Corporate failuresCorporate failures: lessons for NHS boards

Dr Neil Goodwin+44 (0)7831 886834neil@goodwinhannah.co.ukwww.goodwinhannah.co.uk

Gerald Ratner 1991‘W l d t l h d t‘We also do cut‐glass sherry decanters complete with six glasses on a silver‐plated tray that your butler can serveplated tray that your butler can serve you drinks on, all for £4.95. People say, "How can you sell this for such a low price?", I say, "because it's total crap".’

H d d thi b l kiHe compounded this by also remarking that some of the earrings were ‘cheaper than an M&S prawn sandwich butthan an M&S prawn sandwich but probably wouldn't last as long.’

After the speech, the value of the Ratners' group plummeted by some £500 million£500 million.

In 2006, John Pluthero, K chairman of Cable & Wireless sent a memo toCable & Wireless, sent a memo to staff, which said: ‘Congratulations, we work for an underperforming f p f gbusiness in a crappy industry and it's going to be hell for the next 12 months.’

He warned of job losses and added: ‘IfHe warned of job losses and added:  If you are worried that it all sounds very hard, it's time for you to step off y , f y p ffthe bus.’

‘Yet 15 months on, the UK chairman’s forthright management style has paid off, with a set of forecast‐busting full‐year results and an indication that tough transformation targets could be met early. ‘ The Times 28 May 2007g f g y y

NHS Inquiriesq

• c130 inquiries 1968‐to date q

• Expensive: 

Shipman (2004) £21mShipman (2004) ‐ £21m

Bristol (2001) ‐ £14m

Alder Hey (2201) ‐ £3m

Inquiry reports

Maidstone and Tunbridge Wells 2007...when patients rang the call bell because they were in pain or needed to 

Bristol Royal Infirmary 2001...from 1991 to 1995 between 30 and 35 more children under 1 died...

go to the toilet, it was often not answered... ...patients were left, sometimes for

...a system of hospital care which was poorly organised...where there was a ‘club culture’...an...patients were left, sometimes for 

hours, in wet or soiled sheets, putting them at increased risk of infection and pressure sores

...where there was a  club culture ...an imbalance of power, with too much control in the hands of a few individualspressure sores. individuals.

Mid St ff d hi 2009Mid Staffordshire 2009...the trust’s board...lost sight of its responsibilities to deliver acceptable standards of care to all patients...It failed to pay sufficient regard to clinical leadership and to the experience and sensibilities of patients and their families.

There is a general tone of disrespect which is particularly gallingThere is a general tone of disrespect which is particularly galling to old people, and which actually frightens a great many of them. The food was adequate and quite well cooked but always cold f q q ywhen served. Incontinence often accompanies the elderly and remains to dehumanise you as you sit or lie in wet or soiled clothing....

Defining corporate failure

Private  sector:Company administration or liquidation; large‐scale destruction p y q ; gof shareholder valuePublic sector:

l d f l h h h bl f l hMaladministration or service failure which the public feels has caused them injustice or hardshipCommon to both sectors:Common to both sectors:Failure of corporate strategyExistence‐threatening decline in performance*g p

*Pandit NR. 2000. Cited in Walshe K et al. 2004. Organization Failure and Turnaround: Lessons for Public Services from the For‐Profit Sector. Public Money  & Management August.

Why we fail

Reason SignReason Sign

Competency  Technical incompetenceSustaining above average performanceSus a g abo e a e age pe o a ce

Interpersonal Managing upwards to the exclusion of local relationshipsInability to handle interpersonal problems, adapt to change or li it t telicit trustPoor team leadership, especially at times of challenge, difficulty or conflict

Bad leadership Incompetent, rigid, intemperate, callous, corrupt, insular, evil

Strategy The natural obsolescence of once‐vital strategiesh i i f di i hThe corrosive impact of discontinuous change

Size and success  Size breeds complacency and lazinessSuccess breeds arroganceSuccess breeds arroganceBelief that success comes from outspending one’s rivals rather than outthinking them

Top 10 business failures?

Ratners FlRatners

Betamax Barings B k

Floorz.com

Swissair

Bank

Enron

Delorean

Swissair

Fashion 

Enron

Cafe

l hHoover’s 

Woolworthsflights

Walker review of corporate governance in UK banks d th fi i l i d t titi 2009and other financial industry entities 2009

• ...principal deficiencies in...boards related much more to patterns of behaviour than to organisation. The sequence in board discussion on major issues should be: presentation by the executive, a disciplined process of challenge, decision on the policy or strategy to be adopted and then full empowerment of the executive to implement. The essential “challenge” step in the sequence appears to have been missed...in the sequence appears to have been missed...

