Will the world’s biggest HR system become a white elephant?

I was once told, by a graduate trainee at the evil City firm where I used to work, that my most annoying phrase was “I hate to say ‘I told you so’ but….”.  Yes, I’m afraid this is going to be another one of those posts.

My good friend Vince Lammas has posted this morning about the future of the NHS HR and Payroll system. For those who are not familiar with it, the Electronic Staff Records system (ESR) is almost certainly the largest HR and Payroll system in the world. It holds the employee data of all 1.2 million NHS employees in England and Wales and thus pays some 7 percent of the working population

But how will ESR work now that the NHS is being broken up and devolved? Will the increasingly autonomous foundation trusts and the new GP commissioning bodies continue to use ESR? Will those who work for these organisations still be NHS employees? Clearly, with some NHS functions transferring to the Third Sector, many will not. The ESR system, which was introduced to save money, is starting to look like an expensive overhead. The technology may be up to date but the concept suddenly looks old fashioned. As Vince says:

A child of it’s time, commencing in 2000, when national IT renewal efforts in the NHS were viewed as a significant enabler for change and service improvement, the NHS invested resources and effort in replacing more than 90 different human resources and payroll systems plus myriad local records with a single integrated system. The aim was to save the NHS around £300m over the life of its 10 year contract.

ESR was conceived in the context of a national human resources strategy – the new ORACLE platform introducing new functionality which most NHS Trusts would never have bought in local procurement exercises. Admittedly, there were exceptions – Trusts already using modern HR systems – but, accepting the retrograde step for them, the NHS saw these few ”local losses” as a price worth paying for the common good.

When it commenced, ESR’s “standardisation project” was an initial step on the way to a wider shared service strategy –  the eventual objective being to centralise administration of staff records for around 1.3 million NHS employees in no more than 20 transactional processing centres. In most shared service strategies, “standardise, centralise and streamline” forms a common mantra.

Sounds like something from a bygone age doesn’t it?  Standardise, centralise and streamline? A national human resources strategy? How do these ideas fit with foundation trusts and 700 GP commissioning bodies?

But, like all large centralised systems, ESR has high fixed costs. If parts of the NHS stop using it, the per capita charge levied on those remaining will increase. Running ESR for 600,000 people will not be much cheaper than running it for 1.2 million. Those left will just pick up more of the total cost. There is then a danger, as Vince warns, of a flight from ESR as NHS trusts abandon it for something cheaper – or at least, something which looks cheaper from the perspective of individual trusts.

Of course a system like ESR does give NHS organisations a chance to cut their costs. In theory, it should be possible to run all the transactional HR and payroll activities from a single location or, at least, from a few regional hubs. However, the creation of these shared service centres has been left to individual NHS trusts, may of whom have proved reluctant to hand over control of their payrolls, even with the incentive of significantly reduced costs.

This is yet another example of the vacillation between centralisation and localism that blights the public sector. The British state usually bottles out of enforcing standardisation. It goes so far then seems to lose its nerve. It forced all NHS trusts to take on a new IT system but left them to work out how to make the promised cost savings individually. Some of them just didn’t bother. To take the project to its logical conclusion, setting up shared service centres and forcing NHS trusts to participate, would have saved millions but it would have been….well….a bit French, wouldn’t it? We don’t really do that standardisation stuff in Britain, we just, sort of, half do it.

Now for the really annoying bit. I saw all this coming almost a decade ago when I was still at that evil City firm. Within a short time, we received invitations to tender for the early design phases of two NHS projects. One was ESR, the other was foundation trusts. At the time, I said that there was a contradiction between the drive for centralisation, represented by the ESR project and the trend towards devolution implicit in the move to foundation trusts. And so it proved. Over the past ten years, centralisation’s star has set and devolution’s has risen. This process started under Labour and will continue under the Coalition.

That the NHS is left with an expensive IT system, which will now probably never deliver all the savings it was designed to achieve, is yet another symptom of the confusion between localism and centralisation which I keep banging on about on this blog and which the British state has never seemed able to resolve.

