George S. Patton 1885 –1945 Making things happen One of the most basic things that a manager has to do

354 point where they began to think like him – to the extent that, in a sudden, unplanned engagement, they could be hoped to react exactly as he would himself. Like any great leader, Nelson had much strength. Perhaps his most defining characteristic, one which he demonstrated throughout his career, was his outstanding personal bravery and his habit of leading from the front. Nelson was always in thick of it. He had lost an arm and an eye on separate occasions leading attacks on the enemy on shore. He never asked his crew to do anything that he would not do himself and, as a result, he could be certain that they would follow him.

3.6 Bringing people with you

Bringing people with you is not one skill, but a set of skills. Some managers bring people with them because they are good speakers. They may or may not be good at motivating people face to face, but if you put them on a podium, or behind a microphone, then they are able to inspire an audience to follow them to the ends of the earth. Others achieve the same ends, more painstakingly, through their actions. They keep on doing the right thing, consistently, until people can see the intention that runs through their actions. In the wider context within which an organization works, managers must also try to bring along their various constituencies – customers and suppliers; the local community; the media; the industry – without them having bought into the plan in the same way. These constituencies may be brought with you by a combination of factors, including appeals to self- interest and common interest. They may come with you, but only because there is something in it for them. 3.6.1 George Washington 1732 –1799 George Washington, the first President of the United States, led the revolutionary army that was to defeat the British Empire, and turned the 13 east-coast colonies – from Massachusetts and New Hampshire in the north to South Carolina and Georgia in the south – into the 13 ―United States‖ of America Ellis, 2005 . A man of commanding personal presence, Washington came to personify the struggle against the British. As commander-in-chief of the Continental Army, as it was known, he fought a dogged war for eight long years, suffering some heavy defeats but also some occasional victories of great psychological significance. Washington seemed to hold his army together by sheer willpower and force of personality. Washington at first declined a salary 25,000 per annum on the grounds that his was a public service that should not be rewarded, but then accepted the salary so that the future presidency should not become a rich man‘s preserve. He opposed the idea of party politics. He reluctantly accepted the second term of office to which he was elected in 1792, and then refused a third, establishing the practice that would become law when the 22nd amendment was passed in 1947.

3.7 Making things happen One of the most basic things that a manager has to do

is to make things happen. As a junior manager, even a middle manager, it will do you no harm at all to be seen rolling up your sleeves and sorting out whatever mess you may have inherited: whether it be completely revamping the training program, overhauling the bonus system.

3.7.1 George S. Patton 1885 –1945

Patton once said , “―I don‘t want to get any messages saying, ‗I am holding my position.‘ We‘re not holding a goddamned thing. We are advancing constantly and we are not interested in holding onto anything, except the enemys balls. We are going to twist his balls and kick the living shit out of him all of the time. Our basic plan of operation is to advance and to keep on advancing regardless of whether we have to go over, under, or through the enemy. We are going to go through him like crap through a goose; like shit through a tin horn From time to time there will be some complaints that we are pushing our people too hard. I don‘t give a good goddamn about such complaints. I believe in the old and sound rule that an ounce of sweat will save a gallon of blood. The harder we push, the more Germans we will kill. The more Germans we kill, the fewer of our men will be killed. Pushing means fewer casualties. I want you all to re member that‖ Forty, 1996. George S. Patton was in command of the US Third Army in the lead-up to the Allied invasion of northern Europe in 1944, as the final effort to defeat Nazi Germany got under way. Patton believed above all things in training and discipline, in being prepared to meet the enemy. ―If men do not obey orders in small things, they are incapable of being led in battle. I will have discipline – to do otherwise is to commit murder.‖62 Patton trained his men hard and insisted on tight discipline: sloppiness, lack of alertness, and waiting in foxholes for the enemy to come to you – these were what got you killed. 3.8 Creating opportunities Creating opportunities is a different skill from that of successful delegation or of genuinely empowering team members. Once the team is empowered, they need chances that they can take, opportunities that they can exploit. A really good manager helps to create these opportunities – and a really well-run team eventually begins to create their own opportunities, which is when the whole thing really begins to take off. We all recognize this in sport. When a team is playing at its best, with every player making the best 355 use of their individual skills and playing at the top of their game, then opportunities start, as if by magic, to appear. The individual skills of one player create the opportunity for the next player. The cumulative effect of a number of small opportunities suddenly becomes one big opportunity. A coach can set out the general strategy for a team like this, and encourage them to play a certain sort of game, but even the best coach cannot plan for the precise opportunity that will win the game. Opportunities can be created