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NHS CURRENT CAPABILITY TO MEASURE AND IMPROVE BUSINESS PROCESS PERFORMANCE

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TABLE OF CONTENTS

1. 2. 3. 4. 4.1 4.2 4.3 4.4 4.5 4.6 4.7 5. 6.

INTRODUCTION -----------------------------------------------------------------------------------FINANCIAL PERFORMANCE OF UK PUBLIC HEALTH SECTOR --------------------------SUITABILITY AND MEASUREMENT OF NHS MISSION -----------------------------------NHS PERFORMANCE MANAGEMENT PROCESS -------------------------------------------ISSUES IN MEASURING PERFORMANCE -----------------------------------------------------REVIEW OF IMPROVEMENT ACTIVITIES & TECHNIQUES --------------------------------BALANCED SCORECARD AS POTENTIAL MEASUREMENT TECHNIQUE ---------------THE PUBLIC SECTOR SCORECARD -------------------------------------------------------------DEMAND AND CAPACITY MANAGEMENT ---------------------------------------------------BUSINESS PROCESS MAPPING AS IMPROVEMENT TECHNIQUE -----------------------LEAN SIX SIGMA AS POTENTIAL IMPROVEMENT TECHNIQUE -------------------------USING CUSTOMER RELATIONSHIP MANAGEMENT IN PUBLIC HEALTH ------------RECOMMENDATIONS AND CONCLUSION --------------------------------------------------REFERENCES -----------------------------------------------------------------------------------------

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LIST OF TABLES Table1: MANAGEMENT ISSUES IN MEASURING PERFORMANCE --------------------------------Table2: COMPARISON BETWEEN PRIVATE AND PUBLIC BALANCED SCORECARDS ----------LIST OF FIGURES Figure 1: THE PUBLIC SECTOR SCORECARD ------------------------------------------------------------8 4 7

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1. INTRODUCTION

Business Process Management (BPM) has the history of not more than twenty years (Jeston and Nelis, 2008). Many organizations adopt BPM to improve the control over management activities by applying traditional accounting techniques. Today, there are many conceptual frameworks are available to measure the performance of the company where Balanced Scorecard is known as one of the best techniques in the World (Kellen, 2003). This particular report is based on to assess the NHSs current capability to measure and improve the performance of the business process. For this purpose, after reviewing the financial performance of the UK health sector, the discussion will be made on the issues in NHS performance management process and how to improve the entire process using Balanced Scorecard approach. A brief discussion on how to improve Customer Relationship Management (CRM) in public health sector using information technology will also be the part of the discussion.
2. FINANCIAL PERFORMANCE OF UK PUBLIC HEALTH SECTOR

The health sector of the United Kingdom is publically funded and managed differently in England, Scotland, Wales, and Ireland. In 2000, the World Health Organization (WHO) ranked UK public health sector at 15th best in the Europe (World Health Organization, 2000). The major part of the UK public health systems is based on National Health Service (NHS) which is publically funded and the main sources of the revenue are income tax, National Insurance tax, Value Added Tax, Corporation Tax, and other taxes. The money is spent on hospitals and community health services where healthy part of the total expenditure is accounted for 40% for the older people (Hardy, 2006). The GDP of the UK health sector is contributed around 9.8% during 2008-09 (OECD Health Data, 2011). The overall performance of UK health sector is satisfactory due to the gross surplus of NHS trusts that is accounted for 1,421 million in 2007 (Department of Health, 2007). The Chief Executive of NHS revealed, in reporting 1345 million surplus in 2011 that the financial health of public health sector including NHS is declining from last couple of years (Flory, 2011).

