Understanding the Importance of Constituent Management When Making Strategic Business Decisions

Julie Smith Hinders, Ph.D. and Summer Zwanziger Elsinger, Ph.D. Posted on
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DOI: https://doi.org/10.64010/HGHN9630

Abstract

Rural business leaders must often balance community viability with business sustainability when making strategic business decisions. Many rural nursing homes are closing, leaving small towns with limited caregiving options for an aging population, and a negative impact on the local economy. This qualitative study sought to expand knowledge related to the experiences and challenges of maintaining rural caregiving options and understanding the importance of constituent management for those in leadership roles. The study examined a rural facility closure through surveys being sent to approximately 50 constituents. Results indicated a breakdown in constituent management, and a negative perception of closure overall. Study results suggest that more must be done to prepare future leaders to manage these types of situations, and to understand the importance of constituent management when making business decisions.

Introduction

Many in the healthcare industry believe we are in the midst of a perfect storm with a looming workforce shortage creating caregiving gaps, while at the same time experiencing a rapidly aging nation. Between now and 2030, 10,000 Baby Boomers will turn 65 every day (Eldercare Workforce Alliance, 2018), and for the first time in our nation’s history seniors will outnumber children (AARP, 2018). With increasing life spans, it is expected that more seniors will live with chronic conditions, and for seniors with advanced healthcare needs, admission to healthcare facilities often becomes necessary.

Aging issues are prominent in rural areas because a disproportionate number of older adults reside in rural communities. According to the United States Census Bureau (2010), a quarter of older adults 65 and over live in rural areas. The demand and need for senior care facilities is clear; yet, care facilities, specifically care options in rural areas are struggling. According to an article by Healy (2019), 440 rural nursing homes have closed or merged in the last decade with more closures expected in the coming years. Rural nursing home closures leave many small towns with few, if any, caregiving options for an aging population. As rural nursing homes close, it is also recognized that there is a broader impact on the communities in which the facility resides. Education and healthcare providers are often a major employer in small rural communities thus having a large impact on the local economy when facilities close.

Some areas of the country are already experiencing serious workforce and bed shortages in long term care settings. As our nation faces what has been termed as a Silver Tsunami, due to our rapidly aging population, business leaders are finding themselves faced with difficult business decisions as they work to keep struggling nursing homes from closing. According to the Iowa Department of Public Health (2020), just in Iowa, a highly rural state, there is a shortage of 11,116 nursing home beds. With the aging population projected to grow in the coming years, the United States will face a supply and demand issue regarding the need for healthcare services in rural areas. Consequently, those in healthcare leadership roles, especially in rural communities, will be faced with competing priorities in the coming years, more so than before.

Long term community viability and business sustainability can be a difficult balancing act for those in leadership roles. When rural nursing homes close it not only creates a shortage of needed services, but often eliminates what may be the largest employer in a rural community. As noted by Neal, Miller, Ban-sal, Fishman, & Chew (2019, p.9), “these challenges can foster a vicious cycle in rural communities. As a result, industries decline, economies dwindle, and the brunt of that impact affects the quality of life for rural residents who may ultimately get left behind.” This creates a tremendous burden for those in leadership roles.

While business leaders are used to juggling many factors such as regulations, laws, workforce availability, and financial challenges, another important component that cannot be overlooked, especially in rural communities, is constituent management. As noted by Verleye, Gemmel, and Rangarajan (2014, p.2), “firms striving for long-term profitability need to build stronger customer-firm relationships by getting their customers more engaged with the firm. One path to this end is introducing practices to manage different forms of customer engagement behaviors (CEBs).” This research is designed to help those in healthcare leadership roles, and other business leaders, to better understand the importance of customer engagement when making business decisions.

Theoretical Framework

Selections of a theoretical framework were purposeful, given the desire to investigate a wide range of stakeholders in the nursing home and the surrounding community. The Complex Adaptive Systems (CAS) is a framework for “studying, explaining, and understanding systems of agents that collectively combine to form emergent, global level properties” that produce non-linear dynamic behavior (Carmichael & Hadzikadic, 2019, 1). For this research, agents were groups of people in the community or the region, here by referred to as constituents.

