Price vs. Value: Reflections on NHS Confed 2015
I was lucky enough to attend the NHS Confederation conference in Liverpool in early June.
The NHS holds a special place in my heart. I placed my first contractor at Guy’s & St Thomas’ in 1993 and have retained a strong interest in all things NHS ever since, as a business partner, a service user and a tax payer.
However as I would admit to you, and to everyone I met there, I am by no means an expert – especially when placed alongside my colleagues from the Interim Partners Healthcare team. Hence you can imagine my trepidation when, at a dinner we hosted for some high profile NHS leaders, I was asked “What’s the most difficult thing about dealing with the NHS as a commercial business?” One has a number of options in this scenario, but I generally think honesty is the best policy.
“The NHS frequently confuses the difference between price and value.”
As I made this statement I was suddenly aware that the whole table had fallen silent. Anxious to qualify my bold statement I brought up something topical; Jeremy Hunt’s recent comments that “expensive staffing agencies… have been ripping off our hospitals with their extortionate rates”. My audience was surprised that, in the main, I supported the Health Secretary’s view, but I then went on to say that this is because the culture of the NHS has become price led, not value led.
Many hospital departments, especially A&E, rely on agency and locum staff to deliver vital services. Given the shortage of available candidates in the UK, and worldwide in truth, market economics have led to escalating costs, as the doctors, nurses and surgeons can name their price. There is nothing, in short term, that can be done to mitigate this. Only a massive increase in training places will deal with the issue structurally, but that is a long term strategy. Hence, the price of any locum, even when supplied by a “rip-off staffing agency”, is largely determined by the cost of the locum.
Many of the agencies concerned will add on a very hefty margin on top which might be fine if they can demonstrate one, or ideally both, of two things – the value of the service they provide and the value of the care their locums provide.
The value of the service provided in the staffing sector has been a point of discussion since Adam was a lad. Ultimately a 40-50% margin being applied on a candidate, who has been tracked down on LinkedIn, hasn’t been met and has had their CV reformatted and sent to an unsuspecting client probably is a “rip-off”. Given that I have typically worked in professional recruitment environments offering a whole lot more service for a whole lot less margin, this doesn’t seem like value to me.
This isn’t really the crux of the issue though.
The big issue, which is endemic in the recruitment industry in all its manifold complexity, is all the emphasis on the “finder’s fee” - whether a one-off deal or a margin charged on top of the candidate’s pay – rather than the outcome which is delivered. OK, so all recruiters take references, but that only tells a future employer that they have done a good job, not that they will do a good job in their new assignment.
By any definition, the price of the interim managers we provide to the NHS is high. They are experienced senior people, hard to find and engage. However, for me, it’s all about the value they offer.
Real, quantifiable and, in many cases, monetary value.
Here at Interim Partners we have developed a web based tool called Return on Interim (ROI) to give total clarity to both the client and interim manager as to the performance outcomes. The process involves agreeing objectives at the point of engagement including, where possible, monetary value and then monitoring them online throughout the assignment. At the end of the interim’s engagement the client can see clear evidence of ROI and the interim walks away with something more tangible than a healthy bank balance and a standard reference. It is proving very popular with our NHS customers. With all our customers, in fact.
Ultimately the best interim managers in the NHS should be able to demonstrate value which hugely outstrips their price. It is incumbent on interim providers to help them to do this.
Steve Rutherford is the Managing Partner at Interim Partners.