The Procedure of Analyzing Public Policy Environments

The analysis of the public policy environment of an entity such as a healthcare organization or an interest group is part of the larger external environmental analysis through which its leaders seek to determine the externally imposed opportunities and threats facing their organization or, in the case of interest groups, their members. The relevant variables in their external environments include, but are not limited to, the public policy environment. In fact, the external environments of entities include all of the factors outside their boundaries that can influence their performance. Public policies are certainly among the factors; however, as noted above, biological, cultural, demographic, ecological, economic, ethical, legal, psychological, social, and technological factors are also relevant and must be routinely analyzed if they are to be taken into account in an entity's efforts to perform well.

An effective analysis of a public policy environment may be conducted using a variety of tools and techniques. Some of the more common ones include trend identification and extrapolation, expert opinion gathered through the Delphi technique (a means of eliciting opinions and judgments from experts through structured exchange of email, mail, or facsimile that permits successive rounds of interactions) or focus groups, and scenario development. No matter which technique is used, it is most productively applied within the framework of a five-step set of activities that is useful in analyzing any entity's external environment, including its public policy environment. Four of the steps are routinely considered in the general strategic management literature (David 2004) and have been adapted for use specifically in health-related organizations by Swayne, Duncan, and Ginter (2005). A fifth step is added to their list below. The interrelated steps in conducting analyses of public policy environments are as follows:

• scanning the environment to identify strategic public policy issues—that is, issues that may be specific public policies or problems, possible solutions to the problems, and political circumstances that might eventually lead to policies—that are relevant and important to the organization, system, or interest group;

• monitoring the strategic public policy issues identified;

• forecasting or projecting the future direction of strategic public policy issues;

• assessing the importance of the strategic public policy issues for the entity; and

• diffusing results of the analysis of public policy environments among those in the organization, system, or interest group who can help formulate and implement its response to these issues.

Each of these steps in analyzing public policy environments is examined in turn in the following sections. A more extensive discussion of these steps can be found in Chapter 4 of Seeking Strategic Advantage Through Health Policy Analysis (Longest 1997).

Effective environmental scanning acquires and strategically organizes important information from an entity's external environment. This step properly begins with careful consideration by the leaders of what they believe to be strategic public policy issues. In guiding the focus of scanning, it is useful to remember the definition of public policies given earlier: they are authoritative decisions—made in the legislative, executive, or judicial branches of government—that are intended to direct or influence the actions, behaviors, or decisions of others. When these decisions influence in any way the strategic actions, behaviors, or decisions of an entity's leaders, they can be thought of as strategically important public policy issues.

The set of strategic public policies for any entity constitutes a very large set of decisions. Remember that some of these decisions are codified in the

Scanning the Environment to Identify Strategic Public Policy Issues statutory language of specific public laws. Others are the rules or regulations established to implement public laws or to operate government and its various programs. Still others are the judicial branch's relevant decisions.

The large set of public policies that are of strategic importance, however, represents only part of what must be considered strategic public policy issues for an entity. The problems, potential solutions, and political circumstances that might eventually align to lead to strategic policies must also be considered important strategic public policy issues. Thus, effective scanning of the public policy environment involves identifying specific strategic policies and identifying emerging problems, possible solutions, and the political circumstances that surround them, which could eventually lead to policies of strategic importance. Together, these form the set of strategic public policy issues that should be scanned.

Consideration within any entity about what issues are in fact of strategic importance is largely judgmental, speculative, or conjectural (Klein and Linne-man 1984). Obviously, this makes the quality of the judgments, speculations, and conjectures important. For this reason, it is useful to have more than one person decide which of the scanned issues are of strategic significance. One widely used approach in making these judgments is to rely on an ad hoc task force or a committee of people from within the organization or interest group to render their collective opinion.

Another popular approach is to use outside consultants who can provide expert opinions and judgments as to what is strategically important in the environments of health-related organizations and interest groups. It is also possible to utilize any of several more formal expert-based techniques. The most useful among these are the Delphi technique, as well as the nominal group technique (NGT), brainstorming, and focus groups, which are interactive group problem-identification and problem-solving techniques (Swayne, Duncan, and Ginter 2005; Webster, Reif, and Bracker 1989; Jain 1984; Terry 1977; Delbecq, Van de Ven, and Gustafson 1974). The starting point in any scanning activity, no matter who is doing it or which techniques might be employed, is the question of who or what to scan.

Policymakers in federal, state, and local levels of government and those who can influence their decisions—whether through helping shape conceptualization of problems and their potential solutions or through the impact on the political circumstances that help drive the policymaking process—are the appropriate focus ofscanning activities. The focus can be refined for particular situations by limiting it to strategically important policies and the problems, potential solutions, and political circumstances that might eventually lead to policies that affect the specific entity doing the scanning.

Another way of identifying who or what should be scanned in a public policy environment is to think of the suppliers of relevant public policies, and those who can influence them, as forming the appropriate focus. As discussed in Chapter 3, members of each branch of government play a role as supplier of policies in the political market, although the role of each branch is different. Each should receive attention in the scanning activity. Because policies are made in all three branches of government, the list of potential suppliers of public policies—the policymakers—is lengthy, and adding those who can influence the suppliers makes the list even longer.

