The O’Leary-isation of the Public Sector

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At the Reform Alliance national chit-chat Ed Walsh popped up to talk about what the Health Services need.  You might remember Ed Walsh – former President of Limerick University and the one who spread nonsense about the number of ‘welfare-tourists’ in Ballyconnell (you can read it about here and here).

Anyway, he made two calls at the weekend: 

Mr Walsh called for greater privatisation of the health service, with other speakers calling for the “O’Leary-isation” of the sector to achieve efficiencies and better management.  Mr Walsh also said it took Ryanair’s Michael O’Leary to make Aer Lingus more competitive and efficient, and said a further €3 billion health cuts are needed.

Let’s deal with the latter point first – the call for a further €3 billion in health cuts.  Since the start of the crisis, Health expenditure has been cut by 12.6 percent, with the Government pencilling in another 2.6 percent cut this year.

So Ed, seeing that the health budget has been cut by over 15 percent, is still not happy.  He wants to cut another €3 billion out of the health budget.  That would mean additional cuts of 22 percent.  Sure, what’s another round of even harsher cuts?

But Ed has an idea:  the  “O’Leary-isation” of the health services.  Now I’m not going to even try to summarise the ‘better’ management of Ryanair.  Acres of newsprint and websites have been devoted to Ryanair’s organisational culture.  But this is a good encapsulation:

‘A former member of the cabin crew for Ryanair has blown the whistle on the working conditions at the budget airline company . . .Sophie Growcoot revealed the details of her employment contract with the company Crewlink, which acts as a contractor for Ryanair.

[She] explained that Crewlink forced her to take three months of compulsory unpaid leave a year during the winter months, when air traffic is slower. During that period of leave, the contract forbid her from taking additional employment yet provided no compensation.

Other grievances Growcoot listed included making her pay about $540 for her uniform and another approximately $2,700 for a required safety course. They also only paid her for the hours she was “in the air,” which didn’t include pre-flight briefings, turnaround time between flights, sales meetings or time on the ground resulting from delays or flight cancellations. In addition to the restrictions on when payment was received, the salary was only about $20 an hour without contractual review for three years.

Ryanair paid for only four days of work a week, though on the fifth day, Growcoot was expected to be on call to arrive within an hour of being notified, and these standby days were unpaid unless she was actually called in.

Growcoot recounted an incident when she was on standby and received a call to come in at 4 a.m. to work on a flight departing from Liverpool to Dublin. She paid about $15 for a taxi to the airport because public transportation wasn’t running at that hour. When she arrived, she was informed that the flight had been cancelled because too few passengers were booked on it, information that would have been available to the airline prior to calling Growcoot in. She claims she was then sent home without payment or so much as an apology.’

This is not necessarily the worst case (but it’s pretty bad); it’s just that this found its way into the House of Commons.  I leave you to imagine how our health services could be reconfigured into the Ryanair way.

So a management which depresses wages, trashes working conditions, opposes collective bargaining – all to pump those quarterly returns and keep the shareholders happy (shareholders who, by and large, have no interest in how the company is run as long as it produces dividends); this is the health service that Ed envisages.  Of course, if both public services and the private sector were run in this fashion, the economy would collapse.  But Ed has a mission.

The problem though – for the rest of us who believe in a strong, efficient and capable health service – is that the Eds of the world can point to a number of inefficiencies in the health service.  They use these examples in a selective manner to argue for privatising public services.

That there are inefficiencies in the health service shouldn’t be surprising.  After all, we have had decades of a two-tier health service with high levels of private profit which create perverse (and expensive) incentives; a health service which was subject to weird experiments such as co-location; a health service which was politically managed by parties who were either indifferent, and sometimes hostile, to service quality and equity (remember: for years Fianna Fail and the PDs were in charge).

We are witness another experiment in privatising health services.  In the Netherlands, they have introduced a competitive private insurance market, whereby people are required to purchase a health plan from private providers.  This was intended, a la Ed, to introduce efficiencies through private markets.  And what has happened?

In the Netherlands, health expenditure has exploded.  Since 2000, health spending in the EU-15 rose by 20 percent (measured as a % of GDP).  In Ireland, it increased by 33 percent.  In the Netherlands, it has increased by a whopping 71 percent.

The Irish health service will face serious challenges in the future:  a rising age demographic, the need to invest in primary and community services, the dangers of increased ‘life-style diseases’ (e.g. obesity) and the need to rationalise services throughout the country.  Ed has his vision.  For progressives, what are our starting points?

Let me suggest one.  You start with those who are knowledgeable about how the service is run – the defects, the shortcomings as well as ‘what works’; you start with the employee.

Employee-driven innovation is pursued by the more successful public agencies.  It accepts that one of the best ways to improve the quality and efficiency of a service is to involve employees in the management of that service.  In other words, employees are the ‘innovators’.  If you want, employees are the ‘entrepreneurs’. Another way of putting it is that employees are the ‘reformers’.

