Pharmacy Management Overview

  • Transformational leadership = organizational leadership.  Heterogeneous leadership.  Generate excitement in 3 ways: charisma, give individualized attention, intellectually stimulating
  • Transactional leadership = managers as supervisors who use legitimate, reward power to give commands. Homogenous leadership.  Not exciting, empowering or inspiring
  • Sources of Power:
    • Power = potential ability to influence the behavior of others
      • Legitimate power (aka formal authority/power) = derived from the person’s position within the organization
      • Reward power = stems from legit power, based on a leader’s ability to reward good work through a variety of means
      • Coercive power= opposite of reward, based on the ability to punish
      • Expert power = power derived from having expertise.  Gain more power when the expertise isn’t readily replaceable
      • Referent power (aka charasmatic power) = power due to a person’s ability to acquire employees admiration, loyalty, & emulation.
  •  Commitment = workers share the leader’s point of view & carry out instructions enthusiastically
  • Compliance = workers obey & carry out orders even though they may disagree & or not be enthusiastic
  • Resistance = workers try to avoid or disobey carrying out instructions
  • Position power = formal authority, control over resources, rewards, punishments, information ecological conditions (workers location proximity)
  • Personal power = expertise, friendship, charisma
  • Political power = control over decision process, coalitions, co-optation
  • Leadership theories
    • Ohio St. Leadership studies
      • Initiating structure = how task oriented & direct the leader is in assigning subordinates work toward a goal
      • Consideration = how mindful the leader is of subordinates ideas & feelings
        • These 2 ideas are independent of each other, but high degrees of both together proves to be the most successful leadership style
    • University of Michigan studies
      • Employee centered leaders are most effective
    • Likert system 4 management
      • System 1 = leaders who rely on authority granted by the organization
      • System 2  = don’t pay attention to followers, but use lots of authoritarian power
      • System 3 = consult with followers about decisions but don’t allow full participation by subordinates
      • System 4 = allow full participation in decision making.  Shows high level of trust.  Overcomes resistance to change.  Enhances personal growth
    • Tannenbaum & schmidt
      • Continuum from autocratic to laissez-faire leadership depending on the amount of employee participation
      • Leadership style used depends on the situation
    • Blake & McCanse Grid
      • Impoverished management = little concern for people or results.  Do just enough to get by.
      • Country club management = great concern for people, little concern for results.  Keep people happy
      • Authority-compliance management = concern for production, little concern for people
      • Middle of the road management = medium concern for people & results
      • Team management = ideal style.  Motivate people to reach their highest level of accomplishment through trust & respect
    • Fiedler’s contingency Theory  (leadership style fits the situation)
      • Leader-member relations = group’s acceptance of the leader
      • Task structure = how well defined tasks are defined in terms of procedure & goals
      • Position power = extent of formal control over subordinates
      • Least preferred coworker = leader is sensitive to others feelings if they describe the least preferred worker in positive terms
      • Relationship motivated leaders perform moderately better than task oriented leaders in moderately favorable situations
        • Task oriented do better when the task is very clear or unclear
    • Hershey & blanchard’s Situational Leadership Model

What we used for the 12 angry men assignment

  • S1 = telling
  • S2 = selling
  • S3 = participating
  • S4 = delegating
  • R1 = unable & unwilling to take responsibility
  • R2  = unable but willing to do job tasks
  • R3 = able but unwilling to do what the leader wants
  • R4 = able & willing to do what’s asked
  • Extrinsic rewards = pay increase & promotions
  • Intrinsic rewards = feeling of accomplishment when completing a complex task
  • Motivation arises from within a person & motivation factors are different for each employee
  • Physiological = necessary for survival.  Ex. Air, food, water, shelter
  • Safety & security = health care benefits, job security
  • Social activity = need for belonging, friendship, love
  • Ego & self esteem = need for positive self image & self respect.  Need for recognition  & respect from others
  • Self-actualization = realizing potential for continual growth & development
  • McGregor’s Theory X
    • Based on the assumption that most people don’t like work, aren’t ambitious, & don’t want responsibility

The only reason people work is because they have to

  • Motivation occurs only at physiological & safety levels
  • McGregor’s Theory Y
    • Work is as natural as play if conditions are favorable
    • Need self-control
    • Motivation occurs at social, esteem, & self-actualization in addition to physiological & security

This theory is only applicable in a wealthy society

  • Alderfer’s ERG theory
    • Existence needs

Material & physical needs

  • Relatedness needs

All needs that involve other people including anger, hostility, & friendship

  • Growth needs

All needs involving creative effort

  • Herzberg’s 2 factor theory
    • Hygiene factors or dissatisfiers

If hygiene factors are absent workers are dissatisfied & not motivated

  • Presence of hygiene is necessary for satisfaction but doesn’t guarantee it
  • Motivational factors (satisfiers)
  • McClelland’s Learned Needs
    • Need for achievement (to excel & achieve standards), affiliation (interpersonal relationships), & power (ability to influence others & exercise authority)
  • Process theory = focuses on how individual expectations & preferences for outcomes influence performance
  • Vrooms’ Expectancy Theory
    • Motivation = expectancy x instrumentality x valence for outcomes
    • Assumes that an effort will lead to high performance
  • Adam’s Equity theory
    • Focuses on how well people think they are be treated in comparison to others

People are motivated to seek social equity (be treated fairly)

Based on perception not reality necessarily

  • Locke’s Goal-Setting Theory
    • Goals setting explains motivation
    • Management by objective (do whatever it takes to accomplish goals)
  • Skinner’s Reinforcement Theory
    • Behavior is associated with consequences learned from experience
    • Reinforcement may be positive, from punishment, extinction, or avoidance learning (negative reinforcement)
  • When the pharmacy manager neglects his management responsibilities it often leads to individuals  trying to supervise “their area” thus leading to a pharmacy full of bosses, thus leading to fighting among the staff
  • Problems in retail pharmacy some time result between the pharmacy & the non-pharmacist store manager
  • Remember:  we carry inflated views of pharmacy relative to management as well as other professions
  • Takes less time, energy & money to retain pharmacists versus recruiting new pharmacists
  • Qualifications of pharmacy managers:  big ego, highly educated, work autonomously, highly motivated, highly mobile
    • Credibility: instant credibility when the pharmacist/manager is of higher standing (by experience, education, recognition).  Recent graduates for pharmacists/managers can have problems
  • Workers are most often held on to via:
    • Personal satisfaction
    • Work conditions

Freedom (not closely supervised)

Rewarding & challenging work

  • Money is important but the most important factor
  • Tact:  pharmacy manager must get acquainted with the staff & act sincere & reasonable at the beginning of interactions with workers
  • Employees look for the following qualities in managers:  their respectful & plan well.  Delegates instructions, authority, & gives room to let employees execute.  Managers should be able to compliment as well as criticize.  Aware of employees & their problems:  they show their human side.  Avoids nit-picking.  Keeps employees informed about changes & discusses problems as soon as possible.  Attempts to know each employee as an individual
  • Top 10 mistakes that managers make:

Think that you know everything (or that you’re expected to)

Communicate ineffectively

Must learn to practice active learning




Must check for understanding: ask individuals to summarize

Failure to set clear goals & expectations

Goal setting is the foundation for success

Goals should be SMART

Specific–  clearly define what needs to be done

Measurable– establish criteria for measuring progress toward the attainment of each goal

Attainable– challenging yet not out of reach

Realistic– given the availability of resources, knowledge, & time is it realistically possible

Timely– set a time frame for the goal

Assign responsibility w/o appropriate authority

Lack of authority leads to de-motivation, lack of enthusiasm, stress & dissatisfaction, allow staff to “own” their task

