staff – Escondido Framework

Lessons from a hospital turnaround chief executive

Queen's Medical Centre, Nottingham University Hospital — Queen’s Medical Centre, Nottingham University Hospital

I read an inspiring interview in Health Service Journal last week with the fairly recently appointed chief executive of a large NHS Trust facing a massive turnaround challenge. Anthony May, recruited last year to Nottingham University Hospital following many years as a successful chief executive of a large local authority spoke of the importance of providing the organisation with “hope” and of his visibility throughout the Trust. He also commented that the problems faced by the organisation had resulted in it spending too much time looking inwards and that it now had to rebuild relationships with its stakeholders. This resonated with my experience chairing to two NHS organisations through turnaround where I worked in support of two outstanding chief executives. A sense of hope and what I recall describing to colleagues as “something to believe in” is part of the “Dark Matter” that makes organisations more than the sum of their parts. And these are things that can only be created and communicated by a leadership team who are highly visible.

It has taken a few days for me to find time to blog about the interview. Returning to the on-line interview, I discover that it is now accompanied by a dozen or so comments from May’s colleagues. They are all anonymous (which enhances rather than diminishes their credibility) and all clearly come from within NUH. Some are very supportive. All confirm the scale of the task confronting May and the Trust. Some more sceptical, although they suggest an impatience in the delivery of the turnaround – but, as another comment points out, given the toxicity of the culture that May has come into it seems unreasonable to expect a turnaround to be completed overnight. Other comments have descended into a mudslinging between front-line and support services staff, only confirming the cultural challenge. Others display a degree of cynicism: one expresses this in a constructive tone, remarking “Always conscious a few quotes could be taken out of context but CEO needs to be careful here he doesn’t look to subscribe to the ‘great man/heroic leader’ school of management. Always implodes in due course.”

The commentators also remark on the intrinsic challenges that NUH faces because of its size, its spread across multiple sites, and its complexity. They also comment on the distraction provided by past M&A activity, regrettably something that has been, and continues to be in fashion in the NHS (many years ago I undertook an analysis that suggested an inverse correlation between NHS trust size and both financial performance and quality of care), and is consistent with most of the work undertaken in the private sector suggesting value destruction from M&A).

The delay in writing this blog piece is fortuitous. My enthusiasm for Anthony May’s comments is undiminished, but the comments highlight the challenge he faces and the need for him to sustain his effort and commitment as he has a long, hard road ahead. I wish him well.

“If you read only one business book this year, read this”

Patrick Nash, author of Creating Social Enterprise[1]

I knew very little about Patrick Nash when he joined me in 2019 as an angel investor and advisor at Tranquiliti, a start-up providing an innovative mobile phone app mental wellbeing tool for school students and their teachers. I didn’t know much more when we were bought out in August last year by Tes Investments[2], other than what I gleaned from our monthly video call with George and Aaron, Tranquiliti’s founders, which was essentially that Patrick knows a thing or two about social enterprises. He proved a source of sound advice to them and had a similar appetite for risk and the level of investment as me.

A couple of weeks ago, he invited me to a book launch in November. I explained that I would be travelling to New York but promised to buy the book and read it on the plane. Amazon already had “Creating Social Enterprise” in stock and a train journey created the opportunity to get stuck into it right away. It proved hard to put down and I quickly concluded that it deserves the “If you read only one business book this year, read this” accolade. Scrutiny of the spine shows the publisher to be Patrick’s own company[3], so I doubt whether it will get the push (although it would from any self-respecting business book publisher) in the direction of the shortlisting for FT Book of the Year 2024 that it deserves .

While I was studying for an MBA at the Stanford University Graduate School of Business and serving my apprenticeship at McKinsey, Patrick was doing alternative stuff and getting his first taste of commercial life at Nova[4], a whole food co-operative in Bristol. He drove the company van, turned the handle on the trail-mix mixer, learnt a range of valuable lessons about people, customers, marketing, margin management, cash-flow, risk, systems implementation – loads that you have still to learn when you graduate from Harvard, Wharton or LBS – and, importantly for his own development, undertook a crash course in double entry book-keeping (something I did learn in the first term at the GSB) from his father when the founder’s ill-health meant he had to step back from the business at short notice.