in many ways. Building the right team is essential: highly talented individuals will bring opportunities to a manager‘s doorstep. Developing a really outstanding marketing idea can do the same thing: suddenly a particular image or a slogan incorporates the organization‘s goals so well that other things start to fall into place; apparently unrelated bits of activity suddenly make more sense from this new perspective; different departments suddenly come up with new ideas that fit neatly into the new perspective. Entering a new market or entering a market at a particularly well-judged time can do the same thing: suddenly opportunities are falling at a team‘s feet. 4 Conclusion Ancient leaders with Strategic Intelligence moved their followers to become willing collaborators. These collaborators tended to feel that they were participating in the creation of their relationship to their work. Erich Fromm 1947 emphasizes the connection between productive work and happiness. Effective leaders provided the opportunity for people to connect their work to their values. To do this they worked with both intellectual and emotional issues, knowledge of both the head and the heart. It took both head and heart to develop a philosophy of leadership and a philosophy of life. In short, it took leadership Intelligence to become a leader who is needed to win. References 1. Andrews, A. 1988. Management of change requires leaders with boldness and vision. Human Resource Management , 4 4, 12-15. 2. Bruner, E. M. 1994. Abraham Lincoln as authentic reproduction: A critique of postmodernism. American Anthropologist , 96 2, 397-415. 3. Ellis, J. J. 2005. His Excellency: George Washington . Vintage. 4. Ngunjiri, F. W., Hernandez, K. A. C., Chang, H. 2010. Living autoethnography: Connecting life and research. Journal of Research Practice , 6 1, 1. 5. Ellis, C., Adams, T. E., Bochner, A. P. 2011. Autoethnography: an overview. Historical Social ResearchHistorische Sozialforschung , 273-290. 6. Forty, G. 1996. The Armies of George S. Patton . Arms and Armour. 7. Gifford, J. 2010. 100 Great Leadership Ideas: From successful leaders and managers around the world . Marshall Cavendish International Asia Pte Ltd. 8. Goleman, D. 2006. The socially intelligent. Educational leadership , 64 1, 76-81. 9. Hesselbein, F., Goldsmith, M. 2006. The leader of the future 2. Soundview Executive Summaries, 28 12 . 10. Knight, R. J. B. 2005. The pursuit of victory: the life and achievement of Horatio Nelson . Basic Books. 11. Maccoby, M. 2007. Narcissistic leaders . Boston: Harvard Business School Press. 12. Mandela, N. 2008. Long walk to freedom: The autobiography of Nelson Mandela . Little, Brown 13. Sanders, T. 2006. The likeability factor: How to boost your L-Factor and achieve your lifes dreams . Three Rivers Press CA. 14. Semmel, S. 2004. Napoleon and the British . Yale University Press. 15. Sternberg, R. J. 2003. Wisdom, intelligence, and creativity synthesized . Cambridge University Press. 16. Topel, J. 1998. The tarnished Golden Rule Luke 6: 31: The inescapable radicalness of Christain ethics. Theological Studies , 59 3, 475. 17. Webb, E. 1915. Character and intelligence: An attempt at an exact study of character . University Press. 18. Zohar, D. 2012. Spiritual intelligence: The ultimate intelligence . Bloomsbury Publishing. 356 ASYMMETRY BETWEEN THE COST OF MEDICAL LITIGATIONS AND THE NUMBER OF MEDICAL LITIGATIONS Moshibudi J. Selatole, Collins C. Ngwakwe Abstract The impact that rising costs of litigations has had on many countries has seen society deprived of good quality health care and a substantial extra-expenditure in health budgets. The financial and societal costs of medical malpractice litigations have also been a growing cause for concern in the developing country of South Africa. This paper attempted to contribute to the knowledge of this problem in the South African setting by examining settlement costs of medical litigations in one province of the country over a 6 year period, and examining the relationship between these costs and the number of litigations. No correlation was found between the number of litigations and the costs of litigations, this indicates that, aside from the number of litigations, other factors are responsible for rising costs of litigation. The paper recommends that the department should continue monitoring the environmental costs of litigations for budgetary and management purposes; and the need to introduce an electronic integrated medical litigations reporting system, as well as tort reforms to curb the costs of the litigations. This work also calls for substantial further research in terms of what disciplines, what medical errors, and what circumstances greatly influence litigation outcomes. Keywords: medical litigations, litigation costs, medical malpractice, environmental costs, tort reforms, medical costs Turfloop Graduate School of Leadership, Faculty of Management Law, University of Limpopo, South Africa Introduction The recent years have seen the local press being inundated with reports of expanding litigation costs against the health care sector, particularly the private sector, corroborated by a medical indemnity insurance in South Africa, the Medical Protection Society MPS. The public sector seems to be catching up, with large litigation pay-outs to individuals by the state being reported. South Africa‘s health system has for many years lagged behind developed countries, e.g. USA, in suffering a great deal of financial loss due to medical malpractice. These spiralling litigation cases have however, led many to believe South Africa is on the verge of a litigation storm. In the context of the ongoing suboptimal economic climate, and the already ailing state of the public health care system, this added expanding extraordinary expenditure is of great financial and quality assurance concern. It is acknowledged that costs of litigations, which can be regarded as environmental costs, range from non-financial to