Trident University International Bezos Community Medical Center Paper

Trident University International Bezos Community Medical Center Paper
A Sample Answer For the Assignment: Trident University International Bezos Community Medical Center Paper
Title: Trident University International Bezos Community Medical Center Paper
Trident University International Bezos Community Medical Center Paper
Copyright 2018. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. Chapter 3: Financial Analysis and Management Reporting 51 that compare the organization’s present ratios, trends, and percentages to those of other, similar organizations.1 The third step of financial analysis, using perspective and judgment to make decisions, takes into account the information obtained in the first two steps, in addition to information derived from the decision maker’s unique perspective and judgment, to make the decision.
Decisions that may at first appear to be contrary to the information provided in the first two steps may make perfect sense based on pressures from internal and external constituents, including medical staff, employers, regulators, donors, and others. The example of a fictional facility, Bobcat Hospital, will be used to illustrate the financial analysis concepts in this chapter. Balance Sheet The balance sheet shows the organization’s financial position at a specific point in time, typically at the end of an accounting period (see exhibit 3.1). The balance sheet presents the organization’s assets, liabilities, and net assets (or shareholders’ equity in for-profit organizations) and its relationships, which are reflected in the following accounting equation: Assets = Liabilities + Net Assets Assets are economic resources that provide or are expected to provide benefit to the organization.
Current assets are economic resources that have a life of less than one year (i.e., the organization expects to consume them within one year). Current assets are listed on the balance sheet in order of liquidity. Cash is money on hand and in the bank that the organization can access immediately. Temporary investments consist of money placed in securities with maturities up to one year, such as commodities and options. The category receivables, net—made up of patient accounts receivable, net of allowances for contractual allowances, charity care, and bad debt—represents money due to the organization from patients and third parties for services already provided. Inventory is the cost of food, fuel, drugs, and other supplies purchased by the hospital but not yet used or consumed. Prepaid expenses are expenditures made by the hospital for goods and services not yet consumed or used in hospital operations (sometimes referred to as deferred expenses), such as rent and insurance premiums. Noncurrent assets are economic resources that have a life of one year or more (i.e., the organization expects to consume them over a span longer than one year). Plant and equipment, net consists of economic resources, such as land, buildings, and equipment, minus the amount that has been depreciated over the life of the buildings and equipment (which is called accumulated depreciation). Long-term investments are economic resources that the hospital owns, such as corporate bonds and government securities, and intends assets Economic resources that provide or are expected to provide benefit to the organization. EBSCO Publishing : eBook Academic Collection (EBSCOhost) – printed on 1/15/2023 3:34 PM via TRIDENT UNIVERSITY AN: 1839058 ; Michael Nowicki.; Introduction to the Financial Management of Healthcare Organizations, Seventh Edition Account: s3642728.main.ehost 00_Nowicki (2339) Book.indb 51 5/17/17 10:57 AM 52 Exhibit 3.1 Bobcat Hospital Balance Sheet as of December 31, 2016 and 2017 (in thousands) Introduction to the Financial Management of Healthcare Organizations 2017 2016 ASSETS Current assets Cash Temporary investments Receivables, net Inventory Prepaid expenses Total current assets $ 124 45 3,536 175 32 3,912 $ 280 30 3,717 140 40 4,207 Noncurrent assets Land, plant, and equipment Accumulated depreciation Plant and equipment, net Long-term investments Other noncurrent assets Total noncurrent assets 6,980 –1,730 5,250 609 113 5,972 6,580 –1,660 4,920 990 109 6,019 Total assets 9,884 10,226 LIABILITIES AND NET ASSETS Current liabilities Accounts payable Notes payable Accrued expenses payable    Deferred revenues Estimated third-party adjustments Current portion of long-term debt Total current liabilities $ 302 345 871 10 137 184 1,849 $ 370 335 408 15 224 178 1,530 Noncurrent liabilities Long-term debt, net of current portion 3,600 3,500 Total liabilities 5,449 5,030 NET ASSETS Unrestricted net assets Temporarily restricted net assets Permanently restricted net assets 3,285 750 400 3,896 700 600 Total net assets 4,435 5,196 Total liabilities and net assets $9,884 $10,226 EBSCOhost – printed on 1/15/2023 3:34 PM via TRIDENT UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 00_Nowicki (2339) Book.indb 52 5/17/17 10:57 AM Chapter 3: Financial Analysis and Management Reporting to hold for more than one year. Other noncurrent assets include assets limited as to use (by contracts with outside parties) and