Stakeholders and Performance Management Systems of Small and Medium-Sized Outpatient Clinics

The concept of stakeholders was initially raised and next developed by Emshoff and Freeman (1978). They defined stakeholders as any individual or a group of individuals who can affect or are affected by the company. Freeman (1984) claimed that any organization should: possess a stakeholder management capability and be capable of integrating the interests of stakeholders and stockholders. Currently, the term stakeholder is understood as anyone with a legitimate interest in the company (Cragg and Greenbaum, 2002), while the stakeholders approach has been widely acknowledged.

The three most important attributes of stakeholders that determine their salience to managers are: power, legitimacy, and urgency. The relative importance of these three attributes determines the priority managers give to complete stakeholder claims (Loi, 2016).

The stakeholder groups consider target organizations are responsive to their needs. They can: mobilize if they desire to protect their interests, form coalitions and influence on strategy or activities of the organizations, and configure relationship structures (Friedman and Miles, 2002; Neville and Menguc, 2006). The stakeholders can also support organizations, provided they: have treated them fairly, are reliable, accountable and legitimate, and do not have a negative environmental impact (Choi and Shepard, 2005).

In order to balance the needs and contribution of various stakeholders, organizations should: take into consideration multiple perspectives, gain their trust, accept their representation on the company boards, use mediation, manage organizational identity and reputation, or make charitable contributions (Carter, 2006; Schwarzkopf, 2006).

The popularity of PMS stems from the fact that any organization requires its operations to be efficient and its goals to be met, in order to be successful and sustainable. That underlying need of any organization to manage the performance of its employees and processes to ensure the goals are met in an efficient and effective manner provided a fertile ground for performance management theory development.

PMS proved to be very often successful, providing many advantages to the organizations, among which are: the growth of sales, improved quality, increased profits, improved strategic planning, better communication, improved relationships with clients, higher employee satisfaction, improved goal achievement, and improved efficiency (Sim and Koh, 2001; Franco-Santos, et al., 2012; Jazayeri and Scapens, 2008).

PMS is defined, in this study, as dynamic and balanced systems that support decision-making processes by gathering and evaluating relevant information (Korneta, 2018). It is widely acknowledged in the literature that modern a PMS should be: (1) balanced, that is, comprise various groups of different measures, which give collectively a holistic view of the organization; (2) dynamic, that is, continuously adjust to the changes in the internal and external factors surrounding the organization; and overall (3) support strategy of organizations (Korneta, 2018; Waal, 2007).

PMS should not be considered only in the light of benefits. Recently, a new trend of scholars emerged in the literature, claiming many problems appear while PMS is being applied, with significant portion of them being related to stakeholders (Waal, 2007, Pulakos and O’Leary, 2011; Korneta, 2019). Due to that, increasingly more researchers claim PMS should take into consideration the human factor and to involve stakeholders in the performance measurement process (Chenhall and Langfield-Smith, 2007; Chenhall, et al., 2009).

The literature presents a considerable number of PMS. For the purposes of this study, PMS has been divided into two groups. The first one comprises PMS that ignores or pays very little attention to the concept of stakeholders. The second one comprises PMS that are highly reliant on stakeholders. Among the well-recognized representatives of the first group of PMS are, inter alia: the performance measurement questionnaire, performance pyramid system, results and determinants framework, balanced scorecard, return on quality approach, manufacturing system design decomposition, effective performance measurement in SMEs, unused capacity decomposition framework, performance measurement system for health-care processes (Heinicke, 2018; Purbey, et al., 2006). These PMS are primarily focused on two major groups of stakeholders, namely stockholders and clients, while paying nearly no attention to the others. These systems have been used by many organizations and proved to be successful in improvement of their operations.

The most well-recognized representative of this group is balanced scorecard, which focuses the attention of the organization on four critical perspectives, namely: (1) financial, (2) clients, (3) operations and (4) learning and development. The value of a balanced scorecard was well acknowledged by Harvard Business Review, which described it as one of the most important management tools of the past 75 years (Bourne, et al., 2005).