financial, and include direct compensation pay-out and legal fees and indirect costs such as defensive medicine costs Kessler et al., 2006, risk management expenses, and others Mello et al., 2010. In the light of the highlighted increasing litigation costs in South Africa Seggie, 2013; Pepper and Slabbert, 2011, despite literature search and as far as the author is aware, no studies examining the cost of litigations against public health sector have been conducted. There are notions of unpredictability of the size of the settlement costs in relation to any litigation Sohn Bal, 2012, however the direct statistical determination of the relationship between the costs and the number of the litigations is hardly offered in the literature. Therefore, the objective of this is to examine whether any relationship exists between the costs and the number of litigations. The paper is organised in the following manner: section 1 discusses related literature; section 2 summarises the research methodology; section 3 looks at data analysis and results and section 4 at the discussion of the results; lastly section 5 concludes and submits recommendations 1 Related literature Recent local and international publications have highlighted the rising cost and number of litigations against the health care sector Alsaadique, 2004; Seggie 2013; Fenn et al., 2000, suggested actual reasons underlying this trend Holohan et al., 2005; Hamasaki et al., 2008; Moore and Slabbert, 2013; 357 Cavitz, 2013,, the implications and consequences Seggie, 2013; Medical Chronicle, 2012; Baker, 2011; Kessler, 2014, as well as factors that may help mitigate risks against litigations Boothman et al, 2009; Medical Protection Society, 2011; Berlinger, 2007; Mazor et al., 2004. Pepper and Slabbert 2011 made recommendations by suggesting ways that may assist to dampen the rate at which society sues the health institutions, and the manner in which pay-outs are made, citing several studies that also looked at legal reforms pertaining to litigations. Several papers have looked at the specific disciplines in the eye of the storm: the field of obstetrics and gynaecology and surgery Alsaadique, 2004; Jenna, 2011; East and Snyckers, 2011; Matsaseng and Moodley, 2005, as well as medical conditions that carry high risks Vukmir, 2008. Locally, one just has to look at local newspapers to see what litigation is costing the South African government City Press, 2013. Rising medical litigation costs is not unique to South Africa; Phillips et al. 2004 cite that in 2000 there were just over 16 000 paid claims against [private] medical healthcare providers in the United States of America with total payments of nearly 4 billion. Roberts and Hoch 2009 examined the relationship between medical malpractice litigations and medical costs in the USA and found them to be positively and significantly related, with estimates indicating that malpractice litigation costs account for 2-10 of medical expenditures. Mello et al. 2010 estimated that the USA medical liability system costs, including defensive medicine costs, amounted to 55.6 billion dollars, and 2.4 of the US total health care spending. In 1999 the NHS Litigation Authority in England closed 3 254 claims at a cost of £386 million. In 2004, Finland incurred total costs of paid compensation of €24.2 million under their no-fault compensation system, with 88 of the claims arising against their public health and 12 from the private sector Hirvensalo, 2006. Explanatory factors included technological advances that are expensive and improved life expectancy, which meant increased cost of care Bown, 2012; the medical discipline involved McAbee et al., 2008; the severity of the disability cited in Bhatt et al., 2013; as well as legal mechanisms of managing litigations in a country Hambali Khodapanahandeh, 2014; Sohn Bal, 2012, leading to the notion of unpredictability in the payment size related to any litigation. This has resulted in high medical indemnity insurance premiums Medical Chronicle, 2012 and a general impediment of patient access to quality healthcare because of practitioners neglecting risky fields Cline Pepine, 2004. However following placing a cap on compensation of medical litigations one tort reform model, some US states saw a decline in defensive medicine costs and a remarkable return of medical practitioners who had left and a reduction in medical malpractice indemnity insurance, as well as a better distribution of funds between lawyers and their plaintiff clients Legant, 2006. 2 Method, analysis and results This study is a quantitative survey of all medical litigation cases from all districts of a province in South Africa between the financial years 20082009 – 20132014. The research applied purposive sampling to target only those litigations brought for the 6 years, in order to give an estimate of the amount of expenditure from litigations for that period. The total sample was comprised of 372 cases. Data were collected from the department of health and treasury records. Approval was granted for access only to details of the closed settled litigations. The number of all the litigation cases and the costs of all the settled cases year by year, as well as annual budgets and expenditures of the department of health over the 6 year period were recorded. Data were analysed by descriptive statistical and correlation analysis using a Microsoft Excel electronic spreadsheet and the SPSS software. The main objective is to ascertain possible correlation between cost of litigation and the number of litigation; furthermore, the analysis also examined possible relationship between the number of lost litigations and the settlement costs cost of litigations. This is with a view to determining if other causative factors may aside from number of litigations, contribute to the rising cost of litigation. The correlation analysis showed that there is no relationship between the number of the total litigations and the settlement costs of the litigations. Neither is there any relationship between lost litigations and the settlement costs of the litigations. The analyses are shown in tables 1 – 4 and Figures 2 - 3. Table 1. Parametric Correlations Number of Litigation and Cost of Litigation No.of.Litigation Cost.of.Litigation No.of.Litigation Pearson Correlation 1 -.074 Sig. 2-tailed .890 N 6 6 Cost.of.Litigation Pearson Correlation -.074 1 Sig. 2-tailed .890 N 6 6 358 Table 2. Nonparametric Correlations Number of Litigation and Cost of Litigation No.of.Litigation Cost.of.Litigation Kendalls tau_b No.of.Litigation Correlation Coefficient 1.000 .000 Sig. 2-tailed . 