1. Chapter 2. History of Performance Improvement Daniel B. McLaughlin Julie M. Hays Healthcare Operations Management

2. Copyright 2008 Health Administration Press. All rights reserved. 2-2 Chapter 2 History of Performance Improvement Knowledge Based Management (KBM) Scientific Management -Mass Production -Frederick Taylor -Frank and Lillian Gilbreth Quality -Quality Gurus TQM, CQI, Six Sigma ISO 9000, Baldrige Award Lean Service Typologies

3. Copyright 2008 Health Administration Press. All rights reserved. 2-3 Operations Management What is operations management? Operations management is the design, operation, and improvement of the processes and systems that create and deliver the organization’s products and services. The goal of operations management is to more effectively and efficiently produce and deliver the organization’s products and services.

4. Copyright 2008 Health Administration Press. All rights reserved. 2-4 Operations Management in Healthcare Organizations Cost and level of healthcare is increasing -1987 11% of US economy for healthcare -2004 15% of US economy Control costs Improve level of service Improve quality

5. Copyright 2008 Health Administration Press. All rights reserved. 2-5 Systems View Labor Material Machines Management Capital Goods or Services OUTPUT INPUT Transformation Process Feedback

6. Copyright 2008 Health Administration Press. All rights reserved. 2-6 Knowledge Hierarchy Importance Learning Information Data Knowledge Understanding Wisdom Relationships Patterns Principles Morals

7. Copyright 2008 Health Administration Press. All rights reserved. 2-7 Mass Production Two men use hammers on Ford factory assembly line Men work on Ford on assembly line and then drive away Two men assembling car in Ford factory

8. Copyright 2008 Health Administration Press. All rights reserved. 2-8 Frederick Taylor The Principles of Scientific Management (1911) “Wasted” human effort One best way Four principles -Standard work -Training -Cooperation -Planning

9. Copyright 2008 Health Administration Press. All rights reserved. 2-9 Frank and Lillian Gilbreth One best way Time and motion studies Cheaper by the Dozen

10. Copyright 2008 Health Administration Press. All rights reserved. 2-10 Project Management Gantt chart (early 1900s) Program Evaluation and Review Technique (1950s) -U.S. Navy -Beta distribution for task times Critical Path Method (1950s) -DuPont and Remington Rand

11. Copyright 2008 Health Administration Press. All rights reserved. 2-11 Quality Gurus Walter Shewhart -SPC and PDCA W. Edwards Deming Joseph M. Juran Do CheckAct Plan PDCA Cycle

12. Copyright 2008 Health Administration Press. All rights reserved. 2-12 W. Edwards Deming Father of the quality revolution 1970s energy crisis Common cause versus special variation 14 points System of profound knowledge -Appreciation for a system -Knowledge about variation -Theory of knowledge -Knowledge of psychology

13. Copyright 2008 Health Administration Press. All rights reserved. 2-13 Joseph M. Juran Quality trilogy -Quality planning -Control -Improvement

14. Copyright 2008 Health Administration Press. All rights reserved. 2-14 TQM (CQI) → Six Sigma TQM less codified than Six Sigma Based on the teachings of Shewhart, Deming, Juran Top management support and leadership Continuous improvement DMAIC, PDCA Six Sigma goal of 3.4 DPMO

15. Copyright 2008 Health Administration Press. All rights reserved. 2-15 Quality Certification and Awards ISO 9000 -To be certified, an organization must demonstrate compliance with the standards -Standards are concerned with the processes of insuring quality Baldrige Award -Based on organizational excellence in seven categories -Dissemination of best practices -2005 winners2005 winners

16. Copyright 2008 Health Administration Press. All rights reserved. 2-16 JIT → Lean → Agile Just In Time (JIT) -Inventory management strategy aimed at reducing inventory Lean -Philosophy of eliminating waste Agile -Ability to respond quickly to changing conditions

17. Copyright 2008 Health Administration Press. All rights reserved. 2-17 Service Process Matrix Adapted from Schmenner, R. W. 2004. "Service Businesses and Productivity." Decision Sciences 35 (3): 333–347. Degree of Variation Customer Interaction and Service Customization Service factory Relative Throughput Time Low High Service shop Mass service Professional service

18. Copyright 2008 Health Administration Press. All rights reserved. 2-18 Supply Chain Management Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. It also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

19. Copyright 2008 Health Administration Press. All rights reserved. 2-19 Important Events in Performance Improvement

20. Copyright 2008 Health Administration Press. All rights reserved. 2-20 Performance Improvement Improve the quality, safety, efficiency, and effectiveness of healthcare using knowledge-based tools, techniques, and programs for system improvement.