Must determine what level of authority is needed

Align the team

Communicate expectations & address barriers

Set dates for follow up

Avoid conflict

Avoidance only escalates problems

Fail to delegate

Rule:  only do what only you can do

Barriers to delegation

Thinking you can do a task better, faster

Benefits of delegation

Develop the skills of your employees

Increase employee satisfaction

Expand your productivity & effectiveness

Effective delegation entails:

Identify available resources to assist in successfully completing the assignment

Communicate the details of the assignment with desired results

Create a process to monitor progress

Delaying or ignoring coaching opportunities

Coaching = discussion aimed at exerting a positive influence in the motivation, performance & awareness of areas for improvement & development of an individual to help them be as effective as possible

Coaches must provide:

Clarity = give & receive clear communication

Supportiveness = commitment to stand with & behind the person you coach

Mutuality = establish a partnership between yourself & the person you coach rather than the formal hierarchy

Perspective = have a focus on the entire organization

Risk = encourage innovation & effort that fosters a learn by doing attitude & reduces the punishment for mistakes

Patience = go balance the short-term business goals & long-term gains

Involvement = get to know individuals in order to find out what motivates them

Confidentiality = must protect information shared in communication with employees

Respect = give & expect mutual level of respect

Conducting ineffective performance reviews:

  • Structured performance reviews should be conducted on a scheduled basis (quarterly, annually)
  • Provide specific feedback–highlight successes & areas for improvement
  • Implement an individual development plan
  • Provided ongoing feedback  (that’s focused on how not why, use open-ended questions to expand discussion, use closed ended questions to prompt specifics, state your understanding of what you are hearing)
  • Providing misaligned rewards & recognition
    • Don’t provide rewards for unsatisfactory performance
    • Challenging work assignments can be a reward for employees
  •  Retaining poor performers
    • This requires additional time & effort of manager (requires ongoing counseling, review & rework of their poor work)
    • Inform them that they aren’t meeting expectations, that their performance must improve & the negative/positive outcomes depending on future performance
  • Fiscal year = any 12 month period a company adopts for accounting purposes (usually @ the beginning & end of a company’s slowest business time)
  • Cost of Goods Sold = cost of obtaining merchandise that is sold to produce sales

How much it costs for the stuff you sell

COGS is about 75% of total sales

  • Gross Margin = sales (revenues) – COGS

Industry average = 25%

What’s left over after you pay operating expenses

  • Net income (profit) = gross margin – expenses
  • Assets = economic resources

Have ability or potential to provide future benefits to the pharmacy

Assets = liabilities + equity (net worth)

  • = part you owe + part you own

Current assets

  • Cash, accounts receivable, inventory
    • Accounts receivable are more liquid than inventory
    • Anything that will become cash with one year
    • Liquidity = the ease at which an asset can be turned into cash

Fixed assets = land & manufactured items that the business will use for several years

  • Liabilities = creditor’s claim on the assets of the pharmacy

= debts = what we owe

Current liabilities = debts that must be paid in at least 1 year

Long-term liabilities = debts that are due in more than a year

  • Equity = owner’s claim on the assets of the firm.  Owner has a claim on all assets in excess of those required to meet a creditor’s claims
  • Retained earnings = earnings realized by a pharmacy since its formation.  Used to replace assets & for business growth.
  • Net working capital = current assets – current liabilities
  • Current ratio = current assets / current liabilities

Liquidity (solvency) measure that shows a firm’s ability to pay its current debts with its current assets (<1 year)

  • Acid test = cash + accounts receivable  /   current liabilities             (doesn’t include inventory)

Shows ability of a pharmacy to pay its current debts with its most liquid assets

A substandard acid test would indicate its inventory is too large

  • Inventory Turnover (T/O) rate = COGS / average inventory

As long as you aren’t missing sales due to OOS situations, the higher the better

Tells you how many times a year you sell the value of your inventory

Shows the efficiency of the pharmacy

Best way to increase this is to reduce the non-productive inventory

  • Net income / Net sales

Traditional measure of profitability

  • Profits = total revenues – total costs

Total costs = COGS + operating expenses

3 ways to increase profitability:

  • Increase sales
  • Reduce expenses
  • Reduce excess assets (especially inventory)
  • Return on Net Worth = Net income / Net Worth

Tells you how much you make on every dollar you invest

  • Return on Total Assets = Liabilities (loans) + Equity (owner’s $)

Measures financial return based on the owner’s & bank’s money

  • What you own + what you owe

Ability to generate profit independent of the financing of the assets

  • Return on equity = return on stuff you have already paid for
  • Inventory: the stock of products on hand to meet the present & anticipated needs
  • Net profit for pharmacies: between 3-4%
  • Inventory turnover has been increasing

The higher the number, the more efficiently you are using your inventory

  • Over 3/4 of your money is invested in inventory which is your least liquid current asset
  • Inventory management is the single most important reason  pharmacy has survived lower reimbursement typical of managed care

Results of inventory management:

  • Keeps costs down
  • Improves cash flow
  • Improves customer service
  • Promotes good relationships with wholesalers
  • Wholesalers supply over 80% of merchandise sold in community pharmacies
  • Wholesaler functions:

Storage of inventory until it’s needed

Allow for frequent delivery

Generally liberal returned merchandise policy

Most offer a cash discount:

  • reduction in price given in return for the prompt payment of invoices
  • Often is a 2% discount if paid within 10 days of the end of the month

Cumulative discount: purchase of generic drugs over a given period of time

Non-cumulative discount is a one time discount for the purchase of a large volume of a product

Electronic funds transfer (EFT) = 1.5 %

May also help with advertising, promotion, store layout, design, check merchandise, update shelves

  • Consequences of poorly managed inventory:

Decreased cash flow

Non-competitive prices

Poor overall image & return on investment

  • Inventory management goals:

Minimize total investment in inventory

Minimize carrying & procurement costs

Carry the right mix of products to satisfy demand

  • Acquisition cost: cost of product
  • Stock-out cost: cost of have not having a product on the shelf (loss of business)
  • Carrying costs: storage, handling, insurance & cost of capital to finance inventory
  • Procurement costs: costs required to place orders, receive them, stock shelves & process accounts payable
  • Inventory control systems:

Perpetual–most common, allows inventory to be monitored at all times

Visual–compare what you have to how many should be carried

Periodic–count stock at predetermined intervals & compare to minimum desired level

  • Cash on Delivery

Shipper collects full payment for merchandise on behalf of seller  before releasing the merch to the purchaser


  • Drug diversion (aka stealing)

Most often done to support habits

  • 2 types of recruiting done by Employers:

Direct recruiting: efforts to find qualified people to fill jobs

  • Advertising in trade papers, want ads, job fairs, open house events, active rotation programs

Indirect recruiting: use things such as publicity & media to make the external appearance of the organization very appealing.  These activities don’t immediately yield employees, but they increase the potential applicant pool.

  • News releases, encouraging volunteers, health promotion programs–LMS, adopt a charity.
  • Indirect shows the institution in a favorable way, attracts both workers & patients
  • An application allows for the determination if an applicant has appropriate training & experience for the job
  • The EEOC is the organization that investigates complaints of discrimination
  • Job turnover is disruptive to staff morale & the quality & quantity of care
  • Reason that people stay with a job: professional growth opportunities

Even more important than salary

  • Why people leave there job?

1st year: raise kids, lack of CE, too much work

2nd-6th  year:  family responsibilities, move to a different location, upset with management, inadequate pay raises

7th-10th year:  all have to do with the job itself, management, departmental decisions

  • Reasons people quit: lack of recognition (most common), lack of advancement, money, too many bosses
  • 4 stages of Burnout:

Enthusiasm:  highly energized, wants to take on a lot of work, over-investment may lead to an unhealthy imbalance of all work activities

Stagnation: employee begins to question if all efforts are worth it.

Frustration: employee becomes dissatisfied & negative.  Frequent complaining about institution, job, staff & management.  May argue with management, use a lot of sick time.

Apathy: avoids job responsibilities.  Performs job duties in a mechanical, disinterested manner.