1.000 N 6 6 Cost.of.Litigation Correlation Coefficient .000 1.000 Sig. 2-tailed 1.000 . N 6 6 Spearmans rho No.of.Litigation Correlation Coefficient 1.000 -.116 Sig. 2-tailed . .827 N 6 6 Cost.of.Litigation Correlation Coefficient -.116 1.000 Sig. 2-tailed .827 . N 6 6 Figure 1. Number of Litigation and Cost of Litigation Table 3. Parametric Correlations Lost Litigation and Cost of Litigation No.of.Lost.Litigation Cost.of.Litigation No.of.Lost.Litigation Pearson Correlation 1 .715 Sig. 2-tailed .110 N 6 6 Cost.of.Litigation Pearson Correlation .715 1 Sig. 2-tailed .110 N 6 6 359 Table 4. Nonparametric Correlations Lost Litigation and Cost of Litigation No.of.Lost.Litigation Cost.of.Litigation Kendalls tau_b No.of.Lost.Litigation Correlation Coefficient 1.000 .414 Sig. 2-tailed . .251 N 6 6 Cost.of.Litigation Correlation Coefficient .414 1.000 Sig. 2-tailed .251 . N 6 6 Spearmans rho No.of.Lost.Litigation Correlation Coefficient 1.000 .551 Sig. 2-tailed . .257 N 6 6 Cost.of.Litigation Correlation Coefficient .551 1.000 Sig. 2-tailed .257 . N 6 6 Figure 2. Lost Litigation and Cost of Litigation 3 Discussion of results and findings The study found that over the 6-year period, the department an average of 0.06 of the total expenditures in the department in litigation settlement costs. This is way less than the amounts reported to have been paid in other provinces City Press, 2013, and certainly a drop in the ocean compared to the billions of dollars and hundreds of millions of pounds paid out in medical litigations in the US and UK respectively. Mello et al. 2010 and Roberts Hoch 2009 reported that in the US, costs of litigations, although including some other costs other than settlement costs, amounted to 2-10 of health expenditure. Monitoring these costs of litigation environmental contingency costs has implications for future healthcare budgeting wherein it can be noted that less than 0.5 can be budgeted for medical litigation risk. According to the Public Finance Management Act of the country, these costs, although they will have to be budgeted for in the medium and long term, can be regarded as fruitless and wasteful expenditure. This refers to expenditure that could have been avoided had reasonable care been exercised South Africa, 1999. The result of the correlation analysis in Tables 1 - 4 show that there is no relationship between the total number of litigations and the litigation settlement costs; neither is there any relationship between the number of lost litigations and the settlement costs. This suggests that the cost of litigations have not necessarily been due to concomitant rises in the number of litigations, other variables may have played 360 a significant role in the rising cost of medical litigation. This finding supports literature findings that other issues are at play in terms of the rapidly rising costs of litigations. The type of case involved plays a significant role. It has been stated that certain medical disciplines such as obstetrics and paediatrics attract very high litigation settlement costs. Within these disciplines there are certain types of errors or error outcomes or severity of disability Bhatt et al., 2013, such as obstetric errors giving rise to cerebral palsy in the child, that attract high costs. This study did not involve looking at which disciplines and what kind of errors were involved, however this is likely to have been the case. As inflation increases and cost of living, particularly cost of health care and equipment, has become too high, so must have litigation settlement costs. The traditional system of dealing with medical litigation in South Africa must also have played a role, assuming that there is currently competence of legal representatives and judges on medico-legal issues. Some countries that have reformed their legal Tort systems are able to put caps on the settlement cost, thus reducing these costs Sohn Bal, 2012. However, the implication of the lack of relationship between lost litigations and the settlement amounts is that every case will still need to be scrutinised and decided on its merit, and tort reforms such as a no- fault system may not be applicable to all cases. 4 Conclusions and recommendations The impact that rising costs of medical litigations has had on many countries has seen society being deprived of good quality health care and a substantial extra-expenditure in health care budgets. In an attempt to address this problem, calls have been made to put emphasis on patient safety, and most rigorously on law reforms to reduce costs and to encourage the notion that best medical care is not substantiated by a lack of medical errors. It is ironical that patients may not be patient anymore; it is also a reality that medical errors will occur, and that only where it is warranted compensation should be paid out to the injured. The financial and societal costs of medical malpractice litigations are also a growing cause for concern in the developing country of South Africa faced with deteriorating economic conditions and an ailing public health care sector. This study attempted to contribute to the knowledge of this problem in the South African setting by investigating this phenomenon in one province of the country. Although there were some limitations in terms of data completeness, estimations were still made possible. Litigations