human resource management in hospitals, this study applied resource-based view and strategic human resource management theory to explain the fit of strategic human resource management in Taiwanese hospitals. THEORETICAL BACKGROUND

Resource-base View Wernerfelt (1984) first adopted the term of resource-based view to analyze firms from the resource side rather than from the product side. Barney (1991) further claimed that environmental analysis cannot create the required unique insights, while in some circumstances, the analysis of a firms unique skills and capabilities can. Thus, from the perspective of economic performance, he suggested that strategic choices should be selected mainly from the analysis of its unique skills and capabilities, rather than from the analysis of its competitive environment. Amit and Schoemaker (1993) built on an emerging strategy literature that views the firm as a bundle of resources and capabilities, and examined conditions that contribute to the realization of sustainable economic rents. Resources could be classified into three broad categories: tangible assets, intangible assets, and organizational capabilities (Collis & Montgomery, 2005). Tangible assets include real estate, production, facilities, and raw materials. Intangible assets include company reputations, brand names, cultures, technological knowledge, patents and trademarks, and accumulated learning and experience. Organizational capabilities are not simply the input factors, but the complex combinations of assets, people, and processes transforming inputs to outputs. In comparison with other competitors, organizations will evaluate competitively relevant strengths and weaknesses of resources according to their value, rareness, imitability, and sustainability (Barney, 1991). After evaluating the competitively relevant strength and weakness of resources and their influence on organizations ability, organizations will then formulate strategies to further enhance their relevant resources. Therefore, organizations which possess various resources, such as tangible assets, intangible assets, and organizational capabilities, will further influence their strategic formulation, especially for human resource strategies. Strategic Human Resource Management and Fit In respect of business-level strategies, Miles and Snow (1978) classified adaptive strategies into three types: defender, prospector, and analyzer. Drawing from business strategies, Miles and Snow (1984) proposed three human resources management strategies: building human resources (defender), acquiring human resources (prospector), and allocating human resources (analyzer). In the building human resources strategy, firms emphasize on efficiency and process engineering. Emphasis on effectiveness and product design is the primary focus of the acquiring human resources strategy. The allocating human resources strategy is used to emphasize on process engineering and product or brand management. Miles and Snow linked adaptive strategies and human resources management systems. These human resource strategies are explained by four dimensions of HRM practices: (1) recruitment, selection, and placement, (2) staff planning, training and development, (3) performance appraisal, (4) compensation. There are two fits of strategic human resource management. Vertical or external fit refers to the alignment of HR practices with the specific organizational context and horizontal or internal fit refers to the alignment of HR practices into a coherent system of practices that support one another (Delery, 1998). The major criticisms of strategic human resource management have been its process between human resource architecture and firm performance. Moreover, Becker and Huselid (2006) indicated that more important is the issue of differentiation among firms. The

case study approach could explore the process between HR architecture and firm performance. RESEARCH METHODOLOGY Research Design The purposes of this study are threefold: (1) to describe the human resource practices of a hospital, (2) to clarify the differentiated HR practices among different systems in the same hospital, and (3) to reveal the fit of strategic human resource management in hospitals. How and why questions favor the use of case studies (Yin, 2003).A case study research method is found to be best suited to an in-depth understanding of the interactive relationship between institutions and the response strategies that hospitals adopt. In accordance with the accepted steps of a case study, the theoretical aspects of the relevant research are reviewed firstly and constitute the preliminary research direction. This is followed by case study interviews with the gathering of secondary material for the clarification of the questions probed by this study; and, finally, in accordance with the discoveries of theoretical deduction and the case study interviews. . Case Selection There are several hospitals over 500 beds in Southern Taiwan. Among these hospitals, the I-Hospital was founded in recent years and developed rapidly. Since IHospital was built, it had experienced several human resource practices and developed different fit of strategic human resource management. Therefore, the IHospital can represent the development of Taiwanese hospitals and then the study selected this hospital as our research case. Data Collection This case study collected both primary and secondary data. Primary data used personal interviews with several department leaders in the I-Hospital1. Prior to the interviews, the interviewees were phoned and asked to agree to be interviewed. Secondary data included public reports and the hospitals internal announcements or documents. Through the acquisition of materials from different sources, the impact of the interviewees subjective opinions was reduced and the multi-faceted authenticity of the cases was allowed to emerge. INSTITUTIONAL ENVIRONMENT OF THE HOSPITAL INDUSTRY There are many institutions bringing pressures on hospitals operations (Scott, 2001; Scott, Ruef, Mendel, & Caronna, 2000). These institutional pressures include regulative, normative, and cultural-cognitive institution. Regulative institutions come from Department of Health and Bureau of National Health Insurance. Department of Health designs several laws to control medical staff, clinics, and hospitals. Bureau of
1

