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Customer retention and leadership in the nonprofit healthcare organization

Dissertation
Author: Annette Margaret O'Connell
Abstract:
This quantitative study examined which leadership style correlates more strongly or more positively with customer retention in a healthcare setting. The independent variables were Bass transformational and transactional leadership culture styles. The dependent variables were job satisfaction, long-term commitment, trust, and loyalty intentions. Three surveys were used in this research study. Bass (1992) Organizational Description Questionnaire tested employee opinions about the characteristics of the leadership culture. A developed employee opinion survey tested the dependent variables and a demographic survey was used to classify the sample. One of the eight null hypotheses was rejected because the data distribution was nonnormal. Violation of the normalcy assumption can quash hypothesis testing and lead to an inadequate evaluation of the study. The results pointed out the organization had a coasting culture that was unstructured and employees did not trust the leadership. The strongest correlation to transformational leadership was job satisfaction. [PUBLICATION ABSTRACT]

vi TABLE OF CONTENTS LIST OF TABLES..............................................................................................xii LIST OF FIGURES............................................................................................xv CHAPTER 1: INTRODUCTION.........................................................................1 Background of the Problem..................................................................................5 The United States Healthcare System............................................................8 Employer-Sponsored Health Plans................................................................9 Employees as Customers.............................................................................10 United States versus Foreign Healthcare system.........................................12 Nonprofit versus For-profit..........................................................................12 HealthCare Status of Detroit, Michigan......................................................14 Statement of the Problem....................................................................................15 Purpose of the Study...........................................................................................17 Significance of the Problem................................................................................19 Significance of the Study to Leadership.............................................................21 Nature of the Study.............................................................................................23 Quantitative Method....................................................................................23 Research Design..........................................................................................24 Quantitative versus Qualitative Methods to Collect Data...........................25 Research Questions.............................................................................................26 Hypotheses..........................................................................................................27 Theoretical Framework.......................................................................................29 Transformational Leadership Theory..........................................................30

vii Transactional Leadership Theory................................................................30 Servant Leadership Theory..........................................................................31 Organizational Culture.................................................................................33 Definition of Terms.............................................................................................35 Assumptions........................................................................................................37 Limitations..........................................................................................................38 Delimitations.......................................................................................................39 Summary.............................................................................................................40 CHAPTER 2: REVIEW OF THE LITERATURE.............................................42 Documentation....................................................................................................42 Literature Review................................................................................................45 The Health Service Perspective...................................................................45 Relationship Marketing Perspective............................................................47 Leadership Perspective................................................................................49 Independent Variables........................................................................................50 Transformational Leadership.......................................................................51 Transactional Leadership.............................................................................53 Leadership and Cultural Differences...........................................................54 Ethical Leadership and Values Theories.....................................................55 Servant Leadership vs. Traditional Leadership...........................................56 Leading Strategic and Active Customers....................................................60 Organizational Culture.................................................................................61 Transformational Leadership Culture..........................................................62

viii Transactional Leadership Culture................................................................62 Bass Leadership Culture Topology.............................................................63 Financial Consequences of Retention..........................................................65 Dependent Variables....................................................................................66 Job Satisfaction............................................................................................67 Job Satisfaction Affect on Customer Satisfaction.......................................68 Long-term Commitment..............................................................................68 Trust.............................................................................................................70 Loyalty Intentions........................................................................................71 Summary.............................................................................................................72 Conclusion..........................................................................................................73 CHAPTER 3: METHOD....................................................................................76 Research Design..................................................................................................77 Appropriateness of Design..................................................................................79 Research Questions.............................................................................................81 Hypotheses..........................................................................................................81 Population...........................................................................................................84 Informed Consent................................................................................................86 Handling Data Confidentiality.....................................................................87 Sampling Frame..................................................................................................88 Confidentiality....................................................................................................89 Geographic Location...........................................................................................90 Instrumentation...................................................................................................91

