Exploring the Relationship between Human Resource Management and Organisational Performance in the Healthcare Sector
Ian Kessler, King’s College, University of London
- Introduction
While debate amongst policy makers, practitioners and scholars in the field of human resource management (HRM) has often revolved around whether and how the treatment of the workforce contributes to bottom-line corporate performance in terms ofprofitability and shareholder value (Boxall and Purcell, 2011), in healthcare the organizational outcomes associated with workforce management have assumed an altogether different form. Healthcare is one of the few sectors of an economy in which workforce management is often quite literally a matter of life or death (Propper and Van Reenen, 2010; West et al, 2002; West et al, 2006). Mortality is the most extreme of potential outcomes,but it is certainly the case that the management of employees in the healthcare sector has consequences of a distinctive order related to the quality and longevity of life and, more specifically, to the well being of its most needy and vulnerable citizens: the acute and chronically ill.
The link between workforce management andorganisational outcomes isparticularly directin healthcare, where despite the ongoing introduction of new medical technologies service delivery remains centred on the unmediated relationship between the worker and the service user.The labour intensive nature of healthcare delivery in these settings is reflected in the fact that in most developed countries labour costs constitute around two thirds of total healthcare costs (Dubois, McKee and Nolte, 2006:13). The worker-patient relationship isenacted in three healthcare settings: primary – where frontline care is delivered mainly by general practitioners; community - where chronic illnesses are managed, often in the patients’ home or neighbourhood facilities; and secondary - where acute conditions are treated in hospital. The substance of the worker-patientrelationshipin all these settings ranges from the periodic assessment, diagnosis and treatment undertakenby skilled health professionals,to the more routine but essential care provided by the general nursing workforce and a plethora of paramedical and non-clinical support workers.
Despite the centrality of workforce management to valuable and valuedindividual and societal health outcomes, the attention traditionally devoted to human resource management in the healthcare sector by policy makers and practitioners has been patchy. Buchan (2004:1) stressed that policy and practice, particularly in the 1980s and 90s, focused on cost control, notingthat‘The importance of human resource management to the success or failure of health system performance hadbeen overlooked.’ At the same time, he acknowledged that more recently ‘getting HR policy and management right has been seen as core to any sustainable solution to health system performance.’ It is a shift of interestdriven by the challenges faced by the sectoras the emergent care needs of, typically, aging populations with heightened expectations of service quality run-up againsta tightening resource base, especially in publicly funded healthcare systems,where governmentexpenditure has been reined-back post the 2008 financial crisisand its associated recession.
The research literature has reflected this uneven but growing policy interest in HRM in the healthcare sector. Since its first issue in 1961, a leading US-based journal,Human Resource Management,has publishedjustseven articles with a specific focus on healthcare. However, it is about to produce a special issue on health and social care work (forthcoming[SJ1]). Other HRMjournals havedisplayed a moresustained engagement with the healthcare sector, although this has deepened in recent years with the International Journal of Human Resource Management (2013, 24:16) and the Human Resource Management Journal (2010, 20:4) publishing special issues on the sector and the Industrial and Labor Relations Reviewis planning to do so. However, given that an average of 10% of workforces in OECD countries is to be found in healthcare (Sermeus and Bruyneel, 2010:4),the level of interest shown by the academic HR community in the sector has fallen well short of extravagant.
This characterisation of the mainstream literature on HRM in the healthcare sector as recently emerging andunderdevelopedrelates to a number of factors. As a discipline human resource management has usually found a homein business schools, which are moreinterested in exploring the pursuit of corporate competitive advantage than in the functioning of publicly-funded, often not-for-profit, organisations.More substantively, scope for the development of dynamic organizational forms of HRM practice in the sector has traditionally been quite limited, with healthcare workforcestightly regulated by the state in terms of training, performance standards and pay (Bach et al, 1999). Moreover, with professional rather than general management systems and values historically driving service delivery in healthcare organisations(Ackroyd et al, 1989; Ramanujam and Rousseau, 2006), many workforce issues havebeen tied to specialist clinical and technical fields of expertiseaddressed in other literatures such as those innursing and healthcare studies.
