Control systems in non-profit sevice organizations; the case of the state-owned hospital

Abstract

Complexity of organizations from the point of view of designing control systems, increased as we move from manufacturing to service organizations, and from for-profit to nonprofit organizations. The nonprofit organizations which are also professional organizations would rank as the most complex organizations. Study of literature and cases on nonprofit professional organizations showed that there is need for a critical look at the applicability of the existing framework of management control systems to these organizations. This called for an in-depth study of control systems of such organizations. Public hospitals are excellent example of such organizations. Hospitals are complex organizations, more so if they are state-owned and run on nonprofit lines. Public hospitals in recent times have drawn flak from several quarters for their poor performance. Studies on these hospitals are few and fragmented in nature. There is, therefore, need for an in-depth study of the control system of hospitals from practical side as well. The issues taken up for study in this dissertation are: 1. Identification of the goals of the hospital chosen: and, on the basis of this, identification of the generalized set of goals for hospitals. 2. Manifestation of control system of this hospital, and its congruence with the goals of the hospital. 3. Scope for enhancing the existing framework of control systems for hospitals as representative of professional service organizations. 4. Adaptability of control systems practiced in for profit hospitals for nonprofit hospitals. An exploratory study of this nature would be best served by a comprehensive and indepth study of a public hospital. Three hospitals in Delhi, run by the Central Government, were initially chosen to understand the issues involved in hospital management. After one round of data collection it was decided to concentrate on the All India Institute of Medical Sciences (AIIMS), as it is considered to be premier among the public hospitals. A premier hospital was chosen so that useful inferences can be drawn from it for other hospitals. The goals of the hospital were first identified. They are quality, beach, and resource endowment. Quality can be called the stated goal of AIIMS, and reach the emergent goal. Resource endowment is instrumental to achieving the other goals. Quality and Reach seem to conflict. However, consensus seems to exist among the stakeholders about eh primacy of the goal quality. Later, based on this study a generalized set of goals and their dimensions for hospitals in general has been proposed. The control system, as it operates, is categorized under two processes: ‘Professional control processes and ‘budgetary control system. Professional control is found to be effective in achieving quality but is at dissonance when it comes to achieving reach. The process mechanisms are discussed in terms of goal reiteration, legitimation, selection, and enculturation. At the outset, it seems that outpatient services are maintained to satisfy reach, and the inpatient services for quality. The budgetary control system is found wanting in several respects. The objective of the system seems to be inadequately defined as expenditure control, rather than efficient utilization of resources. The rationale for the system is furnished in terms of the contexts in which the system operates. Considering the peculiarities of the functioning of professional service organizations, which the existing categories of responsibility centre fail to capture, a new concept of Mission Centre has been introduced and its characteristics are outlined. The mission centres are managed by professionals, and they are governed by their values and beliefs, and norms. The values and beliefs are inculcated through the process of enculturation. Norms are derived from professional and organizational considerations. Some propositions have been offered in the light of the discussion on these concepts. In the context of the budgetary control system differences between the ‘DSS Approach’ as prescribed in the literature and perhaps practiced by for- profit organizations and the ‘Vigilance Approach’ as practiced in state-owned nonprofit organizations have been discussed.