Professional Service Organizations and Focus

Author(s): Curtis P. McLaughlin, Shitao Yang and Roland van Dierdonck

Source: Management Science, Vol. 41, No. 7 (Jul., 1995), pp. 1185-1193
Published by: INFORMS
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 Professional Service Organizations and Focus

Curtis P. McLaughlin * Shitao Yang * Roland van Dierdonck

Kenan-Flagler School of Business, Carroll Hall, CB#3490, University of North Carolina,
Chapel Hill, North Carolina 27599-3490
Kenan-Flager School of Business, Carroll Hall, CB#3490, University of North Carolina,
Chapel Hill, North Carolina 27599-3490
Vlerick School of Management, University of Ghent, Belgium

This paper suggests a framework for operations managers to use in making focus decisions
in professional services. This framework is supported empirically from data from the health
care industry using three types of data: (1) industry statistics, (2) case studies, and (3) ques-
tionnaire surveys. Our objective has been to: (1) gain a better understanding of the concept of
focus as it applies to the health care sector, (2) develop a framework to assist service operations
managers with focus decisions, and (3) develop a base from which to generalize about micro-
focusing decisions in professional services.
(Service Strategy; Focus; Professional Services; Value Chain; Economies of Scope)

The literature on focus in services is sparse, yet the ex-
amples are powerful (Davidow and Uttal 1989, Heskett
1983, Carlzon 1987). Many firms including Club Med-
iterranee and McDonald's have focused successfully
(van Dierdonck and Brandt 1988). What is little ad-
dressed, however, is how managers in professional ser-
vices should make focusing decisions. This paper sug-
gests such a framework supported by three types of
data from health care industry: (1) industry statistics,
(2) case studies, and (3) questionnaire surveys.
Many authors have suggested frameworks to classify
service operating situations (Lovelock 1983, Schmenner
1986, Mersha 1990). While these frameworks are use-
ful, they must become industry-specific to be effective
(van Dierdonck and Brandt 1988). This analysis centers
on focus in health care, a professional service. The em-
pirical data comes from a spectrum of outpatient surgery
centers. Our objective here is to: (1) gain a better un-
derstanding of the concept of focus as it applies in this
sector, (2) develop a framework to assist service oper-
ations managers with focus decisions, and (3) develop
a base from which the reader can apply these findings
to other service sectors.
Defining Focus
Focus in professional service organizations is the dif-
ferentiationi and selection of market segments, and the
adjustnment of the process and infrastructure parameters
of the service delivery system to meet the n eeds of those
specific nmarket segmenzts. This definition implies that any
focusing discussion must start with market segmenta-
tion. Only when dealing with distinctively different
market segments or when such segments can be envi-
sioned can one start thinking about focusing.
Focusing is not just a marketing issue. It involves ad-
justing the service delivery (SD) system. Managers must
consider how different segments lead to different service
delivery tasks. The service delivery task is analogous to
Skinner's ( 1974) manufacturing task, i.e., an answer to
the question: "What does operations, i.e. the service
delivery system, have to do well to support the com-
. petitive strategy of the organization."
Focusing does not necessarily imply a narrowing nor
standardization of the product line. The definition can
include identifying multiple market segments that pres-
ent homogeneous demands on the service delivery sys-
tem. Management can focus on standardization or on

0025-1909/95/4107/1 185$01.25
Copyright CO 1995, Institute for Operations Research
and the Management ScienceSM ANAGEM ENTSCIENCE/VOl. 41, NO. 7, July 1995 1185

