This is the transcript of Professor John Seddon’s keynote speech at the 12th Annual Health Conference held in Dublin, Ireland on 24th February 2016.

Thank you very much. Now, I notice it says on your agenda here that they call me the Marmite man; that people either love me or hate me. Well, maybe hate is too strong, but I certainly know there are some people that don’t like me and these are some of them:

the whitehall effect pictureI’ve learned that ministers don’t like to be told they are wrong.

The reason I wrote this book is because it doesn’t really matter who you voted for in the UK over the last 35 years, when it comes to public sector reform, they all believe the same things. In the health service in the UK, we have trebled our expenditure over the last 35 years and I maintain we’ve made the system worse because of the things we have done – things that ministers believe in – and I’m going to talk about some of those things today.

One of the big features of public sector reform has been industrialisation; that means things like call centres and back offices; big factories of service. This started in the private sector back in the 1980s when along came automated call distribution systems and people running financial services companies for example said “Oh look, you know what we can do here is we can take the telephone work out of branches and get rid of some of our staff that cost us £16,000 and go and hire people at £8,000 a year in the armpits of Britain, put them in call centres and give them the telephone work.” And if you do that, what you worry about is how many calls are coming in, how many people you’ve got and how long they take to do things. I call that the core paradigm for service management in industrial services and you measure peoples activity; you worry about how long they take on a call and how many calls they take and inspect their work and make them work to scripts…

The interesting thing is that whenever you do that, when you take service work out of a service and put it in a call centre and manage the work this way, you create more demand.

Demand goes up! Back in the 1980s managers running call centres claimed the unanticipated rise in demand was caused by customers liking the new telephone service – ‘they love us, they keep calling back’.

If you think that way – how many calls, how many people, how long do they take – what do you do when demand goes up? Hire more people – or bear down on them to work faster – or introduce an IVR ‘press 1 for this and 2 for that’, because it passes some of the cost of the transaction through to the customer. Or out-source the work to India. The focus is on managing cost. It’s the wrong focus.

The second major event in industrialisation was the creation of the back office. When I was a boy nobody used the phrase ‘back office’, but now we talk about it as though it’s normal. Well where did this come from? Like a lot of management ideas that aren’t very good, it came from America, a man called Chase. He said “here we are trying to sweat our labour in our service centres and the trouble is, the wretched customer keeps coming in and interrupting us, so what we’ll do is we’ll use the front office to find out what the customer wants; decouple the customer from the service, now we can send the service off to be done in a back office, where we can properly sweat the labour” and in back offices you find the same thing, that peoples activity is measured, but it also means that you can specialise the work, you can standardise the work and then worry about how much work is coming in, how many people have I got and how long do they take to do stuff. And of course, we like these places to work to service levels and standard times. That’s how we run these things. Well the same thing happens, whenever you do that demand goes up.

Now I call this ‘failure demand’ – that’s what it is – it’s not more demand, its failure demand, because the system doesn’t actually serve customers. Now people can get that idea quite simply and they think “well it must be the bloody people, they’re not doing the right thing, or it must be the procedures; lets change the procedures, make them do it right. Well no, it’s not, it’s all of the features of those designs.

Failure demand is caused by everything that we’ve done. If we separate the front office from the back office we create failure demand. Why? Well because the people in the front office are talking to the customer while the people in the back office have to work to rules. It’s a different view of the customer. If you bear down on the time people take to do things, you create failure demand, because some things can’t be done in the standard times. If you give people procedures and protocols and scripts and that kind of thing and inspect their work, they worry about sticking to that, which is not the same as serving the customer. If you specialise the work, you increase the number of handovers and that causes failure demand. If you standardise the work, its stops the whole system absorbing the variety of customer demand and that causes failure demand. So that’s the problem.

