Quality Management and Managerialism in Healthcare

A Critical Historical Survey

Matthias Beck, Sara Melo

• Publisher: Palgrave Macmillan
• Year: 2014
• Print ISBN: 9781137351982
• eBook ISBN: 9781137351999
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Quality Management and Managerialism in Healthcare creates a comprehensive and systematic international survey of various perspectives on healthcare quality management together with some of their most pertinent critiques. It reviews the factors which have underpinned the managerialist trajectory of healthcare management over the past decades.

1

Managerialism: A Historical Overview

The introduction of managerialism in the public sector is associated with the New Public Management (NPM) movement of the 1980s. In the private sector, however, the genesis of managerialism is an event that marked the beginning of the twentieth century (Fleischman and Tyson, 2006), though its roots date back to the Industrial Revolution. As a background for understanding the reasoning behind the introduction of managerialism in the public sector in general and in healthcare in particular, this chapter provides a historical overview of the phenomenon of managerialism, its impact on healthcare management and the development of concepts of healthcare managerialism over time.

The introductory sections of the chapter outline the evolution of performance management as a key managerial tool within private sector companies during the nineteenth century and the subsequent rise of management as a crucial function inside these organisations in the twentieth century. In addition, the discussion summarises the evolving nature of the concept of performance and the approaches that have been used to improve it from the early days of manufacturing until more recently, as well as the impact of both on the ways organisations have been managed, particularly in the past two centuries. The chapter next explores the broader contemporary context in which private sector management approaches have often been uncritically transposed to the public sector in general and into the health services sector more specifically, thus giving rise to allegations of managerialism. Specifically, our discussion focuses on the rationales that NPM advocates proffer in support of the introduction of for-profit-enterprise-related approaches to performance and quality management in public sector contexts. Having developed a working definition of managerialism, the chapter then traces the link between this phenomenon and the rise of performance management and accountability as core themes within the contemporary public sector and healthcare management literature. To conclude, we discuss the spread of New Public Management and recent developments of managerialism, including the emergence of the concepts of ‘leaderism’ and its impact on health policy within an international context. After providing the background for the book’s underlying rationale, this chapter concludes with the presentation of the outline of the remaining chapters.

The rise of the industrial organisation model and the establishment of performance management as a key managerial tool

Performance measurement and management are not recent phenomena. The recording of information on commercial transactions is a long-standing practice, probably as old as trade itself. Ancient civilisations already used bookkeeping records engraved in stone tablets (Johnson and Kaplan, 1991), and in Britain auditing dates at least from medieval times (Matthews, 2006, p. 6). However, as we will see later in this chapter, it is worth noting that despite the long history of bookkeeping records, performance measurement and management only became key management practices in the mid-eighteenth century. Until that time, the putting-out system was the dominant business model adopted in an economy that was primarily agriculture based. Within this model workers were paid for the amount of work done (piece work) and production took place at their home (Mokyr, 1998), the economic units had a simple structure and usually there were no shareholders. The owner-entrepreneur managed the business by buying materials directly from suppliers and selling to consumers without intermediaries. Records of commercial transactions with customers, suppliers and subcontracted labour were prepared by the business owner for his own use and according to his will and needs. This information was used by the owner for multiple purposes, such as to know the business’s whole financial situation, calculate the cost of producing goods and assess the honesty of contracted labour in using the raw materials in the production processes (Johnson and Kaplan, 1991). At that time, taxes were not levied on profits (Day, 2000) and the putting-out system was thus characterised by the absence of public scrutiny of accounts and by limited focus on accountability.

In the period between about 1760 and 1830 a series of changes occurred across four areas. These included economic growth, technological change, structure and scale of firms, and the characteristics of economic transactions (Mokyr, 1998). This took place initially in Britain and later spread to other countries such as the United States and Germany (Chandler, 1994). These changes, which later became known as the Industrial Revolution, led to the substitution of the agriculturalbased economy by a mercantile and manufacturing-orientated setup (Day, 2000). Rapid developments in transport (e.g., steam engine locomotives connecting Merthyr–Abercynon (1804), Stockton–Darlington (1825), Liverpool–Manchester (1830)), communications (electric telegraph (1837) and resulting innovative marketing tools) and economies of scale driven by technological innovation (e.g., mechanical spinning) led to the rise of the industrial organisation model (Mokyr, 1998).

The industrial organisation model marked the beginning of modern mass production, mass marketing and mass distribution, replacing traditional local markets by a new regional market economy (Chandler, 1994). Individual transactions, where the producer personally knew the consumers and the suppliers, gave place to formal, impersonal and competitive economic transactions (Mokyr, 1998). With this new dominant business model, the simple structure of economic units was gradually replaced by large capital-intensive and complex firms such as textile mills, railroads, steel companies, mines and large retail stores (Mokyr, 1998). Some of these (e.g., building and operating of railroads) required vast amount of capital investment (Chandler, 1994). By contrast to the putting-out system used in the past, the factory system relied on hiring workers on long-term employment contracts to work inside the factory premises, where their work was closely supervised using command and control structures (Hudson, 2004).

