Managing Europe's Largest Organization

A presentation to the World Productivity Congress, Edinburgh, October 1999

by Sir Alan Langlands, Chief Executive, National Health Service, England
Video presentation .......

For fifty years the NHS has changed as we have changed. It has faced new demands and many tests but it has always endured. Today the NHS is the largest organisation in Europe. It provides employment for over a million people and care and treatment for over 50 million more. It is in every town & city, every community and neighbourhood. What started as an extraordinary undertaking in 1948, has become an ordinary part in everyday life in 1998. Year by year, almost without us noticing, the NHS has changed our health, our quality of life and our country.

The NHS is probably second only to the major oil companies in terms of scale but I think, even as that very short clip showed, it is arguably more complex.

Every day we look after the most vulnerable people in our society. We shoulder their hopes and their fears, and the hopes and concerns of their relatives and friends. And the NHS doesn't stop. It doesn't stop for the weekends, and it doesn't stop in the evening. It's there 24 hours day, 365 days a year. Its very existence, we think in this country, is the mark of a civilised society.

But to be successful, such an organisation needs to be well managed. It needs a bottom line. What I want to do, in the next half hour or so is tell you a little bit about the health service and the challenges of managing what is Europe's biggest organisation.

Some of these challenges I think will be very familiar. They cross boundaries into other areas of industry and commerce, the sort of things you've been discussing during this conference. Other aspects, I think will be less familiar. But all of them, I hope, will resonate with the conference and the conference themes of revitalisation (we call it modernisation) and achieving excellence through people and productivity.

The NHS in this country belongs to the people. We pay for it through direct taxation. There is very little private health care in this country. About 11% of the population have some sort of private insurance cover but that usually carries with it cover for a very narrow range of activity.

The budget for the NHS in England, which is my responsibility, is £40 billion and for the whole of UK, £47 billion pounds. There is something of a paradox that I should be speaking as a Scot in Edinburgh in charge of the English Health Service, but for those of you who are concerned at these matters, you'll be relieved to know that there's an Englishman in charge of the Scottish Health Service! Now, just reflect for a minute on that budget of £40 billion.

The budget of the NHS is is greater than the combined turnover of BT, British Airways and Marks & Spencers.

It represents about 5.9% of GDP. A further 0.9 relates to the contribution from the private health care sector. So we spend in this country, roughly 6.8% of GDP on providing health services. And that compares with figures of more than double that in the United States, and an average European figure in excess of 8%.

There are one million people employed in the Health Service - not as a single employer, but through a network of NHS Trusts. That is the population of Liverpool and Manchester combined. About half of these people are qualified to degree standard or above, so it is a highly professional workforce and, indeed, in this country we are the second biggest purchaser of higher education. The replacement value of our lands and buildings in the NHS is currently approaching £80 billion. So it's a big, complex organisation.

The Secretary of State for Health is accountable to Parliament for providing health services so the Government has a major stake in the Health Service. A stake which means it has to provide services against agreed objectives based, usually, as part of the electoral process. The current objectives for the Health Service are to improve the health of the population as a whole. To improve the health of the worst off in our society, and to narrow the growing gap between the better off and the worst off. And to modernise our health and social care system. And I mean by that, not just introducing the latest technology and know-how, but changing the nature of the relationship between the people who provide services and the people who use them. So these objectives, stimulated by the election of a new government two years ago, mean a new approach to health services in this country. One that seeks to tackle the root causes of ill-health and inequalities. Not just by direct health interventions but by tackling other areas of social policy, like housing, the environment, and employment. One that breaks down the barriers in the system, so that the patients of the Health Service are not classified by our system, which has always been the way in a professionally dominated organisation but increasingly by their needs. One that ensures uniformly high standards in the quality and effectiveness of clinical care, that reduces waiting and improves the speed and responsiveness of services. And one that values staff, and increasingly involves staff in key decisions and ensures decent employment practice.