ix Data Collection...................................................................................................94 Data Analysis......................................................................................................95 Internal and External Validity.............................................................................96 Internal Validity...........................................................................................96 External Validity..........................................................................................97 Summary.............................................................................................................97 CHAPTER 4: RESULTS....................................................................................99 Respondents and Sample Selection..................................................................100 Survey and Design Tool....................................................................................101 Data Collection Process....................................................................................102 Pilot Study.........................................................................................................103 Reliability and Validity.....................................................................................104 Data Analysis....................................................................................................104 Results...............................................................................................................105 Summary...........................................................................................................125 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS....................128 Discussion.........................................................................................................128 Job Satisfaction and Leadership................................................................127 Long-term Commitment and Leadership...................................................131 Trust and Leadership.................................................................................132 Loyalty Intentions and Leadership............................................................134 Customer Retention and Leadership..........................................................136

x

Conclusion........................................................................................................137 Implications.......................................................................................................138 Study Limitations..............................................................................................141 Recommendations.............................................................................................141 Summary...........................................................................................................144 REFERENCES.................................................................................................146 APPENDIX A: UNIVERSITY OF PHOENIX LETTER OF COLLABORATION AMONG INSTITUTIONS............................................176 APPENDIX B: UNIVERSITY OF PHOENIX INFORMED CONSENT PERMISSION TO USE PREMISES, NAME OR SUBJECT..........................177 APPENDIX C: PERMISSION TO USE ODQ EXISTING SURVEY............178 APPENDIX D: COPY OF SURVEY INSTRUMENT ORGANIZATIONAL DESCRIPTION QUESTIONNAIRE (ODQ)...................................................179 APPENDIX E: INFORMED CONSENT PARTICIPANTS 18 YEARS OF AGE AND OLDER....................................................................................................180 APPENDIX F: DEMOGRAPHIC QUESTIONNAIRE...................................182 APPENDIX G: PERMISSION TO USE RETENTION MODEL...................184 APPENDIX H: EMPLOYEE OPINION SURVEY.........................................185 APPENDIX I: RESEARCH QUESTIONS, HYPOTHESES, ITEMS ON SURVEY AND STATISTIC CHOICE............................................................188 APPENDIX J: FREQUENCY AND PERCENT ON RESPONSES TO ODQ 191

xi APPENDIX K: FREQUENCY AND PERCENT ON RESPONSES TO EMPLOYEE OPINION SURVEY...................................................................192 APPENDIX L: TRANSFORMATIONAL AND TRANSACTIONAL SCORES BY PARTICIPANTS........................................................................................193

xii LIST OF TABLES Table 1 Analysis of One Commercial Plan...........................................................7 Table 2 County Population Trends.....................................................................14 Table 3 University of Phoenix (UOP) Key Word Search...................................43 Table 4 Worldwide Web Keyword Search..........................................................44 Table 5 Literature Review Sources.....................................................................45 Table 6 Comparison of Transformation and. Servant Leadership.....................59 Table 7 Bass and Avolio Leadership Culture Styles...........................................63 Table 8 Interpretation of ODQ Scores................................................................92 Table 9 Frequency and Percent on Gender......................................................106 Table 10 Frequency and Percent on years as an Employee.............................107 Table 11 Frequency and Percent on Highest Educational Degree Completed ........................................................................................................108 Table 12 Frequency and Percent on Department.............................................109 Table 13 Frequency and Percent on Job Status ..............................................110 Table 14 Frequency and Percent on Age..........................................................110 Table 15 Frequency and Percent on Ethnicity.................................................111 Table 16 Frequency and Percent on Participation in the Employer-Sponsored Health Plan................................................................... 111 Table 17 Frequency Percent, and Mean of Transformational Culture Score................................................................................................................ 112 Table 18 Frequency Percent, and Mean of Transactional Culture Score................................................................................................................ 113

