Hospitals are capital-intensive institutions that invest heavily in the latest technologies. Because it requires the latest technologies such as ultrasound, body scanners, nuclear magnetic imaging devices, blood and cell tissue analyzers, and clean rooms. Nevertheless, hospitals do not cut workforce due to the introduction of the latest technology. Rather, hospitals will be hiring additional professionals with higher labor costs for the introduction and operation of the latest technologies.
So, the more hospitals adopt more of the latest technology and employ more people, the higher the cost of medical care. In other words, the reason for the increase in the medical expenses can be attributed to the fact that the hospital is a highly labor-intensive and capital-intensive organization.
In order to prevent the surge in medical expenses, the productivity of the hospital should be improved significantly. Hospitals are organizations of highly knowledge workers. Organizations made up of highly knowledgeable workers like hospitals need to “work smarter” in order to significantly improve their productivity.
For a manual worker who produces or transports goods, “working wisely” is only one key to improving productivity. But for knowledge workers it is almost the only “key”. And the “working wisely” of a knowledge worker is very different from that of a manual worker.
Taylor thought that the following questions were unnecessary for working wisely. “What should I do?”, “Why do it?”. Instead, the only question he asked was “How should it be done?”
Example of “working wisely” 1
Sears Roebuck is a representative example of “How should it be done?”. Sears Roebuck has been able to increase productivity by a factor of 10 by simplifying the mail order process that was common in 1908. In order to process mail orders at the time, we had to open the order envelope and count the money, which was causing the productivity to deteriorate.
At that time, the bills were not used, only coins were circulating, and Sears Roebuck noted that when weighing the envelope they could know sum of money. In this way, they weighed the order envelope and they have simplified the process to build it. Sears Roebuck has only improved one process, but the productivity of mail order operations has increased tenfold.
Like Sears Roebuck, knowledge work can do much better by analyzing the content of work and eliminating things that are not needed or simplifying the process.
Example of “working wisely” 2
It is acknowledged that the report of a multinational corporation, composed of a team of top talents and carefully and precisely written down to the details of the company’s “strategic scenarios”, is the best report to inspire everyone. However, despite the fact that everyone acknowledged the report, it was very ineffective in operating the company.
After all, the CEO of this multinational corporation asked: “What is the purpose of establishing a strategic plan?”. And I was able to find the answer after a lot of trouble. The answer is, “The purpose of strategic planning is not to predict the future, but to set our business direction and goals and to provide a strategy to achieve that goal”.
In the end, building a strategic plan started from scratch, and at last they was able to create a very effective strategy. The strategy they had made was very simple: the planning team was asking the following three questions for each business unit.
“What percentage of market share should be in order to maintain market leadership?”
“What innovative achievements do you need to achieve the market share you need?”
“What innovative performance do we need to compensate for capital costs?”
These questions were a much simpler and less sophisticated strategy than ever before, but they were strategies that could actually help each business unit and management.
This content is based on Professor Peter Drucker’s book “The Essential Drucker on Individuals”.