  • Professionals generally see little “team” loyalty, they follow the money.  More likely than non-professionals to change employers due to: personal satisfaction, professional & financial advancement.
  • True & long-lasting motivators at work:

Learning & acquiring new knowledge, achievement in the profession, performing interesting & meaningful work, assume responsibility

  • Best time to open lines of communication with a person is during an orientation program, because employees haven’t had time to develop strong opinions about the organization yet or be influenced by peer pressure
  • Company Socialization: ongoing process of instilling the professional with standards, prevailing attitudes, values & patterns of behavior expected by the profession

In pharmacy most of this is provided by the profession: pharmacy school, between pharmacists

  • Little professional socialization actually takes place for pharmacists in the workplace
  • Good orientation will avoid information overload on the job
  • Orientations benefits for the organization:

Reduce start-up costs, failure anxiety (by informing employee what’s expected of them & how much time they have to do so), also helps new people feel good about themselves.

  • Also reduces turnover, saves time, increases worker satisfaction
  • Return policy- process of returning merch to the warehouse or wholesaler
  • The immediate supervisor of a new employee should spend as much time as possible with the employee on their first day
  • Corning glass company orientation assumptions:

Early impressions last

1st 90 days are critical

Orientation begins before the employee arrives

1st day on the job is critical

New employee is responsible for learning

Teaching the basics comes first

New employees should understand the whole company

Info should be timed to the employees needs

Avoid info overload

Orientation doesn’t work unless the employee’s supervisor is involved

  • Continued training is a must for a pharmacy
  • Succession planning: must offer ongoing training so that qualified people are able to fill positions higher up in the organization
  • Job enrichment: must redesign employee’s job responsibilities in order to increase opportunities for: responsibility, achievement, growth, & recognition
  • Training & staff development are the main means of changing or modifying behavior
  • Use training for: performance improvement, update skills, solve organizational problems, preparation for promotion
  • Types of training programs:

On the job (OJT)

  • Most common
  • Typically involves assigning a new employee to an experienced worker
  • Inexpensive, workers produce while learning (immediate-feedback), often trainer isn’t certified to be training (lack of standardization of trainers)
  • This should involve 4 steps: prepare the learner (explain why), present the operation (repetition, explain quality & quantity), performance tryout (go through slowly multiple times), & follow-up (gradually decrease supervision, correct bad habits, compliment & encourage worker toward quality/quantity goal)

Job rotation

  • Good for staff training, development & burned-out employees, good for succession planning.
  • Helps employee think in terms of the bigger picture (promotion, organizational goals)


  • Time saving, good for transfer of info (new laws) to a large # of people
  • Can be a problem if the learners are passive & not retaining info

Role playing

  • Good for counseling patients, phone/leadership/cultural training, interview skills

Case studies

  • Active learning (you doing it helps you remember)
  • Helps develop problem solving skills
  • Cultural sensitivity programs help decrease patients complaints by 75%.
  • Safety programs for people’s backs helps reduce back-associated medical claims by 50%
  • Outcome assessment:

Survey (least sophisticated)

Pre & post-test (more sophisticated)

Behavioral studies (did our program achieve its goal?–>most sophisticated)

  • Performance Appraisal is any procedure involving:

Setting work standards

Assessing employee performance relative to work standards

Providing feedback to motivate individuals to stop doing bad stuff & keep doing good stuff

  • Performance appraisal is done in order to evaluate a pay increase/promotion or for developmental/performance feedback

Generally it provides feedback in 3 key areas: cash handling, customer & patient service

  • Each evaluation question in a performance appraisal should only deal with one behavior or facet of the job

No ands should be included

  • Should be either quantity or quality of work, not quantity & quality
  • This is the most common error in a performance evaluation
  • 3 steps in the PA process:

Define the job

  • Should be done early on (start in orientation, do periodically thereafter)
  • Give work standards, rules, policies (should be agreed upon by both the supervisor & employee)

Appraise performance

  • Involves frequent dialog & be sure to only appraise job related behaviors

Give feedback

  • Should be a dialog
  • Need to know what the employee thinks
  • Typical reasons for performance appraisal failure:

No one defined the job to the new employee

Inconsistent appraisal of performance

  • Subjective, unrealistic or lack of standards
    • Lack of standards more often occurs in small operations that lack a HR department
    • Objective (good) standards are measurable whereas subjective are not

Poor feedback/inadequate communication

Differences of opinion/hard feelings most often caused by not giving feedback on a regular basis but rather all at once

  • The employee should be supplied with the following documents prior to a performance appraisal:  job description, copy of PA form, the employee’s previous evaluation
  • Types of performance appraisal methods:

Graphic rating scale

  • Oldest & most common
  • Describe their performance on each trait
  • Tend to be clustered toward higher ratings
  • Ex. Instructor evaluations

Alternate ranking

  • Rank employees from best to worst on each appraisal item
  • Easier to rank extremes

Paired comparison

  • Like alternate ranking but you are directly comparing every employee to every other employee on a variety of traits
    • Think about the table with + & – in comparing employees
    • Usually only done with a very small amount of employees due to how much work is required
    • Can cause resentment among employees if they get a hold of it
    • # of comparisons done = n (n – 1)                      ex. 10 workers:  10 (10 – 1) = 90 comparisons done

Forced distribution

  • Bell curve distribution
  • Predetermined % of employees are placed in performance categories
    • Prevents clumping of exceptional evaluations (problem w/ graphic rating scale)

Critical incident

  • Supervisor keeps a running log of employee behavior (both good & bad)
  • Review “critical incidents” with employee periodically (q 6 mo)
    • Forces supervisor & employee to think about performance appraisal all year
    • May result in employees feeling like they are being watched & not being as comfortable around the supervisor
  • People who do the appraising:

Immediate supervisor

  • Most common
  • Managers must ensure that if a person’s job changes that HR gets informed about the change

Peer appraisal

  • Good predictor of promotion
  • Most often seen in businesses that use work teams
  • Logrolling = peers getting together & ranking each other highly

Rating committees

  • Team of supervisors
  • Several raters can reduce bias in the rating process
  • Managers that are above the raters review the evaluations


  • Can be good if the employee has an appreciation for how difficult the process is
  • Can be bad because it makes the employee have to decide being liberal or conservative about their self-evaluation


  • Workers will anonymously evaluate their supervisor’s performance
  • Top managers will use this info
  • Used to identify potential people problems
  • Best for developmental purposes
  • Occurs when student’s do teacher evaluations

360 degree feedback

  • Everyone evaluates everyone
    • Potential problem if raters are competing with the evaluated person for a job
    • Used for developmental purposes
  • Bias

Supervisor biases

  • Not related to job performance (important)
  • Relates to personal characteristics (supervisor & employee sharing common interests)
  • Organizational characteristics (intimidated)
    • Employee has more seniority than rate
    • Rater is intimidated by the employee
    • Employee is a leader in the union or favorite of the president

Halo effect

  • One aspect of the person’s performance (good or bad) dominates their appraisal
    • Can’t control for this especially with positive halos

Central tendency

  • Tendency to give everyone average ratings b/c raters are uncomfortable with giving extreme scores
  • Often occurs with young or inexperienced supervisors


  • Often occurs with inexperienced or poor supervisors
  • Gives everyone a high rating
    • This leads to the best employees not getting the credit they deserve


  • Give everyone low ratings
    • This can lead to employees not receiving the recognition they deserve
    • Not as wide-spread as leniency


  • Supervisors tend to remember the most recent behavior
    • Need to have more frequent appraisals that are also logged

Overall ratings

  • Assigns employees to a category based on different appraised areas
  • Generally is located at the bottom of the rating form
  • Should be an arithmetic mean
    • Without this the overall category lacks validity
  • Components of compensation