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4 Responses to Will the world’s biggest HR system become a white elephant?

  1. Pingback: Will the world’s biggest HR system become a white elephant? - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. karencwise says:

    Interesting post: with all the changes that are happening, I hadn’t yet given any thought to the ESR / payroll element. But that’s probably because it’s not the most exciting element of HR from my perspective.

    In terms of the brave new world we are entering, I believe that it is highly likely that “sticking plaster” solutions will be found, and this might be driven from the centralised need to continue monitoring key data about staff.

    I have a contemporary example: A Joint Venture – where some of the staff are employed on an RoE basis (and therefore still paid via ESR) and the other staff are directly employed by another party. Arrangements have been put in place for the directly employed staff to have their details inputted on ESR as “honorary contracts”, and are paid directly by the JV employer. On a monthly basis, monthly reports are pulled from ESR providing key information for all the staff within the joint venture. The reports don’t cover everything, but it helps simplify the management of staffing data.

    It’s going to be messy, as these things always are. There will be a range of local arrangements, and this will depend on how much each Trust has embraced ESR (some more than others). There is a shortage of good workforce information / payroll managers within the NHS & implementing any new system will be costly as expertise will need to be brought in. It will be probably this last element that will drive local decisions, and I suspect that sometimes it will be “better the devil you know”.

    PS – I’m an optomist.

  3. Vince Lammas says:

    Rick,

    Thanks for paying attention to this area and adding to the debate. My initial interest here was sparked by the NHS White Paper and comment prompted by an article on SmartHealthcare http://www.smarthealthcare.com/patient-fiddling-npfit-simon-burns-28sep10 – which makes some really interesting observations about the NHS and its IT strategy.

    Of course, while an “organisation” has corporate status it doesn’t mean all actors think in the same way or agree about solutions. This was, apparently a more significant issue for the Blair-Brown Labour government than many (Foundation Trusts and Agenda for Change anyone?), though the Coalition Government will face similar challenges and those tensions will continue to impact on the public sector.

    Political systems rarely provide clear and coherent vision, strategy and plans – even when the government espouses a comprehensive national strategy. Tensions and discrepancies within and between programmes always remain.

    Flux towards and away from centralised solutions is a universal issue in organisations and Karen makes a good point that most solutions in the real world tend to be messy. I’m not sure this especially a “British” thing … though there is often an inherant scepticism about big programmes in the UK.

    It’s important to keep open the possibility of adaptation and change as new priorities emerge and take shape (think Mintzberg on emergent strategy). It’s also vital for local teams to consider how to apply large scale programmes to local conditions …. which can never be fully appreciated from afar.

    Talking to some information strategy consultants working with the NHS yesterday, we discussioned the tensions between local control and flexibility on the one hand and large scale solutions offering efficiencies and benefits on the other. We agreed to work together on a framework which would help NHS organisations navigating the new environment.

    The ESR solution could have a long lifetime, in part because its the devil people know, but also due to the fact that the challenges of managing a healthcare workforce are common between organisations … regardless of whether people are directly employed by the NHS or working for a social enterprise or a cooperative.

    PS. I seem to remember working with some great people from a certain “evil” City firm (no … not you Rick!) who helped us get the best from the ESR solution and prompted me to think about leaving HR to work on change management!

  4. Rick says:

    Vince, I thought about mentioning Agenda for Change but it would have made the post way too long. It is another example of an expensive national initiative where the responsibility for making it pay was left to individual trusts. Once again, with a few honourable exceptions, not a lot happened.

    I agree that all solutions are messy up to a point but, if you are going to adopt a Stalinist approach by imposing a single system on everyone, it seems crazy not to be Stalinist about making the cost savings happen too.

    On a broader note, I’m not convinced that all this localism will save money; in fact I think it will be more expensive but that’s probably a post for another day.

    And you’re right, of course, that the City firm in question wasn’t that evil when compared with some others I could mention but you have to allow me a bit of poetic license.

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