Now you might be thinking, well what’s this got to do with the health service? Well, we’ve done exactly the same things in the health service. In 1998 the labour government introduced the idea of NHS direct – let’s do health over the phone – and so they put people, Nurses, in 1998 on the phone and the same thing happened. Demand went up. People running the call centres crowed about the number of calls they were getting, as though that was a sign of effectiveness. It got to the stage where it was costing £25 a call, and so ministers decided to outsource it to the private sector, change the name to 111 and the cost per call had to come down to £7. That can only be done by hiring people who know nothing and giving them scripts. Now, so it’s more efficient isn’t it? But the question is “is it effective?” You see one of the things we know is they don’t measure is how many calls are resolved from the citizen’s point of view? We know anecdotally that an awful lot of these calls get passed on to other transactions, so people we get told “go to A&E”, “go to a pharmacy”, “go to a GP”; well if you increase the number of transactions, you’re increasing the cost of a service, so by focusing on efficiency, we’ve undermined effectiveness and its effectiveness that will actually drive efficiency. So we know we’ve increased the number of transactions, we know we’ve increased the volume of failure demand; we know we have many incidents of ambulances being sent out unnecessarily and we’ve had examples of scandals ever since we started doing this, where people are not diagnosed or wrongly diagnosed, so lives have been put at risk; some people have died and we’ve even had a recent example where an operator in 111 was so distressed that she committed suicide. Imagine what it is like in this kind of environment. Someone with worries is talking to someone who can’t listen but has to go through the script, filling in the boxes. If you care, as you should, about designing a service to be perfect how often do you think you’ll even get close?

Health service managers don’t understand this problem. They believe, as politicians do, that demand is rising and so what they do is set out to manage demand; they manage demand through eligibility criteria; thresholds for treatment; rationing. Well, all of these things create more failure demand. I mean, do you imagine that if someone isn’t eligible, or doesn’t meet the threshold for a service because they’re not bad enough; do you imagine they get better? Or do they come back in a worse state and consume more resource?

So now here’s one of the things that really irritates the ministers and everyone in the Whitehall machine when I talk to them. You see, they all believe that demand is rising and I say “where’s your data?” – they always look uncomfortable. Because I study demand, and what I’ve learnt is demand is stable. And what I’m talking about here is the original demands people make on the health service, so we’ve studied demand into outpatients, we’ve studied demand into acute hospitals and social care and in every case the original demand is stable, what is rising inexorably is failure demand because the system doesn’t work. What’s more extraordinary about this is that every time people re-present, we treat them as though we don’t know who they are. They have to go through all the same assessments, procedures and so on. It’s an episodic system, we treat failure demand as though its new demand. Costs rise because the system isn’t working.

Of all of the money that we spend on public services, a very large proportion of it goes to broadly what I would call people whose lives have fallen off the rails; so we’re talking here about care services, health services, people who have got problems with families, domestic violence, drugs, alcohol, whatever. Now you would imagine wouldn’t you, in a civilised society, that if your life falls off the rails and you put your hand up for help from the state, that someone would come along and help you. Well that’s not what happens. What happens is, you can have as many as a dozen or more people visiting you, filling in their own forms, looking at you through their own specialist lens, looking at you from the point of view “are you for us? Should we help you?” They are worried about their thresholds and their budgets; they can meet their activity targets if they close your case and refer you on and that’s what happens. Eventually you might get somebody who thinks you’re for them and they’ll give you a service. This service has being commissioned, because the ministers want markets and because the service provider has to bid on price the service has to be standardised, otherwise how can you compare a price? So commissioners go and buy the lowest price and so we give these people a standardised service and guess what? It doesn’t meet the variety of demand, so many people find that they haven’t been helped.

Now you think about that. All of that activity is costing us money and its doing very little in terms of effectiveness. You often find that people who have been given a service and it hasn’t helped them, for example, you might have someone who’d been given a parenting programme or drug programme and they re-present in the following year and they go through all the same assessments again and they end up being offered the same programme, and if they say “oh, well no I tried that and it kind of didn’t help” then they get labelled as being a ‘difficult person’.