Due to the interviewees requirement, this research will not disclose these interviewees job titles and the name of hospital. This research adopts the I-Hospital as the name of research case.

National Health Insurance also controls budget and contracts with hospitals for medical services since the implementation of the Global Budget Payment System in 2002. Normative Institutions come from professional associations and Taiwan Joint Commission on Hospital Accreditation. Professional associations have already established formal criteria to evaluate conformity to their standards. Bureau of National Health Insurance stipulates that hospitals should pass the assessment of Taiwan Joint Commission on Hospital Accreditation (TJCHA). TJCHA also involves the assessment of Teaching Hospitals in organizational level and pushes Taiwanese hospitals to improving their technical and managerial aspects. Finally, there is only one major cultural-cognitive pressure from local large-scale hospitals. To survive and to obtain legitimacy, Taiwanese hospitals tend to imitate the strategies of health care administration of local large-scale hospitals. CASE DESCRIPTION Outline of I-Hospital In Southern Taiwan I-Hospital belongs to a corporate and has launched services and passed the accreditation of Regional Teaching Hospital since 2004. I-Hospital possesses over 1000 beds and over 200 senior attending doctors who are mainly from medical centers. In this hospital, specialties can be divided into three parts: medicine, surgery, and others. It has the professional health-care team and enables patientcentered care to carry out related services. This hospital has purchased many state-ofthe-art equipment devices for diagnosis and treatment of acute and severe illnesses. The Strategic Human Resource Management of I-Hospital Global budget system set up by Bureau of NHI has determined the upper limit of demand for medical care and produce trade-off effect. If some hospitals get more medical fee, the others will get less. As a new comer, I-Hospital must obey the rules formulated by Bureau of NHI. Because its entrance will strongly influence other hospitals, I-Hospital seeks its new position in the health-case market. I-Hospital has promoted its medical technology and trained their medical teams in all specialties to response the change of institutional environment. From the resourcebase view, I-Hospital has many supreme surgical teams that have good reputation. The surgical teams and reputation belongs to intangible resource. So the hospital continues to introduce the medical staff and technology to enhance transplantation surgery and to help the decision making for research and development. It grows mostly through market development and provides stable and changing medical services that emphasizes high volume and low cost. Mostly the hospital seems to be centralized, but decentralized in medical specialties. The hospital also developed new medical technology and could pass the assessment of TJCHA and professional associations. TJCHA also involves the assessment of teaching hospitals in organizational level. From the view of vertical fit, I-Hospital tends to adopt analyzer strategy. In a hospital, medical and administrative systems are two major systems. Medical system includes intern, resident, chief resident, visiting staff etc. Administrative system includes administrative staff and managers. In recruitment, selection, and placement, I-Hospital recruits staff at all level. The Hospital not only depends on