The constituents generate emergent patterns through feedback throughout the system, which the feedback creates and strengthens the basis of attraction: A persistent pattern of behavior that itself is outside of equilibrium (Carmichael & Hadzikadic, 2019). One of the fundamentals of this theory is there is many times the ability for using the key features of one system to gain insight into another distinct field or system. In this case, systems outside of the Nursing Home industry could be considered. Systems or “organizations will exchange with other organizations to ensure the continuation of needed resources” (Chisholm, Zhang, Hyer, Pradhan, Unruh, & Lin, 2018, 1).

In nursing homes, information processed for learning comes from multiple sources and constituents including accumulated knowledge from the field and outside of it (Jordan, Lanham, Anderson, & McDaniel, 2010). Health care administrators must, therefore, “design systems that foster processes for the well-structured problems but that will also capture the ill structured problems so that human problem solving can occur” (Bohmer, 2009, p. 3). Both the types of problems and processes need to encompass continuous learning by the stakeholders; the relationship among the constituents themselves drives learning new ways to solve problems. In short, no system can function in isolation. This is very true in rural communities where economies of scale may not be a realistic option for survival of organizations.

CAS counters traditional linear management theory, which assumes there is one preceding person to influence the next lower level. A common bias that CAS can counteract is the hierarchical bias, which assumes a strong, top-down organization is effective. Penprase and Norris (2005, p. 128) also noted that CAS specifically allows nurse leaders within nursing homes to embrace “the concepts of self-organization and attractors (catalysts that allow new behaviors to emerge spontaneously) that enable order and creativity to emerge” to solve problems. A nursing home operates in a CAS with nonlinear relationships among diverse, far-reaching learning constituents. Failing to recognize all constituents within the network, and what can be learned from each, limits the organization from adapting/responding to its wider environment.

Purpose of Research

Using the problem of rural nursing home closures as the backdrop for this study, the researchers looked at an Iowa-based nursing home and assisted living facility that closed at the end of 2019; while their 16-bed memory care unit and senior Independent Living remains open. The facility is in a small, rural, agricultural community with a population of approximately 1,200 people.

The study was conducted to expand knowledge of the experiences and challenges of maintaining health care services in rural communities and the importance of constituent management for those in leadership roles. The study was designed 1) to provide a better understanding of constituent perceptions related to the facility closure and community impact and 2) to provide further insights into the importance of constituent management for those in leadership roles.

Currently there is limited research looking at rural nursing home closures, particularly in the area of qualitative research. Past research has often been quantitative and has focused on evaluating information such as a facility’s OSCAR reports, five-star quality ratings, and payment rates for the closed facility. While this provides important insights, it offers a limited view of the overall problem. This study was unique, as it explored a rural nursing home closure from the perspective of various internal and external constituents. This type of data should provide valuable information for those in leadership roles that must navigate constituent relationships to gain support of strategic business decisions.

Method

Participants

Various internal and external constituents of the nursing facility were invited to participate in an electronic survey focused on better understanding community perceptions and the overall impact associated with the facility closure. Electronic surveys were sent to 50 constituents both with knowledge of the facility and those that may have been impacted by the facility closure. Efforts were made to increase the number of respondents, but the researchers recognized that the overall number of responses was likely impacted by the Federal lockdown due to the pandemic.

Constituents included employees, board members, community members, local business owners, volunteers, local pastors, and family members of residents. Survey questions ranged from their knowledge related to the reasons for closure, how the closure was communicated to the community, and the anticipated impact of the closure on the community (Table 1). Human subjects’ approval was obtained before researchers began the study from their institution.

A total of 19 participants completed the electronic survey. Approximately 57.89% of participants were women (N = 11), 10.52% were men (N = 2), and the gender was unreported for 31.57% (N = 6). Approximately 31.58% of survey participants identified as community members (N = 6), 10.53% identified as local business owners (N = 2), 5.26% as a volunteer (N = 1), 10.53% as employees (N = 2), and the remaining 42.11% identified as other (N = 8). The other category was made up of family members of past residents, pastors, and board members.

