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ORGANIZATIONAL
Behavior and
Theory in
Healthcare
Leadership Perspectives and
Management Applications
STEPHEN L. WALSTON SECOND EDITION
KENNETH L. JOHNSON
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Indiana University
Julie Agris, PhD, FACHE
SUNY at Stony Brook
Ellen Averett, PhD
University of Kansas School of Medicine
Robert I. Bonar, DHA
George Washington University
Lynn T. Downs, PhD, FACHE
University of the Incarnate Word
Laura Erskine, PhD
UCLA Fielding School of Public Health
Cheryl J. Holden, DHS
University of Arkansas
Diane M. Howard, PhD, FACHE
Rush University
Ning Lu, PhD
Governors State University
Kourtney Nieves, PhD, MSHS
University of Central Florida
Martha C. Riddell, DrPH
University of Kentucky
Gwyndolan L. Swain, DHA
Belmont Abbey College
Mary Ellen Wells, FACHE
C-Suite Resources
Asa B. Wilson, PhD
Southeast Missouri State University
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Copyright © 2022 by the Foundation of the American College of Healthcare Executives. Printed
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Names: Walston, Stephen Lee, author. | Johnson, Kenneth L., 1957– author. | Association of
University Programs in Health Administration, issuing body.
Title: Organizational behavior and theory in healthcare : leadership perspectives and management
applications / Stephen L. Walston and Kenneth L. Johnson.
Description: Second edition. | Chicago, Illinois : Health Administration Press ; Washington, DC :
Association of University Programs in Health Administration, [2022] | Includes bibliographical
references and index. | Summary: “This book examines the theories of organizational design,
leadership, management, and social psychology as they apply to health services”—Provided by
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Identifiers: LCCN 2021027583 (print) | LCCN 2021027584 (ebook) | ISBN 9781640553026
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Subjects: MESH: Public Health Administration | Health Care Sector—organization &
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Classification: LCC R729.5.H4 (print) | LCC R729.5.H4 (ebook) | NLM WA 525 | DDC
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BRIEF CONTENTS
Preface............................................................................................................. xix
Chapter 1 Organizational Behavior, Organizational Theory,
and Their Importance in Healthcare..................................1
Chapter 2 Theories of Managing People...........................................19
Chapter 3 Supporting Diversity, Equity, and Inclusion......................39
Chapter 4 Individual and Organizational Learning ..........................67
Chapter 5 Attitudes and Satisfaction.................................................85
Chapter 6 Individual and Organizational Values and Ethics............107
Chapter 7 Individual and Organizational Motivation......................129
Chapter 8 Emotions, Moods, and Stress on the Job.......................151
Chapter 9 Paradigms and Perceptions.............................................177
Chapter 10 Decision-Making............................................................199
Chapter 11 Creativity and Innovation...............................................221
Chapter 12 Group Behavior.............................................................243
Chapter 13 Work Teams...................................................................263
Chapter 14 Communication.............................................................283
Chapter 15 Leadership Theories and Styles.......................................305
Chapter 16 Power, Politics, and Influence........................................335
Chapter 17 Conflict Management and Negotiation..........................357
Chapter 18 Organizational Design and Structure..............................381
v
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vi B rief Co n te n ts
Chapter 19 Performance Management..............................................417
Chapter 20 Developing Employees Through Mentoring,
Coaching, and Delegation..............................................441
Chapter 21 Organizational Culture...................................................461
Chapter 22 Human Resources Policies and Practices........................481
Chapter 23 Strategy and Change Management.................................503
Case 1 A Dilemma of Loyalties..................................................523
Case 2 Theranos and Elizabeth Holmes.....................................525
Case 3 The Injured Migrant Worker..........................................533
Case 4 The Overutilizing Orthopedist.......................................535
Case 5 The Busy Regional Vice President..................................537
Case 6 Thalidomide and Grünenthal.........................................541
Case 7 Prospect Medical: Imperfect Incentives Drive
Actions Not Consistent with Mission..............................545
Case 8 Pegasus Health’s Integration of Care..............................551
Case 9 Purdue’s Dilemma to Increase Sales................................555
Case 10 OrthoIndy.....................................................................559
Case 11 The New CEO...............................................................563
Case 12 Liver Allocation..............................................................565
Case 13 Letter from a Bereaved Mother......................................567
Case 14 HealthT Seeks Healthier Employees...............................569
Case 15 HealthSouth..................................................................573
Case 16 FHP—Utah...................................................................581
Case 17 Starting as CEO at Skyview Hospital..............................587
Case 18 Director of Marketing Versus Operations........................591
Case 19 The Ogre and the Playroom...........................................593
Case 20 A Saudi Bid and I...........................................................595
Case 21 A Proposed Merger Gone Bad: A Lack of
Confidence in Leadership...............................................597
Case 22 Night Staffing and Job Commitment..............................601
Case 23 Mike and the Walk-Around............................................603
Case 24 Sakal’s Dilemma.............................................................605
Case 25 Sam’s Deposit Recovery.................................................607
Case 26 Shannon’s Extreme Uninsured Healthcare Costs............611
Case 27 The Ethical Challenge of Treating Hepatitis C................615
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Br ief C ontents vii
Case 28 Governance and Decision-Making in Hospital-Based
Surgical Services.............................................................617
Case 29 Mentoring, Coaching, and Delegating: Combating
High Turnover and Poor Culture...................................623
Appendix: Case Matrix................................................................................. 625
Glossary..................................................................................................629
Index......................................................................................................643