Walker makes 39 recommendations: board size (10‐12), composition and functioning  and rigorous evaluation of its effectiveness; role of shareholders, governance of risk, and remuneration.g ,

Why CEOs fail

Arrogance You’re right and everyone else is wrong

Melodrama You always grab the centre of attention

Volatility Your mood shifts are sudden and unpredictable

Excessive caution The next decision you make may be your first

Habitual distrust You focus on the negatives

Aloofness You disengage and disconnect

Mischievousness You know that rules are only suggestions

Eccentricity It’s fun to be different just for the sake of it

Passive resistance Your silence is misinterpreted as agreement

Perfectionism You get the little things right but the big things go wrong

Eagerness to please You want to win any popularity contest

Bristol Royal Infirmary 2001 In Bristol too few people had too much power. Unhappily, if the people have flaws, f p p p pp y, f p p f ,the organisation becomes vulnerable. An organisation offering a service must, of course, have dedicated staff. But that is not enough. It must also have in place within it systems that allow it to learn develop and prosper quite apart from any externalit systems that allow it to learn, develop and prosper, quite apart from any external mechanisms. A key feature of such systems is that all involved must feel able 

Maidstone & Tunbridge Wells 2007150 patients infected with C. Difficile...number died...system for handling serious untoward incidents was poorp...problems relating to the levels of staff, poor care for patients...required resolution [strategically] but...rarely considered by the boardThere was no systematic mechanism to follow up any actions required or to shareThere was no systematic mechanism to follow up any actions required or to share lessons......board appeared to be insulated from the realities...Similarities with...outbreaks of C. difficile at Stoke Mandeville Hospital (2006). Both trusts undergone difficult mergers preoccupied with finances and had atrusts...undergone difficult mergers... preoccupied with finances, and had a demanding agenda for reconfiguration and PFI, all of which consumed much management time and effort. 

Themes from healthcare failuresThemes from healthcare failures1. Longstanding problems known about for some time2. Problems not handled such as poor clinical practices3. Cause of immense harm, for example patients injured or

died with organisational reputations suffering 4. Lack of management systems focusing on dysfunctional

boards, teams or individuals5. Repeated incidences suggesting that lessons are not

l dlearned 6. Barriers to disclosure and investigation

Walshe K, Shortell S. 2004. When Things Go Wrong: How Health Care Organisations Deal With Major Failures. Health Affairs 23(3): 103-111

Symptoms of potential failure of healthcare i tiorganisations

1 Difficulty in implementing core targets or not regarding them as1. Difficulty in implementing core targets or not regarding them as a priority

2. History of major financial or quality or safety problems3. Organisational insularity, exhibiting poor external relationships

and media image4 Operating in a difficult context with incomplete or unresolved4. Operating in a difficult context with incomplete or unresolved

plans or strategies 5. Management distracted, for example by major developments5. Management distracted, for example by major developments

or projects such as mergers, PFIs (or similar), organisational change or foundation trust applications

6. Examples of poor staff management, for instance, low staff morale, staff turnover and recruitment problems

Are some symptoms more indicative of potential failure?

Organisational insularity, exhibiting poor external relationships d di iand media image

Plus one or more of the following...

• Difficulty in implementing core targets or not regarding them as a priorityHi f j fi i l li f bl• History of major financial or quality or safety problems

• Operating in a difficult context with incomplete or unresolved plans or strategies

• Management distracted, for example by major developments or projects such as mergers, PFIs (or similar), organisational change or foundation trust applicationspp

• Examples of poor staff management, for instance, low staff morale, staff turnover and recruitment problems

But...at the heart of all serious failures are the b d h i CEO d t l d fboards, chairs, CEOs and top leaders of organisations

Bromley Hospitals 2008...the approach of [Chairman] and 

Cornwall 2009Although the Chief Executive is said to 

[Chief Executive] to the Trust’s strategic financial management was one of seizing technical opportunities as 

be charismatic, energetic and committed to patients and the Cornwall NHS, his energetic and ‘can g pp

distinct from taking decisive, if painful, executive action to arrest the worsening financial position

, gdo’ approach is not complemented by sufficient investment in developing basic management and leadershipworsening financial position

Cornwall 2009Th b d d i did

basic management and leadership capacity, capability and systems across the organisation, which is patchy at bestThe board and executive team did not 

operate as a highly professional and high performing leadership group.  Mid Staffordshire Hospital FT 2009

h ’ b d d i l d did

best. 

The predominant culture led to a general lack of openness, trust and challenge, and worked against the 

The trust’s board and senior leaders did not develop an open learning culture, to inform themselves about the quality of g , g

development of professional and constructive corporate relationships. 

care, or appear willing to challenge themselves in the light of adverse information.f

Manage the hard and soft indicators of performance  HARD INDICATORS SOFT INDICATORSHARD INDICATORS

Is the organisation achieving key performance targets and maintaining financial balance?

SOFT INDICATORSDoes the organisation make use of available data?