Procedure

Trustworthiness in qualitative research.

Criteria outlined by Lincoln and Guba (1985) was used to help ensure trustworthiness of the research throughout the process. Researchers engaged in triangulation by independently analyzing the survey responses and then coming together to compare results. Some additional discussion was needed to align chosen wording, but overall coding and themes were similar for both researchers. Transferability generally refers to the degree to which the results of qualitative research can be generalized or transferred to other contexts or settings. Researchers worked to enhance transferability by describing the context and assumptions central to the research. Some assumptions were made related to the survey results including that the responses given were true and reflected the honest perspectives of the participants. Using Lincoln and Guba’s framework helped ensure confirmability of the interpretation of the data and provides an audit trail for other researchers interested in conducting similar research.

Results

Three themes were noted and provided evidence to address the research questions (Table 2). Based on survey responses, the facility experienced communication challenges related to the closure, and for many community constituents the reason for the facility closure remains unclear. Another theme emerged related to the negative impact on the community. Many constituents expressed concerns about the long-lasting impact they felt the closure would have on the broader community.

RQ1: Investigate constituent awareness and understanding of the reasons for the facility closure.

Themes emerged that addressed this research question including Unclear Rationale for Closure and Perceived Communication Challenges Related to the Decision to Close (Table 2). Both themes depicted constituent comments that provided insights into the perceptions of how the closure of the facility was handled and communicated by leadership.

Unclear Rationale for Closure

This theme was related to constituents offering various reasons for the facility closure. There was no consistent messaging when posing the question related to why the facility needed to close. When asking about the reason for closure one constituent responded, “The Care Center’s physical structure was outdated and cannot be rehabilitated to suit modern needs and requirements. The facility is losing money because of the current health care system and funding or lack thereof.” Another constituent commented, “My understanding is that they were financially in the hole so badly, that they were unable to see their way out.” Another commented, “Inability to staff appropriately with local residents.” A few constituents simply stated they were unaware of the reason for closure as referenced in the following responses, “I did not hear the reason for closure.” “No, I am unaware of the reasons why the home closed for sure.” and “Never heard the reasons, all hearsay.”

Communication Challenges Related to the Decision to Close

Building on the above theme, this theme was related to how leadership communicated the need for the facility closure. Survey responses would suggest that facility leadership needed to do more to communicate the reasons for closure to the broader community. When asked how the constituents were made aware of the decision to close, responses were varied. One constituent responded, “Announcement at church.” Others commented, “Letter and community member.” and “Local newspaper.” Another constituent also referenced the newspaper, but only after first hearing rumors. They commented, “While there had been rumors, the first direct information I had was through a local newspaper article.”

Communication challenges related to the reasons for closure were noted by several constituents stating they learned of the closure via informal channels, the “…gossip tree.” and “Word of mouth around town.” Other similar comments included, “I heard rumors circulating throughout the community.” “Heard the news by talking with community members.” and “Someone locally shared the news with us.”

RQ2: To provide further insights into the importance of constituent management for those in leadership roles.

Survey questions around this topic generated the greatest feedback. The survey responses help illustrate the challenges leaders face when having to make difficult business decisions. In rural communities, business closures often have an economic impact on the broader community. This can be especially true for nursing homes, which are often one of the largest employers in rural America.

Survey responses indicated great concern from constituents when asked how the closure would impact the broader community. Some of the survey responses focused on the economic impact. One constituent said,

“I feel the closure is a huge detriment. The facility at one time was one of the town’s largest employers. Now the staff have been forced to go out of town for employment.” Other comments included, “I am very concerned about the economic health of the community. It has appeared to already affect our retail sales for goods and services, an example would be the local grocery store and pharmacy.” Another commented, “It is another example of the marginalization of rural America. The impacts are both social and economic.”

Other survey responses focused on the concerns for care for those aging in the community. One constituent said, “My mother is 90. If the time comes that she needs an assisted living or nursing home in the future, she will have to leave town to find services.” Other comments included, “We do not have adequate facilities to care for our elderly population in the rural areas, the closure of the facility has also decreased our local appeal to bring people to town which decreases our tax base of new residents and people coming to visit family and spend money locally.” and “People who have lived here all their lives now have to spend their final years in a strange community.” One constituent comment simply captured the community impact, “Whenever a business closes, the whole community suffers.”