About the Authors...................................................................................697
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DETAILED CONTENTS
Preface......................................................................................................xix
Chapter 1 Organizational Behavior, Organizational Theory,
and Their Importance in Healthcare..................................1
Learning Objectives ..........................................................2
Key Terms .........................................................................2
Organizational Behavior.....................................................3
Organizational Theory.......................................................4
History and Development..................................................5
Relevance to the Healthcare Industry.................................8
Chapter Summary............................................................12
Chapter Questions...........................................................12
Chapter Cases..................................................................13
Chapter Activity...............................................................14
References........................................................................15
Chapter 2 Theories of Managing People...........................................19
Learning Objectives ........................................................19
Key Terms .......................................................................19
Weber’s Efficient Bureaucracy..........................................21
Administrative Theory......................................................23
Maslow’s Hierarchy of Needs...........................................25
Human Relations.............................................................27
Decision-Making Theory..................................................30
Institutional Theory.........................................................31
Chapter Summary............................................................31
Chapter Questions...........................................................32
Chapter Cases..................................................................33
Chapter Activity...............................................................35
References........................................................................36
ix
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x Det a iled C o n te n ts
Chapter 3 Supporting Diversity, Equity, and Inclusion......................39
Learning Objectives ........................................................39
Key Terms .......................................................................40
Cultural, Racial, and Ethnic Diversity...............................43
Gender and Age Diversity................................................45
Racial and Ethnic Disparities in Healthcare......................49
Affirmative Action and Diversity Management.................51
Federal, State, and Private Resources to
Improve Diversity........................................................55
Chapter Summary............................................................56
Chapter Resources...........................................................58
Chapter Questions...........................................................58
Chapter Cases..................................................................59
Chapter Activities.............................................................61
References........................................................................62
Chapter 4 Individual and Organizational Learning...........................67
Learning Objectives ........................................................67
Key Terms .......................................................................68
Role of Motivation in Learning........................................72
Challenges of Learning in Healthcare...............................73
Chapter Summary............................................................76
Chapter Questions...........................................................77
Chapter Case...................................................................78
Chapter Activities.............................................................80
References........................................................................80
Chapter 5 Attitudes and Satisfaction.................................................85
Learning Objectives ........................................................85
Key Terms .......................................................................86
Attitudes..........................................................................87
Engagement.....................................................................90
Satisfaction.......................................................................92
Job Satisfaction Outcomes and Measurement...................95
Chapter Summary............................................................99
Chapter Questions...........................................................99
Chapter Cases................................................................100
Chapter Activities...........................................................101
References......................................................................102
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D etailed C ontents xi
Chapter 6 Individual and Organizational Values and Ethics............107
Learning Objectives ......................................................107
Key Terms .....................................................................108
Business Ethics and Corporate Social Responsibility.......108
Ethical Models...............................................................110
Ethical Challenges in Business and Healthcare...............114
Professional Ethics.........................................................117
A Rule of Thumb for Ethical Behavior: The
Newspaper Test.........................................................119
Chapter Summary..........................................................120
Chapter Questions.........................................................121
Chapter Cases................................................................121
Chapter Activities...........................................................123
References......................................................................124
Chapter 7 Individual and Organizational Motivation......................129
Learning Objectives ......................................................129
Key Terms .....................................................................130
External Stimuli.............................................................131
Intrinsic Stimuli.............................................................132
Job Crafting...................................................................139
Myths About Motivation................................................140
Chapter Summary..........................................................142
Chapter Questions.........................................................144
Chapter Cases................................................................144
Chapter Activity.............................................................146