Let’s look at a couple of examples of ‘employee-driven or ‘bottom-up’ innovation.  From Danish State RailwaysDanske Statsbaner (DSB):

‘In DSB’s train maintenance unit technicians and service staff undertake daily repairs and maintenance work on trains. Employees work in self-managing groups. Instead of responding to requests from an operations manager, the workers now make joint decisions regarding when and where to make repairs and how to shunt the trains.  Since the introduction of self-management the planning of repairs and maintenance has improved. One example is that the shunting of the trains can be adjusted more easily to changing tasks on different trains. This has resulted in increasing the time that the trains are in service by approximately 20 per cent.

This increased autonomy means faster and better-qualified decision making, with the result that the repair and maintenance process is now more efficient. The philosophy behind this initiative is that self-management and increased autonomy enhance both productivity and job satisfaction. By contrast, DSB’s previous hierarchical and formal work culture was an impediment to innovation and employee involvement.’

Interesting – ‘self-management’ leads to higher productivity, an improved service and ‘better-qualified decision making’.  That’s a long ways away from the treatment of Sophie Growcoot in Ryanair.

Here’s another example from a public sector trade union in Sweden, Kommunal, which established a new innovation model, Kom An.  This model involves organising workers into small groups to produce proposals for change, improvements, productivity gains and savings:

During the 1990s, Stockholm Water, a municipally owned water supply and sanitation business, had to improve service quality and reduce costs simultaneously, faced with international pressures from rising environmental standards and global competition.  Recalling the early days of his union’s change of approach, (an official) said: “Faced with demands from employers for cuts in public services or privatisation, we realised that just trying to refuse changes is not very constructive, especially as some of the accusations of inefficiency in the public services have definitely been true. In fact, we had for many years stressed that the traditional hierarchical organisation of work in local government administration must inevitably be inefficient if it does not involve the knowledge and experience of the employees. So we started to develop a model to build more efficient, non-hierarchical organisation by involving the employees, with the aim of saving money without making people redundant”.

The opportunity to try out that approach came first in a town called Malung after the municipality there began to draw up plans to reduce staffing and contract out some areas of service to save money. Before going ahead with their plan, the local politicians in Malung agreed to give the union the chance to show what could be achieved in partnership with the workforce and to allow them enough time to produce results. “When we got the chance to test our ideas in practice, in Malung back in 1991, the municipality’s goal was to decrease costs by at least 10% within three years. We managed to save 10.5% in the first year.” The savings are made by focusing very directly on costs in a process in which quality improvements are also identified.

So, savings targets are exceeded and quality improves – because workers are involved in the management of the services they produce.  But this shouldn’t be surprising. The benefits of employee participation in management have been well documented both in Ireland and abroad (links to the National Centre for Partnership and Performance don’t exit since it was abolished – here’s  a link to one of the reports – which show that unionised workplaces high levels of employee participation have the highest productivity).

All this means increasing democracy – workplace democracy, economic democracy. An interesting insight, in regards to fighting inequality, comes from Kate Pickett, co-author of The Spirit Level:

‘Forms of economic democracy, such as employee ownership, employee representation on boards, employee share ownership, mutuals and cooperatives tend to reduce the scale of income inequality and help equality to become more embedded in a society – these are more long-lasting cultural changes than can be achieved through tweaks to the tax code.’

So campaigning for employee-driven innovation and workers’ participation in management can also be a tool in fighting inequality.

But in Ireland we do things differently.  In Ireland, Governments do not engage in reform. They drive down wages, drive down working conditions, and drive down policies through traditional, hierarchical management structures.  They hammer the reformers, the innovators, the entrepreneurs.  It’s an old model; it’s an unfit model. It’s Ed’s model.

Interesting that a group that styles itself as a ‘Reform Alliance’ provides a platform for spokespersons who are content to repeat the same old mantras:  cut spending, cut wages and cut working conditions.   But whatever they come up with, the challenge for progressives is to provide a concrete and exciting alternative.

And that lies inidentifying workers for what they are – reformers, innovators, entrepreneurs.  In the public services it is not about waiting for the Government or ‘management’ to eliver this common sense approach.  Workers themselves can establish a platform to put forward real ideas about how to reform public services into the best-quality, most-efficient in Europe, both a policy and oeprational level We need a lot of whistles blown; we need a lot of new ideas.

Otherwise we’ll end up with Ed’s public sector.  And the only escape will be to take one of those cheap flights to a country that does thing in a different and better way.


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One Response

  1. Cian Ó Concubhair (@CianOConcubhair)

    January 31, 2014 1:54 pm

    Unusually for RTÉ, they managed to get an actual subject-specific expert to challenge Mr Walsh on his claims about the “Stockholm Revolution”. Prof. Charles Normand, Edward Kennedy Professor of Health Policy and Management in Trinity College Dublin, demonstrated Walsh’s lack of competence in the area of Health System Management, as well as his unquestioning ideological biases. See Today with Sean O’Rourke from Tuesday Jan 28th: