Politicians of all hues are talking about public services being owned by staff - like John Lewis - to increase productivity. Alison Moore examines how this might work and, where staff cannot hold shares, whether just a sense of ownership is enough

John Lewis has suddenly become the politicians’ darling, with all three major parties talking of the role a “John Lewis approach” could have in improving public services.

We think mutuals have a much broader potential across the public sector, especially now where they can become an expression of the new national soul post-credit crunch

The eponymous store has been held up as an example of employee participation and ownership, leading to high standards of service and staff engagement. And a key question for an incoming government will be how a partnership or mutual model could drive productivity in the public services.

How could this work in the NHS? An article in The Guardian recently said that “nurses and patients” could be involved in the way hospitals are governed. Cabinet Office minister Tessa Jowell said: “We think mutuals have a much broader potential across the public sector, especially now where they can become an expression of the new national soul post-credit crunch.”

Shadow health secretary Andrew Lansley has talked of “employee partnerships” running NHS organisations, with social enterprises as an alternative to the foundation trust model. And Liberal Democrat health spokesman Norman Lamb has said they would “turn every NHS hospital into an employee owned trust”.

But what is this likely to mean for the NHS? The politicians are not talking about giving employees a transferable share in their organisation which can be bought or sold, in the way that some large companies give staff shares as part of a bonus. DGH plc won’t be hitting the Stock Exchange any day soon.

And, despite the frequent use of the John Lewis tag, they don’t seem to be talking about employee ownership where profits are distributed to the staff. John Lewis staff get a yearly bonus which has been as high as 24 per cent of salary, plus a host of other benefits.

What is likely to be promoted is more a watered down version of employee ownership where the financial benefits to staff are far less but the organisations can, in theory, harness the energy and innovation of staff.

In other sectors staff ownership has been linked with a substantial increase in productivity. As the NHS faces years of financial stringency, this is enormously attractive to politicians wondering how to satisfy increasing demands for services with less or the same cash.

Staff would be “co-owners” - either by themselves or with other stakeholders - but this would be ownership “in trust”, with the aim of improving services to the community.

In policy terms, this marks a shift from challenging traditional NHS providers through competition to looking at how they can morph into organisations that are both businesslike and accountable.

Julia Manning, chief executive of Think tank 2020health, says the NHS could move away from the present model towards something more akin to what was intended in 1948: “We would be getting back to the original vision of the NHS with reduced political interferences.”

But would this pseudo ownership lead to the boost in productivity everyone wants to see? Or are the financial incentives of providing good service seen in real ownership models the driver of this?

There is some evidence that pseudo ownership can deliver some of the benefits of real ownership - and that feeling “a sense of ownership” can produce some of the effects of actually owning an organisation.

Staff participation

NHS Mutual, a study for the Nuffield Trust, looked at the relationship between employee ownership and the benefits seen in many co-owned companies. The authors concluded that for benefits to be delivered two further factors were necessary - HR management practices that foster staff participation, and a culture of ownership.

But do these factors also deliver benefits in the absence of real ownership? The answer seems to be yes but only up to a point.

The authors suggest a number of employee owned models for general practice and community health services. At the very least, greater staff participation is urged.

Circle, a private healthcare company that provides services to the NHS, has seen stunning productivity improvements in its Nottingham treatment centre since it opened in the middle of last year - in some areas, of over 20 per cent. This has been associated with very high levels of customer satisfaction, with 99.6 per cent of patients saying they would recommend the centre to families and friends.

Circle’s business model involves a high level of employee ownership but that has not been possible in the Nottingham case because many of its staff are seconded from the NHS.

Managing partner Ali Parsa believes staff engagement and a sense of ownership have been crucial in this productivity improvement. Actual ownership, he says, is “not such a big deal. What is important is a sense of ownership… that’s often about allowing people to do something”.

While that does not rule out NHS organisations developing this sense of ownership, he says the hierarchical culture is an issue: “I don’t think the challenge in the NHS will be structural - it will be cultural.”

He points out that innovations in other industries - such as IT - have come from incomers rather than incumbent organisations and have been associated with a drop in the barriers to entry. Would many of today’s technology companies have developed if the founders had had to buy a mainframe rather than a cheap personal computer?

But what sort of structure could give NHS staff that sense of ownership? The most talked about model is some form of social enterprise, a not-for-profit organisation where surpluses are reinvested in services but it is typically run by staff. Although there are some successful social enterprises in the NHS, their numbers are few and their establishment has been difficult.

Working for a social enterprise and competing for contracts may be more risky than working for an NHS organisation: enterprises can fail and staff can end up without a job.

Former King’s Fund senior fellow Richard Lewis, who is now a director at Ernst & Young, says staff may be making a trade-off between the empowerment such organisations can offer and the risks they may entail.

Social enterprises may also be short of capital - the assets of the NHS organisation may not follow them - and may depend on the revenue from contracts. “It seems to me that if social enterprises are going to survive in health, they need a sort of heroism - it is not for the faint-hearted,” says Mr Lewis.

Then there are questions of governance and propriety. Is it right to hand over NHS bodies to staff? What about the public voice? Can it be assumed that staff will always run an organisation for the public good and the structure will resolve conflicts between their interests and those of the patients?

This question is often unresolved in other parts of the NHS, such as primary care. GP practices are often owned by employees - but do they act in the best interests of patients in every way?

Peter Hunt, chief executive of Mutuo, which promotes mutual organisations, points out: “GPs are a fantastic example of producer capture. We would not want to replicate that.”

Partly, the answer lies in commissioning and monitoring contracts - and the public accountability of commissioners.

But partly, it is about what bit of the market an organisation is working within. A social enterprise run by staff could compete against other providers on a level playing field and with its accountability delivered through the contracting system.

But that might not be appropriate where a monopoly exists. Mr Hunt says different governance may be needed in these cases, with some form of public representation. This, of course, amounts to a foundation trust model with multiple stakeholders and members as stewards of the assets of the organisation.

Foundation Trust Network director Sue Slipman sees the cross-party interest in mutualism as being about extending the model into other public services rather than changing the foundation trust model.

“The appeal for politicians is around a localism agenda,” she says, adding that politicians may not have realised foundation trusts are run on the mutualism lines they are talking about.

Can this multiple stakeholder model deliver the sense of staff ownership that seems to drive productivity? Foundation trusts have often been criticised for not doing enough with their staff governors. Ms Slipman argues they are still a work in progress.

“Some have done more than others with this different group of stakeholders but all of them are trying hard to engage their staff,” she says. “Most people think the model works and they want to continue with it.”

She says foundation trusts have realised improvements in productivity and generated surpluses to reinvest in patient services. However, she warns the demands for taking money out of the system will be so large over the next few years that even the most efficient organisations may not be able to do enough to satisfy them.

Increasing staff representation among governors would be one way of boosting staff engagement and sense of ownership, although this would mean diluting the power of other stakeholders and could be seen as reducing public power.

As Mr Hunt points out, once power and rights are granted to a group, it is very difficult to take them away.

It is more likely that foundation trusts will have to look even harder at their staff engagement and motivation without changing their structure - and that could involve some form of financial incentive, although not at John Lewis levels. And it will require visionary chief executives who are prepared to cede power to groups of staff.