So much of what these days is done in the name of management is idiotic (almost anything foisted on the public sector), unpleasant (‘this is strictly a business decision’) or just plain gross (Bob Dudley and his bonus – partly for meeting safety standards, for God's sake) that sometimes it’s really hard work being a business optimist. So when a good news story turns up, it’s a cautious pleasure. Two, and it’s cause for celebration.
So here are two companies – ‘positive deviants’, we might call them – that have succeeded by doing the exact opposite of most of their mainstream rivals: really putting their customers first, and trusting their staff to do the right thing. Each flourishes in a sector famous for high cost and deep unpopularity, thus proving that despite the excuses of apologists there is nothing inevitable about these two things: it's just that those suffering from them are probably (as above) dumb, self-serving or maybe just horrible.
The organisation you may not have heard of is Buurtzorg (which, explaining itself, is Dutch for ‘neighbourhood care’). Buurtzorg is the brainchild of Jos de Blok, a community nurse and subsequently health administrator who in 2006 was so disillusioned with what healthcare ‘reform’ in the Netherlands was doing to the quality, not to mention cost, of patient care (sounds familiar?), that he and a three others decided to set up a social enterprise to do the job properly. Ten years on, so successful is the vision that Buurtzorg now serves half the country’s home-care patients. Nurses have flocked to an organisation that reconnects them with their vocation. The original four have become 10,000, working in 850 teams that are entirely self-managing. From 2008, Buurtzorg was setting up 10 or more teams a month, a rate made possible, according to Blok, by the fact that the teams ran themselves without need for outside help, and were bureaucracy free.
Nothing has changed since, apart from size. Buurtzorg doesn’t do budgets and has no HR function. There are just 40 people, three or four dealing with finance, at head office, whose function is not to direct but act as service centre to the teams. Blok, CEO, is the only person with a management title. There is a corps of 20 peripatetic coaches available to dispense advice, primarily about teamwork, but they have no management authority or responsibility for results. In fact there is almost no ‘management’ separate from the front line: since teams run themselves, there is nothing much for central management to do.
On whatever level, the results of this lo-management model are startling. Buurtzorg has the highest patient satisfaction ratings and the lowest costs in the Netherlands, and has been the country’s 'best employer' for five years on the trot. Those three things are linked. Buurtzorg employs highly trained nurses and requires them to do what they are good at, which is helping people to live the lives that they want. In consequence (duh), its patients get better faster, consuming 40 per cent fewer care hours and much less medication, than others. In other words, Buurtzorg – and the country as a whole – are reaping the enormous ignored benefits of cutting off demand before it happens. The paradoxical and unanticipated outcome is that Buurtzorg has become a remarkably profitable non-profit. With better trained and paid nurses the unit cost of care is high – but because of the prophylactic effect on demand, the overall cost is far lower. Ernst & Young estimates that extending the Buurtzorg model to the the country as a whole could save €2bn a year, not counting the incalculable benefits to patients and nurses in terms of quality of life and work (motivation is all intrinsic; the company doesn’t offer incentives). Not surprisingly, political parties are eager for this to happen. Hello, anyone paying attention in the UK?
The second cause for cheer is harder to ignore, not least because it is a bank that has opened 180 branches in the UK over the last 10 years – more than one a month in a period that no one in the financial sector would call exuberant. Like Buurtzorg, the Swedish banking group Svenska Handelsbanken expands not by head-office say so but from the bottom up, when there is customer demand on the ground and bankers in existing branches who are eager personally to meet it. Handelsbanken aims to be more profitable relatively than the average of its peers, through serving its customers better at lower overall cost. Largely self-sufficient branches measure themselves on their cost/income ratio (a metric that High Street banks appear to have forgotten about, to their enduring competitive disadvantage), and customer satisfaction. When the group reaches its financial aim, a profit share comes into play, with the proceeds spread, equally, among all staff. The profit share has been paid every year since 1972. Like Buurtzorg, Handelsbanken is a budget-free and largely forecast-free zone. Apart from financial robustness, Handelsbanken also shares with Buurtzorg exceptionally high customer-satisfaction ratings (top in Sweden since 1989, top in the UK for the last seven years), decentralisation (‘the branch is the bank’), and an emphasis on individual decision-making and initiative in building long-term relationships with customers.
It’s a simple and potent combination. Note that the fact that both companies have radically simplified – or rather abolished – financial and planning controls (a bank that doesn’t do budgets!) is not a coincidence. Both are star exhibits in the database of the pioneering Beyond Budgeting Institute, which supports a network of advanced organisations developing more responsive and economical management models. Beyond Budgeting’s key insight is that ‘the budget’ is not only the major generator of corporate bureaucracy, it is also the scaffolding that holds the edifice (or straitjacket) of command-and-control management in place. So while getting rid of the budget removes a swathe of management overhead at a stroke, even more importantly it allows a completely different, low-maintenance management model to emerge. Centred on the business’s real needs rather than those of the accounting cycle.or the bloodsucking capital markets, this promises to be more resistant to disruption, uberisation or just decrepit old age than the rotten and conflicted present version, and thus gives the traditional corporation, composed of people and relationships rather than algorithms and one-night stands, a sporting chance of lasting until the second half of the 21st century. For that, let’s give them a loud cheer.