Targets and performance management – the key to public sector reform

Last week’s report by the Nuffield Trust, showing that England gets better value for money from its NHS spending than Scotland, Wales or Northern Ireland, was bound to stir things up a bit. The NHS outside England is, on the whole, run more like the NHS was in the 1980s. It is managed by local health boards, resembling the old area health authorities, there is much less emphasis on targets and most of the market-based reforms applied in England have been rejected. This means that we have something close to a control group against which we can test the reforms of the last fifteen years or so. If you want to know what a modern NHS would look like if targets, markets, foundation trusts and local devolution had never happened, you only need to look at Scotland and Wales.

Which is why the Nuffield survey is controversial. Everyone who is opposed to the direction the NHS has taken in England doesn’t want to believe the figures. As you might expect, the SNP and the BMA were quick to question the report’s findings. However, there is mounting evidence that the NHS in England is, indeed, out-performing the health services of other parts of the UK. Research by Carol Propper, covered in the FT and on this blog last year, found similar results.

Furthermore, this research also refutes the claim made by opponents of NHS reforms that a focus on targets simply means improvements in the target being measured while everything else goes to pot. For example, Professor Propper found that “targets led to a fall in waiting times without apparent reductions in other aspects of patient care”. Comparative studies between Wales and England have also concluded that the use of targets has not had a detrimental effect on other aspects of patient care. As early as 2006, Hanuck and Street concluded:

Over the period [of the study] the English hospitals recorded increased levels of activity, undertook proportionately more day case activity, and mortality rates fell. The stronger performance management regime operating in England appears to have contributed to higher levels of performance in the English hospitals over the period.

The Nuffield report also deals with the objection that comparing Wales and Scotland with England is unfair because the socio-economic profiles are different. Even when they compared Scotland and Wales with North-East England, an area with similar levels of deprivation, the researchers found that NHS performance in the North East was better than that in Scotland or Wales, despite having lower levels of per-capita funding.

In short, then, there is a lot of evidence to show that the English system with its emphasis on targets and performance management delivers better value for money than the health services in the devolved countries.

Of course, it is easy to attack the use of targets by coming up with silly examples of where they have led to perverse outcomes. Just look in the comments on Peter Preston’s article from earlier this week. All the straw-men are in there somewhere. We all know the stories of bonus driven sales teams achieving massive increases in orders that production and distribution teams were unable to meet. Result – rich salesmen, pissed-off customers and a company losing market share.

But most organisations are getting a lot cleverer about using targets, performance management and incentives and, from the research, the NHS seems to be using them to good effect.

So could targets be the key to improving efficiency elsewhere in the public sector? Almost certainly.

Many public sector organisations, especially central government and its agencies, are bedevilled by a lack of focus. Initiative overload is endemic. Typically a number of improvement projects will be going on at any given time, all competing for resources and getting in each others’ way. To deal with the resulting complexity they then need another team of people to manage the dependencies between the projects. It is very easy to create an industry around a group of projects that have no clear impact on the bottom line.

Part of the problem is that the bottom line isn’t always clear. Even in profit-making organisations, clever people will come up with good reasons to launch their own ego-driven projects. Where the organisation’s purpose is less clear,  a few talented individuals will take advantage of the ambiguity to make their mark, build their skills and enhance their career prospects. If challenged they will usually be able to present a convincing argument explaining why their pet project fits in with one of the organisation’s ninety-seven key priorities. As one former medical director, himself a doctor, explained to me a some years ago:

There are a lot of people in the NHS doing what they want to do, not what they are supposed to do.

Clear targets and performance management have stopped much of that.

The advantage of having a few clear targets is that the ambiguity and wriggle-room is seriously reduced. Once you are clearer about what you have to achieve in a given time, it’s far easier to choose between those good ideas which will contribute to the bottom line and those which won’t.

Over the next few years, public sector organisations will have implement spending cuts on a scale that only those now close to retirement can remember. The un-focused, woolly management that prevails in many of these organisations hasn’t a hope in hell of achieving these cost savings without severe degradation of the country’s public services. Public sector managers, especially those in the civil service, need to be given clear performance targets and managed against them. Those that fail to meet their targets without a very good reason should be fired. And I don’t mean paid off or moved to another job, I mean fired. Sack a couple of high-profile civil servants for failing to deliver and watch the culture of central government change – rapidly!

David Cameron, for all his rhetorical opposition to targets, will soon come to realise that he has no choice other than to give public sector managers clear objectives and to manage their performance closely. Unless he does this, he will never make the public sector more efficient and he won’t be able to get the government deficit down without large tax increases or a complete dismantling of services.

As the Nuffield and other studies have shown, targets work. If the improvements in efficiency experienced by the NHS in England can be extended to other parts of the public sector the next government has at least a chance of managing down its debt.  Without clear targets and strong performance management, it hasn’t a hope in hell.

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2 Responses to Targets and performance management – the key to public sector reform

  1. Howard says:

    Not only is there no evidence that targets work, there is plenty of evidence that they motivate people to do the wrong thing.

    Here is a link to an article that explains why:

  2. Rick says:

    No evidence that targets work? Funny, I thought I’d linked to quite a lot of evidence here.

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