Scarred by the experience of putting Nova’s stock system onto computer (Patrick’s Learning#8 in the book is “Never Trust ‘should’” as in “This should work” or “It should be ready by then”) and burnt out by three years without a holiday, he took a spell away from work. A few months later, he discovered the Findhorn Community. Most people are drawn to Findhorn in the search for a more spiritual focus to their lives but Patrick was sufficiently intrigued by a conversation with its finance director that he joined it to work in its accounting and finance department. Rather than finding himself spiritually, he stayed on to lead the project to develop its Ecovillage (the first homes were built from giant whisky barrels), where he “learned much of the complexity of running organisations, raising funds, creating multiple corporate structures and leading teams”. During his ten years with Findhorn, Patrick learned a lot more about running a successful business, not least about managing external and internal stakeholders. He describes this time as a “significant phase in my social enterprise journey. Many of the skills I have deployed as a social entrepreneur were developed there”. But lessons and consequent skills are not just for the social entrepreneur, most of them translate into any enterprise, public or private, large or small, and independent of industrial sector.

Although Patrick has established twelve social enterprises, charities and values-driven businesses in all, his greatest achievement was establishing Connect Assist, a specialised 24/7, outsourced call centre supporting multiple clients from the public, private and third sectors (including Versus Arthritis where I spent 8 years as a trustee), employing over 450 people in a part of south Wales where employment has still not recovered from the demise of coal mining. The third part of Creating Social Enterprise tells how Patrick developed a string of businesses that evolved into Connect Assist after first joining the Teachers’ Benevolent Fund, a charity operated for the teaching unions. In this role he took the lead in some tough decisions, including closing TBF’s legacy residential homes for retired teachers (he is the first to call out the case for closing businesses that are loss making and no longer fulfil their purpose) and pivoting the organisation to become a telephone counselling service, setting him on the path towards establishing Connect Assist.

Patrick has great stories to tell, including how, along the way, he had the Dalai Llama as his boss when, for a few years in between the big projects that are the meat of Creating Social Enterprise, he was CEO of the Tibetan Relief Fund. He tells tales of scrapes with the law as a twenty-something driving a whole-foods van around the country, when the grass roof of a house in the Ecovillage bursting into flames, and the thrill and relief at securing financing for assorted projects at the eleventh hour. These come across with a freshness as though they only happened yesterday rather than ten, twenty, thirty or even forty years ago.

He has built the account of his career around no fewer than 44 learnings, drawn out at the end of each chapter and recapped at the end of each of the three major sections of Creating Social Enterprise. Most, if not all, are relevant to anyone who picks up the book. As someone who preaches the importance of purpose and values to a business (as part of the Dark Matter that makes organisations more than the sum of their parts) I turned the page corner down at Learning#3: Align values and commercial interests. I did the same at Learning#38: Empathy is the new superpower, as I have no doubt that being able “to understand another person’s thoughts and feeling is a situation from their point of view, rather than your own” is essential to effective leadership based on trust. And his observance of the final sign-off learning, Learning#44: Moving on when it’s time to leave was the one that positioned Patrick for life after Connect Assist where, from the comfort of home on the Pembrokeshire coast, he could join me in our support to the young founders of Tranquiliti and find time to write Creating Social Enterprise.

[1] ISBN 978-1-3999-47-6 www.creatingsocialenterprise.o.uk

[2] Tes invests in fast-growing tech to transform pupil wellbeing | Tes

[3] Enterprise Values – Enterprise Values

[4] Still thriving: see Essential Trading Co-operative Ltd | Welcome (essential-trading.coop)

Lessons for leaders from a front-line healthcare team

I couldn’t fail to be impressed by a slide in a recent presentation by the community health director at the NHS Trust that I have chaired for the past eight years. It described the Team Charter developed in a programme of mutually agreed behaviour workshops in the Hammersmith & Fulham Community Independence Service in which community nurses, occupational therapists, physiotherapists, and care workers support patients to keep them out of hospital. They are a high performing team delivering a great service, facing challenging demands, working with constrained resources, juggling priorities, and taking difficult decisions. The Team Charter illustrated above speaks for itself. It may look like a “motherhood and apple pie” recipe, but it is no worse for that. And, what’s more, it provides a lesson for teams and their leaders everywhere.

A “Big Read” feature in the Financial Times recently (23^rd February 2023) described how the isolation of Vladimir Putin within the Kremlin and narrowness of the circle he consults contributed to his disastrous decision to invade Ukraine and subsequent conduct of the “special military operation”. Pictures can paint many thousands of words, but if there was anything to illustrate the need for the Kremlin to take a lesson from the healthcare workers of Hammersmith & Fulham, the photograph below, used by the FT to accompany its article, does the job.

Putin with foreign minister Sergei Lavrov - a clue to why we're in the mess we're in? — Putin with foreign minister Sergei Lavrov – would they benefit from a team charter?

