Feature / Take your partners

How many financial statements really reflect underlying performance? This question started a transformation in the finance department at one NHS trust, as Duncan Orme explains

Nottingham University Hospitals NHS Trust has been changing the way its financial management team works by adopting a business- like approach. This reflects a more commercial culture and an attempt to create business partners rather than traditional management accountants.

New recruits from the commercial sector – with experience in companies such as Saint Gobain, Boots and Specsavers – have helped to reinforce this change in culture.   

Business partnering means providing financial support for directorates and service lines to design and execute business strategy. It means actively helping the business to plan, achieve and exceed revenue, cost, surplus and investment return performance targets. And it requires going beyond simply reporting actual versus budgetary performance.

Individual roles have not been relabelled nor rebanded, but accountants have been urged to rethink their approach.

The basic change in mindset is to recognise that they provide a finance business partner service to customers, rather than just creating the finance budget report. This service includes stewardship, innovation, leadership and strategy. Specifically, each business partner needs to:

• Ensure the stewardship of assets through adherence to standard financial instructions and schemes of delegation
• Become a catalyst for service improvement and innovation, stimulating changes through the provision of patient-level cost information
• Provide financial leadership, delivering service line reporting information to support decision-making
• Act as a strategist, interpreting the business direction of the service into financial forecasts and risk assessment.

A fundamental premise of business partnering is knowing the customer and understanding their needs. Accountants at Nottingham undertake service line leadership training – a course also used at the trust to provide clinical leaders with more commercial skills (shortlisted for this year’s HFMA Havelock Training Award). Course participants are asked to identify their customers and whether they think they would be rehired by these customers.

Finance departments have many customers, including boards, management and clinicians.  And while customer surveys as part of annual internal audit provide some feedback on quality of service, it was felt they did not provide a real way of adequately gauging overall customer satisfaction. A new approach was needed. Borrowing from Fred Reichheld’s work on The ultimate question and net promoter score the trust developed its own question:

How likely are you to recommend your budget statement as reflecting the underlying business performance of the directorate?  (score 1-10)

This was then followed up by:
What single thing would you like to see improved next week/month?

Only scores of nine and 10 equate to a customer recommending the statements. The trust started out by asking the finance team about the statements they were producing. Answers were illuminating, with lots of plaudits for timeliness and accuracy, but many managers less sure the statements really reflected underlying performance. The second question was used to identify weekly improvements until the department was ready to unleash the question on its customers.

Managers welcomed the chance to feed back, especially in a climate when new approaches of margin accounting and service line reporting were being implemented in the monthly budget statements. Accountants’ focus transferred from traditional variance analysis to understanding how margins could be improved.

For a few months there was some debate on overhead apportionment. But this was quickly replaced by a sharp focus on the drivers of financial performance and on the financial information provided through service line reporting and patient-level costing. The approach places a much greater emphasis on robust cost data and cost analysis and directorate finance teams are encouraged to involve the costing accountants. However, this is a small resource, so teams lead on their own costing improvements.

For example, some directorates did not understand their theatre charges. In response, the trust’s 50 theatres have moved from being charged as an overhead or indirect cost to being billable items and have started to tackle issues such as charging for theatre down time.

NHS finance managers need to go on a journey from management accountant to business partner (see table). Nottingham has started this journey. We make no claims to have the definitive model, but we are excited by what would appear a more productive, interesting and rewarding approach to providing financial expertise and knowing our business.