Kathleen D. Sanford

Leadership development for nurses can have a positive impact on an organization's bottom line, particularly in light of future financial challenges.

At a Glance

Nursing and finance leaders can support their organizations' goals and strategies by:

  • Recognizing the business case for management competence, specifically in how supervisors affect employee satisfaction and turnover  
  • Gaining business acumen, specifically in competencies such as human resource management and understanding of healthcare financing  
  • Promoting management and leadership development, starting with charge nurses and moving up through the ranks of nursing management  

When nursing leaders discuss how they entered the ranks of management, most wryly admit their first leadership positions were not planned. "I was the only one who would take the job" or "I came to work one day and was told I was the new charge nurse" or "I was talked into it by my boss" are all common stories. What they don't mention, however, is the underlying reason they were tapped for promotion: They were excellent clinical nurses. Therefore, it was assumed they would make excellent managers.

This reasoning is not unique to nursing or even to clinical fields. For years, other professions have also failed to recognize that management is a specialty with its own knowledge base and competencies. They have promoted individuals who, despite previous successes, are ill prepared or even unsuited for the realities of supervisory jobs.

This practice can have serious repercussions. There are real costs to organizations whose supervisors are not competent in management, a discipline devised to maintain control and do things right, and leadership, an art that inspires the hearts of others and concentrates on doing the right things (Sanford, K., Leading With Love, Washington: Vashon Publishing, 1998, pp. 42-43). Both finance and clinical leaders need to be aware of this concern and work together to ensure the appropriate selection and education of clinical leaders.

This article focuses primarily on nursing leaders, but there are clear correlations to other hospital leaders. For example, as hospital leaders strategize and plan for success in the future, one tactic frequently mentioned as part of the goal of physician engagement is the promotion of more physicians into formal leadership positions. Just as the best clinical nurses are not necessarily the best leaders, the physicians most talented in patient care might not be the best choices for healthcare management jobs.

Clinical leaders require human-resource management skills because they manage and work with people. They also need to understand the business side of health care so they can support business goals that might, at least to some, seem to be at odds with quality initiatives. To clinicians, hospital finance leaders may seem to have little concern for the provision of safe patient care. Meanwhile, those who understand the business of health care may find it frustrating and even incomprehensible that so many clinicians do not understand the reasons behind business decisions. "How," they wonder, "can it be that nurses who have worked their whole lives in hospitals know so little about hospital finance?"

It's a valid question: How did so many of us who provide patient care get so separated from those who manage a hospital's financial resources? This question points to an evolution that began almost a century ago, in which hospitals' finance leadership began to separate from clinical leadership. And with this evolution came many challenges, which have remained with us to this day. (For an examination of the reasons why the healthcare industry evolved into a separation of business and clinical skills, and why that evolution needs to be reversed, go to "Why Business and Clinical Disciplines Separated,and Why They Needed to Be Reunited."

But this question aside, it is up to leaders on the business side of health care to offer clinical leaders a clear rationale for why it is so important for them to have a deeper knowledge of hospital finance.

The Financial Case for Management Competence

For the past several years, NSI Nursing Solutions, Inc., a national staffing company based in East Petersburg, Pa., has compiled a list of reasons nurses leave their jobs. The list has remained remarkably similar from year to year. According to one report, 56 percent of registered nurses (RNs) surveyed cited poor nurse management skills as a reason to leave their jobs.

This number is alarming when viewed by itself, and even more so when other reasons are considered: workload/staffing (listed by 91 percent of nurses surveyed), peer and nurse manager relationships (81 percent), a more desirable work culture elsewhere (79 percent), and physician relationships (29 percent). All of these reasons can easily be connected to the management and leadership skills of the nurse management team, as is shown in an online presentation by NSI Nursing Solutions (CNO Salaries and Top Concerns 2011, www.nsinursingsolutions.com/administrators/admin-research/compensation-studies.aspx ). Work culture is largely influenced by leaders, from the boardroom to the individual unit. In addition, skilled managers know how to intervene when peer and physician relationships are poor.

NSI Nursing Solutions' presentation notes that the estimated cost of replacing one nurse is $66,560 to $133,120. Costs include recruitment, orientation, and overtime payments when vacancies are unfilled, as well as use of agency hours to fill staffing shortfalls temporarily. In today's economy, with hospitals reporting reduced turnover and vacancy rates, these costs might not be at the forefront of CNO and CFO concerns. However, as the economy improves, turnover will increase as some nurses choose retirement and others seek different employment opportunities. The nursing shortage will reach 260,000 unfilled positions by 2025, according to the American Association of Colleges of Nursing (www.aacn.nche.edu/Media/Factsheets/Nursingshortage.htm).

New job opportunities for nurses in the changing continuum of care model will add to the shortage experienced in acute care hospitals. It's clear, then, that organizations need to take actions to attract and retain competent staff. Given that the reasons for turnover are so strongly influenced by nursing management skills, the cost of not addressing nurse leadership development will only become more significant.

Turnover is not the only cost incurred when an organization lacks strong clinical management and leadership. As the Centers for Medicare & Medicaid Services and other payers accelerate value-based purchasing, hospital-acquired conditions (HACs) will present a price tag that goes beyond the ethical cost of failing to perform in accordance with the physician and nurse mantra "First, do no harm." Under value-based purchasing, hospitals will begin to receive incentive payments in FY13, based on their achievement or improvement on a set of clinical and patient care quality measures (CMS press release, Jan. 7, 2011). There will be increased financial ramifications of HACs, which are largely dependent upon the organization's nursing care. Nursing care, in turn, is strongly influenced by the skill of nursing managers to decrease clinical care variability and institute evidence-based care (Sanford, K., "Reducing Variance in Nursing Practice," hfm, November 2010).

Managers who are respected by the staffs they lead know how to sponsor and lead others to make clinical improvements. They can help clinicians understand how evidence-based practices are essential to improving patient care quality and safety, and thus will benefit the clinicians' patients. Finance leaders will easily be able to calculate the cost of an unintended shortage of competent leaders as they estimate the margin losses that their organizations almost inevitably incur as value-based purchasing is implemented and expanded.

Other costs correlated to nursing management competency may not be as easily calculated, but also have a significant impact on a hospital's financial health. Hospitals adjusting to healthcare reform will need to change processes, staffing models, services, and procedures. Organizations that invest in professional change agents-either through employed specialists or consultants-to facilitate these transformations in patient care should not overlook the influence of their formal clinical leaders. A clinical manager has different types of power:

  • Position power because of the manager's title or job
  • Expert power because of her or his specialized clinical knowledge
  • Personal power to influence others because of personal relationships and the respect earned through demonstrated competence

The clinical manager's commitment to the organization's goals strongly influences that of other clinicians. And without commitment from most of the clinical team, change cannot occur. As one change management firm notes, "Most organizations introducing major change agree that the full value promised from investment seldom materializes," and "It is only when the organization accompanies installation [of the change] with the effective management of the human aspects of change that it may fully realize an initiative's intended benefits" ("Building Commitment to Organizational Change," Conner Partners, 2004).

An investment in clinical leadership development is a legitimate cost for hospitals that want to realize full ROI on any project that requires nursing support. A lack of strong clinical leadership can put many types of hospital projects at risk:

  • Clinical IT implementations that positively impact patient care
  • Changes to increase nursing and other clinician productivity
  • Patient safety and quality initiatives
  • Adoption of new technologies, such as virtual and telenursing

If nurses in management practice are to fully support their organization's goals and strategies, they can no longer afford to develop their leadership skills simply by observing role models or accepting new challenges and "learning as they go." Although both of these approaches have helped many leaders succeed in the past, organizations today need to develop a more thoughtful plan to help nurse managers gain the skills they need to ensure the organization will thrive into the future.

When nurse leaders make a commitment to formal management and leadership development, the value they bring to patients, colleagues, and the organization as a whole increases substantially. A good place to start this development is with charge nurses, first-line supervisors who are often overlooked in programs of management education (see the sidebar below). 

CNOs and CFOs: Partners in Clinical Leadership Development

CNOs recognize the leadership development needs of their organization's nursing managers. Many hospitals and systems have invested in formal programs, both to identify potential future leaders and to provide them with educational opportunities. At Catholic Health Initiatives (CHI) in Denver, recognition of the importance of clinical leadership competence has resulted in a systemwide program to develop both nursing and medical leaders. The initiative is led by a vice president for nursing leadership development, who is an RN, and a vice president for physician leadership development, who is a physician. Recognizing the similar education needs of nurses and physicians, these two leaders work with each other as well as with CHI's Center for Leadership Formation.

Why don't all organizations invest in formal leadership development programs? The reasons include limited resources, a failure to understand the benefits of competent nursing leaders at every level (or even of what competencies clinical leaders need), and a lack of awareness of the costs incurred when clinical leaders are not developed. Perhaps the underlying perception that great clinicians make great leaders persists as part of the failure to understand that clinical management is as much a specialty as any clinical specialty, with its own set of competencies.

Clinical leaders need the support of their financial colleagues to make the business case for their own and their peers' leadership development. CNOs have the expertise to know what type of education is needed for each group of managers and how development should be planned depending on the needs of each individual leader. Individualized programs might include:

  • Professional organization fellowships and conferences, such as those mentioned above
  • Online courses
  • Group classes in basic management as appropriate for particular jobs
  • Mentorships or in-house management residencies

New managers also should be paired with exemplary leaders for coaching, as well as with a member of the finance staff. Clinical leaders would benefit from learning about the business side of the enterprise and gain practical skills, such as budgeting and variance reporting. And finance leaders would likely benefit from learning more about the clinical enterprise. Often, leaders from different professions are surprised to learn how much they did not know.