  • Open (non-secret) salary policy improves motivation b/c it helps people to see hard work & salary go hand in hand.
  • Secret pay policy:  most common.  Good b/c there may be special circumstances in which certain new employees need to get paid more
    • Salary compression: due to inflation, may lead to higher starting salaries, union pay raises
      • Paying for longevity, merit increases & equity adjustments for existing employees help to compensate for this


  • Insurance, disability coverage, child care allowances

Short-term incentives: yearly bonuses

Long-term incentives: usually for upper management.  Ex. Stock options

Perquisites (aka perks)

  • Reserved for top management
  • May include limo rides, use of company plane or condo


Describe and explain the following concepts:

  • Marketing Channels
  • Channels of distribution
  • Manufacturer (who doesn’t sell directly) –> wholesaler –> pharmacy –> patient
  • Manufacturer (who does sell) –> pharmacy –> patient
    • Factors that can impact which drug product is received by the patient
    • Insurance companies, doctors, drug reps (impact doctors), DTC advertising, friends
      • The difference between Growth Industries & Growth Opportunities
      • Growth industry
        • There is no such thing as a growth industry
        • Companies must remember that they are part of a bigger industry than they would think
        • You’re not part of the TV industry, you’re part of the entertainment industry
          • Instead of growth industries, there are only companies organized & operated to create & capitalize on growth opportunities
          • Growth opportunities
            • When a producer makes a product which sets the tone for the market
            • Today the focus is on identifying & meeting consumer needs
            • Need to accurately define which business you’re in
            • The importance of defining exactly what business you are in
            • Don’t want to limit yourself & put “blinders on” by narrowly defining your business
            • Pharmacy is in the health care industry
              • Not just dispensing or pharmaceutical care
              • Pharmacy consumers: patients, other health care professionals
              • Clients aren’t always the consumers as well
                • Clients include PBMs, third party payers, insurance


Describe, explain and compare/contrast the following:

Marketing Philosophies:   (it’s more expensive to bring in a new customer than keep a current customer)

  • Product Concept
  • Consumers will favor products that offer the most quality, performance & features
    • In pharmacy, this alone is not sufficient
    • Selling Concept
    • Aggressive selling & promotion campaign  (also includes product concept)
      • In pharmacy this still isn’t enough
Selling and Marketing Compared
Selling Concept Marketing Concept
Focus Seller’s needs Customer’s needs

Selling and promoting

(i.e., push marketing)

Marketing research and strategy

(customer satisfaction engineering)

Ends Profits through increased sales volume Profits through customer satisfaction


  • **Marketing Concept**
  • Determining the needs & wants of target markets
  • Delivering the desired satisfactions of consumers more effectively & efficiently than competitors
    • Key to achieving organization goals
    • 3 key components
      • Marketing research (part of marketing concept)
      • Marketing strategy (part of marketing concept)
      • Doing what’s legally & ethically in the best interest of the patients
      • Societal Marketing Concept
      • Previous marketing concept + the idea of preserving or enhancing consumer/societal well being

Marketing Research:

  • Definitions
  • Text book definition:  systemic design, collection, analysis, reporting of data & finding relevant to a specific marketing situation or problem facing an organization
  • Working definition:  determining the wants & needs of our customers.  The info gained is used to make decisions (what products/services we provide)
    • Purposes
    • Maximize the success of your practice site by assuring quality assurance & maintaining good relationships with clients
      • Techniques
      • Formal
        • Structured measurement of satisfaction  (ex. Survey on customer service)
        • Focus groups: involve open-ended questions to determine patient needs & wants
        • Shop &/or observe competition:  what usually occurs in chain pharmacies, may use secret shopper  (costs money)
        • Informal
          • Talking to patients & asking for opinions when considering making a change (like changing hours)


Describe, explain and compare/contrast the following:

  • Marketing Strategy
    • Selection of target market(s), choice of a competitive position & development of an effective marketing mix to reach & serve the chosen customers
    • Design for getting where you want to go
    • Marketing strategy = market segmentation + market positioning + market entry + marketing mix + timing
    • Market
      • All the people who’ve an actual or potential interest in a product or service
      • Market Segmentation
        • Recognition that every market is made up of distinguishable segments or subgroups
          • What are the variables?  How is this market divided up?
          • Each segment consists of buyers with different needs, buying habits & responses
          • No single approach will satisfy all segments  (different subgroups respond & purchase differently)
          • Dividing a market into distinct, meaningful groups of customers who might use products or services
          • Segmentation is based on:
            • Demographics
            • Volume or purchasing characteristics (ex. Elderly market segment will purchase more volume than other age groups)
            • Perceived benefits (that customers believe they will receive–ex. GNC)
            • Sensitivity to price
            • Customer experience  (ppl with more knowledge about taking drugs vs. someone w/ no experience)
              • Those who know more want limited service pharmacy, those who need more info want your time & may be willing to pay more
              • Market Positioning
                • Selecting a specific pattern of concentration that will allow us as a company to achieve our objectives
                  • Select segments that give the maximum opportunity to achieve objectives
                  • It’s impossible to serve all market segments
                  • Market to target population
                  • Recognize potential for growth
                  • Competition
                  • Are there unsatisfied needs/wants that you can serve
                  • May be either single or multiple segment concentration:
                    • Single segment– serving a single or specific segment
                    • Multiple segment– serving multiple market segments, where strengths in one segment will be of benefit in other segments
                      • Choosing market concentration helps you determine what products/services you’ll provide, customers you’ll services, competition you’ll face
                      • Target Marketing
                        • Choosing which segment or segments you will serve (choosing target population)    action as opposed to research with market positioning
                          • Market segmentation is the process of actually breaking the market up into different groups of customers that have different habits & needs
                          • Market entry for existing pharmacies:
                            • Advantages: established relationships with suppliers

Examples to consider where target marketing is used:  converting to a centralized system (have more errors, increased turn around time), acquiring an existing community pharmacy, open a new pharmacy

  • Marketing Mix (beginning of The 4 “Ps”)
    • Blend of controllable marketing variables the firm uses to achieve its objective in the target market
    • Set of controllable variables that one may use or adjust to influence buyer responses
      • Controllable variables are the 4 P’s of the marketing mix:  product, place, promotion, price
        • Product–either a physical object or service which is packaged with a physical object capable of satisfying a want or need.
          • Symptomatic relief–treating symptoms/needs
          • 4 products
            • Generic/core
            • Expected
            • Augmented
            • Potential
            • Place–the image (according to the customer) of the pharmacy facility
            • Promotion
            • Price–expression of value for products/services as communicated in the exchange process
            • Product – including Levitt’s Total Product Concept



Describe, explain and compare/contrast the following:

  • Levitt’s Total Product Concept (continued)
    • Core (“generic”) Product– (different from generic drugs)
      • Undifferentiated (can’t be bundled) product that’s the same from pharmacy to pharmacy
      • What’s required by the law
      • Expected Product–varies from patient to patient, but basically it is adding or bundling services on top of the generic product to provide a differentiated
        • Considers price, service, competency of staff/provided care
        • Augmented (i.e., differentiated) Product–in addition to including the generic & expected product, it includes something that you are doing now
          • Includes things like drug info sheet, website accessibility, drive up window, patient counseling rooms, other ways for the patient to gain info, auxiliary labels (may cause drowsiness), scheduling medication times, informing staff nurses about new drugs, rehab, teaching
          • Potential Product–everything feasible to attract & hold customers, what is not being done, developing/creating something that’s unique
            • Done through service (ex. pharmacist personally delivering Rxs), large font labels upon request, self-care consultation, helping with dietary supplements, providing flu shots, blood tests, compounding
            • 80/20 rule–80% is what all pharmacies do, 20% is what makes you unique
            • Marketing Mix (The 4 “Ps”, continued)
              • Place–the image (according to the customer) of the pharmacy facility
                • Location–convenience is key
                • Physical Plant (Exterior & Interior)
                  • Exterior aesthetics, interior aesthetics (includes store design, atmosphere of the business–is it professional, employee dress, appearance to media, space management), space around cash register, inventory (assortment & quality of products), staff (avoid turnover, ensure proper training/development of employee skills)
                  • Promotion
                    • Methods
                      • Advertising
                      • Sales Promotion
                      • Publicity
                      • Personal Selling

