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Why not give staff a share in the practice?

GPs should issue shares to practice staff and they should pay a dividend each year on profits, says health academic Professor Chris Ham

As one of the biggest employers in the world, the NHS depends critically on its staff to deliver high standards of care. Despite frequent structural reorganisations, the relationship between staff and the NHS remains fundamentally the same today as at its inception in 1948.

With the important exception of GPs and other independent contractors, almost all staff are salaried employees working under the terms of contracts negotiated nationally. The relationship between staff and the NHS reflects the nationalised industry model that prevailed after the second world war.

This model has served the NHS tolerably well throughout its history, but appears increasingly anachronistic in the context of current health reforms. With ministers aspiring to develop a 'self-improving' NHS in which innovations in care are driven by patient choices and provider competition, the time is right for a radical rethink.

As part of this rethink, serious consideration should be given to employee-owned companies and the lessons they hold for the NHS. These companies perform exceptionally well in meeting the needs of customers and achieving good financial results. They also deliver much more innovation than centralised, bureaucratic organisations that are slower to change and less effective in communicating new ideas up the management chain.

Research has shown successful companies of this kind have three characteristics.

Superior outcomes

First, they give staff a direct financial stake in their success. Second, they invest in participative mechanisms that encourage dialogue between staff and managers. And third, they have a culture of ownership that is associated with employees having a collective voice in the organisation1.

It is the combination of these characteristics that explains the superior outcomes of employee-owned companies rather than

financial incentives in isolation. The flaws inherent in the nationalised industry model and the importance of devolving power to NHS organisations at a local level are underscored by this research.

The implication is that the Government needs to go further than simply establishing foundation trusts and encouraging the emergence of social enterprises in the provision of care outside hospital.

General practice is well placed to do so

because most GPs are already the owners of their practices. By offering a share in ownership to other staff, strengthening participative mechanisms and giving staff a collective voice, practices could build on their

already substantial achievements. And by giving staff a much stronger stake in their success, financial and otherwise, practices would be better positioned to respond to the demands of patients as choice and competition in primary care gather pace.

There are different ways of doing this and the strengths and weaknesses of each need to be explored. One approach would simply be to develop incentive arrangements to engage and motivate staff in order to deliver higher levels of performance. These incentives might include bonuses, profit sharing and profit-related pay. More radically, staff could be become part-owners of practices – as in the John Lewis Partnership, where all 60,000 staff are partners in the business.

Whichever route is taken, the important point to emphasise is that partnership with staff is a means to an end. Fundamentally, it aligns the interests of patients, staff and the organisations they work for.

Peer pressure

The virtue of the partnership model is the use of both financial and non-financial incentives in increasing staff motivation. By linking the rewards of staff to organisational performance, and by valuing and supporting staff to continuously improve, the model has much to offer the NHS.

For example, research has shown that staff in employee-owned companies are more likely to confront a non-performing colleague. This finding is especially important in healthcare in view of the importance of peer pressure as a driver of performance, and the difficulty facing non-clinicians in challenging underperformance.

By strengthening the involvement of staff in raising standards, partnership approaches are a practical example of how the NHS can become self-improving. In particular, they offer the potential of developing a much greater commitment to service improvement among staff and the organisations they work for. If this potential can be realised, then clinicians can be released from the requirement to comply with a multitude of targets imposed by politicians.

These arguments have equal relevance in hospitals and other healthcare settings. Foundation trusts, for example, will only succeed in achieving their objectives if they engage and value staff and recognise and reward their performance.

Many foundation trusts have acknowledged this by giving priority to the engagement of doctors in leadership roles and the use of incentives in clinical directorates. Like successful general practices, foundation trusts need to go much further in giving all staff a real sense of ownership if they are to achieve and sustain high levels of performance.

As the NHS approaches its 60th birthday, a radical rethink of its relationship with staff is long overdue. The alternative to the nationalised industry model is not simply to give investor-owned companies a bigger role in the NHS.

Alternatives such as partnerships are a way of harnessing the commitment of staff and aligning the incentives of the organisations they work for with those of patients.

Chris Ham is professor of health policy and management at the University of Birmingham

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