goodwill, which represents the amount above fair market value based on an entity’s future earning potential. Liabilities are economic obligations, or debts, of the organization. Current liabilities are economic obligations, or debts, that are due within one year. Accounts payable are amounts the organization owes to suppliers and other trade creditors for merchandise and services purchased from them, but for which the organization has not yet paid. Notes payable are short-term obligations for which a formal contract has been signed, such as a short-term loan. Accrued expenses payable are liabilities for expenses that have been incurred by the hospital but for which the hospital has not yet paid, such as compensation to employees. Deferred revenue is money received by the hospital but not yet earned by the hospital, such as registration fees for an educational program not yet provided. Estimated third-party adjustments are approximations of how much money the organization will be required to return to third-party payers due to overpayments to the organization. Current portion of long-term debt is the amount of the organization’s long-term debt (not including interest) that is expected to be paid within one year. Long-term liabilities are economic obligations, or debts, that are due in more than one year. Long-term debt, net of current portion is an economic obligation, or debt, that is due in more than one year, minus the amount that is due within one year. Net assets is the current AICPA-approved term for the difference between assets and liabilities in not-for-profit healthcare organizations2 and represents the owner’s (community’s or religion’s) and others’ (donors external to the organization) financial interest in the organization. Unrestricted net assets include net assets that have not been externally restricted by donors or grantors, such as the excess of revenues to expenses from operations. Unrestricted net assets include net assets that are contractually limited by the governing body, such as proceeds of debt issues, funds deposited with a trustee and limited to use by an indenture agreement, and funds set aside under self-insurance arrangements and statutory reserve requirements. Temporarily restricted net assets include donor-restricted net assets that the organization can use for the donor’s specific purpose after the organization has met the donor’s restriction, such as the passage of time or an action by the organization. Permanently restricted net assets include donor-restricted net assets with restrictions that never expire, such as endowment funds. In fiscal years beginning after December 15, 2017, organizations will be expected to present net assets in two categories instead of three: “net assets without donor restrictions” and “net assets with donor restrictions.” Generally accepted accounting principles (GAAP) will require organizations to disclose the amount, purpose, and type of board restrictions for net assets without donor restrictions, and GAAP will require organizations to disclose the nature and amount of donor restrictions for net assets with donor restrictions (Connor and Mosrie 2016). 53 liabilities Economic obligations, or debts, of the organization. net assets The difference between assets and liabilities in a not-for-profit organization, which represents the owner’s and others’ financial interests in the organization. EBSCOhost – printed on 1/15/2023 3:34 PM via TRIDENT UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 00_Nowicki (2339) Book.indb 53 5/17/17 10:57 AM 54 Introduction to the Financial Management of Healthcare Organizations Shareholders’ equity is the current AICPA-approved term for the difference between assets and liabilities in for-profit healthcare organizations; it represents the ownership interest of stockholders in the organization. Shareholders’ equity is also called stockholders’ equity, owners’ equity, or net worth and comprises common stock and retained earnings. Common stock is money invested in the organization by its owners. Retained earnings result from income earned by the organization from operations minus dividends (distributions of earnings paid to stockholders based on the number of shares of stock owned). Explanatory notes for the balance sheet and the other financial statements should identify extraordinary events, as well as certain required provisions, and should be presented following the financial statements. In fiscal years beginning after December 15, 2018, public organizations and not-for-profit organizations that have issued securities that are traded or listed on an exchange or over-the-counter market will be expected to present the effects of all leases on the balance sheet (the deadline for all other organizations is fiscal years beginning after December 15, 2019). ASU 2016-02, Leases (Topic 842) intends to increase transparency and comparability among organizations by requiring all organizations, not just healthcare organizations, to present the effects of both financial leases and operating leases on the balance sheet (historically, organizations have not presented the effects of operating leases on the balance sheet). The organization should recognize a liability (lease