Imperial 320 presentation by Carol Propper - Title of the talk: Management in the NHS

Management in the Public Sector:

Evidence from English hospitals

Carol Propper

Imperial College Business School

© Imperial College Business School

Imperial means Intelligent BusinessImperial College Business School 2

Motivation

• Management quality shown to matter for firm productivity in wide range of countries and types of firms (e.g. Bloom et al 2016)

• In search for productivity in public services a common reform model is to grant public sector organisations greater managerial autonomy

• Can managers make a difference in these settings where the services are often subject to political scrutiny and global caps on expenditure?

• Examine managers in English public hospitals



Motivation

• Ideal setting to examine whether management affects behaviour of organisations that are almost entirely funded from the public purse

• Hospitals are large organisations: > 300 senior docs and 1100 nurses; 75K admissions per year; > 700 beds

• Long-standing programme of greater autonomy to public hospitals + revenue from contracts won in competition with other hospitals

• Hospitals required to collect and publish data on multiple aspects of performance and data on remuneration of top management

• Accompanied by increase in number of managers and their pay relative to clinical staff



NHS CEO and other healthcare staff pay



• Exploit this setting to focus on NHS CEOs to examine

• whether there are persistent differences in pay across CE0s

• whether these related to differences in observed performance and, if so, which aspects of performance (targets, clinical, financial, inputs)

• Use statistical approach using detailed data on over 2000 managers over 14 years to distinguish between hospital and CEO effects



What we find

• There are persistent differences across NHS CEOs in their pay

• Individuals who are paid above average in one hospital are paid above average in the next post

• Individuals who are paid below average in one hospital are paid above below in the next post

• The differences in this persistent remuneration gap can be large



Distribution of CEO effects in pay

Effect of moving from the 25th to 75th decile around 12% mean pay

25% of CEO pay effects significantly different to 0



Results: Pay

• Clear evidence of CEO differences in pay

• CEO effects account for significant proportion of variation in pay

• CEOs who move have higher average pay

• Women and clinically trained managers are paid less

• Are there similar CEO effects in hospital performance?

• Are these related to pay, i.e. are CEOs paid for observed hospital performance?



CE effects in hospital production

• Examine multiple aspects of hospital production

• Clinical quality (5)

• Financial performance (1)

• Inputs - labour and capital, levels and growth (13)

• Staff satisfaction

• Activity/throughputs (6)

• Government Targets

• Change over time but focused on activity and productivity, more latterly clinical quality (e.g. waiting times, financial performance, reduction LOS, MRSA rates)



Results

• Compared to CEO pay effects, harder to detect significant CEO hospital production effects

• Improving performance on one dimension of production is not strongly linked to improvements on other dimensions (lack of synergy)

• Pay is not clearly linked to production

• This is not because good managers are allocated to poorly performing hospitals



In summary we find

• Large persistent pay differences between NHS CEOs

• But not linked to large differences in observed performance

• More probable that lack of association of reward and performance and lack of a clear style indicates difficulties of being an NHS hospital CEO



Summary

“Most of the senior [managerial] people seem genuine, intelligent people, who initially create the impression that they will solve obvious, long-running problems. A year or so later, it always becomes apparent that nothing will change. ... I suspect that the central NHS organisation gives them very little room for maneuver or so much work to serve the machinery of bureaucracy, that they never actually make the decisions that I would expect them to be capable of.”

(Clinical director) (Powell A and Davies H 2016)


Healthcare

Imperial 320 presentation by Carol Propper - Title of the talk: Management in the NHS