Private Sector Approaches Essay

Since the advent of new public management reforms, private sector managerial approaches are fast gaining attention in various public sectors. This is due to the belief that on-going global economic constraints and fiscal crises are demanding for more organisational effectiveness with minimal cost, and private sector practices are believed to be more efficient than its public sector counterpart. It is within this context that human resource management practices are being transferred into the public sector for better performance. However, several literatures have debated the numerous differences between the public and private sector and often concluded that effectiveness of privately transferred human resource practices into the public sector are likely to be strained (Rainey et. al., 1976). One argument is that public sector goals as opposed to its private counterpart, are unclear and intangible and therefore, outcome becomes difficult to measure towards performance. Moreover it is also argued that public sector workers are inherently motivated and as such cannot be monetarily motivated towards performance. Also, managers in the public sectors are often argued to have limited autonomy posed by politicians leading to a strain on the performance process. And finally, the constant financial deficit in the public sector has also been argued to limit its performance and reward systems. The case of the NHS as a public sector in the UK will be used to answer the above question. It will first start with a brief description of the NHS, and then provide an overview of what human resource management means and what its practices are. The effects of these practices (performance management, appraisals, and rewards) would then be reviewed in specific NHS examples in relation to the contrasting public environmental differences. Overall, due to the overwhelming literature demonstrating the ineffectiveness of HRM practices in the NHS or rather the inability of HRM and supporting studies empirically demonstrating the link between HRM practices and performance, this essay holds the opinion that the private sector practices of HRM should not be directly transferred into the public sector or at least should be cautiously transferred in its adaptation into the public sector. THE NHS The UK NHS was created for a comprehensive (quality), universal (equity) and free health delivery at its point of use. The search for effective delivery of services in the UK NHS prompted the NHS marketisation via the 1990 NHS and community care act. Markets divided the purchasing power from the providing power of health services thereby making Trusts (self-governing hospital) accountable for their performances. Perhaps, this division occurred because the effective management of human resources out of many other organisational assets was widely viewed as a better tool to address financial crises via organisational performance improvement (Huselid, 1995). HUMAN RESOURCE MANAGEMENT Due to the rapid rise of considerable interest in Human resource management over the last decade, there has been varying definition ascribed to its definition. This essay agrees with the Harvard definition in which Human resource management is viewed to encompass all managerial decisions that influences the relationship between the human resources of an organisation (it’s employees) and the organisation itself (Beer et. al., 1985, p. 1). Though, its practices have been grouped into various models, it is beyond the scope of this essay to discuss them. However, the general concept of its practices can be understood as the use of various strategies which includes amongst many others, performance management, appraisals and reward to effectively manage employee attitudes towards the organisation’s goal and performance (Armstrong, 2002, p. 3). PERFORMANCE MANAGEMENT Performance management and appraisal as described by Bratton and Gold (2007, p. 274) is a process used to assess a team or individual’s abilities towards performance development and improvement. This process involves setting a goal towards an outcome, monitoring and evaluating via performance indicators, and rewards as well as penalties as the case may be. However, in the public sector, arguments have ensued that performance management often contradicts the blue print of public services or is rather strategically used by politicians to assert some form of control over the sectors and not to perform its intended purpose. Performance indicators albeit is fast becoming popular both in the public and private sectors, has a measurability often argued to be complex in the public sector as opposed to the private sector where only monetary values and profits are measured. Even though, the ultimate goal of this HR tool is to drive performance either in the private or public sector, the role of targets in the public sector is often debated as many studies have demonstrated their obscurity by questioning whether ratings or indicators can actually measure performance accurately. However, over the last decades, some studies have agreed that HRM tools have to a certain extent a drive on organisational performance both in the public and private sectors (Carter and Robinson, 2000, Boxall, 2003). In the NHS, the labour government has initiated performance management via the NHS STAR RATING as a tool to drive performance and accountability. A balanced score card which consist of both financial and non-financial measures of HRM measures is used as a multidimensional goal and target in assessing hospital performances. That is, the NHS star rating evaluates hospital performance across dimensions like patient satisfaction, clinical output, waiting times and deliver ing capacity of hospitals (Healthcare Commission , 2004). Hospitals are ascribed ratings of zero, one, two or three stars based on their performances in the score calculation. As a result, higher star rating hospitals acquire greater autonomy whilst