Tag Archives: PFI

End of Year Blog: Reflections on my Time as a Non-Executive Director

I must apologise for the hiatus in blogging. This coincided with the Collaboration for Leadership in Applied Health Research and Care (CLAHRC) grant application – a £10 million grant from the National Institute for Health Research (NIHR), with over £20 million of matched funds. Following this, I successfully applied for a job to lead a Centre for International Research at the University of Warwick, and so I have been a bit busy.

I have had the privilege of serving as a non-executive director on the Sandwell and West Birmingham Hospitals NHS Trust Board for the last year and a half. Regrettably, I now have to resign this important post to pursue the above opportunities. This is a good time to reflect on my time on the Board.

Seventeen years had passed since I last served on a hospital board – the United Leeds Teaching Hospitals Group. I was an executive director in Leeds and this is, of course, a different role to that of non-executive director. The biggest change, however, was in the balance of topics discussed in the board.

Firstly, discussion of finance makes up a relatively small proportion of the business of a current board whereas it was a principle topic for discussion in the earlier epoch. Secondly, quality metrics now take up a large portion of board time and this was certainly not the case two decades ago. Ironically, the number of external groups who scrutinise the hospital has also increased dramatically. The Care Quality Commission, Monitor (or the Trust Development Authority), Litigation Authority, Health and Wellbeing Boards, various types of commissioning organisation, and many other bodies scrutinise hospital ‘performance’. The hospital is now a veritable goldfish bowl, and so the board is but one of many organisations providing ‘assurance’.

I shall return to my own views on the implications of all this external scrutiny in just a moment. In the meantime, I can report that during my brief 18 months on the Board, two very important developments took place, which many board members may not encounter during a complete period of tenure.

Firstly, our Chief Executive, John Adler, moved to the big and turbulent Leicester Teaching Hospital Group and so we had to find a replacement. Appointment of a chief executive is the biggest single decision that a board can make. It was fascinating to participate in this crucially important process, and very gratifying to watch the new Chief Executive, Toby Lewis, take control of the tiller. I think that to be a leader one has to want to lead and it has been a joy to watch Toby take charge. He is also an unusually, or should I say particularly, ‘cerebral’ chief executive. Intellectual curiosity is a safeguard against complacency and error. Hospital consultants are a clever lot (mean IQ above 125?) and they respect a leader who is more than a match for them. It was a delight to observe the constructive, but sometimes piquant, interaction between Toby and one of my peer non-executive directors, herself something of a force of nature.

The other big event was recognition, by the government, that a long-standing proposed new hospital scheme would be a suitable candidate for consideration under HM Treasury’s new model, Public Finance Initiative (PFI). With the exception of Chair Richard Samuda, who had previously been chief executive of a property company, my non-executive colleagues and I had to undergo a steep learning curve. The axioms behind the PFI are fiendishly complicated, yet it is essential for all non-executive directors to have a clear understanding of the decisions involved. Modelling future financial and clinical consequences of a new hospital obviously involves a large number of assumptions, including the amount of risk that can be transferred, whether the cost of transferring that risk is reasonable (given the alternatives), what would happen to ‘market share’, how much patient care will be transferred to the community (and with what financial and clinical consequences), and many other factors to which the model is sensitive. The important principle is that it is not just the future under the new building that must be modelled, but also the counterfactual under a scenario where the building does not go ahead – in other words there is no status quo. I came away with the idea that, quite apart from its impact on the nation’s financial position, PFI is not such a disastrous vehicle for hospital finance as many think, especially if, as expected, some Public Dividend Capital is added to the mix. Indeed, it was also prudent to model the consequences of methods to raise capital other than PFI. Architectural issues are also important. For example, I understand that time and motion studies show that single wards reduce staff efficiency by about 6%, compared to multiple occupancy wards. It is also extremely important that the design can accommodate future expansion. As our accomplished Director of Strategy and Organisational Development, Mike Sharon, put it, “the only thing we can be sure of is that we cannot be sure of the optimum size for a hospital 20 years hence.”

I will return now to the question of the role of the board in a time of increasing external scrutiny. To my mind, the corollary is obvious – the board needs to think less of itself as critical and more as friend. That is to say, it can (notwithstanding its statutory responsibility) place itself more on the side of the poacher than the gamekeeper, with respect to assurance. To my mind, executive directors need another scrutiny body like the proverbial ‘hole in the head’.

So what is the role of non-executive directors, given that their scrutiny role has been, at least partially, subsumed by others? The obvious answer is to assist the executive directors in their tasks. This begs the question of whether the executives need such assistance! Here, I think the answer is somewhat nuanced. Firstly, there’s obvious need for a group who can hire and fire the chief executive. That indispensable role cannot be left to one individual. The second role of non-executives is in developing strategy for the organisation. Here, their primary role is to supply external ‘ballast’ in the form of clever and committed people who can contribute by increasing total brain power and by bringing in the perspective of someone who does not have their nose to the coal face. Their last role is to bring specialist expertise. However, I think that this is the least important role because expertise can always be brought in. Nevertheless, non-executive directors with legal and accountancy backgrounds definitely add something to discussions and may spot ‘unknown unknowns’. In my own small way, I tried to bring an academic perspective to bear and to form something of a bridge between the Hospital and the University. As a researcher, I pushed the Board to go beyond simply scrutinising data with which they were presented and scrutinise the method by which the data are collected. This is important to detect and mitigate bias. Statistical control charts should be used to allow for the play of chance. I hope these ideas have been taken to heart. In my opinion, however, too much is made of lessons that can be learnt from other industries – experience of commanding a ship at sea or running a biscuit factory is not much use in a hospital. Returning ambassadors and captains of industry are valuable because they are intelligent people (mainly) who naturally take a strategic perspective, rather than because they bring specific knowledge from these domains. Part and parcel of taking a greater role in strategy is the importance of finance. I do not go along with the fashion of criticising boards that emphasise money. Firstly, money is the language of choice and I would like to see more, not less, emphasis on value for money. Secondly, the surest way to undermine the care of future patients is to overspend in the current year. Maintaining financial probity is the bedrock of patient safety, as our excellent Director of Finance and Performance Management, Robert White, well understood.

Given my sense that boards of NHS hospitals should take a more prominent role in strategy rather than in simply conducting an assurance function, I was interested to see that this is precisely what is advocated in a new business book “Boards that Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way” by Charan, Carey and Useem. These authors use a huge amount of experience and empirical observation to reach the conclusion that non-executives should be “strategic partners”. They also make the point that non-executives can subtract as well as add value to a company and a lot depends on the personality of the individuals concerned. Large egos, hobby horses, low intelligence and unwillingness to engage with detail can get in the way. For me, the hardest thing was finding enough time to fulfil my duties on the Board while holding down a highly competitive day job. But I leave with thanks to my Board colleagues, and a special “thank you” to our sure-footed Chair, Richard Samuda, and diligent Trust Secretary, Simon Grainger-Payne, who helped me settle in. I will miss working with such a committed and talented group of people, and wish them and the hospital all the very best.

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