xiii

Table 19 Linear Regression with Transformational Leadership Style Predicting Job Satisfaction .............................................................................................. 117 Table 20 Linear Regression with Transactional Leadership Style Predicting Job Satisfaction ............................................................................................. 118 Table 21 Linear Regression with Transformational Leadership Style Predicting Long-Term Commitment.................................................................118 Table 22 Linear Regression with Transactional Leadership Style Predicting Long-Term Commitment...................................................................................119 Table 23 Linear Regression with Transformational Leadership Style Predicting Trust................................................................................................120 Table 24 Linear Regression with Transactional Leadership Style Predicting Trust................................................................................................120 Table 25 Linear Regression with Transformational Leadership Style Predicting Loyalty Intentions............................................................................121 Table 26 Linear Regression with Transactional Leadership Style Predicting Loyalty Intentions............................................................................122 Table 27 Means and Standard Deviations of Independent and Dependent Variables...........................................................................................................123 Table 28 Summary Results of Hypotheses Test................................................ 125 Table I1 Research Questions, Hypotheses and Items on Survey......................188 Table J1 Frequency and Percent on Responses to the ODQ............................190 Table K1 Frequency and Percent on Responses to the Employee Opinion

xiv Survey............................................................................................................... 191 Table L1 Transformational and Transactional Culture Scores by participants …...................................................................................................................... 192

xv LIST OF FIGURES Figure 1 Retention Model.....................................................................................5 Figure 2. Percentage of 14 Transaction and Transformation Culture ODQ Scores ...........................................................................................................................115 Figure 3. ODQ Culture Score for DMC...........................................................124

1 CHAPTER 1: INTRODUCTION Abrams (2002) claimed the average annual turnover rate among employees in healthcare was 20.4% in 1999 compared to 15.6% in other industries. The research suggested the imbalance is affecting the employee loyalty, the quality and cost of care and thus customer retention. Hospital administrators face a growing crisis of how to provide care for more patients with fewer employees, as turnover and a tight labor market hobble the healthcare industry (Abrams, 2002). Customer retention is important for healthcare organizational growth but often little is done to integrate customer and employee retention. Cornner (2002) found less than 10% of the active retention programs were effective and more than half of all U.S. hospitals did not even report their turnover rate. In his article, CEO Questions from Hell, Sullivan (2002) asked why healthcare leaders refuse to fund retention programs. Reichheld (1996) warned that keeping employees was as critical as customers because customer loyalty could not be achieved without employee loyalty and employee loyalty could not continue without leadership commitment (Narayandas, 2005; Pan & Chen, 2004; Peak 1996). Losing valuable customers and employees had financial affects because the organization would not be able to grow (Gemme, 1997). In his book, The Loyalty Effect, Reichheld (as cited in Peak, 1996, ¶2) contended, “A 5% decrease in retention [meant] the difference between a successful business and an also-ran.” Many other researchers offered convincing evidence the financial health of an organization depended on the leadership practices (Duboff & Heaton, 1999; Heskett, Sasser, & Schlesinger, 1997; Reichheld, 1993). Leadership in healthcare referred to how values, directions, and performance expectations govern and focus on customers and

2 stakeholders (Malcolm Baldridge Healthcare Criteria, 2004). Leadership values and practices that promoted a healthy working environment could create a more motivated and productive workforce which, in turn, could create greater customer satisfaction and a sustainable business performance (Scotti, Harmon, Behson & Messina, 2007). In addition, the leadership culture influenced a healthcare organization’s ability to manage human capital, serve patients, and impact economical performance (Dean 2004). Kotter and Heskett (1992) found service organizations developed positive cultures by putting people first, encouraging positive relationships, and valuing personal achievement. The healthcare service industry had been experiencing vast environmental challenges over the past decade (Pan & Chen, 2004). These challenges made it difficult for healthcare leaders to provide customer “value that [was] based on the patient's standards [and] not the healthcare organization's standards” (Gemme, 1997, ¶2). Some causes contributing to these challenges included: developing new technologies, aging of the population, controls and limits, and increasing liabilities (Fine, 2002). Internet communication, globalization, and competition as well as declining payment trends from the two major payers, Medicaid and Medicare, increased complexity forcing many hospitals to manage at a financial loss (Pan & Chen, 2004). Harrington (2003) proposed the challenges had sparked widespread interest in understanding what leadership styles contributed to an effective healthcare system. Bass (1990) stated, “Leadership is the single most critical reason in the success or failure of institutions” (p. 8) while Khan (2005) found the organizational culture was a key cause in binding leaders and followers to perform the organizational objectives. Leaders, as change agents, needed to be aware that strong cultures were the foundation of effective