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3. SUITABILITY AND MEASUREMENT OF NHS MISSION

NHS was formed on small number of principles in the United Kingdom and its mission is based on improving health and care services nationally. The overall aim of NHS foundation trusts is: to provide a high quality, accessible and responsive services by putting the patients at the heart of everything the trusts do. The philosophy is to treat people how the trusts would want to be treated and ensure that no-one tries harder for patients NHS Foundation Trust (2012) There is plenty of literature available to measure the suitability and the performance of the company in achieving its core mission and strategic objectives. Neely (1998) define performance measurement as the process of quantifying the efficiency and effectiveness of past actions through acquisition, collation, sorting, analysis, interpretation and dissemination of appropriate data (cited in Moullin, 2003, p.3). There is much criticisms have been made on performance measurement in the past. According to Kaplan and Norton (1992) and their followers (e.g. Euske et al., 1993; Jagdev et al., 1997; Ghalayini et al., 1997; Neely, 1998), measuring performance quantitatively affects the relationship between different units and their objectives. Other opinions came from Crawford and Cox (1995); Hill (1995); and Kaplan and Cooper (1998) that measuring performance quantitatively may raise number of issues such as short-termism. On the basis of these criticisms, many frameworks have been developed over the years where Balanced Scorecard, Activity Based Costing, Economic Value Added, Quality Management, Customer Value Analysis, and Supply Chain Management are the prominent measures (Kellen, 2003).
4. NHS PERFORMANCE MANAGEMENT PROCESS

According to NHS Trust (2010), their performance management process consists of three steps: performance measurement, performance reporting, and performance improvement. The overall performance of the NHS trust is measured against trust strategic objectives, operational type indicators, and key performance indicators which are based on quality,
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national targets, workforce, and finance (NHS Trust, 2010). There are many traditional tools and models have been utilized to measure the performance and productivity of NHS in the past where Economic Value Added, Total Quality Management, Customer Value Analysis, and Supply Chain Management are eminent. After measuring the performance, the performance reports are provided to board of directors, executive management teams, and operational directorates on monthly basis.
4.1 ISSUES IN MEASURING PERFORMANCE

In reality, few organizations especially in public health sector employ performance management in terms of measuring performance. Bandara et al. (2008) mentioned many management issues in measuring the performance of the public healthcare organizations. They classified the issues in 3 levels of management: strategic level, tactical level, and operation level as presented in table 1.
Table 1: Management issues in measuring performance

Source: Bandara et al (2008)

Harrison et al. (1997) highlighted four potential issues for National Health Service in the UK: change in population structure, technological innovation, changes in the level of morbidity, and increase in expectations of public. They mentioned that NHS should cope with these challenges in an efficient way by effectively applying different management techniques because these issues are emerging in the UK economy rapidly. Greener (2003) indicated that the performance indicators and performance measurement practices in NHS are not up to the standard due to adoption of poor management implemented by Labour Government. Hardy (2006) state that UK public health sector is facing financial pressures due to: an increase in demand and expectations of the people, cost pressures, perceiving poor levels of productivity, and pay modernization. He further mentioned that the failure
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of delivering financial reporting systems also causes a decline in the performance of the sector. In 2006, the UK Audit Commission reported that the core reasons of failure of financial performance in NHS are ineffective management and inadequate board leadership (BBC News, 2006). The acting chairman of the commission said It is crucial that boards and management get the basic right because financial failure is often a reflection of wider organisational failure (UK Audit Commission, 2006). The report further identified that the lack of governance from boards results in deficit problems within the local health systems. Due to these deficits, NHS cut thousands of jobs and also experienced several difficulties such as service closures and operational delays (BBC News, 2006). It was also argued that utilizing ineffective techniques due to lack of management attention in carrying out day-to-day activities caused to lead financial distress (UK Audit Commission, 2006). The point of view of Gill Morgan (the CEO of NHS confederation) was different. According to her, financial problems arrived due to other factors such as targets, reforms, and structural problems (BBC News, 2006).
4.2 REVIEW OF IMPROVEMENT ACTIVITIES AND TECHNIQUES

After the considerable criticism on financial distress and failure of management in measuring business performance, a special health authority was formed in England namely NHS Institute for Innovation and Improvement in 2008/09. The aim of the authority is to support NHS trusts in formulating the new methods of working by utilizing the benefits of latest technology, tools, and leadership (NHS Institute for Innovation and Improvement, 2012). The NHS innovation centres are located nationally to support NHS trusts in developing innovation in their routine operations. Department of Health is supporting and supervising all the activities of the institute in implementing Business Process Management (BPM). Though NHS has become more sophisticated and currently trying to implement BPM to measure the performance of the business as a common practice but in order to create comprehensive performance management system, NHS also requires to identify and improve best areas of practice by focusing on continuous improvement by ensuring that the entire activities are linked to overall strategy of the organization. For that reason, NHS
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needs to adopt a structured framework to emphasize on the annual performance of the organization.
4.3 BALANCED SCORECARD AS POTENTIAL MEASUREMENT TECHNIQUE