In the contextof such a diverse and diffuse extant research literature on HRM in healthcare, this article focuses on a discrete but increasingly important issue for various stakeholders: the current state of knowledge and debate on the relationship between human resource management practiceand organisational performancein the healthcare sector. A focus on the HRM-performance nexus aligns with acentral preoccupation of scholars in strategic human resource management over recent years, but for healthcaresettings, this link needs to be qualified in a number of respects.Firstand as already implied, organisational performance assumes a particular form in healthcare, suggestingcaution in theorising the link between outcomes and HRM practice in the sector. Second,debate on workforce management issues in healthcare has been much broader thanan interest in the HRM-performance relationship.Distinctive features of the healthcare workforce have encouraged consideration of a wide range of research issues. For example, healthcare workforces are highly professionalised and at the same time occupationally segmented and hierarchical prompting research on inter-occupational relations and job boundariesin the sector (Nancarrow and Borthwick, 2005; Currie et al, 2012). Moreover, as an interactive service industry, healthcare has provided fertile ground for a consideration of service user-worker relations, with a particular focus on emotional labour (Smith, 2012). Indeed, the gendered nature of the sector’s workforce (typically about two-thirdsof the employees are women) has generated aninterest in the value (or lack of it) placed on care work and on the (un)fairness of associated rewards (England, 2005). Some of these alternative issues are touched on in exploring the HRM-performance connection in this article, but they remain important research questions in their own right.
A third qualification relates to the moderationof the HRM-performance link by institutional context (Paauwe, 2004). A detailed consideration of different national systems of healthcare deliveryand their associated HRM practices is beyond the scope of this article. In brief, however,such systems vary along various dimensions including: sources of funding; governance; regulation; and access to services(Johnson and Stoskopf, 2010; OECD, 2013). Roemer’s (1993) typology suggests three healthcare models varying along these dimensions. Anentrepreneurial model, found in the USA, has traditionally provided selective healthcare coverage for the population, relyingon the purchase of private health insurance by individuals and employers. It is a model predicated on the delivery of care bymainly privately, rather than publicly owed, providers, often driven by profit. Amandated insurance model, characterising, for example, the German healthcare system, provides universal healthcare coverage, funded through social insurance as bought by workers and employers. It rests on the direct provision of care by a variety of independent, private and publicly owned organisations, reimbursed by the government from the insurance fund for the care they deliver. The third, a state run model, seen in Britain, also ensures universal healthcare coverage, but directly funded through general taxation. In this model services are not only provided free at the point of the delivery, but traditionally by publicly owned healthcare providers, controlled and run by a central government department, the Department of Health.
These institutional differences in national healthcare systems havebeenremarkably durable, with a degree of path dependence basedupon a cumulative supportfrom interested parties for their continuity (Pierson, 2001). Thedifferencesraise questions about whether and how they feed through to shape national HRM policy and practice, although with a few exceptions, (Grimshaw et al 2007), these issues have not been extensively examined. Indeed, research on HRM in healthcare has sometimes shown limited sensitivity to institutional context even within single country studies. In reviewing the literature on the HRM-performance relationship, this article is informed by institutional developments mainly in the British NHS, not least as a means of highlighting how the HRM agenda in healthcare and its connection to organizational outcomes might beinfluenced by broad contextual factors.
More specifically, thisarticleexplores the HRM-performance link across the healthcare sector infourmain parts.The first part examinesgrowing pressure faced by developed countries to address the performance of their healthcares systemsand how workforce management issues have been presented in this context by interested parties. The second part explores a stream of research which haslargelybeen framed by mainstream debates in the field of HRM as they relate to HRM-performance link. The third part considers a more refinedresearch stream, typically found in nursing studies,which examines how staffing patterns connect to various outcomes. A final part provides an overview discussion and draws some conclusions.