Hidden in plain sight – what three statues can tell us about disability*

I have a disability and a history degree, but you don’t need either of these to know that the most iconic hero in British history was disabled. He stands on his column in Trafalgar Square with the result of two “occupational injuries” – the lack of an arm and blind in one eye – proudly displayed, as they are in all his portraits.

Our history is full of disabled heroes, known for their achievements and not defined by their disability.

Down at the other end of Whitehall is the statue to Winston Churchill, rarely recognised as disabled, but who suffered from a recurrent depressive condition that he described as his “black dog”. Unlike Nelson, Churchill’s disability was invisible and often glossed over, so you can’t blame the sculptor for not capturing it.

Head 150 miles north-west and you find a statue that, remarkably, conveys no hint of another hero’s disability. In Stoke on Trent, outside the Wedgwood Museum, stands a statue of Josiah Wedgwood, possibly one of the greatest figures of the Industrial Revolution: entrepreneur, inventor, innovator, radical and anti-slave trade campaigner. Wedgwood had his lower leg amputated because of smallpox contracted as a child. The fact that contemporary portraits do not show his prosthesis may reflect a desire on his part to conceal his disability. But his disability meant that he couldn’t turn a kick wheel and follow the family trade as a potter himself, so directed his attention and his prodigious talent to reshaping the industry he worked in.

Disabled people don’t want to be defined by their disability. However, we do hope people make “reasonable adjustment” (to use the words enshrined in the 2010 Equality Act) to help us mitigate our disability so we can achieve and contribute to the best of our ability. For some of my colleagues in the Disabled NHS Directors’ Network (DNDN), it is a matter of ensuring that there is decent physical access in the shape of ramps and lifts. For others, it involves thinking carefully about lighting, legibility and document suitability for text to speech solutions. At the DNDN, we adopt the discipline of checking at the start of any meeting if anyone requires any adjustment.

For me, it is relatively easy. My hearing is impaired by tinnitus, taking the form of a high-pitched ringing or screeching that means that I can’t hear sibilants and hard consonants even with my hearing aids. It is genetic rather than the result of having played in a rock band, and I slightly resent that the tinnitus also experienced by my father and brother, both of whom served in the armed forces, generated an adjustment to their service pensions (paid out of my taxes) because it was diagnosed as the result of exposure to gunfire.

It helps if I can see your mouth when you speak (which means colleagues dropping their Covid masks when speaking and allowing me to choose where I sit in a meeting). In the endless round of Teams meetings, it helps if you turn your cameras on and the closed captioning facility is enabled. It also helps if you don’t mind me occasionally asking you to repeat what you have said as it is much safer than me having to guess. And finally, please don’t ask me to engage in a mindfulness session that involves sitting silently: I don’t hear silence and this sort of mindfulness session leaves me tormented by my tinnitus!

Kate Smyth, (non-executive director at Lancashire Teaching Hospitals Foundation Trust) and I established the Disabled NHS Directors’ Network in 2019 with multiple objectives. Not only did we want to provide mutual support and share experiences among NHS leaders with disabilities, but we wanted to support disabled people throughout the NHS, providing role models from people at board level to junior colleagues, increasing the representation of disabled people on boards, and raising standard of service provided to patients and services users with disabilities.

It has been an exciting time building the network, discovering colleagues with a very wide range of disabilities: sensory like mine, physically disabling, like those of Kate who is a wheelchair user as a result of multiple sclerosis, and her co-chair, Peter Reading (chief executive at North Lincolnshire and Goole Foundation Trust) who had polio as an infant, or relating to long-term mental health or neurodiversity. It is also exciting that the NHS is at last “getting” disability as it feels that, for too long, it has been the poor relation among the Equality Act protected characteristics.

And, finally, as someone who spent the winter 1976/7 (ancient history for most people reading this) studying the life and career of Josiah Wedgwood, it is also exciting to have the excuse of Disability History month to celebrate one of Britain’s disabled heroes.

Lockdown – through the Escondido lens

We are in lockdown with Covid-19. Large parts of the economy are in suspended animation. Other businesses are operating on a hugely reduced scale. Others have recognised that their sales have dried up but have redeployed that assets and staff to help address the pandemic. The Chancellor of the Exchequer has become the “employer of last resort”, funding 80% of staff wages as an inducement for companies to keep people on their payrolls.

How should we interpret the reshaping of businesses through the lens of the Escondido Framework? In particular, what does it do those market interfaces that define the firm as visualised in a simple form by the Reuleaux Tetrahedron?