Throughout the history of acute care hospitals, there has not always been a widely perceived balance among quality patient care, positive work cultures, and economic success. Many of the challenges faced by healthcare organizations have not changed over multiple decades, while the need to find solutions to these challenges has never been greater. We will be forced to live within tighter budgets while continuing to face high demand for expensive technology and clinical IT systems. At the same time, we will need to mitigate shortages of personnel, balance quality with finances, and juggle demands from stakeholders.

As hospitals and health systems develop plans for thriving in a future of accelerated change, developing clinical leaders becomes an increasingly important tactic. As CFOs analyze how to maintain positive margins, they should work with CNOs and other clinical leaders to support a development plan for a clinical leader pipeline. Working together, we can strategize how to maximize the benefits of our valuable clinical leaders.

Kathleen D. Sanford, RN, DBA, MA, FACHE, is senior vice president and CNO, Catholic Health Initiatives, Denver (kathleensanford@catholichealth.net).

Sidebar 1

The Charge Nurse and Management.   

They may not have the same name at every organization, but their role is fairly consistent. Most commonly known as charge nurses, these key members of the hospital workforce serve in supervisory roles for a single shift on a single unit. Sometimes recognized as part of the management team, charge nurses may be paid a differential. Other times, they may receive the same pay as other nurses. Some charge nurses share the work of shift leader, based on rotations. In the least formal scenarios, these nurses take charge of the shift simply because they were the first nurses to report for duty on a particular day.

  • Typically, the duties performed by inpatient charge nurses include:
  • Making patient care assignments to the other nurses
  • Leading patient care plan conferences
  • Communicating with the admitting team on appropriate patient bed placements
  • Making decisions on when a patient can be transferred from another unit
  • Communicating staffing needs for their own shift and the next shift to a central staffing office (or, if there is not a central office, planning the staffing themselves)
  • Keeping medical staff and other nurses informed of issues on the unit
  • Solving problems for hospital staff, medical staff, patients, and families
  • Caring for patients

More often than not, charge nurses are also informal leaders, with a high degree of influence on their nursing colleagues. They have daily control over use of hospital personnel, equipment, and supplies. They influence how other staff members feel about hospital management and new technology or processes occurring on the units. Their interpersonal skills affect personnel turnover. Yet in many hospitals, they are not considered part of the leadership team and have very little management education or information on the organization's goals. The bottom line: They are an underutilized resource for unit efficiency and change management.

Sidebar 2

Suggested Topics for Nursing Management Education  

Management education for nurses may include graduate business degrees, fellowships, and courses offered by professional nursing associations. These can be augmented with programs that cover topics specifically developed for individual managers or groups of leaders. To this end, each organization must determine the specific needs of its new leaders and then customize courses appropriately for each management level. New managers will require education in human resource management, business and finance, and quality care leadership. Education at each level of management should build on education and learning from previous positions, in accordance with the nursing profession's strong belief in lifelong learning (typically, even highly educated and experienced nurse executives continue to hone their leadership skills). The sample topics listed below are illustrative of how core education can be tailored to each position.

Business and Finance Topics  

For charge nurses:  

  • Basic budget: The parts of a budget and your influence on managing each

For middle managers:  

  • Building and managing your budget, including skills for zero-based budgeting
  • Budget variance reporting
  • Tactics for reducing department costs
  • Basic accounting language and reports

For executives:

  • Healthcare economics
  • Hospital finance
  • Strategic planning
  • Encouraging and nurturing innovation

Human Resources Management Topics  

For charge nurses:  

  • Making the move from colleague to supervisor: What to expect and how to navigate
  • Conflict management: Your role and where/when to get help
  • Personalities-yours and others-and various tactics for working together
  • Change management: Understanding your role
  • Taking care of you: Avoiding supervisor burnout so you can care for others
  • Effective communication

For middle managers:  

  • Basic labor law and your responsibilities as a manager
  • Interviewing and selecting staff
  • Conflict management
  • Change management
  • Taking care of you: Avoiding management burnout
  • Mentoring and coaching others
  • Effective communication

For executives:  

  • Changes/updates in national and state labor laws
  • Developing the clinical management pipeline
  • Planning for future care models and workforce needs

Quality of Care Topics  

For charge nurses:  

  • Your supervisory role in patient quality and safety assurance
  • Your role in communication between management and staff
  • Understanding quality metrics and reports
  • Understanding and participating in incident root-cause analyses

For middle managers:  

  • Planning and implementing interventions to improve quality and safety

For executives:  

  • Strategic planning for improving system wide quality and safety

Publication Date: Tuesday, March 01, 2011

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