- Performance in a Healthcare Context
2.1 Public Policy Developments
The notion of performance in a healthcare context has been contested over the years and variously articulated in shifting socio-economic and political circumstances. In many developed countries, the creation of publicly funded healthcare services was part of a post 1945 social settlement which led to the creation of the welfare state (Esping-Andersen, 1990). In these countries a sizeable and increasing proportion of GDP was devoted to healthcare expenditure, but in a period of economic growth through to the mid 1960s and 70s,this was affordable and prompted few pressing policy concerns about the sector’s performance. In Britain,for example, the NHS became a ‘cherished’ institution delivering free carewhen needed to all.Asformer British Chancellor Nigel Lawsonnoted, the NHS was the nearest the English had to a shared religion.
A global recession in the late seventies and early eighties in the wake of the international oil crisis prompted greater scrutiny of performance in healthcare, particularly in terms of cost efficiency,as public expenditure came underpressure. It was a period which coincided with an ideational shift in approaches public service delivery, captured by the notion of the New Public Management (NPM) (Hood, 1991). As a set of prescriptive principles, underpinned by Public Choice theory (Nisakanen, 1971), NPM challenged sheltered and bureaucratic forms of service delivery through the introduction of market mechanisms and competitive forces. In doing so, service user or ‘customer’ choice was placed at the centre of service provision with direct implications for the workforce. Public service workers were explicitly presented as part of the ‘problem’, with ‘producer capture’ of services seen as undermining ‘consumer sovereignty’. In these circumstances, ways of measuring performance and the setting of targets by which to assess comparative organisational outcomes became a means of allowing users to make more informed choices in the ‘market place’.
While the take-up of NPM principles varied (Pollit and Bouckaert, 2004), some countries pursued them with alacrity, particularly impacting on the management of state funded healthcare systems. In Britain a ‘new right’ Conservative government elected in 1979 sought to apply them in an assertive way, introducing an internal market for health and establishing hospitals as quasi autonomous provider units ‘competing’ with one another. There were direct HRM consequences. The government sought to weaken national systems of workforce management supportinga traditionally integrated bureaucratic form of healthcare delivery by devolving responsibility for such issues as pay determination to thenewly created hospital trusts (Bach and Winchester, 1994). Further indicative of theNPM approach, the Conservative government encouraged the use of private sector HRM practice in healthcare, such as performance related pay, and introduced a cadre of general managers as a countervailing force to the power of the healthcare professional. It is a testament to the resilience of HRM practices in the British NHS that such attempts made limited headway (Bach, 1998; Grimshaw, 1999). But the pursuit of NPM did have a lasting impacton the delivery of healthcare in Britain and in other countries by deepening public policy interest in the demonstrable performance of healthcare systemsdefined by their sensitivity to user voice and choice.
From the 1990s, as economic growth took hold,accompanied in some countries bythe introduction of new political values and approaches, there were shifts in public policy on the performance of healthcare systems. These should not obscure elements of continuity(Bach and Kessler, 2012). In Britain,a ‘Third Way’ New Labour government elected in 1997strengthenedthe previous government’s target-based performance management regime as a means of continuing to facilitate market choice for service users. A star rating system for hospitals was establishedwhich ranked healthcare providers according to various measures, allowing usersto benchmark hospital performance (Givan, 2005). This was accompanied by the introduction of new, more intensemarketforces, for instance, reflected in the outsourcing of routineelective operations to private and independently run treatment centres and in a growing reliance on private sectorfunding to support capital projects(Bach and Givan, 2010; Tailby, 2012). It was a combination of policiesthat encouraged some to characterise New Labour’s approach to healthcare asan extension of the previous government’s neo-liberal agenda designed to commodify public services (Whitfield, 2006).