The novel features of industrial production and organisation and its associated separation of management typical of this form of capitalism presented new challenges to performance measurement and management. The fact that conversion processes started to take place within the factory, rather than at subcontracted labourers’ homes, led to the need to find alternative ways of costing the steps involved in the production process and of measuring the efficiency with which material and labour were being used (Johnson and Kaplan, 1991). As a result of these changes factories became too large for the individual owner-entrepreneur to manage, because it became increasingly difficult to simultaneously control all the transactions the company had with individuals external to the organisation and to exert control over the levels and quality of production within the organisation. This led to the creation of intermediate levels of management and the consequent adoption of a hierarchical organisational structure where the owner-entrepreneur was detached from day-to-day business activities (Johnson and Kaplan, 1991). Operating decisions, which often took place in factories located far from the offices where the owner lived (Johnson and Kaplan, 1991), were controlled by salaried managers (Chandler, 1994). Labelled ‘managerial capitalism’ by Chandler (1994, p. 9), this represented an organisational model in which salaried managers (instead of owners) took decisions concurrently on operational and strategic issues as the growth of a company created new management challenges. This required a series of changes in relation to record keeping and the disclosure of information.

The separation of ownership and management exerted pressures in favour of an expansion of purposeful record keeping. In addition to monitoring debts, records also had to inform the owners of the business regarding its activities which were controlled by salaried managers (Day, 2000). Additionally, in many businesses, the ownership of a company was formed by a number of investors who were geographically scattered and often without an in-depth understanding of the business (Chandler, 1994). In line with these increased information needs within factories, measures traditionally used to control costs (e.g., cost per hour and cost per pound produced) were applied to specific production processes and individual workers (Johnson and Kaplan, 1991). For example, this led to the introduction of gross margin per department indices and inventory stock turnover in retail stores (Johnson and Kaplan, 1991).

Besides leading to internal organisational changes, the adoption of the industrial model also influenced the way companies interacted with the external environment. In conjunction with new performance measurement tools, more detailed and refined accounting practices were gradually enforced by law (Matthews, 2006). Railways, in particular, being amongst the largest companies created during the Industrial Revolution, faced major accounting challenges which fostered the development of several accounting innovations (Matthews, 2006). These included a refined version of the double account system, the balance sheet and uniform accounts becoming mandatory for all railway companies (Matthews, 2006). Furthermore, in Britain, the possibility of stock exchange listing allowed by the Companies Acts of 1856 and 1862 marked an important step towards the enforced adoption of more rigorous accounting procedures as companies were required to meet a number of accounting obligations. These included the adoption of the double-entry bookkeeping principles and the preparation of a company balance sheet (Matthews, 2006). Another example of such changes can be found in the fact that it became common to hire accountants to audit the company’s accounts in order to protect the investments of partners or shareholders in the eighteenth century (Matthews, 2006).

It is worth noting that, notwithstanding these improvements, accounting practices were still rudimentary when compared with the accounting procedures operating at the present time and that the regulation of accounting was still in its infancy. For example, while in Britain the Companies Acts of 1856 and 1862 required the adoption of more rigorous accounting practices, they still did not specify the layout of a company’s accounts or the details of auditing procedures (Matthews, 2006). Two main reasons explain the perpetuation of these basic accounting standards. On the one hand, although there had been a widening of capital markets in the period from 1870 to 1900 with an increase in the number of shareholders per company, their legal rights in terms of access to company information remained quite restricted (Aranya, 1979, p. 266). On the other hand, managers were reluctant to disclose more information, claiming that to do so would give valuable information to competitors and thus harm their shareholders’ interests (Rose, 1963; cited in Aranya, 1979, p. 266).

In terms of the relation of companies to the market, the first entrepreneurs that adopted the industrial organisation model obtained naturally dominant competitive advantages based on the reduction of production costs associated with the economies of scale of their companies (Chandler, 1994, p. 8). However, these economies of scale also fostered the spread of the industrial organisational model. With an increasingly greater number of companies adopting the industrial model, the potential of individual firms to achieve a dominant competitive position based on economies of scale diminished. This meant that the competitive focus of companies had to shift. Companies began to emphasise on improving the efficiency and effectiveness of their operations and adopting suitable strategic approaches with a view towards increasing their market share and profitability (Chandler, 1994, p. 8). As Chandler (1994, p. 8) notes, companies at that time were concentrating their efforts on ‘improving their product, their processes of production, their marketing, their purchasing, and their labour relations and […] by moving into growing markets more rapidly, and out of declining ones more quickly and effectively, than their competitors’. In line with this emphasis on efficiency improvement, the last two decades of the nineteenth century were marked by the beginning of the scientific management movement, which led to a further impetus on performance measurement and management.

