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Summary: Exploring Leadership Styles in Nonprofit and For-Profit Acute Care Setting



A brief summary of the research Exploring Leadership Styles in Nonprofit and For-Profit Acute Care Hospitals.
Dr. Julie Olsen
Exploring Leadership Styles in Nonprofit
and For-Profit Acute Care Setting
Study Objectives:
To determine the leadership styles utilized by nonprofit and for-profit leaders in the acute
care setting.
To analyze if there is a relationship between leadership style and organizational turnover.
To identify the impact of organizational size on leadership style.
Abstract Respondents
The cost of healthcare is rising with the US spending $3.6 trillion, which was
17.7% of the US GDP, in 2018 (National Health Expenditure Data, 2019). As a result,
healthcare has become a major focus of public administrators, politicians, employers,
and the general public. These rising costs are creating a need for innovation and
change in the healthcare industry. Healthcare administrators are searching for new
ways to meet the demands, lower costs, and continue to provide quality care. One
strategy that has grown in popularity is a focus on mergers and acquisitions with the
hope of increasing quality and reducing costs. From 1975 to 2017, the number of for-
profit hospitals grew 70.5%, predominately through the acquisition and transition of
nonprofit hospitals to for-profit centers, creating large for-profit healthcare systems.
Nonprofit hospitals are also acquiring hospitals and creating large nonprofit systems.
With the national attention on healthcare, and the development of large
hospital systems, it is important to understand the impact on leadership, however,
there have been few studies in this area. With the trend towards larger healthcare
systems and leaders transitioning between business sectors, this study sought to
determine if there is a difference in the leadership skills needed for success.
Healthcare leaders participated by completing the Multifactor Leadership
Questionnaire (MLQ) designed to determine a leaders’ propensity towards utilizing
transformational, transactional, and passive avoidant behaviors. Additional insight was
gained through interviews with 20 healthcare leaders with experience in either
nonprofit and for-profit hospitals and with leaders who had experience in both sectors.
The results revealed no significant difference in transformational behaviors
between leaders in the nonprofit and for-profit sectors however for-profit leaders had
a stronger tendency towards some elements of transactional behaviors. As the
organization grew, leaders tended to lean towards increasing transactional behavior.
The study considered turnover which was found not to correlate to leadership style.
Hospital Size
Stand Alone Small (2-5)
Medium (6-10) Large (11+)
Business Model Experience
Nonprofit For-Profit Both
6% VP
Ex. Dir.
For more information or the full survey results, contact
MLQ Survey Results
Passive Avoidant
Business Model
Passive Avoidant
Survey Mean
Transformational Leadership
Bass and Avolio (2004) divided transformational behaviors into five subcategories. Idealized Attributes (IA) build trust, inspire pride and focuses
the team on the overall interest of the group. Idealized Behaviors (IB) assess the leader’s behavior related to integrity and includes values,
beliefs, overall vision, and the moral and ethical consequences of their behavior. Inspirational Motivation (IM) behaviors provide meaning and
challenge to their team’s work and focus on a better future. Intellectual Stimulation (IS) behaviors focus on stimulating innovation, encouraging
new and creative ideas, and there is no ridicule for mistakes. Individualized Consideration (IC) behaviors focus on building the skills of the
individuals on the team through new learning environments and learning opportunities.
While the survey means implied the nonprofit leaders were less inclined to utilize transformational leaders, the statistical testing showed no
significant difference in the transformational leadership tendencies between nonprofit and for-profit leaders. The low number of for-profit
respondents may impact significance. Analyzing leaders with experience in both sectors suggested nonprofit leaders were more
transformational however, again, the statistical testing did not indicate the difference was significant. The interviews provided greater insight
and suggested while leaders in both sectors may demonstrate transformational behaviors, they focus on different elements of transformational
leadership. Nonprofit leaders may tend toward focusing more on the mission, challenging team members, and a higher calling, while their for-
profit peers may focus more on developing strengths and including differences of opinions in decision-making.
Transactional Leadership
According to Bass and Avolio (2004), transactional behaviors included contingent reward (CR) and management-by-exception: active (MBEA). CR
behaviors focus on setting clear expectations and rewarding achievement. MBEA behaviors include clear standards for performance and
monitor performance closely to identify errors and take corrective action quickly.
The MLQ survey results showed for-profit leaders had a stronger tendency toward MBEA behaviors than their nonprofit peers with the
statistical testing validating there is a significant difference. Also, the leadership interviews supported the survey results with statements
suggesting leaders in the for-profit sector typically set clearer goals with metrics that are monitored daily, and the rewards for obtaining goals
are clear.
Passive Avoidant
Passive avoidant characteristics include management-by-exception: passive (MBEP) and laissez-faire (LF). MBEP leadership behaviors include
waiting on a problem to appear then taking punitive corrective action. LF behaviors can be described as non-leadership. They don’t provide
expectations, monitor performance, or accept leadership responsibilities (Bass and Avolio, 2004). The MLQ survey results revealed there is
no significant difference in the tendency towards passive avoidant behaviors between nonprofit and for-profit healthcare leaders.
Leadership Styles and Business Sector
Transformational Transactional Passive Avoidant
For more information or the full survey results, contact
Turnover data was provided by 79 respondents. The data were analyzed by sector to determine the average turnover rate for nonprofit acute
care centers and for-profit acute care centers. For the respondents who have experience in both sectors, the data were separated by their
current business model. The self-reported turnover rate for nonprofit hospitals was 14.28%, and the self-reported turnover rate in the for-
profit sector was 16.98%.
Turnover data were also analyzed by the size of the organization. Stand-alone acute care centers reported a 15.74% turnover rate, small acute
care centers reported a 12.11% turnover rate, medium acute care centers reported a turnover rate of 13.56%, and large acute care centers
reported a turnover rate of 17.02%. Considering these results, large systems and stand-alone acute care centers had the highest turnover rate
whereas small acute care centers had the lowest turnover rate.
Additional analysis was completed to determine if there is a relationship between transformational leadership style and staff turnover and
transactional leadership style and staff turnover. Pearson product-moment correlation coefficient revealed no relationship between
transformational leadership and turnover. There was a small correlation between transactional behavior and turnover however additional
testing indicated the relationship was not significant.
Survey Mean
Small (2-5)
Medium (6-10)
Large (11+)
An analysis of the MLQ 5s survey results in Table 17 indicates a progressive increase in transformational and transactional
behavior as the organization grows with large organizations showing transactional behaviors level off. However, the scores for
large organizations are still higher than the survey mean in every category. Statistical testing indicated the difference was not
Interview responses indicate an increasing focus on transactional behaviors such as goals setting, managing to deviations, and
standardization as the organization grows as evidenced in the following statements:
“It isn’t personal, it’s looking basically at numbers.
“Larger systems invest more in data mining.”
“For a larger system, there is a lot more scrutiny in terms of your performance.”
“You know the standards that are set.”
“I think the size has to do with it because they have to standardize operations across a major company.”
The benchmark themselves against their own hospitals, and know at the end of every month, how people are doing and are we
heading towards the goal.”
Leadership Style and Turnover
Organizational Size and Leadership Style
For more information or the full survey results, contact
Nonprofit Leadership Experience
For-profit Leadership Experience
Nonprofit leaders focus on mission and community needs for
decision-making. They are generally more externally focused than
for-profit leaders; therefore, they may decide to offer services that
address a need in the community even if the service may not be
self-sustaining. They may spend more time making connections with
businesses and the community. Local board members make
decisions with a focus on meeting community needs. They
understand the business economics and often work within tight
budget constraints. There are fewer standardized processes than in
the for-profit model and they have more input into decision-making.
Retention strategies focus on a deep commitment to the mission,
which they expect will foster a deeper sense of loyalty. The
recognition is often personal. Leaders are identified from within the
organization with an emphasis on internal promotions. The skills are
gained through experience in their hospital by expanding
responsibilities. In larger organizations, the experience is
augmented by leadership training.
Nonprofits have metrics that are analyzed; however, the frequency
and access to data are often driven by the size of the organization.
In standalone hospitals, access to data may be lagging, which makes
accountability more difficult. The respondents from larger nonprofit
systems indicated metrics have become a much greater focus and
they utilized more sophisticated systems that were timely and more
effective. In both sectors, whereas it was expected that deviations
were addressed, they were provided more leniency than their for-
profit peers in how long it may take to correct the situation.
Successful leaders in the nonprofit sector understand economics
and how they make money; however, there is also a deep
commitment to the mission. They have a servant perspective, are
fulfilled by mission more than money, and work well with people.
They know how to get people excited about the mission and getting
the work done while displaying integrity in their everyday dealings.
They build collaborative relationships and involve the team in
decision-making. There is the flexibility to meet personal employee
needs while maintaining high standards of care. As one leader
shared, they believe if you have the “right people doing the right
thing, then all the finances will come”.
For-profit hospitals are more internally focused on bottom-line
performance and internal operational procedures. They spend time
inputting information into data systems, monitoring systems, and
responding to deviations in real-time. Decision-making is mostly
done at the corporate or division level leaving the leader with less
input and flexibility to meet local needs. The decisions are based on
data. Whereas the nonprofit organizations ask for input from the
team and other leaders in the decision-making and problem-solving
process, for-profit leaders have vast resources and draw from
expertise throughout the system.
The recognition strategies are structured, typically consistent
throughout the system, include metrics, and leaders have more
resources for recognition. Employees can transfer anywhere in the
system without losing benefits or accrued time with the company.
Leaders are eligible to receive bonuses for meeting targets.
Expectations are clear, as are rewards for meeting expectations.
Leaders are groomed from within the entire system with leadership
development programs in place. The leaders learn through
experience. Therefore, leaders are moved to different locations
throughout the system intentionally to gain experience that
prepares them for a higher position.
Accountability is important. The expectations are clear and there is
structure, multiple processes, and systems in place to correct
deviations quickly. The data are utilized to promote competition
between leaders with the intent to raise the bar system-wide. This
focus on accountability creates a strong transactional leadership
style, which according to Avolio and Bass (1995), builds a foundation
for transformational leadership.
Successful leaders in for-profit centers analyze and make decisions
based on data. They are effective in navigating the political
structure and can communicate with multiple levels in the
organization. Successful leaders drive an agenda and get the
expected results. They recognize the company makes the decisions
and they need to carry them out regardless of their feelings. They
learn how to make it work and they are motivated by competition.
Several leaders mentioned it’s not personal, it’s about the numbers
and meeting targets. If you can deliver results, you are fine.
The study found nonprofit and for-profit leaders display transformational leadership; however, it is manifested in different ways. For-profit
leaders had a stronger propensity to utilize transactional behavior of management by exception active and there was some evidence that
transactional behavior increased with organizational size. Turnover was found to be a concern in both sectors without a correlation to
transformational or transactional leadership. More study is recommended evaluating large hospital organizations to determine the extent to
which business model and size dictate leadership style.
References: Avolio, B., Bass, B. (1995). MLQ License Agreement. Mind Garden, Inc., Bass, B., Avolio, B., (2004). Multifactor Leadership Questionnaire Manual and Sample Set. Third
Edition. Mind Garden, Inc., National Health Expenditure Data (2019). Centers for Medicare & Medicaid Services.
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