These elements of continuity were, however, qualified by important changes in practice, which impacted on how the sector’s performance was conceived, perceived and enacted.Hospital HRM indicators sitting alongside broader organisational financial outcomes and service measures related to user access were developed for the first time, and covered such issues as: staff turnover and absenteeism; the completion of individual performance appraisals; and spend on agency staff. The inclusion of such measures was indicative of an attempt by the new government to reframe relations with public services employees, with a move away from overt hostility to recognition that in a labour intensive sector such as healthcare workforce support and commitment were essential to an effective ‘modernisation’ programme.
The period was also marked by a change in how serviceuserswere conceived, with public policy implications for the management of organisational performance.While users continued to be viewed as an actor in the healthcare market by the New Labourgovernment,they also came to be seenas‘citizens’ displaying responsibility for their own health and well being as a quid pro quo for the receipt of care when needed(Clarke et al, 2007). These developments were accompanied by a growing emphasis on person-centred services to be deliveredin more open, integrated and perhaps less market driven ways (Needham, 2010). Such a shiftencouraged debate on the co-design and -productionof health services, with implications for healthcare workers, viewed as seeking more collaborativerelationships with the service user (Leadbeater, 2004; Kessler and Bach, 2011). A public policy preoccupation with personalisation took root beyond Britainin continentalEuropean countries less obviously attracted by the NPM-turn in public service delivery. It was reflected in the European Union’s Horizon 2020 research programme calling for projects on the development of a workforce able to deliver such personalized healthcare (European Commission, 2013:36)
From the late 1990s, an interest in improved performance in healthcare was alsorelated to state investment in the sector.Over recent decades, expenditure on healthcarehad been increasing in real terms across many developed nations. For example in EU countries average spend on healthcare as a proportion of GDP rose from 6% to 10% between 1970 and 2010. In countries such as Britain, the rise wasparticularly sharp, especially from the early 2000s as the government used the fruits of economic growth to raise healthcare expenditure as a proportion of GDP to the EU average. Between 2000-2001 and 2010-2011 real expenditure in the British NHS increased by 7% a year compared to an annual average of 4% over the life time of the NHS (formed in 1948) (King’s Fund, 2010). Such increases in healthcare spending, particularly in state funded healthcare systems, prompted an interest in the improved performanceof healthcare providers as an assurance that the tax payer was receiving value for money.
2.2 New Pressures
Public policy developments, driving an interest in the performance of the healthcare sector, and arguably constructing notions of such performance through the practices devised to define and measure it, have been complemented bylonger term pressures on healthcare systems in most developed countries. Thesehave mainly taken the form of demographic shifts generating new healthcare challenges. The proportion of the world's population over 60 years is expected to double from about 11% to 22% between 2000 and 2050. In the twenty seven countries of the European Union those aged 65 and over will increase by 66.9 million, with the very old (85+) being the fastest growing segment (EuropeanCommission, 2008). An aging populationbrings more complex healthcare needs, not least associatedwith chronic conditions, most significantly dementia. However, chronicconditions are not restricted to older people,a number being associated with life style changes. For instance, in Britain almost two thirds of adults (61.9%) are now classified as overweight or obese, a condition which increases the risk of type 2 diabetes, heart diseases and certain cancers. Indeed it is striking that in Britain the number of people diagnosed with diabetes more than doubled between 1996 and 2010 from 1.4 million to 2.9 million, with a further doublingexpected by 2025 (
The performance of healthcare systems in developed countries is increasingly being assessed by reference to these current and upcoming challenges, with growing concerns aboutthe capacity of the workforce to meet them. Debate in the EUhas centred on workplace planning to meet future healthcare needs, generating concerns amongst policymakers about a potential skill deficit. It has been estimated that by 2020 across the EU there will be a shortage of some 230,000 physicians and 590,000 nurses (Sermeus and Bruyneel, 2010:11). In broader terms, Dubois et al (2006:2) reviewing the state on the EU healthcare workforce have noted: