Finance-oriented vs. operations-oriented management control in public hospitals

Abstract

The purpose of this paper is to investigate the impact of finance-oriented vs. operations-oriented management control in public hospitals on physicians’ role conflict and cost consciousness as well as on perceived organizational performance. First, we conduct a participatory research project, and identify two public university hospitals with clearly differing management control environments: one finance-oriented, the other operations-oriented. Then we collect quantitative data from 211 physicians employed in these hospitals, and analyze it using regression analyses and structural equation modeling. Our empirical results indicate that a finance-oriented control environment is preferable to an operations-oriented control environment with respect to cost consciousness, but with respect to role conflict the reverse is true. Regarding the perceived organizational performance, our findings indicate that an operations-oriented control environment is more advantageous than a finance-oriented control environment. The main implication of our study is that management control issues in public hospitals are important, risky, and therefore merit dedicated managerial support. To enable effective coordination without unnecessarily creating conflicts, top management has to find an appropriate balance not only between professional autonomy and monitoring requirements, or between trust and control, but also between financial and operational performance measures.