5 EXERCiSE Evaluating the Financial Impact of Human Resource Management Activities: Reduced Turnover Costs I. OBJECTIVES A. To provide you with practice in analyzing data and drawing conclusions regarding managerial implications. B. To make you aware of the potential costs of controllable, dysfunctional turnover and its impact on nel income or profit. e. To make you aware of the potential benefits of human resource management activities to an.organization's "bottom line." II. OUT-OF-CLASS PREPARATION TIM E: 2 hours Ill. IN-CLASS TIME SUGGESTED: 45 minutes IV. PROCEDURES Read the entire exercise, including the "Background" on the Charlotte Health System and the three exhibits. Using the data in the exhibits, do the calculations (on your OWI1, prior to class) requested on Fonn 2. Then as.~emble groups of three to five students during the class period and discuss each of the questions. At the end of the class period, have a spokesperson for each group discuss the group's answers and rationale with the entire class. BACKGROUND The health care industry has undergone dramatic change and restructuring during the past decade. Mergers, consolidations, and downsizing were the norm as organizations struggled to prOVide more cost-effective, high-quality services demanded by managed-care organizations and corporate employers. A major response to these pressures has been the development of "integrated delivery systems" which typically combine multiple units of hospitals, physician practices, outpatient facilities, long-term care facilities, and insurance. While the goal of these systems is to provide "seamless" care through internal referrals, a common medical record, common policies and procedures, etc., the reality has been somewhat less than a total success. Among the problems identified have been differences in values and incentives between the organizational units, lack of top management knowledge of some of the units acquired, and inability to "integrate" the differl'rlt units clinically and manageriaUy. The Charlotte (North Carolina) Health System was developed from a base of a public hospital to which various delivery sites were added after Mr. Harry Majors became CEO 15 years ago. Since his arrival, Majors and his executive team have created the dominant health system in North Carolina. Despite this success, the system continues to be under pressure from employers and managed-care organizations to further reduce its costs and document both clinical quality and cost-effectiveness. Almost four years ago, Majors and the board of directors decided tbat the time had come to "professionalize" the human resource function because the organizations they had purchased or aligned with were exhibiting varying degrees of sophistication and vastly different policies and procedures. Ms. Betty Williams was recruited from another health system as the new vice president for human resources. Williams came t.