3 performance but strong cultures could be difficult to change (Schein, 2004). Effective leaders should understand how to unify style, culture, and resources to arrive at organization success. Hong and Goo (2004, ¶1) proposed two important questions firms should constantly ask, "What did clients want?" And "How to improve client's views?" The implications of leadership and culture should be of particular concern in the nonprofit healthcare organization because these leaders face complexity as well as promise (Merry, 2003; Sarros, Gray, & Densten, 2002). Healthcare leaders who developed a planned approach to segmenting customers and building relationships with them will be in a better position to manage customer retention and gain a competitive advantage in the marketplace. Fullerton (2003) found relationships built on shared values had a positive impact on loyalty. Chapter One will discuss the problem, purpose, and significance of the study. This chapter will introduce the problem of what leadership cultural styles influences employee loyalty and thus customer retention to close the gap between what customers want and what they experience. The significance will explain the contribution to leadership while the nature of the study will focus on the quantitative research method, the correlation design, and the web survey technique that will collect the data. However, the following requirements and permissions had to be met before this study could be conducted. Appendix A shows the authorized letter of collaboration among institutions. Appendix B shows permission to use the organizational premises. Appendix C shows permission to use the Organizational description questionnaire (ODQ), a sample of which is presented in Appendix D. Appendix E shows the informed consent of participants over the age of 18. Appendix F shows the demographic questionnaire used and Appendix G

4 provides the permission to adjust the retention model. Appendix H shows an employee opinion survey. Finally, Appendix I, J, K, and L show the frequencies and comparisons of the statistical results. The results of the study will discover if a strong or positive correlation exists among the independent variables, transformational leadership culture style and the transactional leadership culture style, and the dependent variables, customer retention. The antecedents of customer retention will be job satisfaction, long-term commitment, trust, and loyalty intentions in the nonprofit healthcare organization. Figure 1 shows Weinstein’s (2002) new retention model. The model shows how leadership and organizational culture are integrated to produce organizational outcomes such as: employee job satisfaction, trust, commitment, loyalty intentions, and thus customer retention.

5

Figure 1. Retention Model. Note. Adapted from “Customer-Specific Strategies Customer Retention: A Usage Segmentation and Customer Value Approach,” by A. Weinstein, 2002, Journal of Targeting, Measurement and Analysis for Marketing, 10(3), p. 263. Retrieved January 12, 2005, from EBSCOhost database. Adapted with permission of the author.

Background of the Problem Gemme (1997) reported companies in the United States had been loosing about half of their customers in five years and this loss of existing customers decreased

6 organizational value (Javaigi, Whipple, Ghosh, & Young, 2005). Gemme (1997) reported the annual cost of dissatisfaction in healthcare organizations with 20,000 discharges was roughly $3 million in 1997 and this figure now represented billions. With more health choice offerings, expectations have changed, and customers will expect to receive the same service from healthcare they expected from shops. If customers do not get satisfaction, they will not hesitate to switch to alternative healthcare professionals. For these reasons, customer satisfaction and service quality had become critical issues in healthcare (Gemme, 1997). Disenrollment from health plans has become a growing concern for healthcare leaders to quantify. Healthcare facilities will experience disparate rates depending on the location. A competitive location could have up to a 40% defection rate whereas a hospital facing little competition could have as little as a 3% defection rate (Resse, 1997). The defection rate in a state-sponsored plan is greater than that of an employer-sponsored plan. One of the major reasons for the difference is employees can only change health plans at the yearly open enrollment. Reese also commented voluntary defection rates for members seeking cheaper coverage had increased to 13%. Defection will complicate membership reporting with the breaks in enrollee assignment. As a result, the yearly cost of defections or switching (Liu, 2006) could be large and warrant leadership attention (see Table 1).