Effectively scanning an entity's public policy environment identifies specific public policies that are ofstrategic importance. Very effective scanning also identifies the emerging problems, possible solutions to them, and the political circumstances that surround them that could eventually lead to strategically important policies. But scanning, even when very effectively done, is only the first step in the overall set of interrelated activities involved in analyzing a public policy environment.

Monitoring is more than scanning. It is the tracking, or following, of strategically important public policy issues over time. Public policy issues are monitored because the leaders of organizations, systems, or interest groups, or their support staff who may be doing the actual monitoring, believe the issues are of strategic importance. Monitoring them, especially when the issues are not well structured or are ambiguous as to strategic importance, permits more information to be assembled so that issues can be clarified and the degree to which they are, or the rate at which they are becoming, strategically important can be determined (Thomas and McDaniel 1990).

The monitoring step has a much narrower focus than scanning (Swayne, Duncan, and Ginter 2005). The purpose of monitoring is to build a base of data and information around the set of strategically important public policy issues that are identified through scanning or are verified through earlier monitoring. Fewer, usually far fewer, issues will be monitored than will be scanned as part of analyzing public policy environments.

Monitoring is extremely important because it is so often difficult to determine whether public policy issues are strategically important. Under conditions of certainty, the leaders of entities analyzing their environments would fully understand strategic issues and all consequential implications for their decisions and actions. However, uncertainty characterizes much about the strategically important issues faced by most health-related organizations, systems, and groups. Monitoring will not remove uncertainty, but it will likely reduce it significantly as more detailed and sustained information is acquired. As with scanning, techniques that feature the acquisition of multiple perspectives and expert opinions can help the leaders determine what should be monitored; experts in the form of consultants can also be used for the actual monitoring if this is beyond the capacity of the entity's regular staff.

Monitoring Strategic Public Policy Issues

Monitoring the strategic public policy issues for most organizations and interest groups in the health domain will affirm for their leaders that the vast majority of contemporary policies spring from a relatively few earlier policies. The strategically important public policies for most entities result from the modification of prior policies, not from a constant stream of new policies. Monitoring reveals that public policies have histories and, in fact, are frequently "living" history. Many of them continually, although incrementally, evolve through the modification phase of policymaking. As people monitor these changes, they tend to become intimately familiar with the evolutionary paths of the public policies they monitor. Such knowledge can be valuable as a background for the next step in analyzing public policy environments, forecasting changes.

Forecasting Changes in Strategic Public Policy Issues

Effective scanning and monitoring cannot, by themselves, provide all the information about the strategic public policy issues in an entity's environment that its leaders would like. Often, if the response to strategic issues is to be made effectively, reliable forecasts of future conditions or states is necessary. That is, information about issues and their potential effects before they occur is needed. This may give leaders time to formulate and implement successful responses to the issues.

Scanning and monitoring the public policy environment involves searching this environment for signals, sometimes distant and faint signals, that may be the forerunners of strategically important issues. Forecasting involves extending the issues and their impacts beyond their current state. For some public policy issues (e.g., the impact on patient demand of a change in public policy that redefines the eligibility requirements in the Medicaid program), adequate forecasts can be made by extending past trends or by applying a formula. In other situations, forecasting must rely on conjecture, speculation, and judgment, although these can be systematically compiled through such means as Delphi panels or focus groups. Sometimes, even sophisticated simulations can be conducted to forecast the future.

However, some degree of uncertainty characterizes the results of all of these forecasting techniques. It is especially difficult to incorporate in the utilization of any of them because strategically important public policy issues never exist in a vacuum and typically involve many issues at work simultaneously. Existing forecasting techniques and models do not fully account for this condition.

Trend The most widely used technique for forecasting changes in public policy issues Extrapolation is trend extrapolation (Evans 2002). This technique, when properly used, can be remarkably effective and is relatively simple to use. Trend extrapolation is nothing more than tracking a particular issue and then using the information to predict future changes. Public policies do not emerge de novo. Instead, they result from linked trains of activities that can and typically do span many years. This feature of the policymaking process makes its results more predictable than some might believe (Molitar 1977).

Even so, trend extrapolation as a technique in environmental analysis must be handled very carefully. It works best under highly stable conditions; under all other conditions it has significant limitations. When used to forecast changes in public policy, it usually permits the prediction of some general trend—such as directional trends in the number of people served by a program or in funding streams—rather than quantification of the trend with great specificity.

Significant policy changes, as well as changes in technology, demographics, or other variables, can render the extrapolation of a trend meaningless or misleading. In spite of this, however, predictions about trends through extrapolation can be quite useful to the leaders of organizations, systems, and interest groups as they seek to predict the paths of their strategically important policy issues. For those who exercise caution in its use and who factor in the effect of changes such as the introduction of a new or modified policy, trend extrapolation can be a very useful technique in forecasting certain aspects of the public policy environments of their health-related organizations, systems, or interest groups.