Discussion

Using the problem of rural nursing home closures as the backdrop for this study, the purpose of this research was to 1) provide a better understanding of constituent perceptions related to the business closure and 2) to provide further insights into the importance of constituent management for those in leadership roles. In addition, the researchers sought to understand constituent perceptions related to the impact the business closure had on the broader community. Based on constituent comments, the relationship between community viability and business sustainability became readily apparent. This should reinforce to business leaders the importance that community inclusion and engagement can have on the health of their business, the broader community, and in this study, on the wellbeing of the residents.

All emerging themes clearly pointed to the need for more transparent communication between the facility and community constituents. Survey responses indicated that there was not a clear-cut communication strategy related to the facility closure. As noted, even today for some constituents the rationale for closure remains unclear. It is important for business leaders to create a communication plan in these types of circumstances. It would appear, based on survey responses, that no one assumed ownership (administration, board of directors, etc.), related to a communication strategy, thus there were numerous breakdowns in messaging with the involved or impacted constituents. Seeking a way to manage and track engagement with constituents is highly encouraged, such as a constituent management software. For this facility, lack of communication to constituents can also point to potential future issues that could be encountered by the remaining memory care services and senior living center, one of mistrust. For all business leaders, seeking to actively engage, as well as to include and seek feedback from constituents, is important, but it can be the lifeblood for small rural communities (Verleye, Gemmel, & Rangarajan, 2014).

Complex Adaptive Systems (CAS) & Network Theory

This research points to the need for organizations striving for long-term profitability to build stronger constituent-organization relationships by getting both internal and external stakeholders more engaged with the organization. Seeking ways to better manage broader constituent engagement networks should be considered to gain business support from constituents. In an effort to gain insight on constituents interacting with the facility, the network theory in organizational structures concept was evaluated (Figure 1). Other organizations, such as Toyota, operates, very successfully, under this structure. Based on past qualitative and quantitative studies, it has been demonstrated that organizational support and overall service quality towards “significant others influence” greatly impacts the wellbeing of the organization – more specifically feedback and positive word-of-mouth behaviors of significant others (Verleye, Gemmel & Rangarajan, 2014). Based on this study, the impact of word-of-mouth behaviors is even more influential in small rural communities, in survey results terms such as ‘rumor mill’ or ‘gossip tree’ were mentioned multiple times. Significant others includes all constituents, both internal and external.

Other researchers have discovered a problem that lies within the network, in how information flows in these networks. The stronger the ties and the more numerous the ties between network constituents, the more un-diverse of information gathered. To be exposed to more diverse information, businesses need to get that information for a source that is less connected (weak tie) to the business. Information from weak ties is more likely to be varied because information is from more diverse sources. The weak tie theory is very useful for network structures and if utilized, this theory allows reorganizing of internal organizational structure to promote the free-flow of information between areas (Granovetter, 1973). Often this is done through informal networks/social networks, such as community gatherings or social events within the broader community. The better information and knowledge flows in organizations, the more productive for the business (Cross, Parise, & Weise, 2007).

Notes.

+ Starmont = Strawberry Point, Arlington & Lamont (joined at school district since the mid-1960s)

*Lions Club, Masons, etc.

Italics indicates closure of this organization since research was gathered.

Font size does indicate strength of influence on nursing home

As of 2010 census, Strawberry Point had a population of 1,279 people with a median age of 45.2 years with 26.5% of the population being 45 to 64; and 23.8% are 65 years of age or older (United States Census Bureau, 2011).

Community Engagement

Organizational socialization and support from other constituents were found to have a positive impact on all forms of constituent engagement behavior within CAS. Simply managing the organization from within is not enough; active community inclusion and engagement is sought for a business to be able to thrive. Business leaders must maintain a broad network of stakeholders to generate long-term profitability (Kumar, Aksoy, Donkers, Venkatesan, Wiesel, & Tillmanns, 2010). Specific to rural communities, community engagement may include being present and visible by doing business within the community, advertising in local newspapers, holding/ sponsoring local events, and being active within the community.

