Are we ready for change?

This week The King's Fund has published, in association with the Institute of Fiscal Studies, its analysis of the likely economic environment for the NHS over the next decade.

The report, How cold will it be?, makes for stark reading. Even the most optimistic scenario suggests that productivity would need to increase by around 3.4 per cent per year for six years to compensate for the gap in funding. Less optimistic scenarios suggest an increase of 8 per cent.

To put this in context, figures from the Office for National Statistics suggest that between 1997 and 2007 NHS productivity fell each year by an average of 0.4 per cent, a 10-year reduction of 4.3 per cent. By comparison, private sector productivity growth averages around 2 per cent per year.

How likely is it that we can turn this around – and still achieve the improvement in quality of care set out by the departing Lord Darzi?

We have spoken recently to a number of senior leaders who do have a track record of turnaround in the NHS. They have improved the quality of services while simultaneously cutting costs. They have achieved this by changing practice and skill mix, implementing structural change, reducing variation, managing demand, and streamlining processes using now-familiar techniques such as lean thinking.

What keeps coming up in our conversations with health leaders, though, is that to work through these major challenges, organisations across the system must work together. Tim Rideout, Chief Executive of Leicester PCT sums it up well, 'we can only do this if we realise that the NHS is a federation of mutually dependant organisations, where success is defined as success for all'.

But is our system – and are our leaders – prepared for these new behaviours?

Many chief executives and others bemoan the structural and behavioural impact of recent reforms and of their impact on our readiness to tackle the coming financial crisis effectively. These changes, they argue, have washed away those relationships and ways of working that were all about the collective good, and instead embedded a set of behaviours and incentives that encourage competition and work against collaboration.

But there is a danger here of romanticising a past that did not exist. I would challenge the assumption that what we experienced before these changes were really effective collaborative partnerships. Rather, these were often 'cosy' relationships, characterised by collusive behaviour and a set of common interests that were too often about professional and organisational good rather than improving the quality of service.

The current system is very far from perfect and will need further reform to ensure that incentives are aligned and a host of perverse incentives tackled and removed. But the changes have allowed us to develop new, more sophisticated and more professional relationships that mix competition and collaboration, not just with colleagues in the NHS but with other agencies and industries outside the NHS. These have improved the level of commercial skills and acumen, ability to negotiate and influence, and skills in creative system thinking, which are all needed to operate in this environment.

These skills will still be needed as we move into a very different financial and political environment. Leaders who have developed the skills needed to operate effectively in this new world, under tougher financial constraints, and still driven by the needs of the patient rather than the professions, will be in a strong position. The relationships that will take us through the next 10 years need to be characterised by the same level of healthy challenge, professional rigour and drive for improvement that has begun to emerge among senior leaders in our current system.

Learning from past experience of leading through recession is crucial, but we must also look outside the NHS for lessons from other industries.

But perhaps the single most important asset we have is a generation of leaders who have begun to develop the skills, competencies and mindsets that are reaping real rewards in terms of improved outcomes and patient experiences.

As long as those behaviours are nurtured and directed toward the common goal of delivering a comprehensive service to patients across the whole health service, rather than being used to protect individual areas, we should be more confident of success than the numbers suggest.