Develop a company image, attract new customers, maintain patronage (keep current customers), gain acceptance of a new service or line of products (let customers know you are providing a new service/product), convince new & old customers to purchase more needed products/services

  • Done through:  advertising, sales promotion (done internally), publicity (no cost–TV/radio crew coming to work), personal selling (everyday activities performed by sales clerks/techs/etc)
    • Must know yourself, patients, products, purchasing motives, project empathy
    • Must always act professionally & in the best interest of the patient.
Medium Cost (CPM) Audience Specificity Message Longevity Customer Acceptance Mass Coverage
Newspapers Low Poor Short Good Good
Direct Mail High Very good Short Very good Poor
Radio Moderate Poor Short Good Moderate
Television Very high Very poor Short Good Very good
Outdoor ads Low Very poor Medium Poor to fair Good
Directory ads Moderate Good Long Good Moderate


Describe, explain and compare/contrast the following:

Marketing Mix (The 4 “Ps”, continued)

  • Price
    • Pricing of products
      • 85-95% of payment today is from 3rd parties
        • U & C is focused on cash-paying customers, this group is very important to pay attention to
          • Prices should be accepted by your patients, competitive in the marketplace, profitable in the pharmacy
          • Quality of pricing decisions depends on:
            • Clarity of objectives (volume vs. cost)
            • Consumer & competitor behavior (service vs. price)
              • Pricing objectives:
                • Meet price of competition (possibly beat them for a short amount of time, most likely not economically feasible), may price above competition if customer perceives added value, increase market share
                • How to understand competitor behavior when making pricing decisions
                  • advertise for well known maintenance drugs and expensive drugs, guarantee lowest Rx price (chain’s perceived advantage)
                  • How to understand consumer behavior when making pricing decisions
                    • Consumers are sensitive to changes in price
                    • The Price Sensitivity Approach to Prescription Pricing
                      • Brand name drugs are assigned a rating of 6.5 (low sensitivity) to 34 (high price sensitivity by patients)
                        • Higher the #, may have to decrease price to gain a competitive advantage
                        • Lower the #, may be able to raise price without losing market share
                        • Five Criteria
                          • Customer Awareness– usually greater for a widely used or popular drug
                          • Drug Cost–greater sensitivity for more expensive drug rather than inexpensive drug
                          • Medication Type or Disease State– usually more sensitive to maintenance meds rather than one-time use drugs
                          • Quantity of Drug Dispensed–lower sensitivity on lower quantities, price is usually less on a larger quantity
                          • Dispensing Frequency–sensitivity increases the more often the drug is dispensed to the person
                          • Organization of a Pricing System–
                            • Establish criteria & procedures for pricing exceptions to the base pricing system.  Put it in writing & train key personnel about exceptions & what to do if they occur  (discounts for compounds, senior discounts, etc)
                            • Control of a Pricing System–
                              • Review pricing data to see if objectives are being met, analyze competitors prices, assess patient perceptions, audit your pricing practices to ensure compliance with all 3rd party contracts (including medicaid–medicaid must be billed the same way as other insurance companies, if offer a discounted rate to them you must also do so to medicaid)
                              • Pricing of Services
                                • Before you file a claim for patient services you must: obtain a medicare or other provider, obtain HCFA form, documentation system, establish professional fees, develop a marketing plan, develop an accounting system, must consider timing


  • Compare and contrast the following types of value-added pharmacy services: point of care; wellness/health promotion; monitoring/screening services; disease state management; comprehensive pharmaceutical care services
    • Point of care- all pharmacists do this at the time of dispensing, involves collecting non-comprehensive info like allergy info.  Ex. DUR
    • Wellness/health promotion & monitoring & screening services- requires more patient data, delivered over extended period of time, separate from dispensing function
      • Ex. Smoking cessation, osteoporosis, lipid screening/management services
      • Disease state management- ongoing patient education separate from dispensing, extensive review of drug therapy, lasts between 15-60 minutes typically
        • Ex. Ongoing education programs in asthma, diabetes, hypertension
        • Comprehensive pharmaceutical care services- pharmacist is responsible for complete patient work-up, involves getting a patient/medical history, separate from dispensing.  Ex. MTM
        • Explain the components of value-added pharmacy services
          • Data collection:
            • Patient history, patient medical history, medication history, authorization to release medical info
            • Lab Monitoring
              • Diabetes programs, women’s health, weight scale, lipid monitoring, blood glucose monitoring (lab test quality standards are established by CMS)
              • Medication management protocols
                • Assessment, goal attainment, identify drug therapy problem, develop follow up/monitoring techniques, developing protocols, decision pathways
                • Patient education
                  • Screenings involving limited time (lipid profile)
                  • More comprehensive services (diabetes management)
                  • Describe typical outcomes of value-added pharmacy services
                    • Clinical– BP, lipid profile, weight, blood glucose
                    • Humanistic– quality of life
                    • Economic– ER visits, clinical visits, requires hospitalizations
                    • Patient knowledge– need before/after knowledge assessment
                    • Describe policy and procedures necessary to implement value-added pharmacy services
                      • Policy– referral from MD, create patient chart, sign authorization to release medical info, sign contract outlining patient responsibilities (such as making appointments)
                      • Procedures necessary– doing all of the follow up as set up by the policy decided upon by the patient & healthcare professional
                      • Discuss the marketing of value-added pharmacy services
                        • 6 P’s:
                          • Product– ex. Lipid program
                          • Place– ex. Private space to counsel
                          • Price– costs of appointments/screenings
                          • Promotion– ex. TV, ad in the paper, etc
                          • Process management– create an appointment schedule
                          • Personnel– reward good pharmacists for their effort in the program
                          • List the four stages of collaborative practice arrangements
                            • Stage 0: professional awareness
                            • Stage 1: professional recognition– show doctors desire to start a lipid program
                            • Stage 2:  exploration & trial– develop stronger relationships with doctors, encourage them to refer trial patients to the program
                            • Stage 3: professional relationship expansion– get (+) feedback from physicians
                            • Stage 4: collaborative working relationship- increase quality of program, signing of collaborative practice agreement
                            • Understand how pharmacists are reimbursed for providing value-added services, including the terminology, proper claim forms, and compensation strategies
                              • Current procedure terminology (CPT) is the way in which procedures, labs, & appointments are coded in order to bill insurance (can be found on CMT website)
                                • New CPT codes approved 1/1/08 represent established services provided nationally & frequently
                                • ICD9– same kind of idea as CPT, but is 3-5 #s long & conveys info on specific health conditions
                                • Forms that need to be used to be reimbursed:
                                  • CMS 1500
                                  • CMS 1450 (hospital, outpatient clinic)
                                  • Use a patients medical card (not Rx card) to bill these
                                  • Compensation strategies
                                    • Based on payer type (cash vs. 3rd party)
                                      • Medicare: we can bill for DME, immunizations, diabetes supplies
                                      • Medicaid: some states give pharmacist provider status
                                      • Based on pharmacy setting (may receive compensation through contractual agreement with a physician or outpatient setting)
                                      • Components of MTM (in order)
                                        • Medication therapy review (MTR)— ex. DUR
                                        • Personal medication record (PMR)– record all drugs they are taking
                                        • Medication action plan (MAP)
                                        • Intervention/referral- address medication related problems, set goals
                                        • Documentation & follow up


