Professor Kieran Walshe, from the Centre for Public Policy and Management at Manchester Business School in the UK, addressed the HARC network in April 2008 about how analysis of public service failures can help organisations learn and improve their performance. HARC stands for the Hospital Alliance for Research Collaboration. HARC is a collaborative network of researchers, health managers, clinicians and policy makers based in NSW, Australia managed by the Sax Institute. HARC Forums bring members of the HARC network together to discuss the latest research and analysis about important issues facing our hospitals. For more information visit saxinstitute.org.au.

1. Centre for Public Policy
and Management
HARC Forum – 1 April 2008
Turnaround in healthcare
organisations: lessons from
research
Kieran Walshe
Professor of Health Policy and Management
Manchester Business School, UK
kieran.walshe@mbs.ac.uk
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The Victoria University of Manchester

2. Centre for Public Policy
and Management
Overview
• What’s the problem?
• What goes wrong and why?
• Dealing with failing
organisations
• Approaches to turnaround
• Conclusions
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3. Centre for Public Policy
and Management
Public service failures are not rare and are often
very costly – in financial and human terms
• Child Support Agency
• Home Office Immigration and Nationality Department
• Rural Payments Agency
• NHS University
• North Bristol NHS Trust
• Kent and Canterbury Hospital
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4. Centre for Public Policy
and Management
So what goes wrong?
• Financial failures
– North Bristol NHS Trust – ran up £44.3 million overspend
in one year
• Governance/ethical failures
– NHS University – spent £50 million in brief life, lost
confidence of all its key stakeholders, wound up
• Clinical/performance failures
– Maidstone and Tunbridge Wells NHS Trust – saw two
uncontrolled outbreaks of C difficile in 2005 and 2006
with 500+ patients infected and 60 deaths
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5. Centre for Public Policy
and Management
North Bristol NHS Trust: financial crisis in
2002/03
• Ended 2001/02 with £966k deficit on turnover of about £250m
• Board told balanced budget at start of financial year (April)
• SHA concerned as year progressed and called in auditors who in
month 9 (Dec) predicted £11.6m deficit
• Board reports in month 11 (February) restated £11.6m deficit, but
in March Board told it was up to £15.1m;
• SHA told privately in March it could be as much as £25m
• Actual outturn for 2002/03 deficit of £44.3m on turnover of c£300m
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6. Centre for Public Policy
and Management
North Bristol NHS Trust: financial crisis in
2002/03
• £10.2m nurse staffing (agency/bank)
• £10.2m cost improvements not realised
• £9.5m excess costs of achieving waiting list targets
• £7.3m other directorates (not nursing) overspend
• £3.6m contract overperformance
• £3.5m unrealised income targets
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7. Centre for Public Policy
and Management
North Bristol NHS Trust finances 2002/03
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8. Centre for Public Policy
and Management
Maidstone and Tunbridge Wells NHS Trust –
outbreak of Clostridium difficile in 2005/06
• Two outbreaks of C difficile in October 2005 and April
2006, affecting over 500 patients and resulting in at
least 60 deaths in that period (more before and since)
• First outbreak unrecognised; second reported and
managed more effectively
• Took 4 months to establish an isolation unit for nursing
patients with C difficile – many patients nursed on open
wards, not even in single rooms
• Patients with C difficile not cared for adequately –
lapses in antibiotic therapy and complication
monitoring
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9. Centre for Public Policy
and Management
Maidstone and Tunbridge Wells NHS Trust –
outbreak of Clostridium difficile in 2005/06
• Poor nursing care – call bells not answered; patients
left in wet/soiled sheets; wards, equipment and
bathrooms not cleaned; “escalation areas” used
inappropriately for inpatient care
• Poor response caused partly by pressure on beds
(90%+ occupancy) and trust’s desire to meet waiting
list targets
• Inadequate director of infection control and CoI team,
CoI policies absent or out of date, CoI training sporadic
• Board oversight lacking – “appeared to be insulated
from the realities and problems on the general ward”
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10. Centre for Public Policy
and Management
Some key questions
• Why do organisations decline and fail? Is it inevitable
(or even desirable) that some are going to go to the
wall?
• Can we predict and even prevent performance
decline? What causes it?
• When failures occur – how are they best managed?
• What strategies are there for performance turnaround
and do they work?
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11. Centre for Public Policy
and Management
What do we know?
• Lots of research on failure/turnaround in the for-profit
sector – some transferable ideas and findings
• Inquiries and investigations into failures – no shortage
of case studies and recommendations for change
• Growing body of research into failure and turnaround in
health, local government, schools, and other parts of
the public sector
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12. Centre for Public Policy
and Management
Failure and turnaround: a simple model
Performance
decline
Failure
crisis
Turnaround
process
Improved
performance
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13. Centre for Public Policy
and Management
Performance decline
Normal variation or failure?
High
Performance
Low
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Time
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14. Centre for Public Policy
and Management
Performance decline
High
Reported
Performance
Actual
Low
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15. Centre for Public Policy
and Management
Recognising performance decline
• Performance is naturally cyclical
• Need for a range of “hard” and “soft” indicators of
performance
• Overall level may be less important than rate of change
and trajectory
• Performance decline is relative, not absolute
• Differentiating “normal variation” and “incipient failure”
• True performance may be masked in reported
performance
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16. Centre for Public Policy
and Management
Hard indicators of performance
• Is the organisation achieving key performance targets and
maintaining financial balance?
• What is the level of complaints? How many of these are serious,
enduring complaints, and how well are they resolved?
• What is the level and severity of patient safety incidents?
• What do the findings from audit projects at a clinical and
organisational level show? Are they acted upon?
• What are the results from external reviews such as Healthcare
Commission, national staff surveys, national patient surveys,
national audit programmes, external audit, etc?
• Are there reviews into specific incidents underway e.g. special
investigations?
• What is the level of staff turnover? Are there problems in relation
to recruitment and retention of staff?
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17. Centre for Public Policy
and Management
Soft indicators of performance
• How well does the organisation make use of available data?
• How does the organisation respond to signs of decline - what is
the level of internal challenge and debate?
• Is the organisation ‘in touch’ with what is happening, both
internally and externally?
• How likely is the organisation to be distracted by other major
initiatives, changes or problems?
• How is potential for innovation, creativity and learning used?
• How good are clinical-managerial relationships in the
organisation?
• How is staff morale?
• What is the quality of external relationships?
• What are relationships and reputation with the local media like?
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18. Centre for Public Policy
and Management
Health community views of five SHAs
A B C D E All
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C
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19. Centre for Public Policy
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Health community views of five SHAs
Perf mgt Cap imp Strat fwk Context Lead style
Rel wt comm Decision Ext reln Innov Govern
80
70
60
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A B C D E

