In a recently published article we find that the size of chain organizations has a nonlinear effect on performance of dialysis facilities. Medium-sized chain organizations have lower efficiency and higher quality than smaller and larger chain organizations.
The results call attention to being cognizant of the advantages and disadvantages of their growing size. Our study indicates that as chain organizations grow from a small size to an intermediate size, their efficiency drops and quality improves. We find that the efficiency bottoms out when chain organizations grow to have about 882 dialysis facilities whereas quality reaches its peak when the number of dialysis facilities in a chain organization reaches to about 796. After reaching these inflection points associated with efficiency and quality, facilities within the chain organizations become more efficient, but their quality levels suffer. This presents implications for decision makers to carefully think about the underlying mechanisms. The initial drop in efficiency as chain organization size increases may reflect the investments facilities affiliated with medium-sized chain organizations make when adding dialysis stations and personnel to address the demand growth. We conjecture that facilities affiliated with medium-sized chain organizations do not fully utilize their stations, thereby bringing down the efficiency. Their quality however increases, since staff in these medium-sized chain organizations has more time to give to each patient.
As chain organizations grow in size, it is likely that they see an increase in demand due to cross referrals among facilities within the chain. This increase in demand eventually provides the needed efficiency gains through economies of scale, but the associated deterioration in the quality of care raises concerns. It is possible that the approaches large chain organizations take to increase staff capacity, which differ from those taken by medium-sized chain organizations, could contribute towards deterioration in quality. Larger chain organizations tend to employ fewer registered nurses and licensed practical nurses as a percentage of their staff than medium-sized organizations. To offset the cost associated with staffing, large chain affiliated facilities employ higher levels of patient care technicians as compared to medium-sized chain organizations, which can lower their quality levels. As chain organizations grow, decision makers should appropriately manage the staffing patterns so as to avoid erosion of quality with a corresponding increase in efficiency.
To address both efficiency and quality performance, chain organizations should be strategic and develop appropriate coordination capabilities so that affiliated facilities can improve their quality while retaining efficiency gains through economies of scale. Technological innovations may make it easier to spread tacit knowledge pertaining to quality-oriented best practices. Opportunities for enabling interactions among people involved with clinical care, as well as nonclinical support services, can enhance learning and improve the quality of care. To facilitate quality improvement efforts, chain organizations can oversee the establishment of cross-disciplinary teams comprised of members from the affiliated dialysis facilities as well as the area manager from the chain organization. Organization-wide policies and procedures, including standards for clinical processes and quality improvement activities, should be widely communicated with affiliated dialysis facilities. Performance goals and objectives for dialysis facilities should be established and appropriate reporting structure of quality improvement initiatives and performance should be put in place. Chain organizations should provide feedback to affiliated facilities and, when needed, offer training and cross learning opportunities to the affiliated dialysis facilities.
For facilities within the chain organization, the results present implications for awareness of the influence of the contextual environment that chain organizations create. An independent facility has a better understanding and awareness of its resources and practices than facilities within chain organizations. Our results show that as these independent facilities join others to form a small- to medium-sized chain organization, they are able to improve quality but their efficiency suffers. The efficiency suffers, as these facilities have to coordinate efforts toward pooling their resources. As the size of chain organizations crosses a certain threshold level, the affiliated facilities gain economies of scale and increased demand, such that their efficiencies improve. However, they also witness growing heterogeneity and have difficulty managing the associated ambiguities, which have detrimental effects on their quality performance. An awareness of the changes in the environmental context and adoption of proactive adaptation measures, such as information exchange site visits to other affiliated facilities and training of staff members, can help manage efficiency and quality. Our results may be useful in other service settings beyond healthcare that have multiunit organizational forms, in that becoming part of a network, such as joining a chain organization, can have a positive or negative effect on efficiency and quality, depending on the size of the network.
Source: Dreyfus, D., Nair, A. and Talluri, S., 2020. The Impact of Chain Organization Size on Efficiency and Quality of Affiliated Facilities—Implications for Multi‐Unit Organizational Forms. Production and Operations Management, 29(7), 1605-1623