  • Explain the four key areas that caused the Medicare Modernization Act of 2003 to be passed by Congress
    • Establishing private competing private plans rather than a large government program
      • This gives more responsibility (risk shifting) to the patient to make an informed decision about their medicare D plan (different from the rest of medicare)
      • Voluntary: people opt in, not out (medicare part B)
      • Federal costs = ~$400 billion
      • Providing additional help for people w/ low income &/or catastrophic costs
      • Describe the characteristics of the Medicare population
        • Low income, chronic conditions, poor health, may have decreased cognitive function, possibly enrolled in medicaid, may be disabled & under 65
          • All these groups are less than 46% of the overall medicare population though (separately)
          • Compare and contrast the four main groups of beneficiaries eligible for Medicare Part D
            • Those who already have drug coverage
              • Retiree coverage or medicare advantage coverage
              • Medicare will provide employers with a subsidy (28%) to continue to provide coverage for retirees
              • Dual eligibles (medicare + medicaid)
                • **Auto-enrolled in medicare part D (only group)**
                • Limited # of providers (not all medicare part d providers cover this group)–LTC patients, assisted living, ESRD, disabled
                • Limited income beneficiaries
                  • Gain the most from medicare part d
                  • No doughnut hole, no deductible or premium, may either specified low income or qualified medicare beneficiary
                  • Have money but didn’t (before ’06) or don’t have adequate drug coverage
                    • Largest group of medicare beneficiaries
  • Discuss the Medicare Part D standard benefit
    • Prescription drug plans– like PBMs for medicare
    • Medicare advantage plans– offer both prescription drug & health coverage
    • Basically as the drug coverage is expanded (your drug costs add up), out of pocket expenses/cost sharing increases through plans using things like doughnut holes
    • Discuss the impact on pharmacists, including non-covered medications, pharmacy network contracting, level playing field, pharmacy reimbursement, medication therapy management services, formularies and long term care pharmacy
      • Non-covered by part D- OTC, benzos, barbituates, Rx cough & cold meds  (for nondual covered people, you’re SOL; for people w/ medicaid some of these are covered)
      • Pharmacy network contracting- beneficiaries must live close to a pharmacy
      • Level playing field- no mandatory mail order, emergency access is necessary, must be able to get same quantity from mail order as from retail pharmacy
      • Reimbursement- no min/max for reimbursement rate set by congress, dispensing fees don’t include MTM services
      • MTM services- need to be implemented by the PDP’s to reduce risk of adverse events especially for more at risk groups covered by medicare part d, need CMS program
      • Formularies- must include most all drugs in the following categories: antidepressants, anticonvulsants, antipsychotics, anti-cancer, immunosuppressants, HIV/AIDS, for drugs in other categories there must always be an alternative (no monopoly by one drug), must inform patient before formulary change
      • LTC pharmacy- PDP’s must offer contracts to all LTC pharmacies in a service area
      • Discuss how value added pharmacy services covered previously might be a covered service under Medicare part D
        • Provide & get paid for MTM for a limited # of patients
          • Would be advanced by a CMS program model


At the completion of this unit the student should be able to:

  • Discuss time management philosophies
    • Time is $
    • Discuss common myths and pitfalls about time management
      • I don’t have time, I’m too busy, etc.
      • Discuss time management philosophies proposed by Drucker, Covey, Morgenstern, and Paul
        • Drucker- made suggestions about how to manage time better– look at how you manage your time, what works/what doesn’t, don’t waste other’s time
        • Covey- time management quadrants–quadrant I = urgent & important, quadrant IV = not urgent & unimportant
        • Morgenstern- each day is a container of space & time
        • Discuss how you can do real time management by understanding six main steps to better time management
          • 6 steps
            • Recognize the need to improve
            • Conduct an honest analysis of how you use your time– there are 4 types of leaders: leaders, analytics, relaters, entertainers
            • Establish a mission & goals– SMART goals: specific, measurable, achievable, realistic, timed
            • Get organized (make tasks for yourself)
            • Just do it
            • Review, revise, modify
            • Describe the prevalence of stress in the practice of pharmacy
              • Most stressors are related to time
              • Describe the relationship between stress and time pressures in the practice of pharmacy
                • Stress & time pressures lead to dispensing errors
                • Too much time dispensing, not enough time consulting with patients
                • Give examples of the major stressors in community & institutional pharmacy settings
                  • Heavy Rx load, no time to eat, too many phone calls, too much time on feet (difference between community & hospital pharmacy setting is the amount of patient interaction– more interaction in community)
                  • Describe how pharmacists actually spend their professional time
  • Describe how pharmacists would like to spend their professional time
  • Explain how pharmacy students can use time saving techniques
    • Make time lines, use time saving devices (PDA, laptop), break up big tasks into smaller ones



