Managerial Problems of Sibley Memorial Hospital

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Executive Summary

Sybil hospital is suffering from managerial problems. A lot of problems emanate from the historic management. The management and running of the organization appear to have been left in the hands of two people, leading to difficulties. Some of the problems occurring where lack of proper investment decisions, conflicts touching the creditworthiness of the firm, and the competence of individuals. While it appears that there was interest in the running of the committees (financial and investment), there was difficulty in their operations and they were dominant because the operations were left to two people. Wide consultations and participatory management would have led to making the decisions that were more beneficial. In addition, sourcing for competent individuals would have reduced the chances of mismanagement, self-dealing, and other flaws encountered. The board members appear to have been prominent leaders with experience before but this did not eliminate the chance of making mistakes. The problems of mismanagement were facilitated by the fact that management committees never met, from 1960 when they were created, to 1971. The importance of their operation was necessitated by the fact that a person to make important decisions could lack; that is, after the death of Ernst. Therefore, while many of the staff on the board were competent individuals, problems were arising due to the fact that they could not meet.

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Major Issues in the Case

Sybil Hospital was struggling, according to this case, with the issues of running the institution. Ernst and Orem became to be trusted in making running decisions of the hospital and they grew close to the board of directors. The problem had begun because their decisions came to work against the institution, and led to inactivity of the finance and investment committee. The members became active after the death of the two. Investment decisions were controlled by Ernst, the treasurer, for more than a decade. He shaped his investment policies, only known to a few others. Wrong investment decisions made them fail to invest in U.S. treasuries rather which would have yielded higher interests than maintaining large amounts of their savings in liquid assets and savings and checking accounts. Other problems such as investment in wrong financial institutions where board members served in management or ownership, were made.

Magnitude and Significance of the Problem

It was wrong for the management to have left the running of the organization to only two individuals, whereas a combined effort would have been important. The management as a group would have made more widely consulted decisions about the future as well as discerned the problems related to investments. Accountability was becoming a problem because of their actions.

The problem of investment was a major problem because of the fact that the organization’s finances, which were very important for the running of the organization, were being misused. The idea to leave investments, on one hand, was ill-advised because the management was in a better position to make such decisions on a wide scope.

Average Problems/Issues in Priority Order

The management problem where they left the operation of the institution to only two individuals was ill-advised in the sense that it led to more other problems as can be seen. Leaving financial operations to one individual left the management with only one alternative: that he did what was best for him. The fact that he made such decisions can be explained in the fact that the rest of the team was not committed. The lack of commitment is displayed by the fact that the investment and finance committees were inactive.

The investment decisions were wrongly sought because of the fact that they were not contributing to the financial wellbeing of the institution. They did not result in the financial benefit of the institution, as well as they seem to have not been widely consulted. The weight of this was that the running of the operations became very hard. In fact, Ernst came to view the contribution of the other members as an intrusion into the affairs. It appears as though personal issues influenced decision-making in the case of Ernst and the management of investments. Although the experiences during the depression were an important factor, he resulted in favoring some banks in his investment decisions. These banks were those that were cooperative. The failure of the persons in the directorship can well be explained because they found themselves approving any decisions made by Ernst, and this increased the chance for Ernst to make more influential decisions in the running of the institution. The problems experienced with the comptroller, and the comptroller’s decision to resign, was partly a result of the failure of collaboration with Ernst. The relationship between the comptroller and the treasurer appears to have deteriorated on the grounds of mismanagement or flaws in financial management. Thus, another problem facing the hospital was that of failure of teamwork, and more so poor relationship amongst the working staff. The domination of Ernst as the chairman of the financial committee continued because it was a tradition anyway. Deterioration of relationships with banks and other institutions was also a problem experienced by the hospital. The hospital wanted banks to finance buildings construction and the refusal by banks lend to arrangements plunged the hospital into debts. Poor decision-making continued to haunt the hospital, such as results in a renewal of the loan instead of paying the loan, even when there were sufficient funds to pay. There is evidence that there was a complete dereliction of duties that was ill-advised as well as leading to problems in management. The final punishment was the decision to file a suit against the hospital and the management, which negated anger mixed with embarrassment.

Causal factors and problems and alternatives

Lack of commitment: the board appears to have deteriorated in commitment in the running of the organization to entrust the running to the two people. Of course, this could have been saved, and still can be saved by participatory leadership and teamwork. The alternative course of action would have been to make sure that the committees were active and running in their operations. Of course changes in the bylaws had already created financial and investment committees, but they came to be dormant. The inability of the members of the board and the management to operate is indicated by their lack of cooperation and interlocking responsibilities. There were conflicts of interest among the board members on what should have happened. Conflicts of interest, for example, occurred when the hospital was advised in 1971 about its investment channel. The decision to contract Ferris & Co through an “investment advisory agreement” was an ill-advised decision because the hospital would have benefited more had they invested in certificates of deposit.