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 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professionial Service Organiizationis anid Focus
segments where a wide choice or a customized.service
is an order-winning criterion. Most literature emphasizes
the horizontal dimension of focus in services which re-
fers to the number of markets served and the number
of products offered. However, there is also vertical di-
mension to focus. As firms start to integrate vertically,
i.e., start to expand the number of activities in the "value
chain" offered to a single customer, they begin to en-
counter tasks which are different.
Benefits and Disadvantages of
Focuslng
By limiting the service delivery task, management can
design a delivery system with fewer compromises; one
fully concentrated on the needs of a single segment or
set of segments. The disadvantages of focusing (per-
ceived or real) relate mostly to a loss of economies of
scale and scope. When an ophthalmic surgeon sets up
a center to do only cataract surgery, he or she reduces
the range of eye surgeries provided. More primary care-
givers must be contacted to provide enough cataract-
only referrals, thus increasing marketing costs. The ra-
tionale for broadening the product line or diversifying
into additional markets is usually to increase the pro-
duction volume, utilize capacity, and reduce unit costs.
Economies of scope may also produce economies of
scale: the higher the volume, the lower the cost per
unit. The literature on whether or not there are potential
gains from economies of scope in professional services
is inconclusive. Nayyar (1993) studied economies of
scope as they relate to Zeithaml's (1981) consumer
evaluation process categories of search, experience, or
credence. He reports that for search services firm per-
formance was associated with economies of scope, but
for experience services firm performance was positively
associated with information asymmetry. Health care,
however, tends to be a credence service, the category
which was not studied. Spangenberg's (1989) econ-
omies of atmosphere are a particular form of economies
of scope in professional services defined as "the joint,
positive impact of a distinct set of values, (tacit) knowl-
edge, and competencies on the technical efficiency of
the firm" (p. 247). There is a tendency to believe that
atmosphere is easier to build and maintain in small ser-
vice organizations, but Spangenberg's work indicates
1186 MANAGEMENT SCIENCE/Vol. 41, No. 7, July 1995
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that it can be hard to make the large investments nec-
essary in developing the desired culture unless the costs
can be amortized over a large output volume. Maister
(1985) argues for heavy investments in atmosphere in
multisite professional services and illustrates how much
effort it takes to develop an atmosphere that is reliable
and consistent across sites using examples of successful
professional services leaders.
Professionals and Specialization
Professionals are the key actors in such firms. They in-
troduce their professional culture with its own rites, rit-
uals and totems (Ouchi 1969). The firm must adjust its
focus decisions to the expectations and values of its
professional members. As Maister (1982) observed the
"balance" of the professional services firm often in-
volves tradeoffs among the needs of the client, the needs
of the firm, and the needs of the professionals. Spe-
cialization and focus can be seen as two often parallel
tracks. The focused professional service firm will likely
select specific segments to serve meaning that its
professional associates may have a somewhat restricted
array of opportunities. The Shouldice Clinic (Heskett
1983) was able to get surgeons to limit their work to
hernia repairs with an accompanying loss of skills at
other procedures and loss of job mobility by eliminating
the emergency and weekend duty associated with other
surgical settings. However, when focused professional
firms choose to take on ever more complex problems in
their more narrowly defined areas of expertise, they may
enrich their jobs of their professionals and meet their
needs for personal growth.
Following the Value Chain
In the service sector following the value chain can be
very seductive as a larger span may lead to an increased
number of services which can be sold independently.
"The client is already in the front office, why not provide
another service that he or she wants?" Focusing does
not preclude a broad product line, nor different market
segments, nor high vertical integration at the corporate
level. Yet there is no reason to believe a priori that cus-
tomer has the same order-winning criteria for those
other products. Neither is there any assurance that the
flow which provides the right scale of operations for a
core activity provides the appropriate scale for the add-
 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professionial Service Organiizationis anid Focus

on service. Focusing can include designing separate op- Figure 1 Strategic Positions in Surgicenters

erating systems, leading sometimes to what is called a Narrow

plant-within-a-plant. The separate hospital-owned, in- s

house outpatient surgical service is an example of such E Cataracts Only

a plant-within-a-plant. G

V A L U E -A D D E D C H A I N

The Example of Outpatient Surgery Lab Pre-op Operating N Recovery Anesthesia Hospital Pharmacy
Services Counseling Rooms Rooms Transport
Centers T