expenditures for the province amounted to an average of 0.06 of the department‘s expenditure over the 6 year period. It may not be a storm yet, but the province is definitely experiencing turbulence in terms of medical litigations. Of special interest, no correlation or relationship was found between the number of litigations and the cost of litigations using the correlation analysis, implying that the type of the claim involved, amongst a few other factors, may be of paramount importance. The study submits the following recommendations: In accordance with activity based costing accounting framework, the societal costs of litigations need to be closely monitored and allocated accordingly. To facilitate knowledge dissemination and learning, access to closed litigation cases and outcomes should be readily available to healthcare institutions and practitioners through an integrated database system at the medical professions governing body, the HPCSA. The state should look into tort reforms such as putting caps on settlement costs. This work also calls for substantial further research in terms of what disciplines, what medical errors, and what circumstances greatly influence relational and litigation outcomes. To paint a clearer picture of South Africa, research need to be undertaken in all the provinces of the country. References 1. Alsaadique, A., 2004. Medical liability: The dilemma of litigations. Saudi Medical Journal, 257, pp. 901- 906. 2. Baker, T., 2011. The Medical Malpractice Myth Large Print 16pt. [Online]. Chicago: University of Chicago. Available at: http:www.readhowyouwant.com . [Accessed: 19 th March 2014]. 3. Berlinger, N., 2007. After Harm: Medical Error and the Ethics of Forgiveness . Baltimore: John Hopkins University Press. 4. Bhatt, A., Safdar, A., Chaudhari, D., Clark, D., Pollak, A., Majid, A. Kassab, M., 2013. Medicolegal considerations with intravenous tissue plasminogen activator in stroke: A systematic review. Stroke Research and Treatment [Online] Available at: http:dx.doi.org10.11552013562564. [Accessed: 30 th June 2014]. 5. Boothman, R. N., Blackwell, A. C., Campbell, D. A. Jnr., Commiskey, E. Anderson S., 2009. A better approach to medical malpractice claims? The University of Michigan experience. Journal of Health and Life Sciences Law, 22, pp. 125-159. 6. Bown, S., 2012. Counting the litigation cost. MPS Casebook, 201, pp. 9-11. 7. Cavitz, A., 2013. Medical Malpractice: Liberty Exists In Proportion To Wholesome Restraint . [Online] Available at: http:www.josephs.co.za. [Accessed: 19 th March 2014]. 8. City Press Newspaper., 2014. [Online] Available at: http:www.citypress.co.zanews. [Accessed: 19 th February 2014]. 9. Cline, R. E. . Pepine, C. J., 2004. Medical malpractice crisis. Circulation, 1091, pp. 2936-2938. 10. Fenn, P., Diacon, S., Gray, A., Hodges, R. Rickman, N., 2000. Current cost of medical negligence in NHS hospitals: Analysis of claims database. British Medical Journal, 3207249, pp. 1567-1571. 361 11. Hambali, S. N. . Khodapanahandeh, S., 2014. A review of medical malpractice issues in Malaysia under Tort litigation system. Global Journal Of Health Science, 64, pp. 76-83. 12. Hamasaki, T., Takehara, T. and Hagehara, A., 2008. Physicians‘ communication skills with patients and legal liability in decided medical malpractice litigation cases in Japan. BMC Family Practice. [Online] 91. Available at: http:www.biomedcentral.com1471- 2296943. [Accessed: 26 th March 2014]. 13. Hirvensalo, E., 2006. Legislation covering medical malpractice in Finland. Journal of Bone Joint Surgery, British Volume, 88Supp I, pp. 13-14. 14. Holohan, T. V., Colestro, J., Grippi, J., Converse, J. Hughes, M., 2005. Analysis of diagnostic error in paid malpractice claims with substandard care in a large health care system. Southern Medical Journal, 9811, pp.1083-1087. 15. Jenna, A. B., 2011. Malpractice risk according to physician specialty. New England Journal of medicine, 3652, pp. 629-636. 16. Kessler D. P., Summerton, N. and Graham, J. R., 2006. Effects of medical liability system in Australia, the UK, and the USA. The Lancet, 3689531, pp. 240-246. 17. Kessler, D. P., 2014. Medical malpractice, defensive medicine, and physician supply. In: Culyer, A.J. ed. Encyclopedia of Health Economics. [Online] Amsterdam: Elsevier. Available at: http:www.sciencedirect.com. [Accessed: 25 th March 2014]. 18. Legant, P., 2006. Oncologists and medical practice. Journal of Oncology Practice, 24, pp. 164-169. 19. Matsaseng, T. and Moodley, J., 2005. Adverse events in gynecology at King Edward VIII Hospital, Durban, South Africa. Journal of Obstetrics and Gynecology, 257, pp.676-680. 20. Mazor, K. M., Simon, S. R. and Gumatz, J. H., 2004. Communicating with patients about medical errors: A review of the literature. Archives of Internal Medicine, 16416, pp.1690-1697. 21. McAbee, G. N., Donn, S. M., Mendelson, R. A., McDonnell, W. M., Gonzalez, J. L. Ake, J. K., 2008. Medical diagnoses commonly associated with pediatric malpractice lawsuits in the United States. Pediatrics, 226, pp. 1282-1286. 22. Medical Chronicle., 2012. Litigation: A Killer Epidemic with no Cure. [Online] Available at: http:www.medicalchronicle.co.za . [Accessed: 19 th March 2014]. 23. Medical Protection Society MPS., 2011. Medical Records in South Africa. An MPS Guide. [Online] Available at: http:www.medicalprotection.orgsouthafrica. [Accessed: 19 th March 2014]. 24. Mello, M. M., Chandra, A., Gawande, A. A. Studdert, D. M., 2010. National costs of the national liability system. Health Affairs, 299, pp. 1569-1577. 25. Moore, W. and Slabbert, M. N., 2013. Medical information therapy and medical malpractice litigation in South Africa. South African Journal of Bioethics and Law, 62, pp. 60-63. 26. Pepper, M.S. Slabbert, M.N., 2011. Is South Africa on the verge of a medical malpractice litigation storm? South African Journal of Bioethics and Law, 41, pp. 29-34. 