Are companies in the same business now that they were last month, before lockdown? In some cases, it easy to say that, at least temporarily, they are: the Lymington sail maker who has turned over his computer fabric cutting capability to turning out fabric pieces for others to sew up as scrubs for NHS front line staff and the university engineering departments that have deployed their 3D printers to make components for surgical masks. These companies have moved from one market into completely different one. Their staff, capital, and suppliers are relatively unchanged, but they have exchanged the customer market with which they usually interface with a completely different one.

Others have been transformed into agents of the state: temporary distributors of transfers by a government that has banned their businesses (particularly those in consumer services: retail, hospitality, entertainment) from operating. In their cases, the regulatory interface (not displayed in the 4 market interfaces of the Reuleaux Tetrahedron that describes the simplest companies, but has to be imagined in a multi-dimensional context) has moved inwards to the degree that the company is no longer creating value other than as a channel for transfer payments.

Another way of looking at the interpretation is that the company exists only in a shadow form, some ghost of what the company could become once again. I suspect there is a quantum analogy here – the locked down company with furloughed staff as Schodinger’s Cat. Certainly, the physical assets remain present, the staff remain employed, the wiring of the corporate structure remains in place, and the Dark Matter of the soft things such as relationships, corporate memory, social glue, shared assumptions, implicit operational and communication protocols continue – albeit that they may be vulnerable the longer that the lockdown continues. Zoom and its competitors keep some of the Dark Matter alive. The efforts that the investor, directors, and managers make in supporting and communicating with their staff will help, but the longer the uncertainty remains, or if the companies scrimp on their effort and investment in maintain this soft stuff, the greater the risk that the Dark Matter will leak away.

Should customers have come first in the GKN battle?

I don’t disagree with Michael Skapinker often, but his commentary on the successful bid by Melrose for GKN in today’s Financial Times “Customers should have come first in the GKN battle” had me getting out a metaphorical red ballpoint to mark his homework.

It was a shame. He made such a good start, rehearsing points that he has made well in the past about shareholder value:

Whose interests should companies serve? For decades, the answer, particularly in the US and the UK, was shareholders’. Total stock market return, the argument went, was clear and measurable and it kept managers focused — until Jack Welch, former General Electric boss and one of shareholder value’s greatest champions, denounced it as “the dumbest idea in the world”.

That was in 2009. Mr Welch was not the only business chief to notice that the financial crisis had shredded the idea that if companies looked after shareholders, everything else would follow. Josef Ackermann, then-head of Deutsche Bank, said: “I no longer believe in the market’s self-healing power.”

A little later in his article, I also awarded him marks for citing the late Sumantra Ghoshal of London Business for arguing in 2005 that:

the people whose contribution should be recognised first were employees, who also took the biggest risks;

shareholders could sell their shares far more easily than most employees could find another job;

and employees’ “contributions of knowledge, skills and entrepreneurship are typically more important than the contributions of capital by shareholders, a pure commodity that is perhaps in excess supply”.

Not content with citing Sumantra Ghoshal with approval, Skapinker moved on later in the article, in the context of the intervention by the Tom Williams, chief operating officer of Airbus’s commercial aircraft division, about the need for long-term investment and strategic vision in the aircraft industry, to cite “the great” Peter Drucker for saying that

the purpose of business was to create a customer. Without that customer, there are no jobs for workers, no returns for shareholders and no strategic skills for nations.

All good stuff, and essentially consistent with Escondido Framework thinking, but Skapinker and others who were unhappy at the outcome of the bid seem to have missed the point about what was happening.

During the takeover battle, much was made of the heritage of GKN, whose origins lay in the founding of the Dowlais Ironworks in the village of Dowlais, Merthyr Tydfil, Wales, by Thomas Lewis and Isaac Wilkinson ion 1759. John Guest (whose name survives in the “G” of GKN – formerly Guest Keen and Nettlefold) was appointed manager of the works in 1767, and in 1786, he was succeeded by his son, Thomas Guest, who formed the Dowlais Iron Company. However, the links to the multinational automotive and aerospace components company of 2018 are slight and accidental.

The company acquired by Melrose consists of four major divisions: GKN Aerospace (Aerostructures; Engine Products; Propulsion Systems); GKN Driveline (Driveshafts; Freight Services; Autostructures; Cylinder liners; Sheepbridge Stokes); GKN Land Systems Power Management; PowerTrain Systems & Services; Wheels and Structures; Stromag); and GKN Powder Metallurgy (Sinter Metals; Hoeganaes). This is a collection of businesses that is the outcome of over a hundred years of acquisitions and disposals across the globe¹. At least at the parent company level, there is little to suggest the opportunity for much value creation from them all being part of the same corporate entity.

What business was GKN plc in? The management of a portfolio of business units, primarily in manufacturing but some in services, spread across a range of different industries and technologies serving a variety of different types and classes of industrial customers, many but not all being OEMs.

Who were the customers of the corporate entity, as opposed to the subsidiaries (which are the entities that interface directly with the purchasers of goods and services, with their employees, and with suppliers)? Perhaps the subsidiaries themselves, insofar that they derived value from the parent company and investment funds, in return for cash returned to the parent? Perhaps the employees of the subsidiaries, at least in so far as they were beneficiaries of a corporately administered pension scheme (that, incidentally, Melrose committed to topping up with an extra £1 billion)?

Much has been made, including by Michael Skapinker in his article, of the 25% of the shares that were in the hands of hedge funds and other short term speculators who had only bought them very recently in the hope of a quick return. Presumably they bought these shares from owners who were willing to sell at a lower price against the possibility that the Melrose bid failed and the share price under the existing management team would fall.

Melrose’s argument during the takeover battle was essentially that it is a management team with a record of successful managing corporate assets who would replace a management team that has been destroying value in its management of the GKN portfolio. The commitments Melrose made along the way to the customers for the GKN subsidiaries’ goods and services and to their employers (in part evidenced by the promises relating to the pension scheme), suggest that they are not old fashioned asset strippers, selling off assets as part of strategy to wind down wealth creating business units. Rather, they appear to understand the business that the GKN plc is currently in, which is managing a portfolio of businesses, adding value to those where it can, and selling those to which other companies can add more value.

If this is indeed the approach that Melrose takes, it will reflect a mindset in which the board thinks about the businesses within the portfolio as customers for the corporate centre, recognising that if there are other corporations that can provide individual business units with a better deal, let them go. And that will make it easier to keep their customers in the capital markets, to whom they have spent the last few months marketing themselves, happy, loyal, and committed.

¹ Wikipedia history of GKN plc since 1966

Workforce – “not assets to be managed”

I owe thanks to Ali Webster, Assistant Director for Workforce at West London Mental Health Trust, for opening her presentation at a meeting yesterday with a compelling quotation from a 2015 King’s Fund paper on talent management[1]:

“Successful deployment of workforce talent is about rethinking your view of your employees. They are not assets to be managed but rather people with options who have chosen to invest their aspirations and motivations with your organisation for a while and who will expect a reasonable return on their investment in the form of personal growth and opportunities.”

This is Escondido Framework thinking. You do not own the people who work for you – even if the way that you treat them may leave them thinking of themselves as wage slaves. You have secured their services in a market transaction in which there are two parties, selling to each other and offering opportunities to each other. And both parties are making an investment in the relationship, with both “expect[ing] a reasonable return on their investment”.

[1] Sarah Massie, “Talent Management: Developing leadership not just leaders”. Kings Fund 2015

Highlights from October 2016 Harvard Business Review

My two picks from the latest Harvard Business Review relate to two Escondido Framework themes: the way that executive teams have been the beneficiaries of the misunderstanding by shareholders (or, rather, their representatives on remuneration committees) of what motivates them and how the relevant market relationships work; and the need to think about employees as customers.

An article titled “Compensation, the case against long-term incentive plans” reviews the work of Alexander Pepper, set out in his book “The Economic Psychology of of Incentives: New Design Principles for Executive Pay (Palgrave Macmillan 2015). Pepper documents how pay for performance incentives, and Long Term Incentive Plans in particular, fail to work as proponents expected. The four reasons are summarised as follows:

Executive are more risk-averse than financial theory suggests
Executives discount heavily for time
Executives care more about relative pay
Pay packages undervalue intrinsic motivation

HBR’s review of Pepper’s work, in its Idea Watch section, comes not long after news broke in London on 22^nd August that Woodford Investment Management was to scrap all staff bonuses, based on the belief that ‘bonuses are largely ineffective in influencing the right behaviours.’

The second article of interest is an article by Cheryl Bachelder, CEO of fast food franchise Popeyes: “How I did it…… The CEO of Popeyes on treating franchisees as the most important customers”. It’s not so much the lesson expressed in the article’s title that excites me, but an extract in the middle of the text that takes the message a stage further, recognising staff as customers:

At one point in my career, I was touring restaurants to talk to team members about the importance of serving guests well. I met a young man who was not excited about my “lesson”. He asked who I was. “I’m Cheryl,” I said. “Well Cheryl,” he said, “there’s no place for me to hang up my coat in this restaurant, and until you think I’m important enough to have a hook where I can hang up my coat, I can’t get excited about your new guest experience program.” It was a crucial reminder that we are in service to others – they are not in service to us.