References......................................................................146
Chapter 8 Emotions, Moods, and Stress on the Job.......................151
Learning Objectives ......................................................151
Key Terms .....................................................................152
Emotions.......................................................................152
Stress.............................................................................156
Locus of Control...........................................................159
Chapter Summary..........................................................164
Chapter Questions.........................................................166
Chapter Cases................................................................166
Chapter Activities...........................................................171
References......................................................................171
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xii Det a iled C o n te n ts
Chapter 9 Paradigms and Perceptions.............................................177
Learning Objectives ......................................................177
Key Terms .....................................................................178
Paradigms......................................................................178
Perceptions....................................................................180
Perceptual Biases............................................................183
Effects on Job Commitment..........................................189
Chapter Summary..........................................................189
Chapter Questions.........................................................190
Chapter Cases................................................................191
Chapter Activities...........................................................193
References......................................................................195
Chapter 10 Decision-Making............................................................199
Learning Objectives ......................................................199
Key Terms .....................................................................200
Models of Decision-Making...........................................201
Biases in Decision-Making..............................................204
Groupthink....................................................................206
Decision-Making in Healthcare......................................207
Improving Decision-Making...........................................208
Chapter Summary..........................................................211
Chapter Resources.........................................................212
Chapter Questions.........................................................212
Chapter Cases................................................................213
Chapter Activities...........................................................215
References......................................................................216
Chapter 11 Creativity and Innovation...............................................221
Learning Objectives ......................................................221
Key Terms .....................................................................221
The Link Between Creativity and Innovation.................222
Types of Healthcare Innovations....................................224
Strategies for Increasing Creativity and Innovation.........226
Diffusion of Healthcare Creativity and Innovation.........228
Disruptive Innovation and Sustaining Innovation...........232
Chapter Summary..........................................................233
Chapter Questions.........................................................234
Chapter Cases................................................................235
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D etailed C ontents xiii
Chapter Activities...........................................................238
References......................................................................238
Chapter 12 Group Behavior.............................................................243
Learning Objectives ......................................................243
Key Terms .....................................................................243
Groups Versus Teams.....................................................245
Interdependence............................................................245
Conformity and Norms..................................................246
Cohorts and Reference Groups......................................248
Groupthink and Group Shift..........................................249
Group Polarization.........................................................250
Obedience......................................................................251
Social Facilitation and Social Loafing..............................252
Advantages and Disadvantages of Group
Decision-Making.......................................................253
Chapter Summary..........................................................254
Chapter Questions.........................................................255
Chapter Cases................................................................256
Chapter Activities...........................................................258
References......................................................................258
Chapter 13 Work Teams...................................................................263
Learning Objectives ......................................................263
Key Terms .....................................................................263
The Nature of Teams.....................................................264
Team Composition.........................................................265
Multidisciplinary and Interdisciplinary Teams.................265
Diversity.........................................................................266
Team Formation............................................................267
Team Building...............................................................269
Signs of an Effective Team.............................................272
Conflict..........................................................................274
Team Viability................................................................275
Chapter Summary..........................................................276
Chapter Questions.........................................................277
Chapter Cases................................................................278
Chapter Activities...........................................................280
References......................................................................281
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xiv Det a iled C o n te n ts
Chapter 14 Communication.............................................................283
Learning Objectives ......................................................283
Key Terms .....................................................................283
Communication Process.................................................284
Nonverbal Communication............................................290