How does the organisation respond toWhat is the level of complaints in theorganisation?‐ How many are serious, enduring 

complaints?

How does the organisation respond to signs of decline? What is the level of internal challenge and debate?

Is the organisation ‘in touch’ with what iscomplaints?‐ Is there a satisfactory resolution level of 

complaints?

What is the level and severity of patient

Is the organisation  in touch  with what is Happening internally and externally?

How much potential is there for innovation creativity and learning? Is thisWhat is the level and severity of patient 

safety incidents?  Is this rate increasing or decreasing?

Wh t d th fi di f dit j t t

innovation, creativity and learning? Is this potential utilised?

How good are clinical‐managerial l ti hi ? H i t ff l ?What do the findings from audit projects at 

a clinical and organisational level show?

What are the results from external reviews?

relationships? How is staff morale?

What is the quality of external relationships?

Are there problems in relation to staff recruitment and retention?

Does the organisation function in a centralised or decentralised way?

Recognising, understanding and addressing performance problems in healthcare organisations. DH 2006

Think about structure and culture ‐ the 4 + 2 Rule The results of 10 years research into 160 successful companies 

Primary management practice (do all) Secondary management practice (choose 2)

The research questions: why do some companies consistently outperform  their competitors and which of the hundreds of well‐known management tools and techniques can help a company be great

Primary management practice (do all) Secondary management practice (choose 2) 

1. Strategy ‐ devise and maintain a clearly focused strategy

1. Talent ‐ hold on to talented staff and find more

2. Execution ‐ develop and maintain flawless operational execution

3. Culture ‐ develop and maintain  a 

2. Innovation ‐make industry transforming innovations

3. Leadership ‐ find leaders who are performance‐orientated culture

4. Structure ‐ build and maintain a fast, flexible, flat organisation

committed to the business and its people

4. Mergers & partnerships ‐ seek growth through mergers and partnershipsf , f g g g p p

Found not to be the recipe for corporate success

1 Superb information 2 Corporate change 3 High quality external non

Joyce W et al. 2003.What really works: the 4+2 formula for sustained business success. New York: HarperCollins

1. Superb information technology

2.Corporate change programmes

3.High quality external non‐executive directors

Joyce W et al. 2003. What really works: the 4+2 formula for sustained business success. New York: HarperCollins

Develop relationships and trust

• ‘Soft skills’ are the key to more efficient organisations, systems, and the retention of leadership talent

• Trust is core element of any relationship:

It’s dynamic and contextual

Crucial for managing difficult discussions and disagreements

Gained through actions not words 

• Three dimensions important to optimise trust:

Personal trust 

Organisational trust 

Strategic trust  g

• Developing trust requires consistency of message and action, clear communication and willingness to tackle awkward issues

Manage potentially destructive behaviour

1. Criticism ‐ disapproval expressed by pointing out faults or shortcomingsfaults or shortcomings

2.  Defensiveness ‐ excessive sensitivity to criticism 

3.  Stonewalling ‐ stalling or delaying especially by refusing to answer questions or cooperate 

4. Contempt ‐ lack of respect accompanied by a feeling of intense dislike 

Making Relationships Work: A Conversation with Psychologist John M Gottman. Harvard Business Review. December 2007

Llanelli 2007

The decision...to pursue the centralisation of emergency surgery bl b h l i dwas reasonable but the consultation process was not presented 

against a backdrop of a compelling vision and strategy for acute healthcare in Carmarthenshireacute healthcare in Carmarthenshire. 

...the consultation lacked flexibility and sufficient empathy with and sensitivity to the public and other stakeholders. A history ofand sensitivity to the public and other stakeholders. A history of poor local relationships resulted in too much confrontation and too little collaboration and leadership. 

14 recommendations for the local and the national Welsh NHS. New public consultation process introduced as a result

Conclusions

1. NHS context is more challenging with an equal emphasis on delivering quality and safety,1. NHS context is more challenging with an equal emphasis on delivering quality and safety, productivity,  financial management and public accountability ‐ viz. NHS core business

2. At the heart of most failures is the board’s leadership and corporate competence, and its disconnectedness from clinical and professional staffdisconnectedness from clinical and professional staff

3. Leaders and their boards need access to the right sort of information and the ability to understand, interpret and act on that information appropriately

4. Importance of organisational reflection, learning and vigilance

5. Chief executive competence, ego and behaviours feature in many inquiries

6. Need for effective interpersonal and inter‐organisational relationships are given insufficient weight in most analyses

7. Predicting possible failure is as much about individual and board/team behaviours it is7. Predicting possible failure is as much about individual and board/team behaviours it is about quantitative analysis

8. Little difference from analysis of failures across the public and private sectors

9. Regulatory leaders and others overseeing services seem unable to neither look below the surface of organisations and health systems nor to apply the learning from failures