Briefly explain how the measurement of divisional

performance differs when assessing the achievement of

strategic targets as distinct from operational targets.

$(10$ marks$)$

$($b$)$ BTS is a hospital which supplies a wide range of

healthcare services. The government has created a

competitive internal market for healthcare by separating the

function of service delivery from purchasing. The

government provides funds for local healthcare

organisations to identify healthcare needs and to purchase

services from different organisations which actually supply

the service. The service suppliers are mainly hospitals.

BTS is a service supplier and has established contracts with

some purchasing organisations. The healthcare purchasing

organisations are free to contract with any supplier for the

provision of their healthcare requirements. Previously, BTS

was organised and controlled on the basis of functional

responsibility. This meant that each specialist patient

function, such as medical, nursing and pharmacy services,

was led by a manager who held operational and financial

responsibility for its activities throughout the hospital. BTS

now operates a system of control based on devolved

financial accountability. Divisions comprising different

functions have been established and are responsible for

particular categories of patient care such as general medical

or general surgical services. Each division is managed by a

senior medical officer.

BTS$$s Board recognises that it exists in a competitive

environment. It believes there is a need to introduce a

system of divisional appraisal. This measures performance

against strategic as well as operational targets, using both

financial and non$-$financial criteria. The Board is concerned

to develop a system which improves the motivation of

divisional managers. This will encourage them to accept

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responsibility for achieving strategic as well as operational

organisational targets. In particular, the Board wishes to

encourage more contractual work to supply services to

healthcare purchasing organisations from both within and

outside its local geographical area. It is a clear aim of the

Board that a cultural change in the management of the

organisation will result from the implementation of such a

system.

Required:

Discuss the issues which the Board of BTS should take into

consideration in establishing a system of performance

measurement for divisional managers in order to ensure the

attainment of its strategic targets.