Of course, in a conference like this, we couldn't escape the notion that, like everyone else nowadays, we constantly have to improve our performance, and strive to level up to the results achieved by the best.

Now these suggested headlines are very British. They relate to the UK health service. But it seems to me that across the world, all health services are trying to achieve three results. They're trying to achieve some sort of equity, improving the health of the whole population, if you like. Trying to reduce variations in health status and, increasingly, right across the world, trying to target resources where needs are greatest. All health systems are trying to be more efficient, providing patients with treatment and care, which is both effective - and I include clinical effectiveness in my definition of efficiency - and good value for money. In our case, for the taxpayers money. And also trying to achieve the result of responsiveness. By which I mean, simply meeting the needs and wishes of individual people who use the NHS. In our day-to-day decision-making in health systems right across the world, we make decisions which are essentially a trade off between these three results. So managing the NHS, and I suspect managing any health system, is a very difficult balancing act. Indeed, this may all sound slightly esoteric for a group of people who are concerned with productivity, but I said right at the beginning that we in the health service, too, have our bottom lines, although I won't dwell on these.

Productivity in our hospital and community health service is now outstripping productivity in the economy as a whole, and I think few people would recognise that. We do have problems in the British health system which are characterised by waiting lists. People say that they have to too long in our health system, and we're trying to do something about that. Waiting lists are falling at the moment. Last year we did 9.5% more work, more operations, if you like, which meant that an extra half million people were treated. And finally, keeping our £40 billion budget under control is important to us. We now keep it under very tight control, and the deficit at the end of the last financial year was £12 million, which is something of a blemish on a £40 billion budget - not something we should be terribly worried about. So the NHS is big, and it's complex, and it's delivering. We're not complacent about any of that. There is still a great deal to do.

The involvement of the Government in this issue is very strong at the moment. In this country, health and education are the top priorities for Government. The Government has made it clear that they want the NHS to focus on solving problems. They're not concerned with the ideologically correct way of solving them. Solutions are pragmatic, focused on outcomes, focused on ends - not means. More effort has been put into communication, trying to manage better the national media, trying to boost public confidence in public services. Investment, of which there is a substantial amount, has been linked to reform. So there is very tight central control from the Treasury on the public purse strings of the NHS, and the requirement is for tangible year-on-year improvements. They give us the money, we deliver specific results against those earmarked funds.

It's also understood, although I suspect not by everyone working in the health service and certainly not by the public at large, that we have embarked on what has to be a longer term programme of change and transformation. But we do want to show tangible year-on-year improvement in what we do. The organisational landscape in the health service is also changing in line with many other industries. There are new structures in place including the development of a more managed approach to primary care, the family doctor service in the United Kingdom. There are new national bodies focused on clinical standards. There are new bodies focused on procurement. So we face the same sort of structural upheaval that is experienced in many organisations. There are new processes in play. We hope fair systems of resource allocation of performance assessment, capital planning, improved personnel practice, greater clinical accountability and a big emphasis, at the moment, on boosting learning about good practice. We are trying to combine a hard-nosed approach to performance management, using all the techniques that you would expect, with a developmental approach based on the notion of spreading good practice.

The NHS has traditionally been a rather insular organisation; now, the focus is much more on integration and co-operation with the private sector in relation to capital investment. Greater partnership with industry, with local government, with the education system and other parts of central Government. So this is change on a massive scale. People are trying to catch their breath at the moment faced with these big new structural and policy changes but now, of course, the emphasis is on impact, on making a difference through effective implementation.

Faced with all of this, I wanted to identify ten key management challenges for health service managers although, as I said at the beginning, I think these resonate with other aspects of the conference this week.