Among all the modern techniques, the Balanced Scorecard approach can play a significant role in measuring the performance of NHS businesses in order to address the long-term goals and short-term objectives. The Balanced scorecard helps the organization to measure and monitor the overall performance by assigning Key Performance Indicators (KPIs) to the individual units (Kaplan and Norton, 1992). The Key Performance Indicators covers a range of areas in facilitating the organization to measure its progress in achieving strategic objectives. The Balance Scorecard approach was developed to measure the financial health of the organization by applying operational measures within the organization to control, monitor, and improve overall activities of the organization (Kaplan and Norton, 1992). In order to do so, the balanced scorecard framework uses four key aspects to measure the performance: financial aspect, customer aspect, learning and growth, and internal business processes (Drury, 2007). Unlike other traditional techniques of performance measurement, the balanced scorecard approach directly addresses the mission and strategic objectives of the organization. But the key issue related to the implementation of balanced scorecard is its financial aspect because most of the companies only focus on non-financial factors with the viewpoint that these factors will help to affect the bottomline financial performance. With reference to public and voluntary sector, the Balanced Scorecard approach has some limitations because it was developed with primary focus on private sector (Gambles, 1999). The public and voluntary organizations have large surplus at the end of the year, but they also have long list of poor outcomes in terms of performance because of the lack of proper management activities. Many studies have been conducting to review and implement the balanced scorecard in non-profit organizations with special emphasize on health sector. The results of these studies conclude that the application of balanced scorecard in health sector is also entitled to produce better results in order to improve the

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financial health of the organizations (Irwin, 2002; Lawrie and Cobbold, 2003; Woodward et al., 2004; Gurd and Gao, 2008).
4.4 THE PUBLIC SECTOR SCORECARD

The public sector scorecard was developed in 2002 with the integrated quality management approach for measuring performance (Moullin, 2002). As compare to the private sector Balanced Scorecard, the features of Public Sector Scorecard are different in terms of its focus, financial goals, efficiency, stakeholders, and success factors. Table 2 is highlighting the summary of these features.
Table 2: Summary of comparison between private and public Balanced Scorecards

Source: Mathys (2006; cited in Isoraite, 2008)

In applying balanced scorecard approach in public and health sectors, the first step is to identify the concerns of stakeholders and link them with the overall strategy of the firm. Similarly, the public and health organizations may also need the capability to support employees, management, customers, and processes for productive outcomes. Financial measurement of performance is important in public and health sector to satisfy government, shareholders, and investors (Isoraite, 2008) and off course, the leadership style is the fundamental requirement to cope with these activities. The public sector scorecard was developed to address all above stated perspectives as shown in figure 1.

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Figure 1: The Public Sector Scorecard

Source: Moullin and Soady (2008)

As shown in figure 1 that this version of Balanced Scorecard is focusing on seven perspectives and the possible outcomes of public sector scorecard are the key performance indicators which are covering all the aspects required by the NHS organization. The changes can also be made easily including insertion or removal of factors as required by the organization.
4.5 DEMAND AND CAPACITY MANAGEMENT

Demand and capacity management is important in terms of reducing waiting times and backlogs of customers in each phase of the journey (Blokdijk and Menken, 2008). In reality, NHS has the capacity to fulfil the demands of the patients but mismatch arises due to the variations in demands because sometimes demand exceeds the capacity (NHS Institute of Innovation and Improvement). In order to manage the variations, NHS is required to build up waiting lists for the accurate analysis and to estimate the clear understanding of demand. Hunt (1996) state that the process mapping technique can be helpful in managing demands and capacity in order to bring improvements in NHS processes.

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4.6 BUSINESS PROCESS MAPPING AS IMPROVEMENT TECHNIQUE

Another technique that NHS can employ for reengineering process is Business Process Mapping. The process map shows the relevant procedures and administrative tasks to show how things work (Hunt, 1996). Jacka and Keller (2009) opine that it is not necessary to map every process within the organization but there is a need to focus on the areas where improvement is required. In the healthcare service industry, the process mapping can be used in different aspects to improve the current processes. For example, organizing resources and timescales and engagement and interest of the staff. More importantly, mapping patient journeys can be used to identify bottleneck and constraints in developing and understanding best clinical practices and this will results in reducing the factor of delay (NHS Institute for Innovation and Improvement, 2012). Hunt (1996) mentioned that implementing conventional process mapping in any public sector organizations including healthcare industry may help the staff to know about what happens and when it happens.
4.7 LEAN SIX SIGMA AS POTENTIAL IMPROVEMENT TECHNIQUE

