Page 389 - leadership-experience-2008

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370 PART 4: THE LEADER AS A RELATIONSHIP BUILDER

Centrality is associated with more power because it reflects the contribution made
to the organization. At the University of Illinois, for example, important resources
come from research grants and the quality of students and faculty. Departments that
provide the most resources to the university are rated as having the most power. Also,
departments that generate large research grants are more powerful because the grants
contain a sizable overhead payment to university administration. 44
Coping with Uncertainty
The environment can change swiftly and create uncertainty and complexity for
leaders. In the face of uncertainty, little information is available to leaders on ap-
propriate courses of action. Leaders in departments that cope well with this un-
45
certainty will increase their power. When market research personnel accurately
predict changes in demand for new products, for example, they gain power and
prestige because they have reduced a critical uncertainty. Leaders in industrial
relations departments may gain power by helping the organization deal with un-
certainties created by labor unions. Consider the following example of coping
with uncertainty in the health care industry.

IN THE LEAD HCA and Aetna, Inc.
Once upon a time, insurers called all the shots, forcing hospitals to take lower re-
imbursements, forego price increases, and discharge patients more quickly. HCA,
based in Nashville, Tennessee, says it routinely signed contracts that barely covered
its costs. But HCA is now the largest hospital owner in the United States, and it
owns a huge percentage of the hospital market in major metropolitan areas such as
Denver, Las Vegas, and Houston. Thus, HCA now has enough power to push around
large insurance companies.
HCA’s legal department has been instrumental in absorbing critical uncertain-
ties for the organization. Beginning in 1996, when a Medicare scandal surfaced, the
legal department swung into action to help the organization weather the storm and
develop clear guidelines and compliance programs to make sure similar legal prob-
lems didn’t happen again. The department again played a critical role in negotiating
a series of mergers and acquisitions that enabled HCA to grow in size and power
and turn the tables on big insurers such as Aetna, Inc. In Houston, for example,
HCA now operates 10 hospitals, a 22 percent share of the market. In that city, HCA
officials began warning doctors that it will terminate its contract with Aetna, the

country’s largest health insurer, unless the company meets its demands for price
increases.
At the same time, hospitals are facing another critical uncertainty concerning
billing practices that sometimes require uninsured patients to pay excessively high
rates. A congressional committee has been investigating billing practices at HCA
and other large hospitals, again requiring shrewd attention from the legal depart-
ment. So long as legal issues represent a critical strategic contingency for HCA, the
legal department will remain a powerful force in the organization.
46
Because hospitals have to deal with so many complex legal and regulatory
matters, it is likely that leaders in the legal department at systems such as HCA
are typically in a high power position. Yet power relationships in organizations
change as strategic contingencies change. In a hospital dealing with a major health
crisis, leaders in the public relations department might gain power, for example,
by soothing public fears and keeping people informed about the hospital’s efforts
to control the spread of disease.