1. Description of Situation and Identification of Problems
1. 1 Service
The Shouldice Hospital competitive advantage is that it only conducts external hernia operations and is specifically designed and operated to provide the highest probabilities for successful treatment with “country club like” patient service. Hernia operations typically have a 90% success rate, with Shouldice hernia operations boasting over a 99% success rate. The Shouldice competitive advantage can be summarized into:
- Surgical technique: layered/increased sutured repair technique conducted via local anesthesia
- Postoperative regimen and facility design supporting early/ongoing ambulation and socialization
- Comprehensive and “country club like” location patient service
- HR structure supporting engaged experienced employees with high morale
As shown in Exhibit 1, the clinic generates nearly $3M in annual profits. The Shouldice model is a very profitable model while delivering a higher quality hernia repair service at half the cost. Referring to Exhibit 2 and 3, a Shouldice patient total cost of approximately $3000 compares to the industry average hernia repair total cost of approximately $6000.
1. 2 Description of Process
The patient experience at Shouldice consists of an orientation, tea, friendly supportive staff throughout the stay (hernia operation / recovery) all while patients socialize and relax. This is followed by free annual checkups and annual patient reunions at half the cost. A Shouldice Hospital process flow chart is provided in Exhibit 4, followed with a very regimented and efficient protocol, reinforced with training, work procedures, intensive management/oversight and is supported by experienced staff. When evaluating the process, a current bed capacity bottleneck is identified with occasional early discharges and hostel beds used for overflow.
1. 3 Service Facility
Shouldice Hospital is conveniently located close to metropolitan Toronto, just 15miles outside the city, on a sprawling relaxing countryside acreage in a renovated mansion. The Shouldice location is convenient for supplies, equipment, staff and both local and travelling patients. The hospital is functionally designed with thoughtfully planned features such as low rise stairs conducive to early and ongoing post operative ambulation, but also carpeted for a comfortable, country club vacation feel.
1. 4 Operating Control Systems
Alan O’Dell is the hospital administrator overseeing 91 employees and five departments. The Shouldice management team consists of Dr Shouldice leading the six person executive committee and senior surgeon Dr Obney who leads the surgery team and also chairs the seven person Board of Directors. The “focused factory” service delivery system minimizes “hospital” atmosphere with the country location, mansion decor and pre/post operative regimens.
The regimens encourage patient self-care and socialization supported by design features such as low rise stairs and common TV and telephone areas patient need to travel to. The examination and operating room locations are structured to encourage staff interaction, communication and efficiency of resource use. The Shouldice marketing model is based on word of mouth. Shouldice has actually procrastinated issuing their most recent promotional pamphlets due to a concern over increasingly overburdened wait lists. The hospital also conducts customer satisfaction surveys looking for opportunities for improvement.
1. 5 Work Force
The 91 Shouldice employees are non-unionized, earn higher than average wages and participate in profit sharing. Shouldice hospital workforce performance management follows a “no termination” policy supported by a coaching, training and rehabilitation programs. Shouldice hospital believes that staff need work-life balance, and staff work Monday to Friday regular hours with very little on-call. As a consequence, Shouldice has extremely low turnover, supporting the model of “always following Shouldice practices and procedures” with experienced staff.
Staff are trained extensively, and when they make a mistake, they are coached and given the opportunity to learn and improve.
2. Major Objectives
It is not clear in the case how the administrator, Alan O’Dell is evaluated. The hospital wants to continue servicing customers needing hernia repairs, and possibly increase its capacity to meet the increasing demand. Shouldice has been considering expansion, but is unsure about how to accomplish this without affecting its excellent patient service.
The hospital is concerned about competitor misuse and improper use of the Shouldice procedures which detrimentally affect the Shouldice name and reputation. And lastly, the lead Shouldice surgeon is retiring and needing to be replaced with a surgeon that will embrace the regimented Shouldice protocols but also be open to improvement opportunities and change. Shouldice Hospital does not appear to have issues with customer service, work force management or quality but is struggling with what objective to focus upon. Creating and agreeing upon a vision and mission would help determine the path forward for Shouldice Hospital. The issue of capacity appears to be the most concerning and difficult to answer for Dr Shouldice.
3. Identify alternative courses of action.
Shouldice Hospital has several options available to them for increasing capacity:
- Spend $2M to expand current bed capacity by adding a third floor. This would enable continuing the current process procedures and service model. However it does require significant expenditure.
- Franchise another hospital or outsource to other physicians. Dr Shouldice is very concerned about maintaining the Shouldice reputation, this option would not enable the close monitoring required to ensure the Shouldice procedure and process. In addition other facilities are not designed to facilitate the patient environment to critical so supporting the Shouldice” experience”
- Referring to Exhibit 5, Shouldice has the capacity to perform 42 exams per afternoon and operate on 38 patients.
Shouldice is currently only performing 33 operations per day. Increasing beds available then moves the bottleneck back to operating rooms, requiring addition of weekend operations (and staffing) regardless. Current beds needed does not exceed bed and hostel room capacity with weekend operations, therefore offering surgery on weekends is the most economical decision to better utilizes current resources. However, weekend operations is a concern for staff work-life balance and would need to be carefully considered. Improve throughput without expanding the facility or running additional days by reducing the time spent per step or by increasing the total time available by increasing workloads and/or changing schedules. Both of these options would probably detrimentally affect patient service and employee morale.
4. Evaluate alternatives and make decisions.
Shouldice Hospital is a service model and cannot adjust “inventories” or “level load” demand. Preserving the integrity of the Shouldice name and brand is of significant enough concern to rule out significantly improving throughput or franchising/outsourcing. The remaining viable options are a $2M facility expansion or conducting surgeries on weekends. The most cost effective of those options considering return on investment and challenges to obtain government funding would be to expand days available for surgery.
5. Propose implementation procedures.
To expand to weekend operations, Shouldice management will need to consult the staff. Explaining the problem (servicing patients in need of Shouldice hernia repair), options available and the optimal solution should help convince the staff of the need for the change. The story of Dr Shouldice and his inspiring goals could be presented to staff in a way that would result in the need for the change being positively versus negatively viewed. Shouldice could hire staff and ask existing staff willing to consider an alternative working schedule after the explaining the benefits of that working schedule. The new schedule could provide the flexibility for longer weekends and weekdays off. Overall, this option has the potential to improve the working environment at Shouldice. A work schedule that does not increase hours of work, but shifts workdays or increases days off may be attractive to some staff.
In addition, with the increased throughput, increased profits should be realized and could be shared with the staff willing to work the alternative schedules. Weekend operations could be achieved without affecting the current culture of the company. Executing a carefully planned change management strategy could result in newly hired staff alongside engaged motivated existing staff supporting the new schedule and increasing capacity while continuing to deliver the top quality “Shouldice” hernia repair.
Exhibit 1 – Shouldice Hospital Financials
Exhibit 2 – Customer Value Proposition.
Exhibit 3 – HRSDC Stats Canada 1982 Average Income (http://www4. hrsdc. gc. ca/. 3ndic. 1t. [email protected] jsp? iid=22)
Exhibit 4 – Shouldice Hospital Process
Exhibit 5 – Shouldice Hospital Throughput and Capacity Current Department
Capacity: Exam: 6 rooms x 20min/exam x 3 hours x 5 days/week = 270 patients
Admitting: 2 staff x 10min/exam x 4 hours x 5 days/week = 240 patients
Nursing: 2 spots x 10min/exam x 4 hours x 5 days/week = 240 patients
Operating: 5 rooms x 60min/surgery x 7 hours x 5 days/week = 175 patients
Doctors: 11 doctors x 60min/surgery x 3 hours x 5 days/week = 165 patients
Current throughput: AM 4 surgeries x 5 rooms = 20 Lunch PM 3 surgeries x 5 rooms – 2 (90 min) operations = 13 = Total of 33 operations per day or 165 patients per week New throughput AM 5 surgeries x 5 rooms = 25 Lunch PM 3 surgeries x 5 rooms – 2 (90 min) operations = 13 = Total of 38 operations per day or 190 patients per week
- Heskett J. “Shouldice Hospital Limited”. Harvard Business School Publishing. 2 June 2003.
- Human Resources and Skills Development Canada www. hrsdc.gc. ca. Financial Security – Income Distribution. http://www4. hrsdc. gc. ca/. 3ndic. 1t. [email protected] jsp? iid=22. Accessed 25/April/2012.
- Chase, Jacobs and Aquilano , “Operations Management for Competitive Advantage. ” 11th Edition, McGraw-Hill/Irwin, 2006.
- Goldratt and Cox. “The Goal: a Process of Ongoing Improvement”, 2nd Revised Edition, North River Press, 1992
- A case study on Shouldice Hospital. http://www. slideshare. net/tarunkdl/shouldice-hospital. Accessed 25/April/2012.