The Management of our Public Services

Probably the most frequent questions I was asked during the recent campaign concerned the NHS. And it wasn’t just about funding, an issue I addressed in an earlier article. People were concerned about the way it is being managed, its inefficiency, and about the outsourcing of NHS services to the private sector.

As it happens, early on in the campaign I attended a seminar addressed by Simon Stevens, the Chief Executive of NHS England, and I asked him for the staff turnover figures for doctors and nurses across the NHS, and for the percentage of staff who were on temporary contracts. He avoided giving me any figures. Whether this was because he did not want to, or because he did not know them I am not sure, so I went on to ask why his board did not include any resource-specialist directors such a Human Resources Director, Finance Director (although there is someone they rather begrudgingly call their chief financial officer), IT Director or Facilities Director. How, I asked, could he be held responsible for the performance of the NHS without such a board. He immediately replied that he could not!

Now I have no reason to suppose he was just being flippant in giving this reply. I suspect the real reason is that his brief is not one of chief executive that we in the private sector would recognise. Which in turn means that there is no one properly in charge. It is rather like a manufacturing company where the MD has five production directors and a bookkeeper! Clearly it is impossible for such a board to keep tabs on all the resources within the organisation, of which its staff are its most important. No wonder we end up with a health service where the supply of doctors and nurses cannot keep up with demand, where staff turnover has gone through the roof, where a high proportion are expensive agency staff, and where half of those cannot speak English anyway. It came as no surprise therefore when a debate erupted after the election about the shortage of doctors and nurses in the NHS!

Another concern frequently expressed was how difficult it is to find anyone in the NHS capable of taking the initiative and making decisions. It would appear that the top-down prescriptive, target-orientated management methodology introduced by Tony Blair’s New Labour government is still in place. The whole thing is upside down. You want your doctors and nurses at the sharp end dealing with the patients and doing the research. They are then in a position to propose the changes and budgets necessary drive their own local units forward in response to the needs of their patients. The role of the board is three-fold: to assess these initiatives, to provide the resources they require, and to monitor the use of all resources across the NHS so as to maximise utilisation and efficiency. That just not appears to be happening at present. I accept that there may also be a need for some central initiatives as well, but not at the expense of the reactive ones.

Almost all of our public services are conglomerate in nature; that is they comprise groups of units operating at specialist or local level and accountable through central management to their ultimate owners, Parliament. The most successful method of managing conglomerates is technique perfected by Arnold Weinstock at GEC during the 60s, 70s and 80s which I call comparative management by results. Weinstock famously used just seven key financial indicators (they would of course be different and more diverse in the public sector, but the principle is the same) to compare the performance of all the subsidiaries in the group, and then started kicking arse from the bottom of the list upwards. These numbers aren’t good enough, he would bellow down the line. You are in the bottom half of the list. What are you going to do about it? I want your proposals on my desk by Friday lunchtime” or whatever. If they could improve well and good, but if they could not they were replaced. It was as simple as that.

Compare this approach to that taken by New Labour, which I call ‘top down prescriptive methodology’. “Tick these boxes. Follow these procedures. Meet these targets. Do it this way and stick your head in the sand while you’re at it”! Weinstock never told his MDs how to do their job; these were expensive, experience people who should already know that; it was what he was paying them for. He was only interested in results. His only other major role was to accumulate and allocate capital funds for investment, and if he could get a better return elsewhere he did so. His ‘cash mountain’ became famous.

The difference between the two approaches is striking, but what is also telling is that Weinstock seldom if ever got involved directly with his customers or even with what they were actually buying from GEC. That was all delegated; in other words ‘localised’. Even more so is the role and importance of central management. Weinstock’s head office was tiny. I went there once, just a five story terraced building in Stanhope Gate, but it was only by having a central team that he was able to manage the company in this way.

It is also worth noting that New Labour’s approach was to set absolute targets. This may have been politically convenient, but has the drawback that any target will have a resourcing implication, and if that implication is not addressed then the result will be chaos, which of course is precisely what happened. Weinstock’s approach on the other hand was comparative. He knew what was possible by looking at the companies at the top of the list, and simply expected the others to do as well. And when you think about it, this is precisely how an open competitive market works; the choices available to consumers are comparative both in price (efficiency) and quality.

Now look at what is actually happening out there! We keep hearing of schools and hospitals being ‘put into special measures’, which involves drafting in a whole raft of interim managers, none of whom know anything about the organisation they going in to manage, none of whom will be there in a year’s time or have any permanent commitment to it, and all of whom are being paid massive fees. I saw one case recently where ten such managers had been drafted into a hospital, all of whom were being paid in excess of £100k pa, and the chief honcho at a rate in excess of £500k pa! OMG! What a total and utter waste of time and public money. All you have to do is change the guy in charge and then support him.

But if you thought that was bad enough, look at Social Services. They don’t have anyone in charge at all. They are quite literally running around like headless chickens. It’s all very well to say that such services are run by local authorities, but the money comes from central government and when things go wrong we expect ministers to take responsibility. Local authorities are simply not physically in a position to make the comparative assessments required or allocate resources according to demand.

I suspect the source of the problem lies in the structure of the spending departments themselves. How many of them have a clear structural separation between their advisory side, with its responsibility to advise ministers of current problems and future needs, and their executive side, with its responsibility to deliver a mandate approved by Parliament? Taking it from the top therefore, I would expect to see:-

–  A National Director General / Chief Executive (DG) for each and every public service reporting directly to the relevant Secretary of State and his Permanent Secretary. There could be several within a given department depending on the breadth of that department’s responsibilities.

–  The advisory side of the department organized on a pool basis, such as you would find in a firm of accountants or solicitors, managed through the use of timesheets, project budgets and activity percentages, and run by an Under-Secretary.

–  Each DG having a board of directors covering the full range of functional responsibilities, including HR, Finance, IT, Facilities, internal audit and inspection, and others as may be appropriate, with the Executive side structured on a traditional hierarchical basis.

–  Every level of management under the DG having the power to hire and fire the next level down. This is essential for both authority and accountability.

–  A comprehensive quarterly Management Information System (MIS) covering all key performance and efficiency indicators across the service, including management accounts, enabling comparisons to be made and follow-up action taken where necessary. It is important to emphasise that these indicators are not targets, simply monitoring procedures. It is often said that a good MIS only poses questions; it does not provide answers.

–  Each DG having full and complete autonomy over the allocation of his budget, with no ring-fencing or other restrictions. To the extent that Parliament has decreed certain levels of provision within the service, these should simply be monitored through the MIS.

–  The Board including a non-exec Customer Representative, to whom local governors and customer representatives can report on a functional basis. Each local board would have a similar position, possibly elected locally. Our manifesto commitment for elected county representatives fitted this requirement neatly.


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