While experienced chief executives can be paid off even after gross misconduct, first-timers are often persuaded to take reputation-damaging jobs at failing trusts. Neither is acceptable - the health service needs to take more care of its talent, says Nigel Edwards
The spotlight has once again fallen on the performance of leaders in the NHS. Yet, while the public and tabloids are exercised by large golden handshakes and the apparent failure to deal with poor performance, we in the NHS think that too many chief executives in primary care and non-foundation trusts seem to be removed unfairly.
In fact, these are two sides of the same issue. One of the things that has puzzled me most is the way that a number of talented directors have been appointed to failing hospitals as their first chief executive job. Some of these hospitals have been notorious failures for years, with cultures that are resistant to change, dysfunctional and even toxic. They generally have poor or non-existent basic systems and new (and perhaps worse) problems awaiting discovery. Experienced chief executives have often tried and failed before.
Unsurprisingly, a number of these new chief executives - who often show great promise - have had severe difficulties and been removed relatively quickly. From being promising future chief executives they become ex-chief executives and inevitably suffer damage to their reputation, self esteem and confidence - damage that is avoidable and generally undeserved.
There are several reasons for this phenomenon. Those responsible for performance management and making judgements about chief executives seem to have very short memories. A chief executive I know - regarded as very able, with a track record of delivery - was persuaded to take on a new challenge in a failing organisation. He found very quickly that his record of achievement was forgotten and that he had acquired the same reputation as the organisation he had been sent to rescue.
This was made worse by the unreasonable expectations of rapid improvement which failed to acknowledge the experience of turnaround in the NHS and private sector, which shows that real sustainable improvement takes two to five years and that things often get worse before they get better. All of his previous experience and performance record appeared to count for nothing.
While it is true there are cases where people have skills and styles that work well in one place but fail in another, this was not one of them. He came through it but his reflection is that had he not been an experienced chief executive (and pretty tough customer), he might well have succumbed to the pressure.
His situation was made more precarious by another common feature of these cases: a new chief executive often finds unresolved horrors and picks up the consequences of previous poor decision-making. Unfortunately, while people are aware that they need to avoid shooting the messenger, this is effectively what happens as the leader who breaks the bad news becomes personally associated with it.
This is most likely where the people making these judgements were implicated in the problem - perhaps they signed off the unaffordable PFI, or agreed to the pursuit of waiting times or financial balance over other objectives, or failed to intervene early enough to prevent a disaster. Having made mistakes in the past they often seem determined not to make the mistake of being too soft and may over-compensate: in particular by setting unrealistic expectations of the pace of change.
If this led to there being more tangible support it might be tolerable, but this is often not the case.
A number of chief executives in this position find they get much less support - either financial, practical or moral - than is needed or might be expected given the commitments apparently made when they took the job. As one ex-chief executive ruefully observed to me: 'Get it in writing.' Chief executives in this situation particularly need support on some of the so-called softer goals such as improving climate and leadership - and unfortunately this is not readily available.
If all this is not bad enough, these new chief executives may find that the problems of the organisation mean that the top team is exhausted and demoralised, has left, or needs to be replaced. Unsurprisingly, it is not very easy to rebuild a team in these circumstances, not least because potential applicants can see the risks of joining a struggling trust. The time needed to rebuild the team can be longer than allowed for in the performance management system: research on FTSE companies suggests that, even with pressure from investors, it can take two to four years to replace a board.
There is an impression that too many chief executives disappear for reasons that are not clear and are highly questionable.
Where the relationship between the chief executive and the board or chair has broken down, and where there is no fault involved, the availability of a compromise agreement is a useful safeguard for the chief executive. Sometimes, the instruction to remove a chief executive has come from the strategic health authority, which is not the employer, and obeying its instruction creates a situation in which the organisation has to pay compensation to avoid a claim of wrongful/unfair dismissal that would undoubtedly succeed.
Chief executives are employees. If their performance is not up to scratch there are procedures for dealing with this and a code of conduct that sets out the standards of professional behaviour against which they can be measured. This is supposed to be embodied in their contract. This means that chief executives should have the same protection from inappropriate top-down instruction to dismiss them as other staff.
If the SHA wants to see the chief executive move on then it should be talking to the chair and board. If there is a genuine problem with performance and the board has not been following the procedures properly, or has failed to notice it, they are sometimes tempted to buy their way out of the problem. In this case there should be a big question about the board remaining: both because of the cost and the failure to deal appropriately with poor performance.
The importance of the relationship between the chief executive and board can mean that there may be times when it is best for the chief executive to move on by mutual agreement. However, it is just wrong for payouts to be made to chief executives and other senior staff where there is a suggestion of incompetence or gross misconduct, which would have led to the dismissal of more junior staff.
If the principle that chief executives should not be singled out for especially harsh termination applies, then it should also follow that they should not escape the sanctions that would apply to other staff who have presided over major failures. It follows from this that they should certainly not benefit financially. The negative publicity and damage to the reputation of the NHS and management is very significant but worse than this is the corrosive effect on the rest of the organisation. The rationale that a compromise agreement may be a good and unobtrusive solution in these cases can be a serious miscalculation and undermine the organisation's values.
Another area of concern is succession planning and talent management. The NHS in the last 10 years has spent tens of millions of pounds early-retiring many talented people and then on many occasions buying them back as consultants. Not only is this financially mad but I have also wondered whether encouraging senior staff to take a view that once you are 50 being sacked is financially better than keeping your job is a good idea. It might encourage more innovation and risk-taking - or it could have the opposite effect.
The blase approach to the loss of talent seems strange when we are told so often that it is hard to get really good top leaders. The exodus of leaders may have infected the development of the next generation and increasingly there are anecdotes of it being difficult to fill chief executive and director posts.
The message here is that the NHS needs to take more care of its talent and be more systematic about its development. Where things go wrong the approach needs to be proportionate, fair and legal.
It is the employer, not the Department of Health or SHA that is responsible for the employment of chief executives and there are well-established procedures, legal requirements and an under-used but fundamentally sound managerial code of conduct that underpin how poor performance is dealt with.
We need to look after people who cannot continue in post for reasons that are not connected to their performance and ensure that the chief executive does not become the scapegoat for the failings of others or the wider system.
But no member of staff should be relying on the potential to extract a large payout as an insurance against the vagaries of a system that fails to be transparent and fair: nor should we reward poor performance.