7 Table 1 Analysis of One Commercial Plan No. Description Value

1. Specify the total plan members (number) 450,000 2. Determine annual voluntary disenrollment rate (%) 7% 3. Determine number of voluntary annual defectors 31,500 (plan members x disenrollment rate) 4. Specify the average annual premium each member 1, 500 5. Estimate the annual voluntary disenrollment losses 47,250,000 (number of defectors x annual premium

Note: Analysis of One Commercial Plan. Adapted From “Data from Disenrollment: What it costs, how to stop it - abandoning healthcare plans showing the financial impact of defection” by S. Reese, 1997. Retrieved June 15, 2006, from http://findarticles.com/p/articles/mi_m0903/is_n10_v14/ai_20435069 p. 5). Reprinted with permission of the author. Loyalty intentions affected growth and profitability (Reichheld, 2003). The American Management Association claimed business done by loyal customers who returned to buy again and again because of satisfaction with the service yielded 65% of a typical organization’s volume (Reese, 1997). Reichheld (2002) found if customer defection rate decreased 5%, profits could increase 25%-85% and if the customer defection rate decreased 50%, the organization could almost double growth. Marketing studies estimated the cost of winning new customers was five times to save an existing

8 customer (Reese, 1997; Reichheld, 1996) and customer retention needed the entire organization to commit (Gemme, 1997). Gummerus, Liljander, Pura, and Riel (2004) claimed, “Healthcare leaders faced the challenge of creating a sustainable customer base in a market environment where consumers [could] easily find and evaluate alternative offerings” (¶2). Leaders needed to evaluate how customers hear the content of their services and decide what the styles or roles create loyalty and customer retention in the nonprofit healthcare industry (Gummerus et al., 2004). Other researchers found customers would repurchase when they formed psychological bonds with their service provider (Weinstein, 2002; Zeithaml, 2000). The United States Healthcare System The United States spent more than any other county on research and development for health matters (Null, Dean, Feldman, Rasio, & Smith, 2003). However, trials to lower healthcare costs have failed because of market complexity and lack of integration of insurers, hospital systems, doctors, and pharmaceutical companies (Null et al., 2003). In the article, Death by Medicine, Null et al. (2003) reported the following healthcare statistics. United States had over 5,000 acute-care hospitals, under 1,000 specialty care hospitals, and 340 governmental hospitals. There were 33 million admissions, hospital stay averaged 9.2 days, and occupancy rate peaked at 66%. Compared to other global countries, the U.S. had shorter lengths of stay and fewer admissions. At least 33% of the 615,000 U.S. doctors were primary care while 67% represented specialist. In 2005, healthcare spending accounted for nearly $2 trillion in charges and 16% of the gross domestic product (Catlin, Cowan, Heffler, & Washington, 2007). Null et al. (2003)

