An examination of the effect of strategic management on performance in selected Virginia not-for-profit hospitals

Strategic management has been shown as improving organizational performance. However, no empirical research has assessed the impact of strategic management on the performance of nongovernment, not-for-profit community hospitals, a category with more than 3,000 institutions.

Using a sample of 34 Virginia, not-for-profit hospitals, the intensity of the components of strategic management (strategic planning and strategic implementation) was determined for each hospital. Mail questionnaire data in 1979 and 1983 was used to develop a longitudinal strategic planning score for 22 hospitals. A contemporaneous strategic implementation score was derived from interviews held at all 34 hospitals in late 1983 and early 1984.

Three theoretical and 15 operational hypotheses on the relationship between the strategic management components and the percentage change in five performance measures were tested through the usage of multivariate analysis of variance and cross-lagged correlation techniques.

Descriptive data identified few intensive strategic planners or strategic implementers. Statistical tests revealed that the hypothesized relationships were supported only for intensive strategic planning and its impact on longitudinal changes in performance for the dependent variables of personnel per occupied bed, total expenses per occupied bed, personnel expenses per occupied bed, and relative market share. Hospital location (urban versus rural) was shown to have acted as a moderating variable. For three of the dependent variables, cross-lagged correlation analysis exhibited reverse causality in that performance changes were antecedent to changes in strategic planning intensity.

It was concluded for the majority of hospitals that form, not substance, was the nature of increased strategic planning. Strategic implementation was found to have received less emphasis than strategic planning. From these findings a prescriptive model was built for practitioners in order to improve the quality of their strategic management process.