The first is just to think about the importance of context - understanding the context, in which we're operating. In our case, perhaps rather surprisingly, this includes the effects of globalisation, where increased travel is leading to the spread of communicable diseases across the world and, of course, rather parochially perhaps, the effects of the UK's greater involvement in Europe, which at the moment is affecting issues relating to health protection and medicines and food and employment practice. Ultimately, I suspect, these will affect our national scope to organise and finance public services in this country. We also have to be concerned with demography. Knowing how we're going to handle the changing face and the changing age profile of Britain. The fact that there will be 11.4 million children and 11.5 million older people by 2008. The first time that graph has crossed the line in this country for hundreds of years. This has implications for the growing elderly population in terms of health, pensions and welfare policies, which all have to be coherent. We have to understand and come to terms with advances in science and technology, including advances in biomedical research, which will result in new forms of diagnosis and treatment. Gene mapping and gene therapy are very high on our agenda at the moment, as you would expect. We're also seeing advances in imaging and ultra sound treatment of tumours, in dealing with intravenous treatment - nowadays controlled at home by chip. And, indeed, advances in nano technology, the science of creating very little working machines on a molecular scale. Allowing nanometer-sized chemical agents to repair damaged cells in the body. So science and technology is a hugely complex issue for us, and understanding how best to cope with the entry and diffusion of new technology is something that has taxed us a lot in recent times.

My second theme, and this may be slightly obscure for some people but not for those who work in professionally dominated organisations, is the need to redefine the ethos of professional practice and public service in some sort of modern setting. Traditional forms of professional accountability, in this country, are breaking down. They've been called into question and the professions and government have tried to take up this challenge by doing three things. By being more explicit about the duties and responsibilities of individuals and individual institutions - in other words, trying to improve the dependability of local delivery systems and by the requirement for much greater external monitoring. Making this happen is one of our pre-occupations at the moment - seeing beyond the technical changes to embrace a new currency. A new currency that all walks of life are having to cope with in terms of new skills, new attitude, new ways of using knowledge and information. Working more in partnership, being more outcome focused. We in the health service are having to cope with these things as well.

My third point is about the need for greater public involvement. I talked about the NHS being a little insular. It certainly lags behind every other public service and other industries in its tradition of involving people. The past in the health service is represented by people being grateful for access to care and sometimes over-awed by professional knowledge and skills. This is no longer sustainable. People are accessing knowledge about their own health, all of the time. We need a stronger and much more transparent dialogue at national level and local level and indeed at the interface between clinicians and the people they're looking after, so that individuals have a real say in the choices that are facing society and facing them in terms of health and the health service choices that are open to them. My fourth point recognises the preoccupation with responsiveness. The need to improve the quality of public services by redefining the relationship between the people who provide them and the people who use them. On one side of the equation we have a quest for greater convenience, better access, better information, improved facilities and that's why we have targets on waiting. That's why we're trying to improve by very substantial investment, our cancer services. That's why we have been piloting, over the last few weeks, what is going to be the first national health information system by telelink, staffed by professional nurses : NHS Direct. That's why we're currently spending more than £3 billion in trying to improve our capital stock. But there has to be another side to this equation in a tax-funded system. It is less well articulated at the moment, but we're beginning to see new strands of thinking about responsible use of services. About a new deal in the relationship between the health service and the people it serves. With a new emphasis on self care and that equation, that balancing act between responsiveness and the responsible use of services, is something that is taking a lot of time and a lot of effort at the moment. These, if you like, are flipsides of the same coin and again will be familiar to many of you.

My fifth point is that I want to underline something that I know to be true of just about any organisation that I've had any contact with. And that is that, ultimately, it is the skills and the knowledge and the attitudes of staff which determine peoples' experience of public services. We still have a huge amount of work to do in the health service to hit human resource bottom lines. Getting, if you like, the right skills organised in the right way, ensuring diversity - a huge issue for public services in the UK - so that the workforce properly reflects the communities it serves and we maximise the contribution of black and ethnic minority staff. We need to adopt more enlightened employment and education practice and greater staff involvement in shaping the environment in which we operate. We're working on all of these fronts, as you would expect. In my view, these are the issues that are the most significant facing the health service at the present time. A great deal is being done to modernise employment practice.