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Another big problem, in this case, appears to be that of accountability. While it was important to have the organization run properly, board members were not willing to be responsible or accountable for the decisions of running the institution. While management was a problem, they appear to have delegated much trust to one person or two, without being careful that the two would make decisions that would affect them and the organization in general. The decisions by the two may not have necessarily been intentional, but to the best of their knowledge in running the organization, and therefore blame on them must be limited. The fact that there was a need for monitoring of the situation about how the organization was being run, including tracking the financial performance, appears to have been neglected. Performance tracking was not given priority and the organization became prone to more problems. Accountability of officials like Ernst and Orem also was an issue yet to be dealt with (Kurt, n.d.). If these officials acted as top officials, then their actions relating to mismanagement and misinformed decisions that they made, can well be understood from that perspective.

The financial mismanagement and investment could have been caused by more than one factor. First, it would have been possible that the lack of consultations amongst the board caused this problem. In this case, the situation can be saved by having wide consultations on financial decisions. Furthermore, the many considerations would have helped the institution manage finances. In addition, it would have been possible that there was a lack of competence in investment by the treasurer, which lead to making wrong investment decisions. The alternative would have been to have a competent person running financial issues and investments.

Alternatives and Consequences

Organizational structure influences communication (Mehralizadeh, Shahi, & Sharify, 2008), which appears to have been a problem within Sibley. Unfortunately, the management is indicative of roles that were conflicting and mixed up. Reorganization therefore would have been important. The alternatives would have a variety of problems as well as advantages. Having many people participating in management would, for example, prolong the decision-making process. In addition, it was possible for many flaws as many people are involved. However, participatory leadership and management would result in wide consultations that would make them see problems as they were, and in a large dimension than before. The people would be more accountable for the decisions they make and their results, rather than blaming it on one person-the treasurer. Several problems within the management would have been saved by negotiations as well as collaboration within the management and board members. Instead, it appears that people quit when things were not in order. The problem could also have been a result of top management failing to organize the hospital well. There appears to have been a struggle of power between the top management or the people who were there originally when the hospital was being established.

The alternative to seeking a person who was financially competent had the possibility of making the organization invest in viable areas which would result in more benefits, but might have cost the organization trust and money for paying the competent person. In addition, even this person would have been prone to making errors and miscalculations in decision-making. The fact that the managerial structures encouraged decision-making by one individual means that the meetings that would have removed the differences as well as outlining the courses on investment, was also to blame.

Recommendations

The solution to solving the problem of financial mismanagement and wrongly advised investment decisions was to better be solved by wide consultations and participatory leadership. This would allow all members of the board to feel responsible for whatever results, and to be involved in decision making, which increases the chances for better management of finances. The other main option would have been to seek a competent person, as has been discussed earlier on. Health and effective communication within all levels of management needed to be given priority in the organization (Adubato, n.d.).

Major difficulties

Some of the major difficulties that would have been encountered include taking time for decisions to be made as several people are involved in the management and the making of decisions. The fact that decisions being made by many people were liable for encountering errors, was also possible. Seeking a professionally competent person in financial management would have resulted in possible errors also as the individual would have to gain experience and take time to learn the organization. In addition, the person would also likely make errors.

Testing working of recommendations

The possibility of working on recommendations can be tested by mostly noting and monitoring the outputs of the involved factors being discussed. For instance, the idea of the management being participatory can result in improvement in the running of the organization. How well the organization is doing can be monitored by the impact of the decisions made by participatory leadership on key areas such as finances and investment, among others. The decision to have competent staff in financial management may be valued by continuous improvement in profit of the organization among other things. His or her competence can only be gauged by improvement in investment and the benefits thereof.

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Questions

  • How can conflicts of interest be avoided in the management so as to align the operations of the organization, and improve in the decision?
  • Is it possible for the organization to improve on investment decisions by consulting professionals on the same? How can the organization solicit information from various sources to determine the best investment decision?
  • Can teamwork help in improving to reduce conflicts relating to investment decisions as well as management? How can the organizational structure of an organization be used to improve managerial decision-making and the hierarchy of making decisions?

References

Adubato, S. (n.d.). Organizational structure impacts communication style. Caucus. 2010. Web.

Kurt, D. Sibley Memorial Hospital. Washington: The George Washington University D.C

Mehralizadeh, Y., Sakineh, S., & Ali, S. (2008). Effectiveness of organizational communication (organizational structure and technology). Social Science Electronic Publishing Inc. Web.

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