Mid Staffs: The public sector’s Lehman Brothers

18^th February 2013

Simon Caulkin on the fatal consequences of mismanagement in the public sector

Mid-Staffs is the public sector’s Lehman Brothers, an organisation in which staff were faced in the wrong direction, the numbers were bogus and measured the wrong thing, and managers spent 95 per cent of their time on the wrong part of the job. With such an inept management model Lehman went bust; Mid-Staffs resulted in death. If either of them did good it was despite, not because of, the dysfunctional system that people were working in.

Staff face back to front when they respond to targets set by managers, civil servants and ministers, rather than directly to patients’ or customers’ needs. In the colourful phrase of former GE CEO Jack Welch, they have their face towards the CEO and their arse towards the customer. When needs conflict with targets – or patients with CEOs – guess which wins.

Whether relating to sales in the private sector or waiting times in the public, targets are arbitrary, bearing no necessary relation to the capacity of the organisation to meet them. As statistician W. Edwards Deming patiently explained, if a system is stable, there’s no point in setting a target because it will give you what it is designed to give you. On the other hand if a system is unstable, its capacity is unknowable, so there’s no point in setting a target either.

In such circumstances, how do people under pressure meet their targets? By creative use of the only thing they can control: the figures. In small or large ways, they cheat. The banks cheated their customers. In the NHS, hospitals fiddle their four-hour wait limit and ambulances their response times. As Toby Lowe reported of the NHS in Guardian Professional recently, “‘target-based performance management always creates gaming’. Not sometimes. Not frequently. Always.” So consistent is this behaviour that there is a law (named after economist Charles Goodhart) to describe it, stated as: “When a measure becomes a target, it ceases to be a reliable measure.”

Massaged figures are one reason why managers don’t see what’s going on under their noses. Another is that the numbers mostly measure the wrong thing, making them doubly misleading. To be useful, a measure needs to be related to purpose from the patient or customer’s point of view – the end-to-end time it takes to get a loan from a bank or a diagnosis and treatment from a hospital. The measures that managers usually target – standard response times, call-handling times, agreed service levels – measure activity, not purpose. So a unit can be answering phone calls at first ring and making all appointments within 24 hours and still be delivering hopeless service from the customer’s viewpoint. At its blackest, patients die and customers lose millions while managers pocket bonuses for meeting their targets.

In most organisations, frontline workers have little control over the ways work is carried out. Deming (yes, him again) estimated that 95 per cent of performance was attributable to ‘the system’ and just 5 per cent to the individual. Yet under today’s performance-management regimes in both public and private sectors, managers focus their time and energy in exactly the reverse proportion.

In the literature, ‘performance management’ is an expression of enlightened shared interest – a way of aligning individual and organisational objectives to benefit the whole company. But a recent Scottish TUC research report shows how, spreading from the private to the public sector and accelerating since the financial crash of 2008, the concept has steadily shed its ‘soft’ side as it expanded its scope, in the process morphing into its opposite – a vice for tightening management control, systematically used to force costs down, and to discipline and drive ‘managed exits’ of ‘underperformers’. Lean working and new technology have likewise been used to deskill and intensify work, making a travesty of the promise of empowerment. In both public sector organisations like HMRC and the NHS and private-sector banks and telcos, performance management has come to be synonymous “not with developmental HRM and agreed objectives but with a claustrophobically monitored experience of top-down target driven work”.

‘Deliverology’, as grotesque in practice as it is on the page, is the public-sector variant of the ideologically inspired shareholder-first, externalising management model that in the private sector gave us sub-prime, RBS, and the financial meltdown. Unwittingly emphasizing how closely they are related, David Cameron’s dismal addition to Robert Francis QC’s 290 recommendations for preventing another Mid-Staffs is performance-related pay – the very thing that in the finance sector almost brought the walls of capitalism tumbling down. The threat of criminal prosecution for lack of care is another turn of the screw in the same self-defeating spiral in which tighter controls to extract higher performance from employees just lead to demoralisation and worse outcomes.

It is not medicine that is in the dock for causing up to 3,000 unnecessary deaths at the 14 hospitals now being investigated for suspiciously high death-rates but a disastrously flawed model of management – a staggering charge sheet. If anyone is to go on trial for what has happened, it should be those who ignore the lesson of first the financial meltdown and now the collapse of the public sector: the futility of trying to reform other institutions by foisting on them a technology that, like medicine in the Middle Ages, a mixture of superstition, ideological prejudice and pseudo-science, fails the most basic test, that of first doing no harm.