Organisational Turnaround: lessons from a study of ‘failing’ health care providers in England

1. Organisational Turnaround:lessons from a study of ‘failing’ health care providers in England Naomi Fulop London School of Hygiene & Tropical Medicine

2. Acknowledgements Project team: Fiona Scheibl Nigel Edwards Gerasimos Protopsaltis Funded by: NHS Confederation

3. Policy context • New Public Management – increasing focus on performance in public sector • Performance assessment system introduced in NHS in 2001 • Health care organizations graded using ‘star rating’ system: zero, one, two, three stars (highly contested) • Policy responses: • Franchising policy (‘heroic leadership’ model) • Support from Modernisation Agency • 3 * get ‘earned autonomy’ (Foundation hospitals)

4. What do we know from the literature? • Approx. 25-30 studies on turnaround in private sector • Explain failure in two main ways: • a) changes in external environment • b) inertia within the organisation • Dominant model of successful turnaround • Retrenchment (withdraw from unprofitable sectors) • Strategic change (new markets or new products in existing markets) • Leadership change (CEO and/or senior management team) Source: Skelcher et al (2003)

5. Study objectives • Draw lessons from the experience of changing the management of ‘failing’ organisations • Specifically exploring: • Markers for ‘failure’ • Responses to turnaround • Strategies for turnaround • Process/Impact of these strategies

6. Methods • Phase 1 (2002): case studies of 5 hospitals • Perceived to be ‘failing’ • New management brought in • At different stages of turnaround • Phase 2 (2003): followed up 4/5 from phase 1 plus four added: • Zero star (or ‘at risk’) • Management replaced • Support from Modernisation Agency

7. Data collection and analysis • Semi-structured interviews with 106 internal and external stakeholders across 9 hospitals • Analysis of national and local media coverage • Changes in star ratings over time • Analysis within and between case studies

8. Findings (1): markers for failure • Poor performance on key targets e.g. waiting lists • Financial deficits • Major developments – ‘eyes off the ball’ e.g. merger, redevelopment (PFI) • Stagnating management team • Lack of clear management structures/processes • Lack of engagement of clinicians in management of services • Poor public image e.g. relations with media and external stakeholders • Low staff morale

9. Markers Secondary causes - “eyes off the ball” - poor relationships with external stakeholders - financial deficits INTERNAL EXTERNAL - poor financial control - increase in competition - changes in Govt policy - lack of HRM strategies - lack of leadership Organisational - introspection - arrogance - trauma Primary Causes Markers and causes offailure

10. Findings (2): turnaround interventions • Internal reorganisation • Formally and informally involving clinicians • Introduction of systems/processes/protocols • Improving operational performance • Focus on human resources • Financial analysis and control • Attempts to change ‘organisational culture’ • External relations

11. Findings (3): constraints on turnaround • Cultural diversity within organisations (competing sub-cultures) • Complexity (multi-layered nature of hospitals and external environment) • Lack of leadership • External influences

12. Findings (4): impact of turnaround interventions • In short term, some showed improvements in operational performance • Takes longer to address organisational culture issues • Two groups of hospitals: • Group 1 (5): transformed from ‘failing’ to ‘self-regulating’ • Group 2 (4): stagnating or ‘permanently failing’

13. Impact Of Turnaround Strategies? A BCDE New Management Dec 99Feb 01Dec 99April 99April 01 Star Rating 01 00*** **0 Star Rating 02 ***** ** Star Rating 03 * *** ** 0

14. Impact Of Turnaround Strategies? FGHI New Management Mar 0101Jan 02Jun02 Star Rating 01 **2**0 Star Rating 02 *000 Star Rating 03 *2 ** 0

15. Findings (5): resources required for turnaround • Temporal (time, stability) • Leadership skills • Ability to develop change agenda • Ability to grasp detail required to deliver core targets • External support • Financial (access to funding to achieve ‘quick wins’)

16. Lessons for management/policy • Skills for identifying ‘at risk’ organisations • Resources required for turnaround (esp. time and leadership) • Diagnose the problem • Establish clear leadership • Secure engagement of clinical staff • Work with external stakeholders • Right people in right posts • Use internal reward systems • Use external support systems