27. Phillips, R. L. Jnr., Bartholomew, L. A., Dovey, S. M., Fryer, G. E. Jnr., Miyoshi, T. J. Green, L. A., 2004. Learning from malpractice claims about negligent, adverse events in primary care in the United States. BMJ Quality and Safety, 132, pp.121-126. 28. Roberts, B. Hoch, I., 2009. Malpractice litigation and medical costs in the United States. Health Economics, 1812, pp. 1394-1419. 29. Seggie, J., 2013. The ‗boom‘ in medical malpractice claims – patients could be the losers. South African Medical Journal, 1037, pp. 433. 30. Sohn, D. H. Bal, B. S., 2012. Medical malpractice reform: the role of alternative dispute resolution. Clinical Orthopaedics and Related Research, 4705, pp. 1370-1378. 31. South Africa. Government., 1999. Public Finance Management Act No 1 of 1999. Pretoria: Government Printers. 32. Vukmir, R. B., 2004. Medical malpractice: managing the risk. Medicine and Law, 233, pp. 495-514. 362 PRODUCTIVITY EFFICIENCY OF THE SYSTEMIC BANKS: EVIDENCE FROM GREECE Kyriazopoulos George Abstract This study delves into the productivity efficiency of Greek systemic banks for the years 2013 and 2014, that is, the two years following the recapitalization process of the Greek banking system. Greece’s ongoing debt crisis has severely inflicted domestic banks by causing significant losses in their bond portfolio through the PSI scheme. The immediate consequences were loan portfolio restructurings and capital injections from the Hellenic Financial Stability Fund HFSF in order to rebuild the banking system. Employing Data Envelope Analysis to test banking efficiency, we calculate the Malmquist productivity indices for the post-recapitalization period. Our results display that all Greek systemic banks enjoy a remarkable productivity increase of 17.3 according to the geometric mean approach and 18 according to the weighted mean approach. Keywords: Malmquist Index, Greek Banks, Banking Productivity, DEA JEL Classification: G21; G23 Department of Accounting and Finance, Technological Educational Institute of Western Macedonia, 50100, Koila, Kozani, Greece Tel: +30-2461068188 1 Introduction Banking efficiency has been at the epicenter of bank management, shareholders and market regulators for several years. However, the investigation of banking efficiency became necessary once European rescuers decided in late 2011 that a second bail-out of Greece would require a big write-down of its public debt. This bail-out scheme known as the recapitalization of the Greek systemic banks called for further research on the outcome of such rescue plans. This study aims at investigating the technological as well as the technical efficiency of Greek systemic banks that underwent dramatic structural changes following the recapitalization process of 2012. Our main research question is whether the recapitalization of Greek systemic banks improve their efficiency. To the best of our knowledge, this is the first academic attempt to probe into the effects of recapitalization on Greek banks‘ efficiency and performance. For this purpose, we employ the Malmquist index for productivity employing Data Envelopment Analysis DEA. More specifically, employing the Malmquist productivity index we test bank productivity in terms of technological, technical and scale efficiency. Our examination period covers 2012 and 2013, that is the year that recapitalization took place and the subsequent year. Several theories have been propounded in the pertinent literature to explain banking efficiency such as the intermediation approach, the production or value added approach, the user cost approach, and the transactions-cost approach. According to intermediation approach, bank deposits are converted into loans, that is, deposits are considered as financial inputs. The value added approach assumes that banks use labor and capital to generate deposits and loans Mester, 1987; Berger and Humphrey, 1992. Banks collect funds from depositors in order to provide loans to their customers. Therefore, deposits should be regarded as outputs because of the continuously increasing competition among financial organisms to convince potential depositors to trust their financial institution. On the other hand, the user-cost approach assigns an asset as an output if the financial returns more than offset the opportunity cost of funds. In similar way, a liability item is seen as an output if the financial costs are less than the opportunity costs. If none of these conditions is satisfied, the assets or the liability is categorized as input Berger and Humphrey, 1992. Finally, according to Wyckoff ‘s approach Berger and Humphrey 1992 deposits are neither outputs nor inputs, but they are financial instruments with a flow of a wide variety of complex and subtle services received by deposit customers. The structure of the current study is as follows. Section 2 describes the recapitalization process, while section 3 analyzes the pertinent literature. Section 4 363 presents the research design of the study and section 5 presents the main empirical findings. Finally, section 6 provides the concluding remarks of the study. 2 The recapitalization process Greece‘s accession in the Euro area in 2001 was treated with great enthusiasm by local media and market participants. The impression at the time was that Greece‘s inclusion in the core of European economies would act as a catalyst to accelerate its real convergence with the advanced European countries at both the economic and social level. Greece enjoyed the benefits of the single currency, but did not try to meet the obligations arising from its adoption. In the economy in particular, growth was strong, but was led by domestic demand, which was fueled by borrowing, both public and private. The production base did not adjust accordingly and competitiveness declined rapidly, resulting in a deterioration of the external deficit. Public spending kept increasing, while revenue lagged behind, leading to large deficits and historically high levels of public debt Bank of Greece, 2014. The consequences of the ensuing debt crisis were remarkable for