Critical Role of Human Resource Management in the Cost, Quality and Productivity Equation
New Horizons in Management series
Edited by Peter Spurgeon, Ronald J. Burke and Cary L. Cooper
Chapter 2: Productivity in health care
It may seem surprising, but up to 1998 the entire value of the output created by government spending on the NHS was considered (by convention) to be the same value as the inputs that created these outputs. The volume of resources – capital and labour, plus goods and services – that went into the NHS was taken to be the volume of output created by that service. In such a world where outputs=inputs the ratio of the former to the latter – that is, productivity – would be forever stuck at unity regardless of any improvement in the way the NHS actually delivered its services. The convention that outputs=inputs was neither a willful slight to the NHS concerning its capacity to change its productivity, nor a passive oversight; the same assumption was made across all government spending and activity, not just in the UK but in most other countries. Some countries assumed that government output grew at the average rate for all nongovernment output. Whatever the assumption, the problem had been a practical one: the difficulty in devising and measuring the output of much of what the government produced through activities and services it controlled or funded. Getting to grips with this measurement problem was important not just for the individual sectors of the public services but also for the economy as a whole. Government spending accounts for a large chunk of GDP and if the assumption that outputs=inputs was wrong (and that there was for example similar productivity growth in the public as private sectors) then the measure of overall GDP growth would be an underestimate.
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