Healthcare Leaders

Based on the themes generated from the study, the researchers believe there could be a relationship between lack of community engagement and leadership training on constituent management.

In Iowa, nursing home administrators have multiple requirements, but specifically education requirements include:

  • Bachelor’s degree from accredited college in:
    • health care administration,
    • health services administration,
    • health care management,
    • health services management,
    • nursing home administration, or
    • long term care administration.

The degree program must also include the following:

  • Ten semester hours of business management, accounting or business law, or any combination thereof, AND
  • Six semester hours of gerontology or aging-related coursework in disciplines including, but not limited to, the sciences and humanities, AND
  • Twelve semester hours in health care administration, including, but not limited to, the areas of organizational management, regulatory management, human resources management, resident care management, environmental services management, and financial management.

(Bureau of Professional Licensure, 2021).

States each set their own licensure standards, but the Administrator Licensure Exam is a national exam. The healthcare industry is highly regulated, thus those in leadership roles often become so focused on meeting industry regulations that many times the constituent management piece of the role may get missed or forgotten. The search for resources or training available for nursing home administration was undertaken by the researchers. Leading Age is a charity organization providing a trusted voice for aging that focuses on education, advocacy, and research (Leading Age About Us, 2021). Leading Age offers a Leadership Academy, which is a year-long, graduate-level curriculum that unfolds over “five in-person experiences and monthly virtual gatherings that provides a broad understanding of leadership theory and practice through multiple program components” (Leading Age About Leadership Academy, 2021). This type of program is commendable, but for facilities already struggling financially, the time and cost outlay for this type of program may not be realistic.

Although not typically required for Nursing Home Administrator Licensure, the coursework for a Masters in Healthcare Administration does heavily focus on constituent management more so than that of undergraduate programs, with between 40-50% of the coursework focusing on leadership ‘soft’ skills. Potential coursework includes: Health Care Human Relations Management, Organizational Behavior & Leader Theory, Organizational Development, Strategy Formulation & Implementation, Strategy Marketing & Communications (Des Moines University, 2021).

Chisholm, Zhang, Hyer, Pradhan, Unruh, & Lin (2018) found that nursing homes that disproportionately serve minority residents may also have additional challenges implementing certain change initiatives compared with other facilities, due to limited financial and staffing resources. As an example, high culture change adoption was associated with nursing homes having lower proportions of Medicaid residents (Chisholm et al, 2018). The 2020 Iowa Certificate of Need data shows the need for facilities to care for the aging is outpacing the supply in the county in which this facility resided, where many residents were reported to be funded by the government-funded Medicaid program. This might suggest the need to revisit the Medicaid payment allocation amount, which typically does not cover the full cost of patient care (Cox, 2020). Inadequate resources make it difficult for those in leadership roles to engage in training programs that may be of benefit. A lack of resources can also lead to a strained workforce, thus impacting the time available for community engagement activities.

Limitations and Future Directions

While the number of survey participants meets sample size sufficiency suggested for qualitative studies, more confidence and detail in the results would exist if the sample had been more robust (Vasileiou, Barnett, Thorpe, & Young, 2018). After the researchers came together for comparing emerging themes, some additional questions arose that could have strengthened the research. Consideration was also given to the value that could be added through interviews rather than surveys with constituents to gain further historical context related to the facility and the struggles and changes in their symbiotic relationship with the community.

Many themes emerged from this qualitative study on the constituent perceptions of the business closure and community impact in rural Iowa. As with all research undertaken, many times more questions arise than are answered, especially for exploratory research such as this. The emerging study themes do point to the need for more communication with a wider constituent base to be considered, along with seeking new ways to manage and track the flow of communication between constituents.

According to Scott (2014), corporations are seeking graduates with strong communication skills that can critically think, be good listeners, that are solution-focused, and that can work well with others. This research also demonstrates how important effective communication can be when faced with making strategic business decisions. To better prepare current and future leaders, it is important that business communication focused on soft skills, along with constituent management be a part of training programs and required coursework.

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