The second group comprises PMS highly reliant on various groups of stakeholders and comprises, among others: the comparative business scorecard, performance prism, integrated holistic performance management framework, flexible strategy game card, strategy aligned integrated linked scoring system, GRASP performance management model, total performance scorecard, performance measurement and management system for small and medium-sized Polish health-care services providers (Neely, et al., 2001, Korneta 2018; Heinicke, 2018; Sushil, 2010).

These PMS emerged later than the first group, widely acknowledging various groups of stakeholders, around whom, these systems have been designed. The most well-recognized system within this group is undoubtedly the performance prism, whose foundations are well rooted with various significant stakeholders. The organizations willing to introduce performance prism should first identify all significant stakeholding groups, together with their contribution to the organization and their satisfaction. Next, the organization should develop various processes, capabilities, and strategies, which rely on the contribution of the stakeholders and which should finally provide satisfaction to them (Neely, et al., 2001).

Although highly reliant on stakeholders, PMS emerged as a response to criticism of the first group of systems, yet many organizations use and scholars still propose for some organization PMS focused primarily on stockholders and clients, paying very limited attention to other significant stakeholders (Nieplowicz, 2019). As a result, the study assessing if PMS ignoring stakeholders can be efficient and effective for certain industries, including the health care one, appears to be justified.

It is difficult to separate the management function from the stockholding one. Eight out of 10 interviewees were both the owners and managers. Furthermore, the owner was frequently a key medical doctor providing significant health-care services. According to the interviewees, the owner, managing the company, is literally responsible for everything, beginning with provision of funds for the entity, through managing the company (hiring staff, procurement, financial liquidity management, administration, legal issues and compliance, strategy and development of companies) and ending with administration works like buying medical materials, doing minor repairs of medical devices, substitution of absent employees. Two of the interviewees confessed to cleaning the premises occasionally. Only two out of 10 studied companies had ownership completely separated from management and provision of medical services within the company. In these two cases, the managers were fully responsible for the company and had a final say, while the stockholders were not interested in the day-to-day operations of the companies.

There is a consensus among interviewees about medical doctors who consider them as critical stakeholders. The key cause behind that is a shortage of medical doctors in the Polish market. All 10 interviewees experienced in their career loses of medical doctors who left either to competitors or set up their own businesses. As a result, outpatient clinics are increasingly more focused on medical doctors’ satisfaction. The first of satisfaction measures of medical doctors is their salary. In the studied companies, medical doctors, excluding primary health care, earned around 50% of provided by them health-care services. The lowest percentage of revenue was 35% and related to general dentistry. The highest percentage of revenue paid to doctor was 85% (head of hospital cardiology ward); such number was reported only by one interviewee.

The interviewees stated that, despite being hard to make any profit with medical doctors employed for more than 65%, some outpatient clinics tend to do so because they believe employment of top-class specialists will make the clinic premium in the eyes of the patients and allow to sale other services to these patients. The shortage of medical doctors puts a considerable pressure on price of health-care services purchased by outpatient clinics.

One of the interviewees stated that, recently, he had to increase the salary of one orthodontist (considering leaving his company) up to 65% from 45%; otherwise, he would lose the contract with Narodowy Fundusz Zdrowia (NFZ; National Health Fund). Salaries are not the only satisfaction factor of medical doctors. The interviewees mentioned medical doctors are also interested in: user-friendly software, location of clinics close to their households, suitable working hours, and overall good work atmosphere. Two interviewees stated the medical doctors paid close to the market average are unlikely to leave the company for the competitor even for higher salary if good relationships are maintained. They defined good relationship by dialogue, that is, if the doctor has nice and regular conversations with clinic representatives (manager, reception, nurses), one should not leave the company.