payments) and a right-of-use asset on the balance sheet (Connor and Mosrie 2016). S tat e m e n t o f O p e r at i o n s The statement of operations, called the income statement in for-profit organizations, summarizes the organization’s net revenues, expenses, and excess of net revenues over expenses (called income before taxes in a for-profit organization) over a period of time (see exhibit 3.2). The relationship of the statement of operations to the balance sheet can be best expressed by the following expanded accounting equation: Assets = Liabilities + Net Assets + (Net Revenue – Expenses) revenues The amounts earned by the organization or sometimes donated to it. where the permanent accounts of the balance sheet, which are accounts that carry balances forward to the next year, relate to the temporary accounts of the statement of operations, which are accounts that zero out at the end of each year. To zero out the net results of the statement of operations at the end of the year, the net results are transferred to unrestricted net assets on the balance sheet (or to retained earnings on the balance sheet of a for-profit organization). Revenues are the amounts earned by the organization or sometimes donated to it. Gross patient services revenue is the total amount of charges for patients utilizing the hospital, regardless of the amount actually paid. Deductions from gross patient services EBSCOhost – printed on 1/15/2023 3:34 PM via TRIDENT UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 00_Nowicki (2339) Book.indb 54 5/17/17 10:57 AM Chapter 3: Financial Analysis and Management Reporting REVENUES Gross patient services revenue (non-GAAP) Provision for contractual adjustments (non-GAAP) Provision for charity care (non-GAAP) Net patient services revenue Provision for bad debt allowance Net patient services revenue less provisions for bad debt Premium revenue Other operating revenue Total operating revenue EXPENSES Salaries, wages, and benefits Supplies, drugs, and purchased services Depreciation and amortization Interest Total operating expenses 2017 2016 $13,031 –4,209 –420 8,402 –600 7,802 $12,610 –4,083 –408 8,119 –4,763 7,643 400 440 $ 8,642 0 447 $ 8,090 4,980 3,080 471 113 8,644 5,278 2,956 443 109 8,786 OPERATING INCOME NONOPERATING INCOME Investment income –2 –696 $ 95 $ 85 EXCESS OF REVENUE OVER EXPENSES Unrestricted net assets Temporarily restricted net assets Permanently restricted net assets 93 3,285 750 400 –611 3,896 700 600 4,435 5,196 55 Exhibit 3.2 Bobcat Hospital Statement of Operations (in thousands) through December 31, 2016 and 2017 CHANGES IN NET ASSETS Total changes in net assets revenue include amounts deducted from total charges to account for contractual allowances and charity care. Net patient services revenue is money generated by providing patient care minus the amount the organization will not collect as a result of discounting charges per contractual agreement and providing charity care. For financial reporting purposes, patient services revenue does not include provisions for charity care because charity care was never intended to result in cash flow. GAAP in 2010 required that organizations report the amount of charity care recorded at cost along with the method of determining cost and the organization’s EBSCOhost – printed on 1/15/2023 3:34 PM via TRIDENT UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 00_Nowicki (2339) Book.indb 55 5/17/17 10:57 AM 56 expenses Amounts of resources used by the organization. Introduction to the Financial Management of Healthcare Organizations charity care policy in notes to the financial statements. (Bad debt is the accounting recognition of how much money the organization has billed but will not collect; the amount reported must be based on charges. Bad debt should not be confused with charity care. Bad debt expense reflects the amount for which the organization provided services with the expectation of payment. Charity care reflects services the organization provided with no expectation of payment.) Net patient services revenue minus provisions for bad debt includes net patient service revenue minus the amount the organization will not collect as a result of bad debt. In 2012 GAAP moved bad debt from an operating expense to a deduction of revenue to account for the patient’s inability to pay deductibles for high-deductible health policies (which the organization knows at time of service). In 2016 the AICPA Revenue Recognition Task Force for Healthcare proposed, but did not require, new guidance for presenting bad debt. After recording revenue at the amount the organization expects to be paid, bad debt would then be recognized in two categories: classic bad debt (the organization believes the patient is able to pay, but the patient does not pay) would be recorded as a bad debt expense under operating expenses; and an implicit price concession (the organization believes the patient is unable to pay, but the patient is not eligible for charity care, and the organization recognizes a write-off based on internal policy). The proposed new guidance for presenting bad debt would allow organizations to group patients with similar characteristics, such as true self-pay or high deductible (Connor and Mosrie 2016). Premium revenue is money generated from capitation arrangements that must be reported separately from patient services revenue because premium revenue is earned by agreeing to provide care, regardless of whether care is ever delivered. Other operating revenue is money generated from services other than health services to patients and enrollees. It may include revenue from rental equipment and office space, sales of supplies and pharmaceuticals, cafeteria and gift shop sales, and so on. Often the test for whether revenue is considered other operating revenue or nonoperating revenue is whether the revenue was generated in support of the organization’s mission statement. Why is it important to distinguish between operating and nonoperating revenue? Because for a not-for-profit hospital, income derived from operations is not taxed, but income from unrelated businesses, such as the gift shop, may be taxed as unrelated business income. Net assets released from restrictions used for operations, while not reflected in Bobcat Hospital’s statement of operations, consist of money previously restricted by donors that has become available for operations. Expenses are the amounts of resources used by the organization. The category of operating expenses represents resources used on operations to generate revenue in support of the organization’s mission statement. These expenses can be listed by functional classification (organizational division), such as nursing department and support department, which is useful for internal purposes, or by natural classification, under such categories as salaries, wages, and benefits or supplies, drugs, and purchased services, as is the case with Bobcat Hospital’s statement of operations, which is useful for external purposes. EBSCOhost – printed on 1/15/2023 3:34 PM via TRIDENT UNIVERSITY. All use subject to https://www.ebsco.com/terms-of-use 00_Nowicki (2339) Book.indb 56 5/17/17 10:57 AM Copyright © 2018. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. Chapter 13: Strategic and Operational Planning 1. Strategic planning: determines the organization’s overall direction in the next three to ten years 2. Operational planning: converts the strategic plan into the next year’s objectives 3. Budgeting: converts the operating plan into budgets for revenues, expenses, and cash 4. Capital budgeting: converts the operating plan into budgets for capital expenditures 299 Strategic planning and operational planning are discussed in the following sections of this chapter. Budgeting is covered in chapter 14 and capital budgeting in chapter 15. As shown in exhibit 13.1, the corporate planning process consists of 22 steps that progress through the four stages within the planning horizon. S t r at e gi c P l an ni n g Strategic planning forces managers to anticipate where they want the healthcare organization to be in three to ten years; to identify the resources that will be necessary to get there; and to preview the provision of healthcare services at the end of the planning horizon. Strategic planning also provides the starting point for the operating plan and budget. The governing board has the overall responsibility for strategic planning for the organization, but it should actively seek input from the organization’s stakeholders, which are those constituents with a vested interest in the organization. Certainly, the community (which may be represented by the board members), the medical staff, and organization employees should provide input. While a strategic plan is mandated by both Medicare and The Joint Commission, healthcare organizations sometimes offer excuses for not fully engaging in the planning process. Excuses range from a lack of time to a rapidly changing future. Paradoxically, if organizations spent more time planning, they would end up having more time to execute the plans. Organizations with serious planning processes position themselves to control the turbulent future, rather than simply react to it. Often financial management, including the chief financial officer (CFO), is not involved in the planning process until the budgeting stage. The CFO might be viewed as an impediment to the vision needed for the strategic plan to work. However, the CFO is necessary to provide input to the strategic financial plan—that is, the ability of the organization to fund the capital and operating costs necessary to make the strategic plan successful. strategic planning Long-range planning that anticipates where an organization will be in three to ten years. T he P l an ni n g P r o c e s s The planning process involves 13 steps, as outlined in the sections that follow. EBSCO Publishing : eBook Academic Collection (EBSCOhost) – printed on 1/15/2023 8:53 PM via TRIDENT UNIVERSITY AN: 1839058 ; Michael Nowicki.; Introduction to the Financial Management of Healthcare Organizations, Seventh Edition 00_Nowicki (2339) Book.indb 299 Account: s3642728 5/17/17 10:58 AM Copyright © 2018. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. 300 Introduction to the Financial Management of Healthcare Organizations Exhibit 13.1 Corporate Planning Process Stage Strategic Planning Planning Horizon 3–10 years out, revised annually 1. Validate mission and strategic interpretations. 