managers in lower star rating hospitals are been threatened of their dismissal (Givan, 2005). Some researchers have tried to demonstrate its efficacy, however, other researchers have demonstrated that the associated indicators, targets, star ratings, rewards and punishment are unfair and unreal in the public sector and consequently destroy the blue print of NHS which is fairness, equity, quality and universality. Givan (2005, p. 636) argues that the supposed intention of the NHS star ratings to improve performance and to increase public awareness to quality of delivered health services is only rhetorical. She argues that, in practice, HR performance indicators have not been generated from fair, accurate and transparent data, and as such; the indicators have not fulfilled their primary goals as m any HR directors have expressed their lack of confidence in the quality of data used towards the ratings. She further notes that the public has used the rating as an opportunity to criticise hospitals instead of understanding and appropriately accessing the facilities. The ratings therefore affected how patients patronize hospitals. It was noticed that more patients patronize the highly rated hospitals whilst, the poorly rated ones were less visited with subsequent difficulty on how to restore their image. Another point, Givan (2005) highlighted, is the negative effect the media plays in the association of the public sector performance and the effect of HRM performance measurement. She explained how the NHS publication of hospital ratings has led to the demoralisation of hospital staffs resulting in poorer performance. She argues that the media took advantage of these publications by constantly publicising the negative aspect of health service delivery even though according to her the best rated hospitals are not necessarily the best performing as items measured are sometimes intangible and those not measured becomes insignificant. Bevan (2006) has also highlighted how HRM practices have led to the loss of one of NHS blue print, which is the quality of services provided to patients. He argued that, due to the fact that rewards and punishment have been perceived to be unfair as a result of unfair indicators and ratings, pretence and gaming has ensued amongst practitioners because measurement and ratings are perceived to be presently more weighted than quality of services being rendered. As a result, practitioners have devised means of being measured well as opposed to the focus on quality of service given. Indeed, waiting times have reduced just for hospital recurrences to increase. Moreover, the measurement of service quality within the NHS has been highlighted and argued to represent a form of professional distrust from the government and seen as a breach of professional idealism where a nurse or a doctor can be expected to perform maximally without supervision (Morgan & Potter, 1995). In the same vein, public service employees have been argued to have public service ethos where staffs perform maximally without strict supervision or even any form of incentives (Public Administration Select Committee, 2002). Indeed, to some extent, these researchers have believed that performance management via NHS star rating is a political gimmick for politicians to shift blames of underperformances on professionals who work in the public sector or at least to control the public sector which still perhaps, point to the fact that the public sector is different from the private sector within politicians’ control devices. This is also in line with the notion of Propper and Wilson (2003) who have noted that performance management and NPM are strategic methods used by politicians to assert control over the public and not for its intended purpose for performance improvement as in the private sector. However, although the NHS star rating and the balanced score card have met some form of resistance from professionals and hospitals in the public sector, Aidemark & Funck (2009) have been able to positively demonstrate their effect on practitioners and NHS services. In their study, they explained how competition for efficiency ensued amongst practitioners towards becoming best performing hospital and consequently seen to improve availability of health care services. The balanced score card which consist of most practices from HRM was able to help practitioners work more efficiently by helping them compare more numbers of patient parameters in one unit. For example, comparing patient need, treatment and feedback simultaneously facilitated cost efficiency and reducing waiting times. PERFORMANCE APPRAISAL Moving away from the view of government and NHS institutions, and looking at performance appraisals within organisations, that is, between organisational leaders and employees, HRM practices seem also not to be applauded. The argument is that due to the measurement of intangible goals within the public sector, many of the performance appraisals conducted by senior managers or supervisors would result into a low quality appraisal. Within this context, low quality appraisals are faults generated during performance management processes, which often lead to wrong evaluation/judgments of appraisal either from employee or supervisory perspectives. This notion follows Murphy and Cleveland (1995)’s argument that public sector performance appraisal is a complex process because services are unquantifiable and would most likely result into bias and subjective judgment by the management supervisor. They noticed that these biases often result from the way a supervisor perceives and judges the outcome of the management process. Moreover, the judgment of any managerial appraisal in the public sector can be influenced by so many factors such as emotion, government policy, structures or even the appearance of the person appraised. Treadway et al. (2007, pp. 48-55) further emphasised on the progressive increase in appraisal bias and subjectivity within the