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operationalizing the value-rational organizationAL FORM to synthesize the paradoxes of ambidexterity and enable DA

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operationalizing the value-rational organizationAL FORM to synthesize the paradoxes of ambidexterity and enable DA

Our theoretical model is one in which each of the four features of the value-rational organizational form moderates—and more specifically, helps to resolve via synthesis—one of the key organizational paradoxes of ambidexterity and thereby fosters DA. Figure 1 displays the argument in diagram form, showing for each of the four functions both the general principle and their operationalizations. The paragraphs below explicate in turn each of the moderating paths. As with other ideal-type formulations (Doty & Glick, 1994), our working assumption is that any given organization will embody a mix of forms, of which the value-rational might be absent, dominant, or present but overshadowed by other forms.

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In order to illustrate our argument, we will refer to some of the case studies in the ambidexterity literature and also to a case study we have conducted on one healthcare organization that has achieved a notable level of DA—Kaiser Permanente. By way of introduction, we offer some background on this case. (Our account is based on Eaton, Konitsney, Litwin, and Vanderhorst (2011); Kochan (2013); Kochan, Eaton, McKersie, and Adler (2009); Litwin (2010); Schilling et al. (2010a); Schilling et al. (2011); Schilling et al. (2010b); Whippy et al. (2011) and the first author’s field research since 2004.)

Kaiser Permanente as a case of DA

In the US healthcare industry, ambidexterity in general and DA in particular have become a pressing priority (Bodwell, 2011). Healthcare delivery organizations—indeed, each of the units and all the people working in them—are under increasing pressure to be more aggressive in exploiting evidence-based practices that will drive improvement in cost and safety and in assuring patients faster access and shorter hospital stays. Simultaneously, these organizations and their staffs are also under pressure to adopt more rapidly radical innovations in their infrastructure (for example, with electronic health records), to stay abreast of rapid and radical innovation in diagnostic and treatment technologies, and to be flexibly responsive to the great variety of patient needs as well as to the urgency of many of these needs.

One asset that the healthcare industry might leverage in attempting to meet these DA demands is the widespread commitment to the ultimate value of assuring the patient’s health: this creates a foundation of shared purpose that is characteristic of the value-rational model. However, as it has been understood traditionally, this value orients medical personnel away from any concern for economic efficiency—to the point where any consideration of cost has been considered unethical (Angell, 1993): commitment to such a value undermines DA efforts. As a result, the healthcare field is pressed to rethink medical values to make room for preventive care, for population health outcomes, and for the responsible use of society’s limited economic resources (Adler, Heckscher, McCarthy, & Rubinstein, 2015).

Moreover, the practice of medicine in the US has often diluted its dedication to the patient’s health with strong elements of the guild-like traditionalism, as well as with self-interested income-maximization (Adler et al., 2008). The guild-like elements have long been visible in the professional loyalty that binds doctors together in defense of peers against criticism or interference by outsiders and in the debilitating effects of status tensions in many interactions among physicians and between physicians and nurses. The self-interest elements encourage doctors to multiply tests and procedures to maximize their own income, even referring patients to imaging and surgery centers in which they have an ownership stake (Lungren et al., 2013). Increasingly, external stakeholders are using financial incentives to “drive” changes in behavior among healthcare delivery organizations and professionals; in the process, however, these efforts often reinforce self-interest orientations and yield little of the needed ambidexterity (Cromwell, Trisolini, Pope, Mitchell, & Greenwald, 2011; Jha, Joynt, Orav, & Epstein, 2012).

Kaiser Permanente (“Kaiser” for short) is one healthcare organization in the US that has long sought to encourage doctors to practice medicine in a more value-rational, collaborative, and ambidextrous way (McCarthy, Mueller, Wrenn, & Fund, 2009). Kaiser is the largest healthcare provider and one of the largest healthcare insurance companies in the country: as of 2013, it had nearly 9 million health plan members, 167,300 employees, 14,600 physicians, 35 medical centers, and 431 medical offices. It is organized as a consortium of the (not-for-profit) Kaiser Foundation Health Plan (insurance), the (not-for-profit) Kaiser Foundation Hospitals, and a set of affiliated regional Permanente Medical Groups (which are for-profit physician partnerships or professional corporations that do business almost exclusively with Kaiser).

The challenge of DA in the healthcare industry has also shaped the experience of non-physician personnel at Kaiser and the unions that represent most of them. Unions are an essential part of Kaiser’s business, going back to its earliest years, and Kaiser has developed a labor/management partnership that is unique in its scale and ambition (Kochan et al., 2008; Kochan, Eaton, McKersie, & Adler, 2009). Most of Kaiser’s non-physician, non-managerial employees are unionized, and many of Kaiser’s “members”—the patients covered by Kaiser’s insurance plan and treated by Kaiser staff—are also unionized. As a result, and unlike many other employers in the US, it is difficult for Kaiser to ignore or attack unions without risking both internal organizational turmoil and damage to their reputation in the target market. Conversely, however, the unions see that using their power in confrontational ways risks destroying Kaiser, and that, compared to other employers, Kaiser pays and treats its workers relative well. The parties recognized this interdependence in a landmark partnership agreement that was included in the collective bargaining contract in 1997. The collaboration enabled by this partnership has become central to Kaiser’s efforts to meet its ever-intensifying DA challenges, providing a foundation for combining top-down initiatives by specialized technical staff (e.g. for new computerized medical records) with “bottom-up” input and involvement by a broad range of personnel (for local improvement projects), as well as with extensive lateral learning (so that similar locations can share lessons learned). (For more critical views of the partnership as class capitulation, see Borsos (2013) and Early (2011).)

The following paragraphs show how the value-rational organizational form affords a synthesis resolution of the organizational paradoxes of DA, and we use the Kaiser case to illustrate the corresponding management techniques. Deploying these various managerial techniques, Kaiser has indeed seen dramatic improvements in both exploration and exploitation dimensions. Kaiser performs near the top of the rankings of healthcare delivery organizations in many of the key operational metrics (Schilling et al., 2010a; Whippy et al., 2011), and has developed an impressive capacity for radical innovation (Nelson, 2010). Surveys of worker attitudes conducted jointly by union and management show improved worker morale, too, with widespread support for the partnership process and its outcomes (which have, in recent years, included wage and benefit gains as well as growth in union membership) (Kochan, 2013).

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