Barriers to Effective Communication..............................292
Impact of Culture on Communication...........................293
Virtual Communication.................................................294
Successful Communication.............................................295
Chapter Summary..........................................................296
Chapter Questions.........................................................297
Chapter Cases................................................................298
Chapter Activity.............................................................300
References......................................................................301
Chapter 15 Leadership Theories and Styles.......................................305
Learning Objectives ......................................................305
Key Terms .....................................................................306
Defining Leadership.......................................................307
Trait Theory..................................................................308
Behavior Theory............................................................308
Contingency Theory......................................................310
Transactional Leadership and Situational Leadership......311
Transformational Leadership..........................................313
Emerging Theories.........................................................321
Chapter Summary..........................................................323
Chapter Questions.........................................................325
Chapter Cases................................................................326
Chapter Activities...........................................................329
References......................................................................330
Chapter 16 Power, Politics, and Influence........................................335
Learning Objectives ......................................................335
Key Terms .....................................................................335
Power and Influence Defined.........................................336
Influence Tactics............................................................339
Organizational Politics...................................................342
Chapter Summary..........................................................347
Chapter Questions.........................................................348
Chapter Cases................................................................348
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D etailed C ontents xv
Chapter Activities...........................................................353
References......................................................................353
Chapter 17 Conflict Management and Negotiation..........................357
Learning Objectives ......................................................357
Key Terms .....................................................................357
Conflict Basics................................................................358
Types of Work-Related Conflict.....................................360
Dealing with Conflict.....................................................361
Contributing Factors to Conflicts in Healthcare.............362
Zero-Sum Games and Competition................................364
Conflict and COVID-19................................................365
Managing Conflict.........................................................366
Negotiation Skills...........................................................368
Chapter Summary..........................................................371
Chapter Questions.........................................................373
Chapter Cases................................................................374
Chapter Activities...........................................................377
References......................................................................378
Chapter 18 Organizational Design and Structure..............................381
Learning Objectives ......................................................381
Key Terms .....................................................................382
Corporations..................................................................382
Organizational Structure and Organizational
Design.......................................................................384
Structure Types..............................................................391
Advantages and Disadvantages of Different
Structures..................................................................398
Possible Future Structures in Healthcare........................400
Organizational Structure and the Environment..............402
Governing Boards..........................................................402
Chapter Summary..........................................................403
Chapter Questions.........................................................406
Chapter Cases................................................................406
Chapter Activities...........................................................411
References......................................................................412
Chapter 19 Performance Management..............................................417
Learning Objectives ......................................................417
Key Terms .....................................................................418
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xvi Det a iled C o n te n ts
Performance Management Tools....................................420
Individual Performance Management.............................423
360-Degree Feedback Appraisal Systems........................428
Competency-Based Performance Systems.......................430
Chapter Summary..........................................................432
Chapter Questions.........................................................433
Chapter Cases................................................................433
Chapter Activities...........................................................438
References......................................................................438
Chapter 20 Developing Employees Through Mentoring,
Coaching, and Delegation..............................................441
Learning Objectives ......................................................441
Key Terms .....................................................................442
Mentoring and Coaching...............................................442
Delegation.....................................................................446
Beware of Micromanaging.............................................451
Communicate Clearly When Delegating.........................451
Eight Steps to Effective Delegation................................452
Chapter Summary..........................................................453
Chapter Questions.........................................................454
Chapter Cases................................................................454
Chapter Activities...........................................................457
References......................................................................457
Chapter 21 Organizational Culture...................................................461
Learning Objectives ......................................................461
Key Terms .....................................................................462
Components of Organizational Culture..........................463
Cultural Differences.......................................................466
Changing a Culture.......................................................470
Chapter Summary..........................................................472
Chapter Questions.........................................................473
Chapter Cases................................................................474
Chapter Activities...........................................................476
References......................................................................476
Chapter 22 Human Resources Policies and Practices........................481
Learning Objectives ......................................................481
Key Terms .....................................................................481
Job Descriptions and Specifications................................482
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D etailed C ontents xvii
Performance Simulation.................................................483
Additional Testing Techniques.......................................484
Interviews......................................................................486
Training.........................................................................488
The Leadership Role of HR...........................................492
Chapter Summary..........................................................493
Chapter Questions.........................................................494
Chapter Cases................................................................494
Chapter Activities...........................................................496
References......................................................................497
Chapter 23 Strategy and Change Management.................................503
Learning Objectives ......................................................503
Key Terms .....................................................................504
Values, Mission, and Vision............................................504
Gap Analysis and Organizational Change.......................510
Chapter Summary..........................................................515
Chapter Resource...........................................................516
Chapter Questions.........................................................516
Chapter Cases................................................................516
Chapter Activities...........................................................519
References......................................................................520
Case 1 A Dilemma of Loyalties..................................................523
Case 2 Theranos and Elizabeth Holmes.....................................525
Case 3 The Injured Migrant Worker..........................................533
Case 4 The Overutilizing Orthopedist.......................................535
Case 5 The Busy Regional Vice President..................................537
Case 6 Thalidomide and Grünenthal.........................................541
Case 7 Prospect Medical: Imperfect Incentives Drive
Actions Not Consistent with Mission..............................545
Case 8 Pegasus Health’s Integration of Care..............................551
Case 9 Purdue’s Dilemma to Increase Sales................................555
Case 10 OrthoIndy.....................................................................559
Case 11 The New CEO...............................................................563
Case 12 Liver Allocation..............................................................565
Case 13 Letter from a Bereaved Mother......................................567
Case 14 HealthT Seeks Healthier Employees...............................569
Case 15 HealthSouth..................................................................573
Case 16 FHP—Utah...................................................................581
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xviii Det a iled C o n te n ts
Case 17 Starting as CEO at Skyview Hospital..............................587
Case 18 Director of Marketing Versus Operations........................591
Case 19 The Ogre and the Playroom...........................................593
Case 20 A Saudi Bid and I...........................................................595
Case 21 A Proposed Merger Gone Bad: A Lack of
Confidence in Leadership...............................................597
Case 22 Night Staffing and Job Commitment..............................601
Case 23 Mike and the Walk-Around............................................603
Case 24 Sakal’s Dilemma.............................................................605
Case 25 Sam’s Deposit Recovery.................................................607
Case 26 Shannon’s Extreme Uninsured Healthcare Costs............611
Case 27 The Ethical Challenge of Treating Hepatitis C................615
Case 28 Governance and Decision-Making in Hospital-Based
Surgical Services.............................................................617
Case 29 Mentoring, Coaching, and Delegating: Combating
High Turnover and Poor Culture...................................623
Appendix: Case Matrix............................................................................625
Glossary..................................................................................................629
Index......................................................................................................643
About the Authors...................................................................................697
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PREFACE
H
ealthcare is a dynamic and demanding field that involves continuous
human interaction. Successful leaders in this field are characterized by
their ability to work well with others. The success or failure of leaders
is primarily tied to how they interact with and motivate their employees. This
book is designed to prepare and instruct existing and future healthcare lead-
ers to understand and apply the principles of organizational behavior and
theory to improve their management abilities and skills. Ultimately, honing
these abilities and skills will lead to greater success and satisfaction with one’s
accomplishments.
This text examines theories of organizational design, leadership, and
management and the social psychology of organizations as they apply to
health services organizations. It provides the tools and framework needed to
understand, structure, and change organizational behavior in our dynamic
healthcare environment.
Specifically, this book approaches these concepts from a practical,
applied perspective. Through the chapters and cases, the book provides
an understanding of not only theory but also the way the interactions and
interrelationships of people, organizations, and structures affect the extent
to which companies succeed or fail. Having spent many years as healthcare
administrators, we have sought to demonstrate real-world experiences in use-
ful and direct ways.