The share of the surgical procedures performed by Out- A

patient Surgery Centers (OSCs) has been rising from T

22% in 1983 to 60% in 1993. The factors behind this

evolution are: (1) the desire by government, employers,
0 Many Surgical Specialties
and insurers to control cost of health care, (2) techno-
N
logical developments in the fields of anesthesia and
Broad
surgery (drugs, equipment, and techniques) (Wong
1990) and (3) enterprising doctors who have seen the
benefits of focus for cost and quality (Heskett 1983).
bulatory surgery) by refusing to pay for an expensive
Outpatient surgery centers, while a subset of surgery,
hospital admission when an alternative technology is
are often further segmented in terms of the range of
available. The pioneers in ambulatory surgery have
surgery they support and the scope of activities they
shown that they can compete against in-patient surgery
will provide beyond their core of operating room and
departments for many procedures on the basis of low
anesthesia services.
cost, high safety, and dependable schedules.
All outpatient surgery centers are focused on elective
An OSC has many alternatives available involving
(schedulable) surgeries. They avoid life-threatening
degree of detailed focus and process choice. Heskett
emergencies like trauma or heart attacks. Some are spe-
(1990) suggests five ways to focus service strategies:
cialized to a single type of surgery such as cataract re-
(1) customer group, (2) service concept, (3) operating
moval or hernia repair, while others are open to a wide
strategy or process, (4) service area or site, and (5) group
variety of surgical specialties and operating techniques.
of providers. Some OSCs focus on certain customer
Figure 1 shows the possibilities for both vertical and
groups or differentiate by the medical specialty involved,
horizontal integration. Patients are kept only a short
by complexity of operation, or by insurance mode.
period of time and then sent home. The subsegments
of the surgical market that the center has chosen to
serve determine what facilities, equipment, skilled per- Micro-Focus Decisions
sonnel and supplies the center must provide. Decisionmaking starts with a broad set of generic ques-
One important design choice is the degree to which tions (macro-focusing) such as: "What must we do well
a center will integrate its activities with or merely at- to support the competitive strategy of the organization?"
tempt to coordinate with or in many cases separate itself "What will be especially difficult for operations to do
from the inpatient activities of the hospital. The decision in order to be successful?" "Where are the compromises
to do outpatient surgery is, therefore, a multistage pro- and the contradictions or suboptimizations introduced
cess: ( 1 ) what set of surgeons and their patients to seek by joint production?" These can be followed up with a
and what range of services to provide, and (2) how to second level of generic micro-focus questions such as:
organize the service to best meet customer needs. In- "If we want to serve this market segment or carry out
surers have forced most hospitals to provide some form this value-added activity, what kinds of processes do
of outpatient surgery service (also called day-op or am- we need? How can we achieve minimum efficient

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 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professionial Service Organiizationis anid Focus

scale?" Table 1 expands this list of questions and applies
them to ambulatory surgery centers.
Assessing the Differences and Similarities
1. Differences in Order Winning and Qualifying Cri-
teria: Hill (1989) suggests identifying for each segment
the relevant competitive priorities or competitive com-
petencies and then assigning them priorities as order
qualifiers or order winners. When OSCs began com-
peting with inpatient surgery, safety and delivery reli-
ability were important order winners. Once they proved
safe and reliable, other factors such as available capacity,
ambiance, or price become differentiating and began to
be order winners. Berry et al. (1991) argue that a de-
tailed analysis of orders can be aggregated to identify
the process characteristics that are desirable for specific
Table 1 Micro-focusing Questions for OSCs
market segments. That is not feasible without heavy
research investments in health care because of patient
confidentiality and consent requirements and patient
chart review costs, although that approach would allow
for case mix adjustments of the data across segments
and providers. The alternative is survey research looking
at the perceptions of the importance of specific factors
and responses in competitive markets reported by ex-
perienced managers (Roth and van der Velde 1991).
The latter approach, based on surveys of ambulatory
surgery unit managers, was used here.
The complex buying decision for surgery must take
into account the preferences of surgeons, insurance
companies, patients and patients' families. Services, in
contrast to industrial products, have characteristics
arising from their intangible nature and from the si-
multaneity of production and consumption. They are a
complex bundle of components influencing these cus-
tomers' overall perception of the product (Vaughn et