On the contrary, reduction of dialogue with medical doctors to only saying “good morning” when a doctors comes to the clinic and “good bye” when one leaves is a risky practice, as the doctor stays vulnerable for any action of the competitors. The importance of medical doctors for outpatient clinics was best described by one of the interweaves, who stated: “if only I could hire more medical doctors, my business would double.”

All of the interviewees recon patients as critical to outpatient clinics. One of the interviewees stated “Our philosophy is we treat the patients. Every employee must understand it. Once it is being acknowledged, by each employee of the clinic, the company growths, the atmosphere is good, doctors find their job important, while the patients feel they are in a very deep heart of the company, so they stay loyal and recommend us to their relatives. This is a key of our success.”

Further, it has been noticed that a patient's needs, satisfaction, and contribution to the clinic were different in various business areas; hence, the results of interviews for the identified three business areas, namely: primary healthcare, dentistry, and medical specialties, are presented separately. In primary health care, NFZ pays around 30 PLN per month per patient. This fee is slightly higher for children and older people. The remuneration of general practitioners is within 80–120 PLN per hour, with lower fees for graduates of medicine, yet without specialties and doctors who are retired. The job of an outpatient clinic is to obtain as much patients as possible, for whom NFZ pays monthly and to organize general practitioners.

Three out of four interviewees stated that waiting time is critical for patients who expect to receive the services the same day they contact the clinic, whereas the patient accepts lower quality perceived from a medical perspective. These three interviewees stated that if their clinic is not able to provide services within 24 or 48 hours, no matter how good their doctors are and no matter to other conditions, they will lose the patients quickly to competitors. Only one interviewee said the quality of medical services is as much important as waiting time, especially for children services. As for medical specialty services, waiting time is of secondary importance.

Cooperation with medical doctors who are top stars in their specialties or are head of hospital departments make patients accept longer waiting times, no matter that the services are not free of charge. Furthermore, three interviewees stated that, in general, patients are not loyal to clinics, but to such specialists. In case the specialist leaves the company, the patients go with him/her, rather than stay with the clinic. In dentistry, the waiting time is not on the first place of patients’ expectations who expect high quality from medical perspective and fair price. The clinics expect from patients to stay loyal, purchase other services, recommend a clinic to their friends, and accept delays of services.

NFZ is considered as a critical stakeholder by seven interviewees because of several aspects. Firstly, NFZ has the right to increase prices (once per several months) for primary health-care services (paid per month per person), conclude contracts for medical specialties with the clinic or terminate them. In general, it is difficult to obtain a new contract for any other specialty than primary health care and relatively easy to renew a contract that expires usually after a five-year period. Secondly, NFZ monitors execution of concluded contracts.

These contracts are very detailed, and small outpatient clinics sometimes have problems with fulfillment of all obligations arising from them. Although NFZ has the right to accept violation of some agreed obligations, outpatient clinics must monitor compliance of their activities according to the contract and try to fulfill the contract as much as possible. Thirdly, occasionally, NFZ asks outpatient clinics for help with provision of certain services. For example, to provide more dentistry services to children, which is considerably less profitable than dentistry for adults; to provide dentistry under anesthesia while there is a shortage of anesthesiologists; or to open a new primary health-care clinic in the district that has already been built, or yet there is no clinic in such location.

Keeping good relation with this stakeholder is, according to majority of interviewees, very important. Not all interviewees consider NFZ critical to their clinics. Two out of 10 interviewees stated their clinics have no contracts with NFZ and are not interested in them. They ranked NFZ as not significant. They also said that patients pay more for the service than NFZ, and given a shortage of medical doctors in the market, it is more efficient from the sales margin perspective to work only in the private sector, ignoring the public one (NFZ).

The group of medical assistants comprises nurses, dental hygienists, and physiotherapists. The importance of this group stems from the fact that these stakeholders are in close contact with other critical stakeholders: medical doctors and patients.