Now at this point you'll be relieved to know that my five remaining points are really one big point. It's a point about leading change in a complex environment. And I will cover them quickly. We can't afford to be seduced by the complexities of change to structure and systems in running a public service that turns people off. We need focus. The changes that are being made in the health service need to be rooted in the work of the NHS. If what we're doing to change our system, to change the way we do things, doesn't result in better health or better clinical outcomes or a better all-round experience for older people or people suffering from cancer, or coronary heart disease, or mental illness or diabetes, then we are wasting time and we're wasting the people's money.

Second, we have to achieve good short-term results if we are to build sustainable long-term change. I think this imperative is accentuated in a political system because everything we do is very public. Our legitimacy depends on sorting out the pressures that face the health service during the winter period or maintaining financial discipline on delivering what are very public targets, on waiting and the modernisation of services. So much the better if these can be delivered, however, as a by product of good leadership of coherent process. So much the better if the results that are being achieved really mean something to people at a local level. And we have some excellent, truly excellent, work that would stand, I think, the test of any industry in this room, going on at the moment. This relates to process re-engineering, old fashioned title I know, and to use of the business excellence model in our health services and community services to make real tangible improvements in the way that people are treated on a day-to-day basis.

My next challenge is a bit more fundamental. We've achieved, I think, over the last few years, tremendous coherence in our policies for public services but we also need to achieve coherence in implementation. A wonderful study recently, from the University of York, of large and medium sized companies right across Europe shows that consistently high performing organisations make changes, not in an ad hoc way, but in carefully aligned and complimentary sets. And we've spent a lot of time recently, trying to line up to our strategies and our plans for implementation, in the way that we're seeking to achieve quality improvement, in the way that we're developing primary care and in the way that we're seeking to achieve quality improvement, in the way that we're developing our information systems, in the way that we develop our employment practice. All of these things are linked and crucially they can't just be linked at a policy level. They have to be linked to implementation. They're inter-dependent . They need to be well managed at every level and we need a sort of constant iteration as we get used to new ideas.

I think we stand a much better chance of doing that if we accept the penultimate challenge which is about embracing new ways of working. It is true, I think, of all large organisations, at the moment, that we have to live with and manage through hierarchies and local partnerships and networks. I don't think there's any right or wrong way of doing things. Coming to terms with that duality is an issue which faces lots of big complex organisations. We need to improve vertical and horizontal communications simultaneously. The vertical in our case is to strengthen accountability. The horizontal to encourage the dissemination of good ideas to ensure the integration that's needed through transfer of knowledge. Clarity about which mode we're operating in at any part. Time is very important. And finally we have to acknowledge and exploit the possibility of new forms of project working and it is now much more the case that we operate through time limited projects to stimulate change in the health service.

My final point, is something that I've mentioned already, and that is the importance, in handling change in any organisation, of investing in learning and development. It's certainly the case in the health service that over the last two or three years the emphasis has been more on re-establishing a rather centralised approach to management - as a result of government pressures and policy. It is perhaps not the natural position the health service would like to be in. The change has been surrounded by some fairly crude incentives. That is changing, because everyone understands that that is not enough to deliver sustained rounded improvements in performance - the sort of things that make a real difference to people's experience of public services. So we are developing an infrastructure about good ideas, of taking advantage of the electronic age to do that. Providing opportunities for people on the job to learn about what works in practice. And we have developed, recently, something called the NHS Learning Network, which is an important, first step down this path. We are also investing in capability by paying more attention to management development, leadership and succession planning - things that often get eclipsed in the politically dominated public service in this country.

So, I've rattled off ten rather general points in quick succession without trying to explore them in depth. But even, I think, at the best of conferences, people get pretty word weary. The NHS is different in scale and I think, in complexity, but many of the management challenges it faces are common to other organisations - the sort of organisations that are reflected in this room. Tackling these challenges systematically is resulting in more modern services, and the best results are being achieved where staff are involved and where there is coherent implementation by management. The best results are being achieved where staff themselves become the champions of change and greater productivity But of course, you know all that already!

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