We’ve been redesigning services for people whose life falls off the rails and this is how it works. You need to understand demand in a geography. It’s not difficult to do, because everyone has got their computer systems and you can find out in this geography who is making demands on which services. But it is vital that you understand this demand in citizen terms. Knowledge of the nature of the demand dictates the expertise that you need in your team to go and help these people. Now what happens then is that when people place a demand on the system, someone goes straight out to meet them; regardless of the demand. There is no threshold, you make a demand, someone comes straight out to meet you and what they are interested in is understanding, first of all, is your ‘need’ as you would articulate it. Secondly, having understood that, your context, what’s going on in your life, in your family, in your community, or whatever it is that’s affecting you. Having understood your need and your context, then the next thing to do is to help you establish what it is that would be, for you, a good result. What do you need to live a good life in your terms? Or, have a good death? Having established that, now, we can look at, what is it that this person can do to take responsibility in achieving that end? And then and only then determine what further support they need from their family, from their community, from the voluntary sector, or from the public sector, to help them achieve their end and only the things that are required are provided. What happens is quite amazing. Lives often get quickly put back on the rails. The cost of the service falls dramatically and most important of all; demand falls. Think about that, demand falls; happier people, happier families, communities. Isn’t that what public services ought to be about?

So demand is the big lever for understanding and designing effective public services. When we established the health service, back in the 1940s, a lot of the demands that it was designed to service were things like acute infections, accidents, people who needed surgery. Let’s call this ‘fix me’ demand. When you study demand today, you find as much as 85% of demand into the health service also includes what we might call ‘help me’ demand. 85% of the demand is both help me and fix me. By ‘help me’ I mean psycho-social, contextual, issues; things like obesity, drugs, family breakdown, and so on.

When you take a big picture approach to understanding what is happening to demand, you learn that in hospitals 5% of the patients consume as much as 54% of the unscheduled beds. In GPs surgeries, 8% of the patients consume as much as 40% of the GPs resource. Now commissioners sit above this and they’re excited about the fact they’re reducing unit costs, but worried about the fact that the volume of activity is always rising – they can’t see what’s going on. Managers… they’re looking at their targets and they’re meeting their ambulance targets, their A&E targets, their waiting times; they see unit costs going down, they see length of stay going down and in their world; if they’re using the RAG status, everything is Green. But when you study these systems at the level of individuals going through them, which you must, you learn that the truth is the world isn’t Green, its Red… So for example, you find one person over 63 days, had eight visits to A&E, six days in hospital consuming 44 nights, had 13 tests, 32 assessments, including nine disciplines. Managers can’t see that.

They can’t see the big picture. The A&E target drives more demand into hospitals. It’s interesting when you study it that 52% of people being sent through to hospitals from A&E occur in the last 10 minutes of the A&E four hour target and most of these people stay for fewer than three days.

In the NHS managers are obsessed with improvement. We’ve had more improvement activities in the NHS in the last 35 years than you can shake a stick at. Managers spend their time reviewing their processes and pathways; trying to reduce their activity, because they think activity is all about cost. It’s a mistake. You know, if your processes and your pathways are full of failure demand this is not going to improve anything. They worry about standardising activity. Well that will stop the system absorbing variety, so that’ll create more failure demand. They employ strategies and tactics for getting rid of ‘bed blockers’ as they call them. It is absolutely the wrong thing to do; it will ensure people are sent away for the wrong reason.

Let me tell you of an example of how to dissolve this so-called problem. Working in stroke care, leaders studied demand to understand peoples’ need and context, understand the things that I talked about before. If you design the right service for every individual that comes into stroke care the consequences are that the service improves and the costs of stroke care fall – they were halved in this case – and the number of beds utilised dropped by 30%. There’s the story you see: effectiveness means managing value; doing the right thing for the patient; not managing cost.

Another example of managing cost is that managers are obsessed with passing doctors work to nurses and nurses work to technicians.

If you leave with one clear message from today it should be this: If you manage costs, your costs will go up!

