Organisational Turnaround:
lessons from a study of ‘failing’
health care providers in England
Naomi Fulop
London School of Hygiene &
Tropical Medicine
1
Acknowledgements
Project team:
Fiona Scheibl
Nigel Edwards
Gerasimos Protopsaltis
Funded by: NHS Confederation
2
Policy context
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New Public Management – increasing focus on
performance in public sector
Performance assessment system introduced in
NHS in 2001
Health care organizations graded using ‘star rating’
system: zero, one, two, three stars (highly
contested)
Policy responses:

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Franchising policy (‘heroic leadership’ model)
Support from Modernisation Agency
3 * get ‘earned autonomy’ (Foundation hospitals)
3
What do we know from the
literature?
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Approx. 25-30 studies on turnaround in private
sector
Explain failure in two main ways:
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a) changes in external environment
b) inertia within the organisation
Dominant model of successful turnaround
Retrenchment (withdraw from unprofitable sectors)

Strategic change (new markets or new products in existing
markets)

Leadership change (CEO and/or senior management
team)
Source: Skelcher et al (2003)

4
Study objectives
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Draw lessons from the experience of changing the
management of ‘failing’ organisations
Specifically exploring:
 Markers for ‘failure’
 Responses to turnaround
 Strategies for turnaround
 Process/Impact of these strategies
5
Methods
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Phase 1 (2002): case studies of 5 hospitals
 Perceived to be ‘failing’
 New management brought in
 At different stages of turnaround

Phase 2 (2003): followed up 4/5 from phase 1 plus
four added:
 Zero star (or ‘at risk’)
 Management replaced
 Support from Modernisation Agency
6
Data collection and analysis
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Semi-structured interviews with 106 internal and
external stakeholders across 9 hospitals
Analysis of national and local media coverage
Changes in star ratings over time
Analysis within and between case studies
7
Findings (1): markers for failure
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Poor performance on key targets e.g. waiting lists
Financial deficits
Major developments – ‘eyes off the ball’ e.g. merger,
redevelopment (PFI)
Stagnating management team
Lack of clear management structures/processes
Lack of engagement of clinicians in management of
services
Poor public image e.g. relations with media and
external stakeholders
Low staff morale
8
Markers and causes of failure
Markers
- “eyes off the ball”
- poor relationships with external
stakeholders
- financial deficits
INTERNAL
- poor financial
control
- lack of HRM
strategies
Secondary
causes
EXTERNAL
- increase in
competition
- changes in
Govt policy
- lack of
leadership
Primary
Causes
Organisational
- introspection
- arrogance
- trauma
9
Findings (2): turnaround
interventions
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Internal reorganisation
 Formally and informally involving clinicians
 Introduction of systems/processes/protocols
Improving operational performance
Focus on human resources
Financial analysis and control
Attempts to change ‘organisational culture’
External relations
10
Findings (3): constraints on
turnaround
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Cultural diversity within organisations (competing
sub-cultures)
Complexity (multi-layered nature of hospitals and
external environment)
Lack of leadership
External influences
11
Findings (4): impact of
turnaround interventions
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In short term, some showed improvements in
operational performance
Takes longer to address organisational culture
issues
Two groups of hospitals:
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Group 1 (5): transformed from ‘failing’ to ‘self-regulating’
Group 2 (4): stagnating or ‘permanently failing’
12
Impact Of Turnaround Strategies?
New Management
A
B
C
D
E
Dec 99 Feb 01 Dec 99 April 99 April 01
Star Rating 01
0
0
***
**
0
Star Rating 02
*
**
**
*
*
Star Rating 03
*
*
**
**
0
13
Impact Of Turnaround Strategies?
New Management
F
Mar 01
G
01
H
Jan 02
I
Jun 02
Star Rating 01
**
2
**
0
Star Rating 02
*
0
0
0
Star Rating 03
*
2
**
0
14
Findings (5): resources
required for turnaround
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Temporal (time, stability)
Leadership skills
 Ability to develop change agenda
 Ability to grasp detail required to deliver core
targets
External support
Financial (access to funding to achieve ‘quick wins’)
15
Lessons for
management/policy
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Skills for identifying ‘at risk’ organisations
Resources required for turnaround (esp. time and
leadership)
Diagnose the problem
Establish clear leadership
Secure engagement of clinical staff
Work with external stakeholders
Right people in right posts
Use internal reward systems
Use external support systems
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