Another technique for forecasting the public policy environment is the devel- Scenario opment, usually in writing, of scenarios of the future (Leemhuis 1985; Shoe- Development maker 1993). A scenario is simply a plausible story about the future. This technique is especially appropriate for analyzing environments that include many uncertainties and imponderables. Such features generally characterize the public policy environments of health-related organizations and interest groups.

The essence of scenario development is to define several alternative future scenarios, or states of affairs. These can be used as the basis for developing contingent responses to the predictions; alternatively, the set ofsce-narios can be used to select what the organization, system, or interest group leaders consider the most likely future, the one to which they will prepare to respond.

Scenarios of the future can pertain to a single policy issue (e.g., the federal government's policy regarding approval procedures for new medical technology) or to broader-based sets of policy issues (e.g., the federal government's policies regarding regulation of health plans, funding for medical education or research, or a preventive approach to improved health). Scenarios can, and in practice do, vary considerably in scope and depth (Venable et al. 1994).

As a general rule, when using the scenario development technique in forecasting public policy environments, it is useful to develop several scenarios. Multiple scenarios permit the breadth of future possibilities to be explored. After the full range of possibilities has been reflected in a set of scenarios, one can be chosen as the most likely scenario. However, the most common mistake made in using scenario development is to envision too early in the process one particular scenario and base planning on it. The leaders who think they know which scenario will prevail and who prepare only for the one they select may find that the price of guessing incorrectly can be very high indeed.

Assessing the Strategic Importance of Public Policy Issues

Scanning and monitoring strategic public policy issues, and forecasting future changes in them, are important steps in a good environmental analysis. However, the leaders of organizations and interest groups must also concern themselves with the specific and relative strategic importance of the issues they are analyzing. That is, they must be concerned with an assessment or interpretation of the strategic importance and implications of public policy issues for their entities.

Frequently, this assessment involves characterizing issues as opportunities for or threats to their entity (see Figure 2.1). However, such assessments are far from exact. It may well be that sound human judgment is the best technique for making these determinations, although the strategic importance of public policy issues can be considered on several bases.

Experience with similar issues is frequently a useful basis for assessing the strategic importance of a public policy issue. The experience may have been acquired firsthand within the particular organization or interest group where an assessment is being made, or it may come from contact with colleagues in other organizations or groups that have experienced similar public policy issues and who are willing to share their experiences. Great variety exists among the states regarding their public policies that affect the pursuit of health; this variety can be instructive. Similarly, the experiences in other countries with various public policies affecting health and its pursuit can be drawn on for insight. Other bases for assessments include intuition or best guesses about what particular public policy issues might mean to an entity, as well as advice from well-informed and experienced others. When possible, quantification, modeling, and simulation of the potential impacts of public policy issues being assessed can be useful.

Making the appropriate determination is rarely a simple task, even when all of the bases suggested above are considered. Aside from the difficulties encountered in collecting and properly analyzing enough information to inform the assessment fully, there sometimes are problems that derive from the influence of the personal prejudices and biases of those conducting the environmental assessment. Such problems can force assessments that fit some preconceived notions about what is strategically important rather than reflecting the realities of a particular situation (Thomas and McDaniel 1990).

The final step in analyzing public policy environments is the sometimes difficult one of diffusing or spreading the results of the effort to all of those in the entity who require the information to carry out their own responsibilities. For example, the identification of a shift in a funding stream for certain services may be of strategic importance to several managers in an organization. Each of them needs this information, and it should be effectively diffused in such a way that it reaches all of them. This step is frequently undervalued and may even be overlooked in some situations. Unless it is effectively carried out, however, it really does not matter how well the other steps in environmental analysis are performed.

Leaders can diffuse relevant information about the public policy environment of an entity throughout the organization or to the members served by an interest group in the following three basic ways:

1. use their power to dictate diffusion and use of the information (this approach works best in entities whose leaders can, if they choose, use coercion or sanctions to see that the information is diffused and used in all the appropriate places);

2. use reason to persuade all of those who are affected by the information to use it (this works as well as or better than relying on power, if the leaders are persuasive); or

3. perhaps best of all in most situations, use education of participants in the entity to emphasize and convince those who need to be convinced of the importance and usefulness of the information as a way of improving the chances that the information will be properly used.

However it is done, diffusion of strategically important information about public policy issues among the relevant participants in organizations or interest groups brings the steps in analyzing public policy environments to completion. Given the vital link between entities and the public policies that affect them, no contemporary health-related organization or interest group can expect to succeed in the absence of a reasonably effective set of activities through which its leaders discern and, ultimately, respond to strategically important public policy issues. However, this is only half of the task facing these contemporary leaders regarding their public policy environments. They are also responsible for influencing these environments to the strategic advantage of their organization or system or to the members of their interest group. This complex activity—which is the other half of policy competency—is explored in the next section.

Diffusing the Results of Environmental Analysis into Organizations and Interest Groups

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