This second edition offers more in-depth, focused chapters on diver-
sity, attitudes and satisfaction, work teams, and human resources policies and
practices. All chapters have been rewritten, and each includes activities and
questions designed to prompt deeper reflection on the complexity and chal-
lenge of working with individuals in organizations. Thought-provoking cases
are provided at the end of each chapter, most based on actual occurrences
that either we or one of our associates experienced. Furthermore, 29 new
cases have been added to the end of the book, which can be used to enrich
learning and improve understanding of the book’s concepts. A matrix in
the appendix shows how each case can be used in conjunction with specific
xix
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xx Prefa c e
chapters. We believe the second edition gives instructors many more options
to enrich their classes and provides more material on critical healthcare topics.
Text Competencies
Our educational and professional environment, along with accrediting bodies,
now strongly encourages—indeed, mandates—the use of competency-based
learning models that seek to identify performance needs and demonstrate the
value of learning. From an educational perspective, course curricula should
provide students with the knowledge and skills required for future careers.
Recognizing the wide variation of healthcare administration roles and profes-
sional settings, accrediting bodies such as the Commission on Accreditation
of Healthcare Management Education allow individual programs to develop
their own unique competencies.
Likewise, several professional organizations propose different sets of
competencies for healthcare leaders. The Healthcare Leadership Alliance
(HLA)—a consortium of professional healthcare administration associations
composed of the American College of Healthcare Executives (ACHE), the
American Organization for Nursing Leadership, the Healthcare Financial
Management Association, the Healthcare Information and Management
Systems Society, and the Medical Group Management Association—has
identified five domains of competencies as being valuable to healthcare
executives, administrators, and managers: (1) communication and relation-
ship management, (2) leadership, (3) professionalism, (4) knowledge of
the healthcare environment, and (5) business skills and knowledge (see the
Competency Directory page on the HLA website for additional informa-
tion and resources). ACHE, in conjunction with the Global Consortium for
Healthcare Management Professionalization, adapted the same HLA com-
petencies and published a document titled “Leadership Competencies for
Healthcare Services Managers” (available from www.ache.org/about-ache/
resources-and-links/healthcare-leadership-competencies/ at “See the full list
of competencies”). ACHE also offers its members the Healthcare Executive
Competencies Assessment Tool (available from www.ache.org/career-resource-
center/ at “Competency Assessment”), which helps healthcare administrators
self-assess their strengths and priorities for skill development. ACHE deems
the identification and improvement of members’ competencies so important
that it updates this tool annually.
Given the wide variation of possible competencies, we have chosen the
ACHE Healthcare Executive Competencies Assessment Tool to identify compe-
tencies in this book. Using the following list, instructors can quickly ascertain
which competencies are covered in each chapter to appropriately develop
their course and syllabus according to their competency-based curricula.
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Prefac e xxi
Competencies by Chapter
Chapter 1. Organizational Behavior, Organizational Theory, and Their Impor-
tance in Healthcare
Competencies:
• Knowledge of the healthcare environment
–– The community and the environment
§§ Socioeconomic environment in which the organization functions
§§ Healthcare trends
• Business skills and knowledge
–– Organizational dynamics and governance
§§ Organization systems theories and structures
§§ Governance structure
§§ Principles and practices of management and organizational
behavior
Chapter 2. Theories of Managing People
Competencies:
• Business skills and knowledge
–– Organizational dynamics and governance
§§ Organization systems theories and structures
§§ Governance theory
§§ Principles and practices of management and organizational
behavior
–– Strategic planning and marketing
§§ Organizational mission, vision, objectives, and priorities
Chapter 3. Supporting Diversity, Equity, and Inclusion
Competencies:
• Communication and relationship management
–– Relationship management
§§ Build collaborative relationships
§§ Demonstrate effective interpersonal relationships
• Leadership
–– Organizational climate and culture
§§ Create an organizational culture that values and supports
diversity
• Professionalism
–– Personal and professional accountability
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com.
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