training by itself, but also recruits new medical staff to gain new knowledge and skill. In staff planning, training and development, the hospital has formal and extensive training program. In performance appraisal, the hospital emphasizes individual, group, division performance evaluation simultaneously, not only individual or division evaluation. From local large-scale hospitals, the Hospital adopted flexible compensation for physician fee and its budget was examined and verified by management team in corporate. From the view of horizontal fit, I-Hospital emphasized both make and buy to allocate human resources. According to the documents of various interviews and compared analysis of above case study, this research has found out that I-Hospital developed the analyzer strategy from medical and administrative staff. Overall, the analyzer strategy of the hospital tends to exhibit the combined form of make and buy emphasis. In fact, the formation of analyzer strategy is responsive to the change of institutional environment. FINDINGS In the following, we will deduce the propositions from the findings of this research. Miles and Snow (1984) inspected the relationship between strategy and human resource management system and indicated that human resource department should pursue appropriate strategies to match organizations strategy. Other scholars presented the similar points of view. The organizations pursue appropriate strategies for human resource management is to be considered as the vertical and horizontal fit (Baird & Meshoulam, 1988; Delery, 1998; Wright & Snell, 1998). There are three major finding in this research. First, according to the cases study, we found that I-Hospital had adjusted their strategy when facing the institutional environment such as Bureau of NHI. Second, when the hospital faces institutional pressures, it will consider its own resource and then adopt suitable organizational strategy. Finally, human resource management system and practice will fit in the organizational strategy. As the three adaptive strategies proposed by Miles and Snow (1984), I-Hospital tends to adopt analyzer strategy and to emphasize make and buy to allocate human resource. Summarizing above theories analysis and case study findings, this research suggests that organizational strategies and human resource management will be influenced by institutional environment and organizational resources. When institutional pressures are large and hospitals possess intangible assets, then hospitals will adopt analyzer strategy and related human resource management to pursue vertical fit. When hospitals adopt analyzer strategy, they will adjust their HR practice and system to emphasize make and buy to allocate human resource. To pursue make and buy simultaneously means not just to acquire human resource from outside or to build human resource from inside but to balance the stability and flexible for organizational development. Hospitals will have synergy among HR practices to pursue horizontal fit.

CONCLUSIONS AND IMPLICATIONS As the literature review about hospital strategies, scholars tended to consider either environmental change or organizational resources as affecting factors. This research applied the institutional theory and resource-base view to explain the formation of hospital strategies and two kinds of fit in strategic human resource management. We integrated both institutional environment and organizational resources as the influence factors of hospital strategies selection. This research finds that when institutional pressures are large and hospitals possess intangible assets, then hospitals will adopt analyzer strategy and related human resource management to pursue that vertical fit. When hospitals adopt analyzer strategy, hospitals will tend to allocate human resource to pursue horizontal fit. The findings of this research contribute to the research scopes of hospital strategies. REFERENCES Amit, R., Schoemaker, P. J. H. (1993). Strategic assets and organizational rent. Strategic Management Journal, 14(1), 3346. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99120. Baird, L., & Meshoulam, I. (1988). Managing two fits of strategic human resource management. Academy of Management Review, 13(1), 116128. Collis, D. J., Montgomery, C. A. (2005). Corporate strategy: A resource-based approach (2PndP ed.). NY: McGraw-Hill, 2005. Miles, R. E., & Snow, C. C. (1984). Designing strategic human resources systems. Organizational Dynamics, 3652. Miles, R. E., Snow, C. C., Meyer, A. D., & Coleman, H. J. (1978). Organizational strategy, structure, and process. Academy of Management Review, July, 546 562. Porter, E. E. (1980). Competitive strategy. NY: The Free Press. Scott, W. R. (2001). Institutions and organizations (2nd ed.). Thousand Oaks, CA: Sage Publications. Scott, W. R., Ruef, M., Mendel, P. J., & Caronna, C. A. (2000). Institutional change and healthcare organizations: From professional dominance to managed care. Chicago: The University of Chicago Press. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(1), 5791. Yin, K. R. 2003. Case study research: Design and methods (3rd ed.). Thousand Oaks, CA: Sage Publications.