  • Compare and contrast the difference between a leader and non-leader according to Peters and Austin
    • 2 page handout
    • Describe and explain the four key areas of leadership
      • People
        • Get to know your employees (especially outside the office), give recognition for good work done, don’t issue orders–make requests, imply, action can be modified– human nature can’t
        • Character
          • Honesty & integrity important, no malice only charity towards subordinates, avoid fighting & arguments with subordinates
          • Endeavor
            • Be decisive, lead by leading, encourage innovation, set goals, be willing to compromise if necessary, encourage subordinates to make suggestions
            • Communication
              • Must be a good public speaker, be able to influence through conversation & story, be vision oriented (keep it simple, attainable & justify the actions you take to make it happen, use body language)
  • Institutional Pharmacy practice = hospitals, assisted living, etc
  • An independent pharmacy has 3 or fewer stores under common ownership
  • A chain pharmacy has 4 or more stores under common ownership
    • According to the US commerce department it is 11 or more stores
    • Retail = buy product and sell it for more than you paid for it (e.g., most community pharmacies and most hospitals).  Non-retail = (for example) VA hospital, where  drugs are essentially given to the patient at less than what was paid for them.
    • Following WWII, pharmaceutical companies transitioned from being the providers of raw chemicals to providers of finished dosage  forms
    • Current role of pharmacists = dispensing & patient care (pharmaceutical care)
    • Major reason for the failure of ~90% of pharmacies is poor management
    • Community pharmacy is the most competitive sector in all of healthcare
    • Drug therapy is the most cost effective way to treat disease today
    • 50% of dispensed drugs are taken incorrectly
    • About 3.5 billion prescriptions filled last year in the US
    • Nebraska has more pharmacists per capita than any other state
    • Outsourcing as a way of managing pharmacy services has been something primarily incorporated by hospitals as a way to manage pharmacy  services
      • Placing certain necessary tasks in the hands of external organizations (your employees don’t complete these tasks)
      • Institute of Medicine Report notes that medical mistakes in all clinical settings kill up to 98,000 Americans a year
      • For an online pharmacy located in Nebraska, they have to call each patient & offer to counsel on that medication
      • VIPPS is the seal of approval for online pharmacies
      • For pharmacists involved in disease state management there are credentialing exams for the following specialties:
        • Diabetes
        • Asthma
        • Lipids
        • Anticoagulants
        • Nutritional/herbal products are considered nutritional supplements not drugs so they are regulated more like food than drugs
        • “The single most powerful determinant of the future practice of pharmacy is the size, composition and attitude of the nation’s population.
        • Pharmaceutical care
          • Finding & responding to the drug therapy problems of patients & acting in the patient’s best interest
          • Central filling = a system that basically allows the patient to pick up their Rx at a local store when it’s actually filled at another (central) location.
          • The primary reason that pharmacists don’t counsel is a perceived lack of time
          • Unit of Use Packaging (aka original pack dispensing)
            • In other industrialized countries doctors only have the option of writing prescriptions for pre-packaged sized counts
            • Ex. Ear drops
            • About 85% of prescriptions are paid for by a 3rd party
            • In Nebraska there must be one pharmacists for every 2 techs.
            • PROCESS APPROACH
              • 5 Universal functions of Management   (POCCC)
                • planning
                • organizing
                • Commanding (aka directing)
                  • Unity of command principle
                    • An employee should receive orders from only one superior
                    • coordinating
                    • controlling
                    • Basic tenets
                      • Specialization improves efficiency
                      • Unity of command principle
                      • Compensation should be fair & justified
                      • Employee turnover has a negative impact on efficiency
                      • Harmony among employees is a strength
                      • QUANTITATIVE APPROACH
                        • Aka scientific approach
                        • Uses mathematical modeling such as EOQ (economic order of quantity), stimulation, cost-benefit, & break-even analysis
                        • BEHAVIORAL APPROACH
                          • Aka human relations approach
                          • Uses behavioral modification, group dynamics, motivation & management by objectives (MBO)
                          • Revolves around assumption that if employees are made happy (salary, work environment, etc), they will perform better
                          • **DEMING APPROACH**
                            • Concerned with quality & long term results
                            • **TQM (total quality management) or CQI (continuous quality improvement)
                            • Applied common sense
                            • *People want to do their best but processes get in the way
                            • You don’t manage people, you manage processes
                            • Variation exists in everything we do
                              • Decreasing variation, should improve the process
                              • He has 14 points but here are the key ones:
                                • Create an environment with a consistency of purpose.  Where are we going?  How do we do it?
                                • Drive out fear of management.  Allow room to think outside the box
                                • Employees should enjoy their work.  Leads to fewer errors & more satisfied patients
                                • Institute a program of education & self-improvement
                                • SYSTEMS APPROACH
                                  • Considers all of the parts of a given situation to be interrelated & interdependent
                                  • Attempt to unify management theory & practice
                                  • In a pharmacy, this is the most often incorporated approach
                                    • In a situation involving high quality the Deming Approach is used
                                    • CONTINGENCY APPROACH
                                      • Only approach that’s discussed that can stand on its own today
                                      • The relationship between relevant environmental variable & appropriate management concepts & techniques that lead to  effective & efficient goal attainment
                                      • Integrates the environment as part of management theory
                                      • Bring management theory & practice together
                                      • If–then relationship
                                        • If is the independent side
                                          • Also consists of environmental (internal or external) variables
                                            • External:  economic climate, political climate, regulatory issues, technological & social climates
                                            • Internal:  Organizational structure of the company, personnel characteristics, communication process
                                            • Then is the dependent side
                                              • Consists of management variables which can be the process, quantitative, behavioral, systems &/or Deming approaches
                                              • No real problems with this approach, it is best incorporated when looking at the big picture
                                              • Steps involved in the decision making process (same steps involved, no matter how complex the decisions may be)
                                                • In slides–(Problem definition–> formulation of alternatives–>evaluation  of alternatives–>commitment–>follow up)
                                                • Awareness
                                                  • Management by walking around (MBWA).  Need to be interactive with employees.
                                                  • Definition
                                                    • Most important part of process
                                                    • Must define the problem, not just the symptoms of the problem
                                                    • Analysis
                                                      • We need to analyze all relevant information
                                                      • Development
                                                        • Need to develop alternative solutions to the problem
                                                        • More alternatives, the better the chance of making the appropriate selection
                                                        • Selection
                                                          • May incorporate quantitative management techniques such as cost-benefit analysis
                                                          • Look at advantages & disadvantages
                                                          • Timing is extremely important
                                                          • Execution
                                                            • Implementation step
                                                            • Need to convert the decision into a efficient & effective action
                                                              • Efficient–accomplish that goal with the optimum utilization of resources
                                                              • Effective–want to accomplish the goal
                                                              • Follow Up
                                                                • Need a control or feedback mechanism to determine if everything is going to plan
                                                                • Often is unjustly ignored
                                                                • Fine tuning turning this time is essential
                                                                • Decision making effort needs to be consistent with the potential consequences of the decision
                                                                • Judgment is always required in any decision, regardless of the complexity of the decision
                                                                • The “No Decision” option is deciding by procrastination or default.  Consciously deciding not to decide
                                                                • Types of decisions
                                                                  • Programmed
                                                                    • Day to day decisions
                                                                    • Routine & repetitive in nature
                                                                    • Cost of a wrong decision is usually low
                                                                    • These type of decisions can be delegated
                                                                    • Non-programmed
                                                                      • Unstructured, no set policies or procedures
                                                                      • Cost of a wrong decision is higher here
                                                                        • · Pharmacists make both programmed & non-programmed decisions

Group decision making

More info, knowledge available

Spreads risk, generates more alternatives

Increases subordinate acceptance of the final decision

Takes longer time to make a decision

More costly

Group thinking mentality (agreeing to appease)

Individual decision making

Takes less time

Costs less money

Doesn’t have to deal with interpersonal obstacles

Less info available in general

Subordinates less likely to accept

  • Behavioral Dimensions of Decision Making


Everyone should be evaluated on the basis of merits, accomplishments, & abilities, not pre-judged on stereotypes

Halo Effect

When a person allows one characteristic of an individual to overshadow other characteristics either positively or  negatively

  • Planning is…

The establishment of objectives

Fundamental to all management at all levels

Anticipates what the company must do in the future

Designing & implementing strategies necessary to complete those objectives

An orderly process that helps…

Give the organization direction

Prepare for change

Cope with uncertainty

  • Strategic/Long-range planning

Essential in determining & refining an organization’s objectives & determining how to allocate its resources

Process of identifying, evaluating, & selecting long range courses of action for an organization

>1 Year (usually 5-20 years)

Provides framework for detailed planning & day to day decisions

Involves SWOT analysis

  • Strategic, Weakness, Opportunities, Threats
    • Strategic & weakness are involved in the analysis of the internal environment
    • Opportunities & threats are involved in the analysis of the external environment
    • Also allows you to determine areas of potential for an organization by analyzing the internal & external  environments
    • Allows for the development of goals & objectives
      • Need to be consistent with areas of potential
      • End product/strategic plan need to be flexible

Problems with strategic planning

  • Doesn’t necessarily yield a competitive advantage or organizational metamorphosis
  • Sometimes difficult for employees to accept
  • Goals must be consistent with time period
  • Tactical/short-range/operational planning

Short term (1-5 years)

Viewpoint is internal, focused on completion of day to day tasks

Implementing the strategic plan through the development of policies & procedures

Allocating necessary resources to make this happen

Making sure that the company is able to complete immediate tasks & objectives to meet company goals

  • Differences between tactical & strategic planning

Level at which decisions are made

Tactical planning is done by management

Time Frame

Strategic is long term while tactical is day to day operations

Potential impact on organization’s well being

Strategic is far more important

  • American companies are criticized for being to short sighted, not worried about long term consequences & more  concerned with quantity over quality.
  • Organizing involves determining how the work of an organization is divided into specific jobs, departments & levels of  authority
  • Departmentalization is the process of grouping activities or tasks to achieve a common purpose in the organization.  Do so  through:


Ex. Different departments in a hospital such as cardiology, radiology, etc.


Ex. Prescription vs. non-prescription drugs at a pharmacy


Ex. A company may have multiple manufacturing locations that specialize in different product production.


Departmentalization based on the type of customer that is being served.

Ex. Drug reps going to a hospital or speciality doctors office depending on what they are selling

  • Organizational Chart

Shows the structure/chain of command at an organization

Chain of command aka scalar principle

  • Line of authority that vertically connects all levels of an organizational hierarchy.  Shows the way in which  orders & instructions may be expected to flow.

Shows lines of communication as well as different levels of authority & span of control

Independent pharmacies have a flatter (decentralized organization) type of organizational set-up whereas the set- up at a hospital is far more complex

  • Flattening of organization decreases the length of the chain of command

A violation of this “unity of command” principle is a clinical supervisor

  • This is more of a horizontal (rather than vertical) form of authority
  • This idea works better with highly trained individuals (health care professionals)
    • Are use to answering to multiple people
    • More likely to accept this violation
    • Requires good communication & clear objectives
    • Views of authority

Authority = right to take action & use resources

Position authority

Authority by virtue of holding that position

Not always accepted by subordinates

Acceptance authority

When a person has authority when it is accepted by their subordinates

“ultimate” source of authority

Easier for subordinates to accept if the task is part of their everyday regimen & they can see that it is in-line with  the goals of the organization

  • Delegation

Very important in management

Process of assigning tasks & responsibilities & granting authority to ensure tasks get completed.