9 reported reasons for the inadequacy and inflation as: (a) malpractice litigation (b) defensive medicine (c) the use of expensive medical technologies and (d) leadership. The statistics of Null et al. (2003) showed why U.S. healthcare system is in dire need of change and why healthcare leaders needed to become champions in the transformation effort. Bodinson (2005) argued consistent application of best practices could drastically lower these statistics. Based on these negative realities, healthcare leaders should be open to change, realign their organizational culture, and adopt best practices to improve customers’ service experience (Bodinson, 2005). An important way for healthcare leaders to carry out the best practice goal would be to develop relationships built on trust and involve employees in the decision-making (Bodinson, 2005; Gutek, Groth, & Cherry, 2002). In the turbulent 1990s, the fall of Aetna, the nation’s largest managed care plan showed how an inadequate mission led a healthcare organization to near death (Robinson, 2004). Employer-Sponsored Health Plans Employer-sponsored health plans are a recent trend in healthcare where hospital employers will provide health and medical benefits to employees in exchange for an employee premium. Gabel, Liston, Jensen, and Marsteller’s (1994) research on employer- sponsored health plans revealed 63% of the nonelderly population had employment-based healthcare coverage which “limited enrollees' choice to a restricted network of doctors, hospitals, and other providers” (¶12). Gabel et al. (1994) found enrollees in employer- sponsored plans almost doubled and employees faced higher cost sharing in the form of increased deductibles than they did five years ago.

10 The effectiveness of managed healthcare plans to keep customers is questionable. Goodman (2006) proposed a strange feature of the U.S. healthcare system was the major role the employers play in selecting the employees’ health benefits. According to Goodman (2006), reasons such as job loss, change in employment status, and the employer decision itself, put employees and their families at significant risk. In a try to constrain cost and improve efficiency, nonprofit hospital organizations that administrated their own managed care plan have followed a difference strategy to shift cost to employees under the employer-sponsored health plans (Goodman, 2006). Some researchers argue that managed care improved preventive care but it had problems with access. Managed care might improve continuity of care but it might damage continuation for high-risk enrollees (Gabel et al., 1994). If employer-sponsored health plans will continue was a question of debate and leaders will need to pay attention to market influences. The Working Toward Wellness report (2007) highlighted four dimensions for effective tactics toward employees’ workforce behavior: (1) leadership (2) culture (3) structure, and (4) process. Employees as Customers Another complexity facing nonprofit hospitals is the employee who is also a customer. These employees contribute part of the premium in exchange for healthcare benefits. This employee group worries about the confidentiality of his or her health information and they expect to receive excellent customer service. Healthcare leaders will need to pay attention to privacy information laws. In addition, these leaders will face new challenges and opportunities to define service quality, satisfaction, outcomes and results to this new employee-customer slice. As a result, healthcare leaders would need to make

11 sure employees perform the service right the first time (Bleuel, 2005). This would involve developing an organizational culture that preserved trust among employees while management empowered individual training, and provided tools to solve problems and strengthen customer relationships (Laschinger & Finegan, 2005; Nasir & Nasir, 2005; Shirey, 2006; Stephenson, 2004). Leadership played a significant role in shaping and broadcasting corporate culture (Berry, 2004; Schein, 2004). Schein (1997) found that rewards were a forceful tool in productive cultures, as employees quickly learn through the reward system what their working culture valued and what was rhetoric. When employees’ behavior are not in alignment with the organizational culture, organizational conflict might rise and lead to employee retention problems (Bleuel, 2005). According to Bleuel (2005), leadership styles could mediate employee behavior and those leaders who addressed employees’ complaints could build trust and stability in the organization. Bleuel proposed a loyal customer base was critical to an organization’s business and customer retention strategy. Dissatisfied employees who are also customers might not openly complain but they might significantly undermine the organization and ruin the customer base. Satisfied employees interacted positively with customers and they would recommend their friends and family to come to the healthcare organization for care (Bleuel, 2005). Through the balanced scorecard approach and employee-customer surveys, Press Ganey, the leader in healthcare measurement and improvement, helped critically performing nonprofit hospitals to improve employee satisfaction and build loyalty (Press Ganey, 2004).