almost all Greek banks that underwent significant hair-cuts through the Private Sector Involvement PSI scheme that reduced the face value of Greece‘s sovereign bonds by more than 50. The write-down brought the Greek banks low, because they held much of the debt. As a result, a recapitalization program tailored-made to Greek banks was implemented in 2012 in order to rescue these banks from default. The bail-out package included €50 billion for the Hellenic Financial Stability Fund HFSF in order to rebuild the banking system. Of this, €17 billion covered losses in defunct banks. Another €5 billion was a reserve, in case more holes open up. Most of it, €27.5 billion were directed to recapitalize Greece‘s four biggest banks—Alpha, National Bank of Greece NBG, Piraeus and Eurobank. At least 10 per cent of new capital came from private investors to keep the banks from being effectively nationalized. Following recapitalization, all systemic banks launched seasoned equity offerings SEOs by issuing warrants in addition to new shares. SEOs attracted an unprecedented investor interest by reducing remarkably the stockholding of HFSF. Today, the HFSF holds 57.2 of the National Bank of Greece, 67.3 of Piraeus Bank, 69.9 of Alpha Bank and 35.4 of Eurobank which are the four systemic banks of Greece. 3 Literature review The literature is rich regarding the effects of economies of scale and bank efficiency. For example, Glass and McKillop 1991 probed into the efficiency of Irish banking for a period spanning from 1972 to 1990. The results showed no evidence of economies of scale. On the contrary, the banking sector was found to exhibit diseconomies of scope in the first years of operation, while a reversal occurred and economies of scale pertained in the late of 1980s. Berg et al. 1992 explored productivity growth during the deregulation of the Norwegian banking industry. The results showed productivity retardation for the average bank prior to the deregulation, but notable growth thereafter. Elyasiani and Mehdian 1995 compared the efficiency performance of small and large US commercial banks in the pre- and post- deregulation era. Their findings suggested that in the pre-deregulation environment, small banks were more efficient than the large ones. However, in the deregulated environment small and large banks were equally efficient. Favero and Papi 1995 measured the technical and scale efficiencies in the Italian banking industry using 174 Italian banks taken over in 1991. Efficiency was best explained by productivity specialization, size and to a lesser extent by location. The authors found a positive relationship between bank size and efficiency. Employing the Malmquist index, Fukuyama 1995 investigated the nature and extend of bank efficiency and productivity growth in Japan. The results showed a Malmquist index greater between 1989 and 1990 than between 1990 and 1991. Moreover, the results showed an improved productivity and innovation and deterioration in efficiency for both periods under examination. Dietsch 1997 analyzed X and scale-efficiencies for French Banks for the 1988-1992 period. The results showed that average X-efficiencies of the French banks were in the range of 70 to 90. These results confirmed the existence of scale economies in the French banking industry. Noulas 1997 used the Malmquist index to investigate the productivity growth of the Greek banking industry for 1991 and 1992. His results indicated that, although productivity had increased for state and private banks, the sources of this growth were different. In fact, state banks‘ productivity were due to technological progress, while private banks‘ productivity came from increased efficiency. Jackson et al. 1998 analyzed productivity growth for Turkish commercial banks during the period 1992-1996. Turkish commercial banks experienced productivity growth with the exception of 1993-1994. Private and foreign banks displayed higher productivity growth compared to the state owned banks. Worthington 1998 investigated the efficiency and productivity growth in deposit taking institutions in Australia. His results indicated that most building societies experienced productivity gain in the past years. This was largely due to technological progress rather than efficiency 364 improvements. Worthington claimed that productivity growth due to an increase in efficiency over the period, was the result of improvements in scale efficiency. Fernández et al. 2001 studied economic efficiency for 142 intermediaries from 18 countries over the period 1989-1998. Their sample comprised financial intermediaries from North America, Europe and Japan. Their estimates of efficiency scores showed large gains primarily due to growth in pure technical efficiency. Mean technical efficiency in European and Japanese banks were significantly greater than those in North American. Finally, the results demonstrated that the best managed commercial banks were located in Europe, while Japanese banks were the most scale efficient. Caceres 2002 investigated productivity growth in Chilean banking over the period 1989 to 1999. His results indicated that after a period of frenzy productivity growth, the banking sector experienced lower and relatively stable rates of productivity change. Moreover, the results revealed that small banks displayed a large number of inefficient banks. The Malmquist index was high from 1996 onward and there were no large technical inefficiencies in the Chilean banking industry. Mörttinen 2002 computed banking sector labor productivity Tornqvist indices for Finland, Sweden, United Kingdom, Italy, Germany and France over a period varying from 11 to 20 years. The results showed that the Finnish banking sector productivity improved through a substantial reduction size of labor force, whereas output growth was rather modest. Tortosa-Ausina et al. 2002 explored productivity growth and productive efficiency for Spanish saving banks over the period 1992-1998. Their results showed