Now, here’s the good news. The good news is that Whitehall knows that it would make sense to integrate health and social care. We’ve had copious reports extolling the virtue and necessity of integration. Well that’s the good news. The bad news is how Whitehall is going about it. Whitehall says ‘we want you to integrate your services and you can have some money for doing it’. BUT, you can’t get your money until Whitehall sees your plan. Whitehall talks about ‘devolution’, it is devolution with a straightjacket. The people in Whitehall think they know best and to get ahead with integration you have to show them the things they want to see.

You’ve got to show your new structure and your governance arrangements. Gosh! Governance… There’s a new word in the management lexicon. It’s supposed to be about control, but you see an awful lot of nonsense written about governance and it’s to do with Whitehall seeing you use all the modern jargon. You can comply with the jargon and have no idea that the way you are working ensures you have no effective control.

They want to see your risk assessment. Well here’s another recent fad, another stupid activity. I’m sure you’ve all done this: we spend loads of time, sitting in a room, discussing what could go wrong and the fact of the matter is we won’t have a clue about what’s going to happen next week.

To ask what could go wrong; the risk question; is a stupid question. We should ask the knowledge question “what does go wrong?” and if you ask that question and study your operations, as I’ve been describing here, you’ll learn that there is plenty going wrong and thus plenty of scope for improvement.

You have to write down all your policies and the services that you’ve planned. Now when they’re planning services what they do is they use what I call ‘supply data’, these are the number of things we did last year; so therefore we’re going to need that kind of number. But they haven’t understood the effectiveness of the things they did last year. In these plans they have what the government calls ‘must dos’ and so they want to see plans for the services that they’ve been panicking about because there’s been bad press. So they want to see your plan for dementia services, for mental health services and for learning disability services. Well you know, this is interesting, I was talking yesterday to one of my colleagues working in mental health and he said to me, “when you study demand into mental health, it’s not much different to the demand that we’re seeing when we study what we call ‘people whose lives have fallen off the rails’” and he said “I’m not sure we should call this mental health, because there are very few incidents of psychosis, what you find is lots of people whose lives have literally fallen off the rails and to treat them as though they are mental health problems sometimes stigmatises them and they don’t like that”.

Another ‘must do’ Whitehall wants to see plans for, and this is most extraordinary, is how you will return the system to financial balance. That’s government speak for ‘get the bloody costs down’.
This makes me angry. NHS leaders are being obliged to conform with directives that won’t work and will drive up costs, and then they are held accountable for cost-reduction. Outrageous. Who should be held to account?

And there’s more: you’ve got to have the targets, you’ve got to have the specialisations, you’ve got to have the activity management; treating activity as cost and basically, integration often means no more than sticking all these services in the same building, but they’ve got the same system conditions that are getting us into trouble today. It isn’t going to work. I explained the problems of fragmentation and the nature of demand to our secretary of state for health, Jeremy Hunt, and he said he agreed with my analysis but not my conclusion. He said integration will be achieved through building a common computer system.

I know he’s wrong. This won’t work. This is trying to do the wrong thing righter. Costs will only rise and the most incredible thing is, we don’t need money… we don’t need money. The health service has got more than enough money. So here’s the right thing to do and it goes back to what I described earlier:

If you’ve understood demand (you’ve got to study demand thoroughly and in citizen terms, not what-we-do-with-it terms); you’ve got to establish what kinds of demands are stable and what we’ve learned is most of them are. What kinds of demands are predictable – very important – because that will tell you what expertise you need in the frontline of your service. These people meet the people presenting with their demand, and they become the people who will provide continuity throughout the cycle of care. If any expertise is required that doesn’t exist in those teams, because it’s much more specialist, then you ‘pull’ that specialism to the patient – you don’t pass the patient on.

All of the measures in these designs relate to the purpose of the service from the patient’s point of view and what you find when you do this, is you massively improve the service, increase your capacity and you find that demand falls. And this is no pipe dream. Unlike Whitehall’s ambitions it is evidenced.

Much better service at much lower costs; that’s what ministers want, that’s what we all want, don’t we?