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Clinical Laboratory Management: Basic Principles and Practices

Paul Wesolowski and Susan D. Roseff

• Management, Leadership, and Administration
• A Brief History of Management Concepts
  • Classical Theory • Behavioral Theory • Quantitative Theory • Operations Management and the Integrated Theory
• Decision Making and Problem Solving
  • What Is Decision Making? • Types of Decisions • Individual versus Group Decision Making • The Problem‐Solving/Decision‐Making Process
• Management Functions
  • Planning • Organizing • Directing • Controlling • Summary
• The Evolving Models of Clinical Laboratories
  • Centralized Testing • Decentralized Testing
• The Basics of Financial Management
  • Costs • Revenue • Gross versus Net Revenue • Medicare • Managed Care • Budgeting • Operating Budget • Capital Budget • Revenue Cycle: Billing and Collecting
• A Brief History of Clinical Laboratory Finances
• Management Ethics
• SUMMARY
• KEY POINTS
• GLOSSARY
• ACKNOWLEDGMENTS
• REFERENCES
• APPENDIXES

OBJECTIVES

To familiarize the reader with the concepts of leadership, management, and administration

To define how leadership, management, and administration are similar, are different, and overlap

To place modern management ideas in their historical context

To review the four management functions: planning, organizing, directing, and controlling

To discuss how laboratory models are evolving

To review in general terms the variety of financial management concepts and philosophy

To learn in general terms the process of decision making and how a decision‐making style reflects one’s leadership style

To define relevant economic issues that influence the delivery of healthcare services and their significance to the practice of laboratory medicine

Management is the art of getting things done through people.

MARY PARKER FOLLETT

Management, Leadership, and Administration

Leadership and management are terms that are often considered synonymous. It is essential to understand that leadership is a critical part of effective management. Managers are in constant action. Almost every study of managers in action has found that they switch frequently from task to task, changing their focus of attention to respond to issues as they arise, and engaging in a large volume of tasks of short duration.

As a crucial component of management, leadership behavior stresses building an environment in which each employee develops and excels. Leadership is defined as the potential to influence and drive the group’s efforts towards the accomplishment of goals. A manager must have the traits of a leader. Leaders develop and begin strategies that build and sustain competitive advantage. Organizations require robust leadership and robust management for optimal organizational efficiency (Appendix 1.1).

Leadership differs from management; while managers lay down the structure and delegate authority and responsibility, leaders provide direction by developing the organizational vision, communicating it to the employees, and inspiring them to achieve it. Management includes focus on planning, organizing, staffing, directing, and controlling activity; leadership is mainly a part of directing the function of management. Leaders focus on listening, building relationships, teamwork, inspiring, motivating, and persuading the followers. A leader gets his/her authority from his/her followers; a manager gets his/her authority by virtue of his/her position in the organization. Managers follow the organization’s policies and procedures; leaders follow their own instincts. Management is more of a science, as managers are exact, planned, standard, and logical. Leadership is an art.

In an organization, if managers are required, then leaders are essential. Management deals with the technical dimension of an organization or the job content; leadership deals with the “people” aspect in an organization. Management measures/evaluates people by their individual actions, past records, and present performance; leadership sees and evaluates individuals as having potential for things that cannot be measured, i.e., it deals with future and the performance of people if their potential is fully extracted. Management is reactive, leadership is proactive. Management is based more on written communication, while leadership is based more on verbal communication (Appendix 1.1).

Organizations that are over‐managed and under‐led do not perform up to their potential. Leadership, accompanied by management, sets a new direction and makes efficient use of resources to achieve their goals. Both leadership and management are essential for individual as well as organizational success.

With leadership and management defined, “administration” will be discussed. Is this something different from the above or merely a different word for what managers and leaders do? Defined by Merriam‐Webster, administer lists first, “to manage or supervise …” and later, “to furnish a benefit” (1). Based on that second definition, it is possible to think of administration as an action apart from leadership and management, focusing effort on assistance and service, as opposed to the specific acts that a manager or leader might undertake. A manager and/or leader may have as his charge the requirement to serve others. But that becomes a task specific to that individual rather than a general charge to managers at large.

One of the primary definitions of administrator refers to government and public sector affairs (1). Administration, by that definition, becomes a public service job, much like one would see in academia or healthcare. Thus, administrators might, in fact, do different things than managers. This is to say, administration is a subset of management. Administrators do all those things that make one a manager. Administrators have a public service requirement and commitment that would not necessarily be found in the portfolio of all working managers.

We have quickly covered some of the basics of leadership and management and touched briefly on administration. More information on leadership can be found in chapter 5 of this volume.

A Brief History of Management Concepts

The history of management can be categorized into four periods: classical theory, behavioral theory, quantitative theory, and integrated theory.

Classical Theory

The earliest perspective on management and management theory was described by a group called classical theorists. Most notably, this group includes Frederick Taylor and his work on scientific management theory. Additionally, this group includes Henri Fayol and his work, referred to as administrative management, and Max Weber and his research into the nature of bureaucracy. This group and others laid the foundation for management theory, in part by identifying the key managerial processes and the skills a manager needs to succeed. Perhaps most importantly, their work made management a valid subject for academic inquiry.

Taylor was one of the first people to create a science of management (2). He is best known for his attempts to systematically analyze human behavior at work. His model was a machine made of cheap interchangeable parts. Taylor attempted to do to complex organizations what engineers had done to machines. This involved breaking down each task into the smallest identifiable unit and then figuring out the best way to do that part of the job. He felt that productivity would improve if each aspect of work was carefully studied and the alternatives facing each worker were restricted. He was correct but has been criticized for dehumanizing the workplace and reducing human beings to little more than machine cogs in the production process. But, the principles of scientific management had been well defined:

1. Describe and break down each task into its smallest component and study that task until the best way to do that task is fully defined.
2. Remove uncertainty and alternatives facing each employee and reward productivity with incentives.
3. Use experts—for example, industrial engineers—to define optimal work outputs and plan for optimal results.

Fayol identified the four basic management functions: planning, organizing, leading, and controlling. His work focused on management more than tasks and production. He identified 14 principles of management, universal truths he thought could be taught (reference 3, p. 20–41), namely, division of work, authority, discipline, unity of command, unity of direction, subordination of individual interest, remuneration, centralization, chain of command,...