A. What are the segmentation alternatives? al. 1990). Not all customer groups give the same weight
1. What customers share the same order winners and qualifiers? to these components. Some surgeons will prefer a center
2. Do they require similar front office process characteristics? located within the hospital that will be convenient to
3. Do they require similar back office process characteristics? their other work and to backup services in the case of
4. Where are there benefits in moving along the value-added chain?
a problem. Others will not want to risk being preempted
B. How can the process be adapted to focus alternatives?
by emergencies and want patients and their families
5. How can professionals' needs for professional development and
kept away from the stress of life-threatening situations.
professional autonomy be met effectively?
6. How can the capital requirements be reduced through focus? One should also look at differences affecting elements
7. How can scheduling and planning be modified and simplified? of the SD system. The difference in predictability of
8. How can pricing, payment and collection be modified? demands on resources is a major difference between
9. How can we adapt interinstitutional relationships and adjust location OSCs and traditional surgical settings. Uncertainty in
to fit focus needs?
the health care is often related to the complexity of the
10. What are the revised quality requirements under the focus?
11. What can be done with overhead costs and overhead allocations
case. Vaughan et al. (1991) argue that putting the com-
under the focus? plex operations in with the simple ones is like trying to
12. What changes can be made in personnel assignments, work tasks, mix oil and water. The procedures that go to surgicenters
organizational structure, and employee training under the focus? are shorter, less uncertain in length, and are not emer-
13. What information system and record keeping changes are
gencies. When mixed with the others, they are fre-
appropriate under the focus?
quently bumped by the emergencies. This greater pre-
14. What changes in systems and procedures are appropriate to the
segmentation? dictability of events allows the OSC to change its meth-
15. What changes in existing client contacts, scripting and participation ods of scheduling and its methods of pricing. Given the
can be developed under the focus? lower variability of the less complex operations, sur-
C. What are the benefits and disadvantages of combining or not combining geons can make better use of their time by using a ded-
segments, processes, or value-added activities? Where are there icated outpatient surgery facility. The patient is also
economies of scope, of scale, of atmosphere?
saved the anxieties of schedule uncertainties as well as
D. What should be the final SD system configuration trading off focus
waiting time (Yang et al. 1992). Pasternak et al. (1991),
versus other considerations?
however, warn that such comparisons may be between

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 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professional Service Organizations anid Focuis
apples and oranges, since there has been no rigorous
attempt to classify and compare ambulatory surgery
sites or case mixes. The case mixes for all three categories
of OSC reported here are, however, similar to that re-
ported by Kitz et al. (1988).
2. Sharing/Separating Front Office Processes: Most
OSCs differentiate themselves from inpatient surgery
cases in the front room. Patient streams are separated
with emergencies and inpatients coming through sep-
arate entrances and waiting rooms from outpatients.
Financial matters and pre-operative workups are done
a day or two in advance at the patient's convenience.
Interaction with the surgeon seems to be greater because
both patients and the staff are under less pressure and
stress. Center managers reported that surgeons talked
significantly less frequently with pre-operative patients
in the centers with integrated operating rooms than in
separate in-hospital centers (Yang et al. 1992).
3. Sharing/Separating Back Office Processes: Back
office processes are opaque to the customer. Therefore,
there can be considerable savings in sharing back office
processes. Outpatient surgery centers that are integrated
with the hospital do not have to duplicate diagnostic
facilities such as hospital laboratories, but a free-stand-
ing center must consider duplicating them where they
are needed to support the surgical processes performed
there. However, our research on OSCs showed that the
way the back room was managed, namely whether or
not operating rooms were shared or separately dedi-
cated, significantly affected many attributes of the ser-
vices (Yang et al. 1992).
4. Different Activities in the Value Chain: Focusing
must not only adapt the SD-system to various market
segments but also to different activities in the value-
added chain. Some OSCs keep patients only a few
hours. Others, however, can keep patients overnight or
even three nights. Some have grown to add radiology
services, others a pharmacy, as Figure 1 illustrates.
Adapting the Service Delivery System
Once the segments have been identified, management
can evaluate the impact of their differences on the ser-
vice delivery system. After reviewing them, one can use
that data in designing the service delivery system.
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5. Meeting Professional Requirements: For most sur-
geons, ambulatory surgery represents focusing, but not
increased specialization. Surgeons typically do both
ambulatory and non-ambulatory surgery and can work
in both a hospital and in a free-standing surgicenter.
Each still maintains a private practice which allows
choice among a range of procedures and institutions.
Even before free-standing centers, most community-
based surgeons in multi-hospital towns had privileges
at two or more hospitals.
The original focus of our team's research had been
on the role of the anesthesiologist which could be mod-
ified by the free-standing center concept. While the
anesthesiologist might narrow the breadth of profes-
sional activities by attending only elective surgeries, that
could be offset by the expanded role of becoming the
OSC's medical director (Vaughan et al. 1991).
6. Impact of Focus on Capital Requirements: Am-
bulatory surgery centers have tended to focus on those
operations that have low technical and schedule un-
certainty. Elective surgeries tend to have lower capital
requirements due to low levels of complexity, invasive-
ness and clinical uncertainty and low risk patients. No
expensive intensive care units are needed. Any patient
who becomes unstable is immediately transferred to the
local hospital. The variety of operations performed is
kept down. Therefore, the capital requirements are low
compared to the hospital setting.
7. Differences in Scheduling Systems: Planning sys-
tems in OSCs differ substantially from those in the hos-
pital. They tend to be simpler given the non-urgent na-
ture of the cases. Many surgicenters sell individual sur-
geons blocks of time, allowing them to perform the
dispatching function themselves. The surgeon takes re-
sponsibility for any short-run schedule problems, but
gains more control over the process as Table 2 indicates.
8. Differences in Payment Systems: With less tech-
nical uncertainty and more schedule reliability, the cen-
ter can price in a more standardized way. One would
anticipate that the more independent of the inpatient
surgery activities the center is, the more standardized
the pricing could be. An American Hospital Association
study classified hospital-owned centers along a contin-
uum from integrated to off-site. The integrated centers
priced 58% of operations by the hour and 42% by the
 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professional Service Organiizationis anid Focus