Because of the high amount of time spent with patients, they can recommend to them new services, discuss the needs of patients and so act as marketing researchers, calm the patients down if they are not satisfied with the clinic, and so on. Given many nurses, dental hygienists, and physiotherapists have more than one job, in case of medical doctors’ shortage, they can ask the doctors at other clinics, with whom they cooperate at a daily basis, to come to work for another clinic.

The results of conducted interviewees regarding frontline employees were not consistent, with four considering them as very significant. These four interviewees, compared them to sales representatives who are in constant contact with patients, either in person or by phone, and so they have plenty of opportunities to recommend new services, fit the patients properly in medical doctors’ timetables and others. One of these interviewees described how following the training of frontline employees (reception) on types of orthodontics braces increased the sales levels of high-margin braces.

If the company is able to answer basic questions of a patient at the reception level, show him/her several photos, provide initially more details on different products, and recommend further discussion with a dentist, such clinic makes a very professional impression on a patient, who is very likely to stay with the company. The other interviewees stated that this group of employees is not loyal to the clinic, and that the rotation at these position is huge. Two interviewees stated that their clinics standardize these jobs and expect only basic activities for low salary from these stakeholders, while looking for value among other stakeholders.

Industry-specific suppliers comprise suppliers of medical and dentistry materials and medical devices. Industry-specific suppliers operate through sales representatives who contact medical doctors recommending their products and with owners or managers of clinics, depending on who is finally responsible for the purchasing process. One of the interviewees provided an example of the clinic, in which the sales representative from a medical devices company contacted asking to start cooperation. The sales representative recommended two eye surgeons who were in dispute with the owner of another clinic and who together with their patients and medical devices joined the clinic.

Another interviewee provided an example in which the supplier supported him with implantology development. Without support of the sales representative, the clinic would not have started this new high-profit activity. Now, the clinic stays loyal and purchases the implants only from him. The interviewees stated that industry-related suppliers are also significant because: (1) they can inform the company on market trends, (2) grant longer payment terms for their products, (3) recommend the clinic to medical doctors, or (4) patients, (5) provide quick support in case of difficulties regarding their products. Not all interviewees consider industry-related supplier significant, mainly because of high competition among them.

Two interviewees indicated financial institution as a significant stakeholder, stating the growth of their clinics would not be possible without bank loans, which were not easily obtained. They also stated that financing is one of the key barriers they face in current development. The majority of the interviewees indicated, however, that they can easily obtain bank loans from any bank for current business, assigning no special value to these stakeholders.

While all of the interviewees acknowledged continuously increasing importance of information technology (IT) services for health care, only one of the interviews considered IT suppliers as significant for his business. The rest of interviewees, due to sever competition among IT suppliers, assigned either moderate or low significance level to that group of stakeholders. The latter group of interviewees underlined that their opinion and low significance assigned to them is for the date of today, and it may soon change.

Despite, all interviewees acknowledge and state competitors cannot be ignored, they were not assigned high significance. Three interviewees gave examples from their own experience of two outpatient clinics located in the same building, which, despite their proximity, are still profitable. The experts stated that the studied companies compete more for medical doctors than for patients, and because of that, the salaries of medical doctors rise. The other two interviewees stated that competition is mixed greatly with cooperation, as many of medical doctors parallel to provision of their services for the outpatient clinic, run their own practices. Given a shortage of medical doctors, the clinics cannot afford to cease cooperation with them. Instead, outpatient clinics must ensure no unfair actions, for instance, regarding stealing of the patients, take place.

Business-to-business clients include primarily insurance companies (Allianz, Compensa, PZU) or large competitors like LuxMed or Medicover, which for monthly fees, received from their clients, provide medical services to their clients. Business-to-business stakeholders offer to SMEs outpatient clinics contracts with lower fees per service, but with a promise of larger volumes. Two out of 10 interviewees confessed to have these contracts signed; they indicated, however, the volume of the cooperation is considerably lower than expected, and as a result, the value of the whole cooperation is not significant.

None of interviewees considered back-office employees as critical to their business. Government, despite being a powerful stakeholder, is remote and does not interact directly with outpatient clinics.