02 May 2018
Has the law on the uniformity of top income (WNT2) improved healthcare in the Netherlands?
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After three years, salaries of healthcare leaders (with statutory responsibility) have been reduced and the effects of the law are starting to be reflected in the composition of leadership teams in the Dutch healthcare sector.
We spoke with Michel van Schaik, Director of Healthcare at Rabobank, on his view of this rather controversial law and its effects on the potential to improve the healthcare sector.
What is the general view at the board / supervisory level of WNT2?
Commissioners, in general, are having trouble understanding the rationale behind WNT2. Why did legislators go this far with standardising the income of statutory leaders?
In general, it is now felt that it has become quite hard to find good candidates for statutory roles. Feedback from potential candidates shows that they are not willing to accept the risks associated with the statutory roles for salaries at this level.
A risk is seen as the exposure to damage if something goes wrong. If you are talented and you could be appointed to a statutory role for a WNT2 salary, and something happens that might be out of your control and it gets you fired, then the compensation package is pretty bad. There is also the danger that you will be called out on every social media channel and in every newspaper. This means you will almost have to be financially independent before you accept such a role.
How has WNT2 affected the influx of talented individuals for roles at healthcare organisations?
In the short term, those leaders that use the transitional arrangement (a three year period in which salaries are gradually reduced) will tend to remain where they are now. This leads to fewer career moves and succession to board level.
If a talented administrator can find a more attractive job somewhere else, the decrease in pay is a major consideration. Besides the immediate salary effects, the law also affects the dynamics of the job market.
The job market has found its pace again in a lot of ways, and talented people will decide ‘should I set foot in this [healthcare] sector or should I choose a job outside of the sector?’ This will not only be about money but also how the healthcare industry is portrayed. If it is depicted in the media in a continuous negative way, and its leaders are portrayed as losers and greedy, then it will not make it more attractive.
What kind of leaders are most needed for administrator-level roles in healthcare?
As for the current group of leaders, healthcare now needs a lot more younger people: age is a factor, after all. These should be more subject-matter-driven people. Healthcare needs to transform with quality considerations as the leading principle. We know now, from literature, that good healthcare is also affordable healthcare.
If you are talking about great healthcare, then it requires even more innovation, better use of technology and better use of the ambition to improve. In other words, more of the vision of professionals. These should show more leadership and be less conservative.
So I am all for more subject-matter driven professionals, who also have the right competencies and skills concerning leading an organisation. Besides that, it would be beneficial if there is a good balance between men and women. These could be doctors or nurses, or people with a non-Dutch background. This is often ignored - more diversity at top level.
How has WNT2 affected the potential for improvement of the healthcare sector?
WNT2 delays the rather urgent potential for improvement of healthcare. We spend a lot of money on healthcare, and since these are public funds, we should want to do better. You see an enormous focus on the income of leadership teams, which takes up a disproportionate amount of time and attention. But actually, the decrease of these salaries will have a very limited influence on the total increase in healthcare cost. If we are willing to hire top talent who are able to fundamentally transform healthcare institutions, then for me these salaries could be double than what they are now.
I would argue that a more aligned compensation policy would transform our healthcare world with much more impact in terms of quality improvement and cost reduction, instead of not being able to realise our change agenda.
So it is my opinion that we are having the wrong kind of conversation. We as a bank believe that if we want to transform the provision of healthcare fundamentally, then we need very strong leadership and a lot of innovation power and entrepreneurship. I could show you a curve that shows that billions can be saved if we were able to do that better.
What holds back these much-needed developments?
Most fundamentally, a lack of political will. The will to define the change agenda is lacking, as is the urgency to change. As long as there is political support to provide more money to the sector because there are problems that are covered widely in the media, there will not be a lot of pressure from the political parties to innovate and transform, like we see in other industries.
Within the bank, we are now letting go one out of every four employees, because we see that our services are being digitised. If we don’t do that, then in a few years we will not be part of this industry anymore. In healthcare, we have many protective structures, such as laws and regulations, that are very rigid and obstruct transformation in the sector. The need to innovate is not urgent enough.
What developments in healthcare arising from WNT2 are you experiencing first-hand?
The number of doctors that can be attracted to statutory or C-suite roles is significantly smaller, hence the pool of available doctors with relevant experience is shrinking rapidly. This is because potential candidates do not want to see such a drastic cut in their income, and do not want to relocate to these positions anymore.
As Michel rightfully points out, the potential improvement of quality and cost performance in healthcare will be led by doctors, as they are most likely to drive change, and to get other professionals to follow in their quest for better healthcare at a lower cost.
The current group of managers in healthcare is now less inclined to become statutory leaders because the risk is much greater. You can be fired much more easily and you have a significantly higher reputational risk. The improvement in income related to the shift to statutory responsibility is not that great and does not attract enough qualified candidates. If you look at appointments of the last two years you will see two trends: fewer doctors and more young people on boards of directors.
These trends lead to a higher risk profile of a management board. Now, the supervisory board has to become more closely aligned with the managing of the organisation. Executives need more coaching from the supervisory board.
Also, the number of members in an executive board increases, because fewer candidates want to work that many hours for such a reduced salary. This is a major problem because the maturity and experience curve is much less deep compared to, say, five years ago. And lastly, senior people outside the healthcare industry have much less of an appetite to enter healthcare.
Why should boards be so ambitious?
In the Netherlands, the quality of healthcare and healthcare management is quite good, but there is a lot of room to do better. This is the responsibility of management.
We, at Odgers Berndtson, worry that doing better is something that is increasingly hard to achieve. We see that attracting young and talented people for director roles has been a success, but we worry this will not be sufficient to transform the industry, keeping healthcare as good and affordable as possible.
Michel van Schaik is Director Healthcare at Rabobank, the Netherlands’ second-largest bank with regards to assets, and a member of the supervisory board of the Institute for Positive Health. Furthermore, he leads the Commission Healthcare at the Dutch Banks Association (NvB), is a board member of World Child Cancer, chairman at the Commission Healthcare of VNO-NCW and a distinguished lecturer at Nyenrode Business University.