Table 2 Outpatient Surgery Responses by Type of Facility

A B C Statistical Tests

Hospital Shared Hospital Separate Free-Standing A vs. B A vs. C B vs. C

ADVANTAGES (Higher number is better) N = 13 N = 38 N = 68

Individual Patient Attention 3.84 6.07 6.72 ttt ttt tt
Surgeon Control of Patients 3.10 3.83 5.21 - ttt
Low Overall Costs 4.03 5.69 N.A. tt
Scheduling Efficiency 3.48 5.23 6.28 tt ttt t
Good Environment for the Staff 4.19 6.31 6.48 tt ttt
Inpatient Support Services 6.10 5.69 3.08 - ttt ttt
Parking and Family Access 2.97 5.08 5.67 t ttt -
Space Available for Family 3.68 4.92 5.00 - tt -
Acceptance by Surgeons 5.09 6.08 5.97 - tt -
Low Overhead 4.27 5.67 6.26 t ttt -
Low Infection Rate 4.72 5.54 5.97 - tt -
DISADVANTAGES (Lower number is better)
Lose Priority to Inpatients 3.44 1.08 N.A. ttt
Limited Staff Support Available 1.81 1.69 2.58 -t t
Reimbursement 2.89 2.17 4.27 - tt tt
Patient No-shows 4.25 2.77 1.74 t ttt
Patient Compliance 4.39 2.69 1.83 tt ttt
Unplanned Admissions 2.66 2.00 1.68 - tt

N.A. = Not asked on survey of freestanding center

t p < 0.05 by t-test.

tt p < 0.01 by t-test.
ttt p < 0.001 by t-test.

package or procedure. The off-site ones priced 33% by
the hour and 67% by the package or procedure (Hos-
pital Data Center 1988). Pricing by the procedure means
that a fixed price can be quoted to the customer and
the customer's insurer in advance, thereby reducing
billing costs and increasing collection rates. This also
reduces the financial anxiety to the patient, eliminates
billing hassles, and improves cash flows.
9. Differences in Relationship with Hospital and in
Location: OSCs can be operated within the hospital or
as freestanding units, i.e. independent from an existing
hospital. The number of freestanding centers is growing,
rising from 1% of the market in 1980 to 19% in 1990
(Modern Health Care, 1989). The increasing number
of centers outside of the hospital is a recognition of the
merit of focus. However, hospitals can take counter-
measures to the free-standing centers, by creating, for
instance, in-hospital centers with separate waiting and
operating rooms. We asked the directors of ambulatory
surgery centers to fill out questionnaires on their
achievement of the relative advantages and disadvan-
tages of surgicenters. These responses were classified
into three groups: Freestanding centers, hospital-owned
centers with separate operating rooms, and hospitals
which integrated their inpatient and outpatient surgical
cases, using the same operating rooms. Table 2 gives
the results. A high score on the advantage or a low
score on a disadvantage indicates a better outcome. On
most of the items the hospital that shares operating
rooms has the worst results, except for the item on the
availability of backup services. Of the remaining 20
items, 14 favor the freestanding units and 6 the hospital-
based separate units. The areas where the free-standing
units are significantly worse off pertain to inpatient

