3. The period after the private equity intervention
The private equity intervention is completed. The works council involvement at an early stage in the process now pays off. In the actual transition of ownership the works council’s trust in top management supports creating the new deal with the PEF. Much to everybody’s surprise, the first 12 months after the take over nothing really changes. After a year one of the board members makes use of an early retirement arrangement and the vacancy is filled by a top manager connected to the PEF. This manager has prior experience in a US private company. As soon as this person is appointed things are starting to change rapidly. A new performance management system, based on General Electric’s Six Sigma system, is introduced to increase efficiency, improve service quality and stimulate innovation. The human resource practices linked to this new performance system include:
● training and development of nurses aimed at improving productivity (more clients per hour) and increasing customer satisfaction scores;
● individual scorecards and team scorecards with weekly and monthly outcome measures such as customer satisfaction, employee absence rates, productivity outcomes and peer evaluations of job performance;
● bonuses for excellent teams up to one additional month pay for every team member. At the same time, some major reorganisations are planned to make drastic cutbacks:
● all hospital volunteers are dismissed, because in fact they are old and need a lot of care themselves, which distracts the medical professionals from their patients;
● the level of middle management is removed. The board now directly speaks with medical professionals;
● new and financially attractive forms of medical service are introduced, such as an influenza clinic and a stop smoking clinic;
● all contracts with interim-managers and external advisors are terminated;
● all temporary contracts are terminated and those workers can only continue working for the hospital when they work for a special flex company that employs contingent workers in healthcare;
● Multiple disciplines within the hospital are labelled as non-core business activities (for example psychology) and these functions and departments are outsourced.
For the healthcare sector, the hospital uses unconventional methods, a top-down management style and private sector competitive strategies. This causes conflict with the works council, with other hospitals and even with the local government.