Granting authority & responsibility is the one that most people have a problem with

Ex. Pharmacists need to delegate programmed tasks to techs & make non-programmed decisions themselves

Important to emphasize the importance of the task assigned to whom it is delegated.

  • Less chance of error if they know why they’re doing it

Provide adequate training so others can do your job

2 extremes of delegation

Delegating everything (managers learn to solve problems on their own)

Delegating nothing (want to do both old & new job)

  • Parity Principle

Authority delegated should be equal to the responsibility given

An employee shouldn’t be delegated a task if they aren’t given the proper authority to complete the task properly

  • Span of Control

# of subordinates that a manager is directly responsible for

Varies depending on situational factors

Type of work

  • Easier to supervise in an inpatient vs. community pharmacy setting

Amount of managerial experience

  • More experienced = ability to handle greater span of control

Need for coordination between tasks

  • More complex the task, the smaller the span of control

Educational/Experience level of the people being supervised

  • More educated subordinates, theoretically the larger the possible span of control
  • Directing

Providing direction to subordinates to ensure work is done correct & on time

Leading & motivating employees

Leadership = the ability to inspire & influence others in order to reach an organization’s goals & objectives

  • Theories of leadership:
    • Great person theory
      • Leaders are born, not made
      • Big Bang theory
        • Great events make leaders out of ordinary people
        • Traits theory
          • Leaders have certain traits which can be acquired through learning & experience
            • Some of these traits include: honesty, competency, ability to inspire, & foresight
            • Motivation
              • Using an employee’s value system to motivate them
  • Must fulfil lower tiers before higher tiers
  • Equity theory:

Degree of equity or inequity that people perceive in their work situation

Employees look at the input they give & the output (rewards of the job) & compare to other employees

Every system is designed to produce the results it gets, whether intended or not

  • Expectations

Employees typically reach or fail to reach expectations of them depending on how they’re treated

  • Controlling

Directing & planning processes

A feedback loop is necessary to determine whether or not we are being effective at reaching our goals

Types of Control:

Preventive (prospective actions)

Corrective (retrospective actions)

Stages of the Control Process

Determination of Performance standards

  • Standards must be:
    • Measurable
    • Achievable & realistic
    • Pertinent to the task at hand

Measurement of Performance (compare with standards set for activity)

Comparison of actual against desired performance

Implementation of corrective action

An effective control system (needs to be)

Well communicated

Well coordinated




Behavioural dimensions of control process:

People resist controls & can cause interpersonal conflicts

Need to have flexible control limits & keep legal implications in mind

  • Authority is derived from the job description.  It implies the manager’s right to take action, utilize actions & make  commitments

Formal authority:

Comes from job description

Expert authority:  (this is us)

Type of authority conferred upon professionals by the society at large

Charismatic authority:

Based on the attributes of the individual


Concept of succession of leadership


Whether or not someone has earned their stripes

  • Influence is getting someone to comply voluntarily
  • Sources of Power, influence & authority

Acceptance or consent

Acceptance of a manager’s decision by subordinates is what really confers authority

Zone of indifference

  • Area in which an individual accepts orders without conscious questioning

Zone of acceptance

  • Area established by subordinates within which they are willing to accept the decisions made for them by their  superior
  • Use of authority is restricted by:

Organizational position

An exception is when an expert authority trumps the overseeing authority

Legal & contractual mandates

Social limitations (societal values/expectations)

Physical limits, technological constraints & economic constraints

Manager can’t expect someone to lift something too heavy, do something beyond their technological ability or  beyond the financial limits of the department

Zone of acceptance –explain why it’s important

  • Medication error prevention:

Macro perspective (societal level)

Federal law (society) has mandated that drugs be safe & effective

  • OTC drugs must have adequate instructions so that they be used w/o the use of professional supervision
  • Child resistant packaging

State law

  • State statute & regulations must be enacted to control who may care for patients & what the behavior of their  caregivers should be
  • Only licensed professionals may prescribe, dispense or administer Rx drugs
  • Health care professionals are subject to review & discipline by licensing bodies

Meso perspective (organizational level)

Provide physical facilities

Allocate resources to professionals working in an organization

Micro perspective (individual level)

  • A healthcare professional must take into account all 3 levels


Practice within the law

Uphold professional standards


Work to meet requirements of employment

Manage operations of pharmacy as required


Provide care to individual patients

Supervise support staff

Work in cooperation with other healthcare professionals

  • Selling = promoting what you want to sell
  • marketing = promoting what you want people to buy
  • Negative demand

Potential purchasers dislike the product may be willing to pay something to avoid consuming it

  • No demand

Potential purchasers are uninterested or apathetic about the product (same price for a name vs. generic drug)

  • Latent demand

Lots of potential purchasers but product doesn’t exist yet (ex. AIDS vaccine)

  • Falling demand

Consumers lost interest in the product b/c it either becomes obsolete or no longer needed

  • Irregular demand

Fluctuations in demand due to things such as the season of the year

  • Full demand

Demand for a good or service is equal to production capacity

  • Overfull demand

Demand for goods or services is greater than production capacity resulting in shortages

  • Unwholesome demand  (not the same as negative demand)

Demand for dangerous or unhealthy products

  • Necessary components of an exchange:

At least 2 parties

Capability of each party to communicate & deliver

Each party can either accept or reject the offer

Each part believes it to be appropriate/desirable to deal with the other party

Each party has something of value to offer to the other party

  • Pharmacist participation in ICU at the time of dispensing has been proven to reduce errors

Pharmacists were shown to reduce adverse drug events (ADE) at the time of prescribing

  • Prescription drug spending has been increasing at nearly double the rate of hospital & physician services since 1990
  • 3 main factors driving changes in prescription drug spending:


Price changes

Changes in the types of drugs being used

  • Prices for both generics & brand name drugs are just about doubling
  • Mission statement:

Defines the organization’s primary reasons for existing

Who we are & what we do

It’s a statement of the present going ahead into the near future

Usually no longer than 2 sentences

  • Vision statement

What the organization wants to be at some point in the future

Multidimensional, complex, short in length

Should inspire

Beginning & ending point for strategic planning

Defines the mission of the organization

  • Active failures (front end failures)

Most commonly investigated type error

Often blamed on the prescribing physician or dispensing pharmacist

  • Latent failures (system failures)

Occur at the organizational level

Ex. Faulty information management, ineffective training of employees

Also can result from a lack of info such as not having a complete allergy list, not double checking, poor drug storage,  look-alike/sound-alike medications

  • Confirmation bias

Phenomenon that when choosing an item, people see what they are looking for & once they have found it, they stop  looking

Ex. Pharmacists get used to grabbing a certain bottle or tablet which is familiar, this may ultimately lead to errors.

  • Failure mode & effective analysis (FMEA)

Examine the use of new products in order to determine potential points of failure as well as their effects before an  error can actually occur

  • Split-Reporting relationship

A subordinate having to answer to more than one superior

Violates the unity of command principle

Commonly found in healthcare settings

  • Line & Staff

A line (ex. Pharmacist) advances the accomplishment of the organization’s work

A staff (ex. Pharmacy techs) provides the support for the line’s functions

  • In health care, there exists a dual pyramidal organizational structure (administrative & medical)
  • Objectives are composed of 3 parts

What is to be done, how much is to be done, by when is it to be done

  • Policy = expression of the positions & behavior advocated by the organization
  • Procedure = how the policy is to be implemented &/or applied.

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