public sector. The argument is that supervisors are often noticed to exhibit negative attitudes towards appraisal processes, perhaps due to the reason that they feel uncomfortable giving negative feedbacks to staffs. Therefore, in the public sector, they conduct this process more for the purpose of accountability or just for the reason to be seen conducting it. In the NHS, various studies have been carried out to determine the effectiveness of appraisal systems. It appears that many have not supported their effectiveness. In the study of personnel functions within the NHS by Guest and Peccei (1992), the effectiveness of performance appraisal was ranked 14th out of 17 personnel practices in view. Wilson and Cole (1990) have blamed the lack of sustainability of appraisal system within the NHS to the highly and complex politicized nature of health care. Redman et al. (2000), in their study on the effectiveness of appraisal within an NHS hospital also concluded that the process has not been proven to be fair and effective, perhaps due to lack of time, resources and results ambiguity that makes the process difficult within the health system. REWARD The effectiveness of HRM reward systems in the public sector is another practice that is keenly contested. Bratton and Gold (2007, p. 358) define reward as, the financial and non-financial payment given to an employee by an organization for a successful work done. It is often in form of promotion, recognition, benefits or pay. This new approach of rewarding public sector employees seems more flexible as opposed to the old reward system in which rewards automatically comes after years of service or hierarchy. This new approach may be argued to motivate employees towards work performance since employees are not promoted or rewarded if they do not perform well at work. However, some researchers have viewed this approach to be unethical within the public sector since it goes against the public service ethos of equity, equality and fairness. Some also have demonstrated the paradox and tensions between the pay methods. That is, where an employee perceives the method to be dissatisfactory even though it may be fair, it may cause more harm than good. Some even argue whether public sector staffs that are often seen to be intrinsically motivated are extrinsically motivated. Extrinsic reward within this context is a pay, benefit or promotion rewarded from an equivalently rendered service whilst intrinsic reward is the satisfaction derived psychologically from doing a job without an equivalent pay. Crewson (1997), in his empirical study carried out on public employee to determine to what extent pay incentives will affect motivation to work found out that the majority of staffs were not motivated to do more than how they have often been used to perform. Some were even noticed to demonstrate a demotivation. In fact, the overall notion is that rewards have not been actually effective within the public sector, perhaps, due to the complex and unquantifiable service rendered in public sector, which are often difficult to measure as opposed to the private sector where financial outcome is the basis for performance measurement. The quality and outcome framework of the NHS is an example of an institution that provides financial incentives to its employees (clinical team). It awards points to levels of targeted achievements of care processes and indicators of clinical outcomes. Rewards are directly linked to the number of points achieved. Though Doran et al. (2008) noticed that the framework achieved some changes in employee behaviour and concluded that the process was costly. Campbell et al. (2009), also questioned the relationship between some of its performance targets and the health improvement of its population and concluded that the setting of standard for one aspect of health care have reduced health performance elsewhere. The overall notion is that even though incentives may have seemed to be beneficial, its costly nature within the NHS may not be able to justify its implementation and subsequently its sustainability may not be guaranteed. CONCLUSION The effectiveness of private practices including Human resource management practices in the public sector is still unclear; yet, these practices are continuously utilised in the public sector. Perhaps, this is due to the wide belief that private sector tools are better than its public counterpart in resolving the on-going financial and fiscal deficit. Tools used by the human resource management are performance management, appraisal and rewards. The NHS is no exception to public sectors that greatly depends on these human resource management tools presently in the UK. The NHS having its blue print in fairness, equity and quality has been widely criticised to lose its originality after the initiation of new public management and human resource management. To drive performance within the NHS, the government adopted the NHS star rating which paved the way for various studies to be carried out on its fairness and effectiveness. Many researchers as discussed above have demonstrated the process to be unfair and highly politicized especially whilst questioning the indicators and targets used during this process. Appraisals have also not been applauded by many studies as it is seen to lead to a low quality appraisal via supervisory subjectivity and bias. It has also been viewed as contradictory to public service ethos and has led to distrust between employees with subsequent underperformance of staffs. Rewards in the quality and outcome framework of the NHS have also not been perceived to be effective and where it is, it was described to be costly and lack sustainability within the public sector or at least in the NHS. Overall, this essay holds the opinion that the success in transferring private human resource management practices into the public sector is yet unclear at least in the NHS. 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