12 United States versus Foreign Healthcare system A common misconception surrounding the healthcare debate was that some foreign countries have already developed solutions that America could copy to care for the uninsured (Levchuck, Kosek & Drohan, 2000). According to the U.S. Census Bureau, the United States had over 45 million uninsured and this figure represent 15% of the population. Policy makers agree that healthcare was one of the nation’s biggest domestic challenges. Universal Healthcare has challenges too. Long wait times and outdated technology caused global customers to come to the U.S. for immediate care. Levchuck et al. (2000) argued Canadians got top quality medical care at reasonable costs and Germany and Britain were posed as examples of countries with effective healthcare systems. Levchuch et al. (2000) questioned why America spent more on healthcare than either country yet the country did not manage coverage for all citizens. The authors assumed that although the United States could learn from the experiences of other countries, building a national health policy is tied closely to the values and priorities of the nation. Canadians pay about 10% of their income for this universal insurance; people choose their own doctors; and “all citizens get equal treatment for the same health services” (Levchuck et al., ¶7). Nonprofit versus For-profit O’Neill (2002) reported over 1.8 million nonprofit organizations were in existence. Many studies compared nonprofit and private for-profit providers, but there had been no definite conclusions (Rosenau & Linder, 2003; Schlesinger & Gray, 2006). Rosenau and Linder claimed nonprofit organizations had a duty to represent the public interest; do what is right; and strive to uphold a trustful reputation. Backman and Smith

13 (2000) reasoned that because of the social and charitable nature of nonprofits, these organizations were in a better position than for-profit organizations to inspire “trust, cooperation and common respect” (p. 362). Increased emphasis on accountability had prompted the nonprofits to introduce many changes successfully practiced in the for- profit organization (Schlesinger & Gray, 2006). These initiatives included efforts to improve quality, productivity, leadership, and workplace environments (Charlesworth, Cook, & Crozier, 2003; Kim, 2002; Korunda, Carayon, Sainfort, Scharitzer, & Hoonakker, 2003). During the 1990s, for-profit healthcare providers sought to offer health services at a competitive cost without compromising quality of care and access (Rosenau & Linder, 2003). Wilder predicted that for-profit healthcare providers might be more cost- efficient and better managed than nonprofits because of market-generated incentives whereas, Wilder argued that nonprofit enterprises were inefficient and unable to compete effectively (Rosenau & Linder). Fundamental differences existed between for-profit and nonprofit organizations in ownership, sources of funding, structure and organizational goals (Boyne, 2002). For-profit and nonprofit employees had different workplace orientations, motivation (Pattakos, 2004), values (Hansen, Huggins, & Ban, 2003; Stillett, 2002), and organizational commitment (Goulet & Frank, 2002). For-profit healthcare providers had opportunities to make a profit, raise capital, expand and pay dividends to stockholders. In contrast to for-profits, nonprofit organizations might make a profit but the company must reinvest the profit. Reinhardt proposed nonprofit organizations benefited from volunteer service, financial contributions, subsidized loans, and were paid lower executive salaries (Rosenau and Linder). Despite the differences of nonprofit and

14 for-profit organizations, all organizations will compete in the same labor market to recruit and keep employees. Thus, to attract good employees, nonprofit organizations will need to adopt sound management practices. HealthCare Status of Detroit, Michigan The population in Detroit, Michigan, where this study will take place, has been declining over the past several decades. In the article, Strengthening the Safety Net in Detroit and Wayne County, Michigan Health Authority (2003) revealed the following statistics that showed the population decline in Detroit in 1990 and 2000 (See Table 2). Table 2 County Population Trends __________________________________________________________________ County 1990 2000 % change __________________________________________________________________ Detroit 1,027,974 951,270 -7.5% Wayne County 2,111,687 2,061,162 -2.4% Oakland County 1,083,592 1,194,561 10.2% Macomb County 714,449 788,149 10.3% __________________________________________________________________ Note. County Population Trends. From “Strengthening the Safety Net in Detroit and Wayne County” by Michigan Health Authority 2003, p. 5. Retrieved March 10, 2007, from http://www.michigan.gov/documents/ ReportofDetroitHealthCareStabilizationWorkgroup_1_70764_7.pdf. Reprinted with permission of the author.