The increasing focus on performance management and the scientific management movement

The principle of managing companies along scientific lines was pioneered by the US engineer Frederick W. Taylor, and became known as Taylorism. The fundamental purpose of the scientific management approach was to ‘secure the maximum prosperity for the employer, coupled with the maximum prosperity for each employé’ (Taylor, 1911, p. 9). According to Taylor (1911), maximum prosperity required the development of each worker to their peak of efficiency which, in turn, would allow achieving the objectives of both employees, by returning higher wages, and employers, who were rewarded with lower labour costs, which implied potentially higher profits. In order to achieve this, managers were instructed to conduct a scientific study of the motions and times of each task involved in the production process with the aim of eliminating all unnecessary motions and substituting slow by the fast motions. The objective was to identify the ‘one best way’ of doing things.

Through training and development provided by managers, employees would then learn how to perform each of their tasks following a uniform ‘scientifically’ designed approach. This scientific approach to work contrasted with the rule-of-thumb methods of previous generations, whereby knowledge was mostly obtained through learning by watching others doing the tasks (Taylor, 1911). As a result of the implementation of ‘scientific’ approaches, workers began to receive detailed written instructions about tasks to be carried out, how to execute them and the duration of each task. This is illustrated in Taylor’s (1911, p. 46) account of the instructions for handling pig iron which were given to an employee at the Bethlehem Steel Company:

When he tells you to pick up a pig and walk, you pick it up and you walk, and when he tells you to sit down and rest, you sit down. You do that right straight through the day. And what’s more, no back talk. […] When this man tells you to walk, you walk; when he tells you to sit down, you sit down, and you don’t talk back at him.

By performing their tasks as instructed, Taylor (1911) demonstrated that good-quality workers were able to improve their performance considerably. As a result, Taylor advocated that they should be paid more. Under the scientific management approach, a high-priced worker (i.e., a good performer) was considered to be someone that would do exactly what their superior told them to do during the entire working day (Taylor, 1911). The adoption of the principles of the scientific management movement encouraged further developments in performance measurement.

Overall, it is evident that the human resource management practices associated with scientific management greatly differ from the ones which governed the putting-out system. This divergence was particularly noticeable in terms of the reduction of employees’ autonomy, which was accompanied by a corresponding power gain by managers. Although the history of managerialism is related to for-profit companies, it is relevant for understanding the processes by which management became a key function within all companies. Similar to private sector companies, NPM was from the outset informed by efficiency concerns, which can be traced to the scientific management approach. Thus, as in the case of workers governed by scientific management approaches in factories, one of the key criticisms voiced in relation to the implementation of NPM in healthcare concerns the loss of autonomy by nurses (Carvalho, 2012, p. 529) and doctors (Bottery, 1996) and the corresponding increase of power of managers (Hunter, 1992, p. 557). Although some authors (e.g., Ferlie et al., 1996, p. 240) have pointed out that this power shift has not been linear, in that ‘some professionals have gained [power], some have lost and some have changed’, it is accepted that practices such as evidence-based medicine (Walshe and Sheldon, 1998, p. 19) and the introduction of the purchaser/provider split have resulted in a loss of power by clinicians (Cairney, 2002, p. 377). Thus, the shift in power from professionals to management, particularly in the early stages of change, can be described as a constituent component of NPM (Ferlie et al., 1996, p. 11).

Large corporations, performance as a multidimensional concept and management control systems

The focus on increasing the market share and profitability, coupled with newly acquired functional improvements and strategic management skills, encouraged firms in the early twentieth century to progressively develop into large, complex, multiproduct, multimarket and multidivisional corporations (Chandler, 1994, p. 42). This organisational design significantly differed from the one adopted by large companies created during the Industrial Revolution (e.g., textile mills, railroads, steel companies, mines, large retail stores), which focused primarily on one product and one production process and thus made it relatively easy to determine the efficiency with which resources were being used.

An example of these large multidivisional corporations was the US Du Pont Powder Company, founded in 1903, as a result of the combination of many family firms into a consolidated corporation with central management ...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Figures and Tables
• Preface
• 1. Managerialism: A Historical Overview
• 2. Risk in Medicine: Early Developments to the 1980s
• 3. Quality Management in Healthcare
• 4. Models of Patient Safety and Critique
• 5. Evidence-Based Medicine
• 6. Connected Health, Personalised Medicine and the End of Managerialism?
• Notes
• Index