Exhibit 1

Value Added, Economic Development, and Academic Medical Centers.⁴

Why should a state support academic medical centers? Because of their unique research and teaching mission and the patient mix, costs are almost always higher than at other hospitals. The quality of their services may or may not be better than that of competitors.

In addition to patient care, academic medical centers can be valuable aids for economic development. Three academic medical centers in Virginia, for example, have reported that they spend $2.7 billion each year on goods and services, employ 26,520 people, and create an additional 31,591 jobs among private sector firms that sell goods and services to the centers. The result­ing impact is significant:

1. One dollar in every $84 in the state can be traced to academic medical centers.

2. State government receives more than $116 million in tax revenue as a direct result of the centers’ operations.

3. Visiting clinicians, patients, and students inject another $103.8 million into the state’s economy

4. Patients from outside Virginia who came to the state for specialized care spend $30.6 million on nonhealth-related goods and services.

5. In 1995, biomedical research conducted at the medical centers brought in more than $160 million in research funds.

The report, based on a study by Tripp, Umback, and Associates of Pittsburgh, indicated that academic medical centers are good investments and add considerable value to the state’s economic development activities.

From another perspective, recent news events, according to a report in The Wall Street Journal, should have executives making supply chain man­agement a top priority as revealed by Mattel’s recent recall of millions of lead-tainted toys from China, which followed fears about hazardous materi­als in toothpaste and pet food and a recall of thousands of tires made in that country. According to the report, “Don’t wait for a crisis. Scrutinize manu­facturing suppliers and improve quality-control systems at your company. Otherwise, you risk moves that damage your company’s brand and can trig­ger lawsuits”⁵ and might lead to a loss of competitive advantage. It is inter­esting to note that subsequent to that recall, Mattel’s Executive Vice President for World-Wide Operations apologized to China, indicating that “Mattel takes full responsibility for these recalls . . . and that it’s important

for everyone to understand that the vast majority of these products that we recalled were the result of a design flaw in Mattel’s design, not through a manufacturing flaw in Chinese manufacturers.”

You should remember

The framework for organizing the formal relationships of responsibility, authority, and accountability is known as the organizational structure. There are a number of variations of organizational structure, including line, line and staff, and committee. Most studies of organizational structure indicate a relationship to the environment as well as to the technology employed. Consequently, a Contingency Approach to organizational structure has developed, which indicates that a number of dynamic forces can and do affect structure.

1. What is departmentalization?

2. What are the primary forms of departmentalization?

3. Describe a matrix form of departmentalization.

4. Why is delegation the art of managing?

5. Describe how the process of delegation works.

6. What is meant by the parity of authority and responsibility?

7. What is the scalar principle?

8. In the organizational context, what is meant by centralization versus decentralization?

9. How do you differ between line and staff in organizational terms?

10. What is committee organization, and what forms can it take?