Management: history and terminology

Healthcare management is often defined as leadership and direction in organizations that deliver health-related services – such as hospitals, pharmaceutical companies and health maintenance organizations (HMOs) (Olden 2019). In this chapter we will not go into great detail on every function of management theory. Rather, we will give a brief overview of the terminology of management, its purpose, instruments and techniques, and how it fits into the broader concept of “economics” – with a focus on healthcare.

Everybody manages their life and day-to-day activities. However, the word “management”, as it is typically used today, is injected with a certain sense, namely, to rationally direct people in organizations in order to achieve something, typically objectives.

These objectives can be quite different and depend on the specific organization. For example, a church-owned hospital may pursue several objectives: to spread Christian belief, to take care of the poor and to achieve a balanced budget. A privately owned GP practice may just earn the owner's income and keep co-workers happy, whereas a pharmaceutical company will probably focus on shareholder value (that is, maximizing its owners’ capital). Depending on their objectives, management activities can be quite different.

What is “best” in management heavily depends on its current environment. Legislation influences which potential activities are available – if the laws prohibit slavery, there is no alternative to employees, and new legal product requirements will also change the ways in which to manage a business. There are regional differences in the way a company can be founded (a British limited company differs somewhat from a German Gesellschaft mit beschränkter Haftung – GmbH – a company with limited liability). Other environmental factors that influence what management is about are, amongst others, technical means and psychosocial culture (e.g. assumptions about the behaviour of customers and employees). As a result, management theory tries to find successful activities that fit a certain, externally produced and somewhat random environment.