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 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professionial Service Organiizationis anid Focus
support services, limited support staff and reimburse-
ment.
The important observation, however, is that the dif-
ferences between the in-house but separate units and
the free-standing units are not all that great and that a
hospital that chose to maintain the separation of ORs
and compete on service with the freestanding units
could probably do so. The bulk of the really big differ-
ences are between these two and the in-house unit that
shares its operating rooms.'
The one advantage of the free-standing OSC is its
freedom from the location of the hospital. Location,
therefore, can better reflect the nature of the patient
base, the logistic problems of patient and family, the
required minimum volume, etc. Location influences ac-
cessibility and the surroundings of the facility may have
an influence on the perception of the service by the
customer as Table 2 indicates. Wong (1990) mentions
this as one of the success factors of the OSCs. The in-
hospital service must counter with improved access for
its patients.
10. Differences in Quality Management: Given that
operations are more homogeneous in a focused unit,
quality control measures can be more formalized and
more consistent. Most of the time focus, when it narrows
the scope of work, improves quality. In health care suc-
cessful focusing may actually require quality improve-
ments to gain acceptance. The free-standing surgicenter
requires a higher standard of quality, because the tech-
nology and personnel are less likely to be available to
back up the surgeon in an emergency. In the mobile
mammography screening case the quality of imaging
done by the radiology technologists had to produce a
' The sample of hospitals was developed by the Chair of Anesthe-
siology at our university who identified by name the chairs at 176
hospitals to whom we could address the questionnaire by name. Our
response rate was 27%, but there was a selection bias toward large
teaching hospitals, ranging from 100 beds to 1,500 beds with a mode
and a median of 500 beds. The sample for the free-standing centers
was the 1,200 member mailing list of the Federated Ambulatory Sur-
gery Association where, lacking contacts, we achieved only a 5%
response rate. There was a wide cross section of respondents, including
both general purpose and specialized (eye, orthopedic, etc.) centers
and a mix of types of surgical procedures typical of the industry mix
(Lion et al. 1990).
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very, very low rate of unusable films, since it is expen-
sive to recall the then distant patient for a second set
of films (McLaughlin 1990). Management considering
a focused process must consider ( 1 ) whether it will pro-
duce higher quality inherently, and (2) whether even
higher quality processes will have to be built in to make
it competitive. In Table 2 it is interesting to note that
the two accepted measures of OSC quality-infection
rate and unplanned admissions-favor the free-
standing centers.
11. Changing Overhead Costs and their Allocations:
Historically, hospitals have used a complex overhead
cost allocation to develop a full cost for insurers who
pay costs. Many overhead costs are associated with high
technology, high complexity and high technical and
schedule uncertainty. Administrative staff must be there,
so must extensive lab facilities, intensive care units,
chaplaincy and social work staffs, etc. Because the public
associates the cost of a hospital day with a hotel room
rate and because so many costs including all nursing
costs are indirect, hospitals have underpriced the room
rate and overpriced other services including operating
room time. One of the main attractions of free-standing
units to insurers is the chance to run away from all of
these hospital overheads. When the hospitals had no
price competition and all insurers cared about was pay-
ing their "fair share," these costing distortions were not
important. Now they are. As Table 2 indicates, assuming
all other things are equal, the low overhead strongly
favors the free-standing unit over the in-house sepa-
rated unit. Such distortions of costs affect the compet-
itive positioning of many hospital-based services. The
Carolina Mammography Screening case (McLaughlin
1990) illustrates both the distortions and the arbitrari-
ness of overhead allocation decisions that come to light
as a health care service is focused.
12. Staff Utilization and Organizational Structure:
The organizational structure will change with the lo-
cation. The American Hospital Association study
showed that there was a change in the title of the person
in charge as the center moved away from the parent
hospital. The staffing of a free-standing surgicenter
tends to be an anesthesiologist, nurses, operating room
technicians and clerical and maintenance staff. The sur-
geons come and go, but the same anesthesiologist can
 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professionial Service Organiizationis anid Focus
serve different surgeons. Preoperative and postoperative
care are generally handled by the anesthesiologists in
a hospital or center. Patients may not go home until the
anesthesiologist certifies that they have recovered. This
essentially means being based there. The anesthesiol-
ogist then is the logical one to take on the post of the
medical director.
Many of the human resource management (HRM)
policies of a hospital reflect the nature of its tasks: com-
plex, highly variable, difficult to control. These process
characteristics impact training, selection, promotion, task