Lean concept is used to synchronized the current process by eliminate wastes from the operations in order to meet the demands of the customers (Nash et al., 2006). The six sigma philosophy is based on measuring customer performance metrics on a common scale. In addition, the Six Sigma approach uses statistical tools and DMAIC (Define, Measure, Analyse, Improve, and Control) model to find out the actual causes of the problems to understand and reduce variations in the processes (Aruleswaran, 2010). The integration of both approaches provides a structured improvement process to solve a particular problem. It can be applied on daily or weekly basis that depends on the depth and breadth of the issue. The lean six sigma approach can be used as an improvement technique in NHS trusts that can help the organization to improve productivity by reducing waste (i.e. unnecessary tasks and practices) from the processes and also to lower the operational costs.

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5. USING CUSTOMER RELATIONSHIP MANAGEMENT IN PUBLIC HEALTH

Customer Relationship Management (CRM) is fundamentally important for making strategy of retaining long-term relationship with the customers. According to Anderson and Kerr (2002), CRM strategy is essential for customers, employees, and organization. Kostkova (2009) state that it is a good practice to implement CRM in hospitals, non-profit organizations, and primary health care centres in order to develop relationships with the customers. He further opines that the CRM system can be implemented in the hospitals by establishing strong physician and patient relationships in order to retain valuable patients. In the public health sector, CRM process is based on the management of customer life cycle that consists of three stages: integration phase, analysis phase, and action phase (Parsons, 1997; Reddy and Acharyulu, 2002; Meersons et al., 2009). The CRM process starts with the integration of front line system with centralised customers data. This phase is important in terms of retaining business value but it never strengthens the relationships with customers. The analysis phase begins with the analysis of customers data in order to identify the demand and satisfaction level of the customers for strategic decision making. The action phase provides the insights of strengthening customer relationships with the improvement in quality through enhanced and improved management processes. Today, Information Technology (IT) is playing an important role to improve the abilities of any system in every field of life. Over the years, the expectations of the patients have been increased but due to lack of budget public healthcare organizations are unable to provide efficient solutions to their customers. The implementation of CRM with amalgamation of information technology may bring quality in the management processes. Today, many software are available in the market that provide improvement solutions to promote NHS strategy and innovation in NHS hospitals. For example, Microsoft Dynamic CRM provides number of solutions that result in integrated healthcare, reduced IT spend, compliance, early detection and diagnosis, mobile working, and long-term condition in order to retain and improve customer relations (Pythagoras Communications, 2011; Microsoft CRM Dynamic; 2012). According to Khoshraftar et al. (2011), the implementation of CRM in healthcare industry using information technology may result
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to increase patient satisfaction and also helps to improve community relationships. In addition, the CRM as a core platform will also help to improve operational efficiency as well as reducing the costs of the operations.
6. RECOMMENDATIONS AND CONCLUSION

The health sector of the UK is publically funded and organized differently in different parts of the country. NHS is the major publically funded organization in the UK and the main sources of the funding streams depend on different types of taxes. During 2005-06, the organization faced financial deficits (BBC News, 2006) and according to many experts and organizations (e.g. Harrison et al., 1997; Greener, 2003; Hardy, 2006; UK Audit Commission), the financial distress was caused by many issues such as lack of governance, change in population structure, changes in expectations of public, poor management, and inadequate board leadership. In order to improve the condition of NHS foundation trusts, NHS institute of innovation and improvement was formed in 2008 with the collaboration of Department of Health in effectively implementing Business Process Management. In terms of improving the current performance measurement processes of NHS, many latest techniques can be employed where Public Sector Scorecard is most appropriate technique which is primarily based on the traditional Balanced Scorecard approach and specifically designed for the public section organizations. The public sector scorecard takes into accounts all the activities required to address and improve the current performance measurement process of any public health organization. In addition, business process mapping technique shows the relevant procedures and administrative tasks to show how things work and also to manage demand and capacity. Another technique Lean Six Sigma is a performance measurement technique that uses statistical tools and DMAIC model to find out the actual causes of the problems to understand and reduce variations in the processes. The application of IT based CRM (e.g. Microsoft Dynamic CRM) in NHS hospitals and trusts can improve the management processes by developing strong relationships between the stakeholders.

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