that productivity growth had occurred mainly due to improvement of production possibilities and that the mean efficiency remained fairly constant over time. Reddy 2005 measured productivity growth of the banking industry in India during 1996-2002. He found that bank Total Factor Productivity TFP remained unaltered, while the contribution of technological progress towards productivity declined. However, technical efficiency and scale efficiency had been enhanced for all banks. Public sector banks enjoyed higher TFP than old private banks. In contrast, both new private and foreign banks recorded decline in TFP growth. Guarda and Rouabah 2009 analyzed technical change and efficiency change using quarterly reporting data from Luxembourg‘s banking sector for the period 1994-2007. The results showed that productivity in Luxembourg‘s bank grew by about 1 per quarter over the sample period. The standard decomposition of the Malmquist productivity index suggested that most of the productivity growth was from efficiency change rather than technical change. Ngo and Nguyen 2012 evaluated the efficiency and TFP changes of Thai banking system in the period of 2007-2010 using panel data of 27 major banks in Thailand. The results demonstrated that local banks remained stable, foreign banks experienced some improvement in their TFPs, while some became worst performers in the system. The authors attributed these results to the Thai banking system which is currently running at decreasing returns to scale situation, which means that Thai banks are wasting resources in over- expansion. Hadad et al. 2011 estimated Malmquist productivity indices for Indonesian banks over the period Q1 2003 to Q2 2007 using the nonparametric, slacks-based, SORM approach for efficiency and super-efficiency estimation. Based on the Malmquist analysis, the dynamics of the average productivity of banks were found to be relatively stable during the analysed period, implying that the main driver of the productivity change in the financial intermediary activities of Indonesian banks was the improvement in their intermediation technology. Neupane 2013 investigated the change in efficiency and productivity of banking industry during the period of 200708 to 201112 and analyzed the effects of various indicators on the efficiency of the 22 commercial banks in Nepal. The results revealed that the productivity change of commercial banks in Nepal has improved over the sample period and that the increase in productivity change in Nepalese commercial banks was attributed to the technical progress rather than efficiency components. It also reports that the decline in efficiency change was due to decline in both pure efficiency change and scale efficiency change. Gwahula 2013 measured the productivity change of Tanzanian commercial banks for the period 2005-2011 using the Malmquist Productivity Index MPI. In particular, the author gauged changes in technical efficiency, in technological change, in pure technical efficiency, in scale efficiency and in total factor productivity. The results showed an improvement in efficiency change by 67 percent, a technical change improvement by 83 percent, pure technical change improvement by 67 and scale efficiency change by 50 percent for most of commercial banks. However, the efficiency gains during the period under investigation were due to improvement in technical efficiency rather than scale efficiency. 365 4 Research design 4.1 Data Our dataset contains all Greek systemic banks, that is, National Bank of Greece, Eurobank, Alpha Bank and Piraeus Bank, and the examination period covers 2013 and 2014, that is, the two years after the recapitalization process. All data were extracted from Bankscope. Following Worthington 1998, Caceres 2002 and Reddy 2005, among others, we adopt the value added approach in order to measure total productivity changes in the Greek banking industry between 2013 and 2014. We selected these two years in order to examine the effects of recapitalization on the total productivity efficiency of the Greek banks. In line with the existing literature, we use three outputs and three inputs variables based on the value added approach. Output variables include total deposits, total customer loans, and investments defined as equity investments and government securities. On the other hand, the inputs are personnel expenses, other operating expenses, and total fixed assets. Table 1 provides a summary of descriptive statistics for the six variables. According to these statistics, total loans of the Greek systemic banks are equal to 56,726,025,000€ and 54,235,500,000€ in 2013 and 2014, respectively. Total deposits are 75,342,300,000€ and 72,352,675,000€ for 2013 and 2014 while exceed 7 billion Euros in both years. On the other hand, personnel expenses are relatively lower in 2014 842,325,000€ compared to 2013 864,100,000€ and the same is true for other operating expenses. In contrast, fixed assets increased from 1,265,97 5,000€ in 2013 to 1,332,550,000€ in 2014. Table 1. Inputs and outputs for the Greek Systemic banks in 2013 and 2014 in 000 of Euros Loans 2014 Loans 2013 Deposits 2014 Deposits 2013 Investments 2014 Investments 2013 Mean 54,235,500 56,726,025 72,352,675 75,342,300 7,949,700 7,326,900 Median 53,350,000 57,022,050 71,113,550 74,594,400 7,514,400 8,120,850 St. Dev. 11,094,840 9,859,118 12,684,413 12,967,387 1,778,852 1,890,599 Max 68,109,000 67,250,000 87,155,000 90,773,000 10,466,000 8,542,900 Min 42,133,000 45,610,000 60,028,600 61,407,400 6,304,000 4,523,000 Personnel Expenses 2014 Personnel Expenses 2013 Operating Expenses 2014 Operating Expenses 2013 Fixed Assets 2014 Fixed Assets 2013 Mean 842,325 864,100 1,590,850 1,912,225 1,332,550 1,265,975 Median 817,650 773,200 1,431,800 1,879,450 1,259,600 1,269,450 St. Dev. 246,207 341,472 380,727 343,986 598,129 419,662 Max 1,163,000 1,337,000 2,156,000 2,363,000 2,109,000 1,755,000 Min 571,000 573,000 1,343,800 1,527,000 702,000 770,000

4.2 Model specification