2. Assess the external environment. 3. Assess the internal environment. 4. Formulate the vision. 5. Establish strategic thrusts, or goals. 6. Identify critical success factors. 7. Develop primary, or core, objectives. 8. Develop the strategic financial plan. Operational Planning 1 year out 9. Develop secondary, or department, objectives. 10. Develop policies. 11. Develop procedures. 12. Develop methods. 13. Develop rules. Budgeting 1 year out 14. Project volumes. 15. Convert volumes into revenues. 16. Convert volumes into expense requirements. 17. Adjust revenues and expenses as necessary. Capital Budgeting 1–3 years out 18. Identify and prioritize requests. 19. Project cash flows. 20. Perform financial analysis. 21. Identify nonfinancial benefits. 22. Evaluate benefits and make decisions. EBSCO Publishing : eBook Academic Collection (EBSCOhost) – printed on 1/15/2023 8:53 PM via TRIDENT UNIVERSITY AN: 1839058 ; Michael Nowicki.; Introduction to the Financial Management of Healthcare Organizations, Seventh Edition 00_Nowicki (2339) Book.indb 300 Account: s3642728 5/17/17 10:58 AM Copyright © 2018. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. Chapter 13: Strategic and Operational Planning 301 S t e p 1: V a l i d at e M i s s i o n a n d S t r at e g i c I n t e r p r e tat i o n s The first step in the corporate planning process—also the first of the eight steps in the strategic planning stage—is for the executive management team, which includes the governing body and the CEO, to validate the organization’s mission. The mission is a broad statement of organizational purpose that can be easily communicated throughout both the organization and the community. Because mission statements are broad, organizations should not need to change them frequently; mission statements should survive to the end of the planning horizon. A study of more than 200 Fortune 500 companies identified common characteristics of effective mission statements (Pearce and David 1987). The mission statements ◆◆ target customers and markets, ◆◆ indicate the principal services delivered by the organization, ◆◆ specify the geographic area in which the organization intends to operate, ◆◆ identify the organization’s philosophy, ◆◆ confirm the organization’s self-image, and ◆◆ express the organization’s desired public image. Strategic interpretations provide the means for executive management to interpret the mission statement by recognizing the changing character of the healthcare industry and the changing needs of the community. Strategic interpretations may also prioritize organizational purposes when the mission statement includes multiple purposes that might conflict when operationalized. Strategic interpretations are seldom directly stated in any form and are more often represented in the actions of executive management. For instance, executive management may show a preference for one purpose over another through the budget allocation process. S t e p 2: A s s e s s t h e E x t e r n a l E n v i r o n m e n t The second step in the corporate planning process and the strategic planning stage is to assess the external environment, including factors that might have an effect on present or future performance. To maintain objectivity and guard against vested interests, a governing body or outside consultants should be responsible for assessing both the external and internal environments. The first part of the assessment should include a determination on the direction of the industry as a whole by investigating national trends. Some of the current national trends for the healthcare industry include EBSCO Publishing : eBook Academic Collection (EBSCOhost) – printed on 1/15/2023 8:53 PM via TRIDENT UNIVERSITY AN: 1839058 ; Michael Nowicki.; Introduction to the Financial Management of Healthcare Organizations, Seventh Edition 00_Nowicki (2339) Book.indb 301 Account: s3642728 5/17/17 10:58 AM Copyright © 2018. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. 302 Introduction to the Financial Management of Healthcare Organizations ◆◆ decreasing reimbursement from federal and state health programs as government tries to slow rising healthcare costs; ◆◆ increasing popularity of managed care programs (and capitation), especially among payers including employers; ◆◆ increasing consolidation as a result of competition; ◆◆ continuing expansion into businesses outside the traditional healthcare industry; ◆◆ increasing growth in outpatient care, preventive care, and innovative alternative delivery systems; ◆◆ declining numbers of rural and public teaching hospitals; and ◆◆ decreasing numbers of uninsured patients as the Affordable Care Act (ACA) is implemented and more people are insured. The second part of the external environment assessment should determine the direction of the local market and should investigate the following elements: ◆◆ Demographic and socioeconomic characteristics of the primary and secondary service areas and their effect on present and future utilization patterns ◆◆ Key economic and employment indicators and their effect on present and future utilization patterns ◆◆ Patient migration patterns, to determine from where patients and potential patients come ◆◆ Market share statistics for key competitors, to determine market strengths and weaknesses ◆◆ Competitor profiles, including strengths and weaknesses, use by service, use by payer, exclusive and other managed care contracts, extent of horizontal and vertical integration, potential expansion plans, and cost comparisons ◆◆ A managed care profile, to determine present and future managed care penetration ◆◆ A physician profile, to determine numbers, ages, and specialists available in the market Any significant differences between national trends identified in the first part of the external environment assessment and the local trends identified in the second part of the EBSCO Publishing : eBook Academic Collection (EBSCOhost) – printed on 1/15/2023 8:53 PM via TRIDENT UNIVERSITY AN: 1839058 ; Michael Nowicki.; Introduction to the Financial Management of Healthcare Organizations, Seventh Edition 00_Nowicki (2339) Book.indb 302 Account: s3642728 5/17/17 10:58 AM Copyright © 2018. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. Chapter 13: Strategic and Operational Planning 303 external environment assessment should be thoroughly analyzed to determine the reasons for the differences. S t e p 3: A s s e s s t h e I n t e r n a l E n v i r o n m e n t The third step in the corporate planning process and the strategic planning stage is for the governing body or outside consultants to assess the internal environment, including factors that might have an effect on performance either now or in the future. The first part of the assessment should determine the direction of the organization by investigating organizational trends. Some of the organizational trends for analysis might include ◆◆ patient composition, including utilization patterns (i.e., patient days, outpatient visits, admissions, discharges, lengths of stay, age, payer, patient origin); ◆◆ medical staff composition, including use patterns by specialty, age, practice (solo versus group), admissions, lengths of stay, and board certification; ◆◆ agreements with payers and managed care organizations; ◆◆ a financial assistance policy that is readily available to the public; ◆◆ financial ratios, including liquidity, profitability, activity, capital structure, and operating ratios (see chapter 3); and ◆◆ Joint Commission quality measures and safety indicators. Some organizations use a SWOT (strengths, weaknesses, opportunities, and threats) analysis to assess the internal environment. A SWOT analysis forces the organization to identify its strengths and weaknesses during internal assessment. Then the organization identifies opportunities for additional market penetration with existing or new programs and threats from competitors that might reduce the organization’s chances for success (Dunn 2016). The ACA requires tax-exempt hospitals to complete a community health needs assessment every three years and to make the assessment, along with audited financial statements, available to the public. The assessment must include a treasurer review of community benefit and an explanation for why certain community health needs are not being addressed. The presumption is that community health needs should be met and financed with the difference between tax savings and the cost of providing community benefit. S t e p 4: F o r m u l at e t h e V i s i o n The fourth step in the corporate planning process and the strategic planning stage is for the executive management team to formulate a vision—a view of the future that the team EBSCO Publishing : eBook Academic Collection (EBSCOhost) – printed on 1/15/2023 8:53 PM via TRIDENT UNIVERSITY AN: 1839058 ; Michael Nowicki.; Introduction to the Financial Management of Healthcare Organizations, Seventh Edition 00_Nowicki (2339) Book.indb 303 Account: s3642728 5/17/17 10:58 AM Copyright © 2018. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law. 304 Introduction to the Financial Management of Healthcare Organizations members think gives the organization the best chance of accomplishing its mission. Executive management bases its vision on the information obtained from assessing the external and internal environments. It must communicate its vision throughout the organization. Effective vision statements have certain characteristics in common, as described in the still-timely text Thriving on Chaos: Handbook for a Management Revolution (Peters 1988). They should ◆◆ be inspiring first of all to employees, but also to customers; ◆◆ be clear, challenging, and about excellence; ◆◆ make sense to the community, be flexible, and stand the test of time; ◆◆ be stable, but change when necessary; ◆◆ provide direction in a chaotic environment; ◆◆ prepare for the future while honoring the past; and ◆◆ be easily translated into action. S t e p 5: E s ta b l i s h S t r at e g i c T h r u s t s strategic thrusts Broad statements of significant results that an organization wants to achieve related to its vision. Also called The fifth step in the corporate planning process and the strategic planning stage is for executive management to establish strategic thrusts, or goals, which are broad statements of significant results that the organization wants to achieve related to