assignment, and reward systems. As OSCs perform
tasks that are more predictable and standardized, and
non-medical factors become order-winners, reward
systems can be tied to organizational goals and to a
customer service orientation. A focused OSC apparently
provides a more comfortable work environment (see
Table 2).
13. Information and Record-keeping Considerations:
The hospital maintains a large and complex medical
records system. It is an expensive undertaking and it
seldom works to everyone's satisfaction. The hospital
puts everything in it concerning the patient's medical
history, assuming that such information could be useful
during a continuing customer relationship. The surgi-
center knows that it is only likely to deal with the patient
once for a finite task and needs only to maintain the
information that is relevant to the current procedure.
The Carolina Mammography Screening and Shouldice
Clinic cases also show how a focused health care or-
ganization can simplify its information system to its
specific needs, having the patient to fill in the bulk of
the information and giving busy clinicians checklists to
use to record and communicate technical information.
Free-standing units can save money by their simplified
information systems.
14. Impacts on Systems and Procedures: Since the
surgicenter processes only cases of low technical un-
certainty and complexity, it needs less systems and pro-
cedures investment. Since the center tends to process
the same sets of operations repetitively, however, the
center can amortize its systems and procedures efforts
over more similar activities. With limited variability it
is possible to try to perfect those things that are done
regularly, rather than having to move on to the next
crisis.
1192 MANAGEMENT SCIENCE/VOl. 41, No. 7, July 1995
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15. Changing Scripts, Behaviors, and Client Expec-
tations: At the free-standing OSCs patients can be more
actively involved in the production process. The script
can be a less domineering and a less guarded one. (The
Shouldice Clinic let the postoperative patients pick up
their own meals and counsel the incoming patients the
night before their surgery.) Family can be included in
most of the aftercare rather than excluded. Much more
attention can be given to developing the social skills
and customer orientation of the medical staff. Patients
can be encouraged to take a tour of the place before-
hand. There is time to counsel the patient and the pa-
tient's family without emergency interruptions. Free-
standing centers present the opportunity to avoid the
impersonal atmosphere of the hospital and its sense
of urgency and gravity and give individual attention
(Table 2).
Making the Final Choices and Tradeoffs
The last step in the micro-focusing process is the selec-
tion of the system configuration. Extreme focusing is
not always possible nor advisable. The final design is
often a tradeoff between the advantages of differen-
tiating and other considerations, especially economies
of scale, scope, and atmosphere. Focusing often does
mean foregoing economies of scope and scale which
must be offset by other economies such as fewer support
staff, less capital investment or offset by greater market
penetration in the focused segment(s) due to better ser-
vice. Free-standing outpatient surgery centers arose be-
cause it appeared possible to reduce capital and other
costs so markedly that it was possible to reequip the
system to meet the reduced scale and scope of operations
and still be cost-effective.
Yang et al. (1992) showed that economies of scale
and focus issues were on the minds of managers of
hospital-owned and operated OSCs. Twenty were "in-
tegrated" with their inpatient surgery units, while thirty
were not. An open-ended question asked why they were
or were not integrated. Twelve of the fourteen integrated
unit responses cited issues related to economies of scale:
sharing equipment, ancillary services, surgeons, anes-
thesiologists, ORs and recovery rooms, and smoothing
out workloads. Three referred to perceived safety issues.
Twenty-two of the twenty-four separated units' re-
sponses mentioned focus effects: patient and family
 MCLAUGHLIN, YANG, AND VAN DIERDONCK
Professional Service Organiizationis and Focus

comfort; reliable times for surgeons; ease of recruiting Lovelock, C. H., "Classifying Services to Gain Strategic Marketing

staff; less infection; lower cost; and ease of maintaining Insights," J. Marketinig, 47, 3, (Summer 1983), 9-20.
Maister, D. H., "The One-Firm: What Makes It Successful," Sloan
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Maniagemiienit Review, 27, 1 (Fall 1985), 3-14.
, "Balancing the Professional Service Firm," Sloan Maniagenteit
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In this paper we have identified and developed a Flagler Business School, University of North Carolina, Chapel

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helps sharpen focusing decision making in professional
service organizations. We believe that the framework
and methodology presented here can provide a fruitful
basis for future research in other professional service
industries. We have illustrated the use of empirical data
to study micro-focus questions using illustrations from
industry sources, from case studies, and from question-
naires to industry participants. This approach to micro-
focusing will have to be applied to other service sectors
to determine whether it applies more generally.
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Accepted by Ricliard B. Chlase a,id Jamiies L. Heskett, actinig as special editors.

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