20. Centre for Public Policy
and Management
Health community views: SHA D
• “It does not deal effectively with difficult strategic issues”
• “As you can tell I am unimpressed. … the SHA has been of little help.
We suffer from a failure of joint commissioning by our PCTs and the SHA
has shirked its responsibility to make them collaborate. As a result
clinical services are suffering. The SHA will teach Pontius Pilate a thing
or two about not getting too involved. General style is remote and high
handed”
• “SHA veers from a very hands off approach to a very interventionist
approach with nothing in between and no agreed strategy. Sometime the
SHA deals with individual organisations and sometimes with health
economy - there is no logic to this”
• “The SHA is reluctant to work with other than (a) a complete "hands off"
or (b) directive intervention too late mode. It needs to develop more
effective participating modes to really work with local Trusts/systems”
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21. Centre for Public Policy
and Management
The causes of performance decline and failure
• Markers, symptoms or warning signs
– Poor relationships, financial deficits, targets missed,
• Secondary causes
– Lack of controls, weak strategy, poor leadership
– Increased competition, innovations, policy changes
• Primary causes
– Organisational culture and attitudes
– Introspection, arrogance, myopia, trauma
– Failure to learn, adapt, change appropriately
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22. Centre for Public Policy
and Management
Crisis and declaration of failure
• External assessment/review – by key stakeholders
– Report from Audit Commission or Healthcare
Commission, publication of performance data,
• An egregious event – disasters and major failures
– High profile patient safety incident, major complaint
investigation, whistleblower, scandal
• Change of perspective
– New chief executive or senior management team, new
governance, new partners/views in public service
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23. Centre for Public Policy
and Management
Performance decline
High Self regulating response to decline
Performance
Low Failing response to decline
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Time
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24. Centre for Public Policy
and Management
The response to failure
• Multifactorial, multidimensional symptoms/causes
which are interrelated and interact
• The self-regulating response to decline
– Recognition, willingness to change, open about
problems/data, internal capacity to tackle problems
• The failing response to decline
– Fallacy of success, fortress mentality, retrospective view,
hide the data, no internal capacity to act
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25. Centre for Public Policy
and Management
Approaches to turnaround
• Range of actors
– Government departments
– Regulators, inspectors and oversight agencies
– Other, neighbouring public organisations
– New boards/management teams
– Management consultancies
• Three basic – and complentary - strategies
– Replacement, retrenchment and renewal
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26. Centre for Public Policy
and Management
Replacement
• Serves both a functional and a symbolic/political
purpose with stakeholders
• Deals with responsibility for failure and allows the
organisation to draw a line and move on
• Brings in necessary new skills and expertise – but risk
of losing key experience, knowledge and
understanding – flight of talent
• Who gets replaced – the organisation’s leadership?
• May be necessary, but not a sufficient response – and
what happens if the new team fails too?
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27. Centre for Public Policy
and Management
Retrenchment
• Addressing most important performance issues and
bringing them under control as soon as possible
• Mechanistic, process-focused, operational changes to
structures and systems
• Financial control, achievement of key activity targets,
tightened monitoring and management
• Short term, stemming losses and halting decline –
focus on symptoms and secondary causes of failure
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28. Centre for Public Policy
and Management
Renewal
• Establishing new vision and purpose for the
organisation – redefining its mission
• Developing clear future long term strategy for return to
growth and future success
• Changing organisational culture, attitudes and
behaviour, focusing on organisational development
• Long-term, fundamental, focused on primary causes of
failure
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29. Centre for Public Policy
and Management
Does turnaround work?
• Not all turnarounds work - reasons for failed
turnarounds and permanently failing organisations
• Timescale for turnaround and likelihood of successful
turnaround variable but can be long
• Added value and impact of external intervention: what
would have happened without it?
• Embedding renewal – avoiding a return to failure when
intervention/support is removed
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30. Centre for Public Policy
and Management
Conclusions
• Public service failures are important – functionally and
symbolically, as part of a wider political narrative
• We can do more to understand, predict and engage
with (?prevent) performance decline and failure
• There is growing expertise and experience with
approaches to turnaround which seem to “work”, but its
neither simple nor quick
• It may be helpful to see failure and turnaround in terms
of organisational capacities to learn, or to use
information to improve performance
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