Ian Smith got to within touching distance of the NHS chief executive job last year. Here he makes the case for managers to revolutionise their focus and free themselves from Whitehall

It is often said that NHS management is 'the problem'. This is dangerous nonsense. An organisation employing nearly 1.4 million people and consuming a third of a per cent of world GDP needs world-class management.

Had I been chosen as NHS chief executive, I hope my contribution would have been to set the service on that course. The problem is not that the wrong set of managers is in charge. The real issue is the direction and culture of the whole organisation. Just as successful for-profit organisations focus directly on customer value, the NHS needs to be refocused on 'patient value' - clinical outcomes for medical conditions over a full cycle of care.

At present the scope for effective management is very limited. I would divide NHS managers into three groups: politicians and their advisers; Department of Health civil servants and senior NHS managers in the NHS itself; and frontline managers.

Ministers and senior advisers are intelligent and committed to reform. Over the last few years they have quite bravely taken on vested interests in the NHS and come up with an impressive policy agenda, driven, especially, by advisers to Number 10 and the DoH.

But this group suffers from two problems. Very few of them have much or any management experience, and even those who have are, by their very role, not executive managers who can make the NHS work effectively day-to-day. Despite this, they do influence the system's dynamics. Whether it is launching another policy initiative, reacting to the latest press report or parliamentary questions or setting new targets, there is a flood of directives coming from politicians, advisers and the DoH. Each makes sense individually, but they are not part of a coherent programme: they sometimes conflict, and they always contribute to the torrent that overwhelms and distracts frontline managers from their jobs.

The second group - DoH civil servants and senior NHS managers - is profoundly conservative. It sees its objective as maintaining the status quo. London mayor Ken Livingstone talks about the civil servants in the transport sector who 'manage decline gracefully'.

It is difficult to think of a mindset less appropriate to NHS reform. The people appointed to lead change in the NHS and DoH are almost universally civil servants or career NHS managers. But it is not possible for someone who has been brought up within the system to have the inclination, drive, experience and perspective to change it.

Blurred perspectives

The third group is frontline NHS managers. They have an unenviable job: they are victims of a centralised bureaucracy; from the politicians they get daily 'imperatives', which distract them from their longer-term objectives by forcing them to react to the latest 'fad'; from senior NHS managers and the DoH they get, at best, top-down directives, and at worst meaningless, bureaucratic, and poorly thought through decisions.

As a result, 'change' in the NHS too often equates to meaningless reorganisation. Too many good managers give up and leave, and competent managers who can have a more rewarding life in the private sector are not attracted to the NHS and, in many cases, not even invited to join.

What the NHS needs is a true change programme. Anyone used to bringing about change in the private sector would admit there is no more difficult challenge in the UK - perhaps in the world - than managing change in the NHS.

The lack of a coherent and explicit change programme is even more damning in this context, and suggests that the reform process is not being managed coherently. The process of managing change in the private sector is the norm these days.

The elements of effective change management are:

  • a robust diagnosis of the reasons change is required and what prevents it;
  • a vision that gives meaning to the change process, and provides a reason for people to orient themselves when the going, inevitably, gets tough and disorienting;
  • a breaking of the old dysfunctional system dynamics, by acting on the diagnosis with three or four well-placed, sustained and co-ordinated interventions;
  • functional dynamics and, through deliberate and planned communication, keep orienting people towards the vision;
  • a self-sustaining system where processes, motivations and rewards are constantly pointing the actors within the system to the objective of patient value.

The case for change is based on a realistic assessment of performance. There is no doubt that UK health outcomes have improved over the last decade. But a full assessment of the position shows that transformative change is still needed. In particular, while clinical outcomes have been improving, our position relative to other advanced countries has not improved. Waiting lists have fallen, but the financial mismanagement of the system will result in even this being reversed.

At the core of the change programme should be a vision of where it is heading. This is lacking. The key aspects are a relentless focus on patient value, which would involve competition between providers. This competitive market will be dominated not by for-profit institutions but by foundation trusts.

It is a nonsense that organisations like Royal Brompton Hospital or Great Ormond Street are not able to make respiratory and paediatric care services available wherever they can demonstrate better results than others. Underpinning this vision would be detailed published data on the quality of clinical outcomes.

But the dynamics of the current system will be astonishingly hard to break. Private sector experience shows that such powerful dynamics can only be broken if the system is perforated at a number of points and in a coherent and systematic way. The key imperatives here are to decentralise, de-bureaucratise and de-politicise; extend and strengthen demand-side mechanisms; and release the power of competition.

It is a mistake that the private sector makes all too often: organisations only work well when you push decision-making and responsibility as close to the consumer as possible. And that has to be based on results, not compliance. The NHS is in urgent need of decentralisation. Strategic health authority chief executives have to become accountable and responsible for the outcomes they produce. And they have to drive that accountability right down to frontline management.

A corollary to this decentralisation is that the DoH should be considerably downsized (if not closed altogether). You cannot have responsible and accountable managers on the ground if they are being second-guessed and ordered around by the central office.

Suspicious minds

Bureaucracies have some very distinctive characteristics: they are driven by centralised directives, they mistake reorganisation for real change, they are insular, inward-looking and suspicious of outsiders, they administer rather than manage, and lack accountability - promotion is based on 'keeping your nose clean' and 'politicking'.

We need to create more professional bodies that make decisions based on good managerial and, especially, clinical criteria. The National Institute for Health and Clinical Excellence has, on the whole, been a great innovation. But we need to extend this success to include other areas.

The result of this process will be a self-sustaining system in which commissioners play a central role. Commissioners are the market makers. They are the mechanism whereby monopolies are prevented from reappearing. They build an experience in defining health needs, and they are the market guardians who ensure the patient remains at the centre of the system.

The stakes are high. The government deserves tremendous credit for acting to change two historic weaknesses in public sector healthcare: under-provision of resources and inadequacy of policy design. But the progress in these areas is already being undermined by chronically dysfunctional organisational dynamics and poor management. Pouring money into an unreformed, poorly managed system has inevitably created waste and will continue to do so.

Too little of the extra funding has actually got through to patients. It has either been spent on bigger salaries for the providers, more administrators or, more generally, wasted.

Pouring policy into an unreformed, poorly managed system has created confusion and gaming.

We have to drive through reform in order to honour the great achievement of Aneurin Bevan, who said in 1948: 'We shall of course find from time to time that alterations and adjustments have to be made. We are not ridden by doctrine; we are a nation very largely of visionary empiricists, able to adjust things where necessary, and between us we shall have a standard of health service that will be the envy and admiration of the world.'

Ian Smith is the former chief executive officer of the General Healthcare Group and was shortlisted for the NHS chief executive job last year. His report Building a world-class NHS is published by the independent think tank Reform and is available at www.reform.co.uk