15 Beside the social, economic and political problems that plagued a shrinking community, Detroit, like most urban cities in the U.S., has a weakening healthcare system. The Michigan Health Authority (2003) noted that while 22.5% of Michigan residents were either not insured or they received Medicaid support, the uninsured represents 52.5% for Detroit. Further, residents who had commercial insurance in Detroit represent 35% compared with 63% statewide (The Michigan Health Authority (2003). The Michigan Health Authority noted several causes contributed to the healthcare crisis in Detroit. Michigan finances healthcare for 700,000 uninsured residents in Wayne County. Severe under funding have led to declining financial margins for the four major hospital systems. Changing demographics, doctor and nurse shortages have sabotaged prevention efforts and the quality of care. As a result, healthcare leaders in Detroit are facing serious challenges to distinguish themselves and strengthen the healthcare delivery system to ensure future organizational success. A strategy for aiding the right leadership cultural style to keep employees and customers is an overwhelming leadership challenge in such a complex environment. Statement of the Problem Javalgi, Whipple, Ghosh, and Young (2005) proposed organizations spend noticeable time and resources courting new customers. Weinstein (2002) confirmed organizations spent 80% of marketing budgets on attracting new customers, leaving only 20% for keeping existing customers. Javaigi et al. (2005) claimed a lost customer could cost the company up to $50,000 in foregone revenues over 10 years if the company offended the customer. Keeping an existing customer will be more profitable than attracting a new one yet most advertising campaigns focused on attracting new clients.

16 For-profit organizations had been realizing financial gains associated with customer loyalty and retention for a longtime (Kerns & St. Clair, 2000). Nonprofit healthcare leaders are beginning to realize few companies can grow profit over the long run with disloyal customers. Burke (2005) advised that leaders need to focus on multiple directions in their business. External reasons such as changing demographics, technology, legislative mandates and financial accountability had caused leaders to reframe the organization (Bolman & Deal, 2003). Internal causes such as organizational culture, worker shortage especially among clinical staff, leadership, and organizational behavior have led to complexity. Researchers affirmed leaders exert influence on the organization culture and behavior and leaders needed to manage actively for the future (Bolman & Deal, 2003, Jones, 2003; Robbins, 2003, Schein, 2004). However, healthcare organizations have not identified leadership style and culture as critical successes. An employee will stay in an organization when he or she feels the organizational and leadership culture values their opinions, involve them in the process, and provides opportunities for interesting work. Bujak (2002) and Barney (2002) suggested an employee’s personal mission and the organizational culture should be in alignment to keep staff. The problem is that nonprofit healthcare leaders have not embraced how to keep customers. A continuing challenge that exists is leaders have not figured out how to link employee loyalty and customer loyalty. Further, leaders were not usually receptive to new ideas (Kezar & Eckel, 2002). Healthcare leaders are still practicing bureaucratic and centralized leadership in an era when complexity demands organizational change and responsiveness. A bureaucratic culture stifles creativity and innovation and hinders

Full document contains 212 pages
Abstract: This quantitative study examined which leadership style correlates more strongly or more positively with customer retention in a healthcare setting. The independent variables were Bass transformational and transactional leadership culture styles. The dependent variables were job satisfaction, long-term commitment, trust, and loyalty intentions. Three surveys were used in this research study. Bass (1992) Organizational Description Questionnaire tested employee opinions about the characteristics of the leadership culture. A developed employee opinion survey tested the dependent variables and a demographic survey was used to classify the sample. One of the eight null hypotheses was rejected because the data distribution was nonnormal. Violation of the normalcy assumption can quash hypothesis testing and lead to an inadequate evaluation of the study. The results pointed out the organization had a coasting culture that was unstructured and employees did not trust the leadership. The strongest correlation to transformational leadership was job satisfaction. [PUBLICATION ABSTRACT]