Public: Partnership + Comment | Public

Public service 'spin outs'

Wed, 25 Aug 2010 10:19:13 GMT

Employee-led mutuals are being used by the government to allow public sector workers to be their own boss - but are they unleashing transformation, or locking in the status quo?

One of the government's earliest moves in reforming public services has been to encourage public sector staff to 'spin out' from the state and form employee-led, mutual service delivery organisations.

Earlier this month the Cabinet Office announced a 'first wave' of these mutuals – 12 fledgling organisations working in fields as diverse as children's services, health and social care, housing support, education and youth services. The government's ambitions, set out in the coalition agreement, are that ultimately such reforms will "empower millions of public sector workers to become their own boss and help them to deliver better services".

This ought to be good news. Giving front-line staff the opportunity to put their understanding of what works at the heart of service delivery ought to lead to higher quality and efficiency. Freeing delivery organisations from the diktat of Whitehall or town hall ought to make space for greater flexibility and innovation. The new spin-outs ought, over time, to bring to service delivery many of the qualities associated with existing third sector providers – qualities that have led governments of all colours to court the third sector for years.

In practice, however, things might not be so rosy. There is a danger that if not implemented with care, rather than unleashing the initiative for transformation, the enthusiasm for mutual spin-outs could lock in the status quo.

The public service ecosystem

Firstly, we need to ensure that the new mutual organisations change more than just the name above the office doors. They need to deliver services in a different way, and work differently with service users and with other organisations in the public service ecosystem. That kind of change of model and culture will be difficult to achieve. It will require the right support and the right incentives.

On the support front, the government's first wave of mutual spin outs will get (unfunded) support from other organisations that they have been paired with. As for incentives, the hope is that frontline workers' desire to do things differently (and at a later date, competition to deliver) will be impetus enough.

But as we move from 'first wave' to second and third, as the energy of the new dissipates, as the support on offer thins out, and as other motives enter into play (is it inconceivable, for instance, that some public sector agencies will see this as a useful way to shed expensive staff and assets?), it will become increasingly difficult to ensure that there is enough reformist impetus behind mutual spin-outs to make for real change.

Secondly, part of the government's critique of the current state of public services – a critique that has laid behind the foundation and growth of many third sector organisations – is that in too many of our public services professionals have been on top not on tap, working out what's best for their passive service users and then proceeding to do it unto them.

Empowerment of service users

What third sector organisations have sought for decades to do in response, and what the government has called for services to do across the board, is to put people first, at the heart of and in control of the services they use. The empowerment of public sector staff through these new mutuals is a good thing. But it must be accompanied by empowerment of service users, or else we risk entrenching one of the key problems at the heart of the welfare state.

Finally, there is a danger that the new mutuals will not just lock in existing problems, but that they will lock out other solutions as well. For the new spin-outs to incubate successfully, they are likely to be guaranteed business from the state for a period (under the Department of Health's existing spin-out policy, that period is three to five years).

Put another way, every spin-out locks out competition from other providers in the third and private sectors for the rest of this parliament. Given the issues outlined above and the urgency with which we need to transform services, that is a big risk to take.

The new mutuals are a good thing. Third sector organisations will need to welcome them into our midst, and work with them to ensure they are a success. But they are not the magic bullet. The spinning out of public sector staff will have its limits, and it will need to be implemented with care.

Ralph Michell is head of policy of ACEVO, the Association of chief executives of voluntary organisations

The partnership principle

Mon, 28 Jun 2010 14:07:17 GMT

The new coalition government has focused attention on the type of partnerships needed to overcome tough challenges, so will there be a knock-on effect for public and private sector collaborations? Stephen Weigel, chief executive, Tandridge district council and Simon Downing, chief executive, Civica Group, voice their opinions

Public sector view: Stephen Weigel, Tandridge district council

Councils have a legal duty to provide their community with a full range of products or services

The similarities between public and private sector organisations may not be immediately apparent but they are certainly there. If anything, the downturn intensified the need for public and private collaborations, long before the coalition was established. The underlying aim remains the same: we need to understand how both sides can continue to learn from each other. I'm passionate about the private and public sectors working more closely together for mutual benefits and outcomes.

People are demanding greater choice in services. The processes underlying departmental items such as benefits administration are extensive and complicated. They cannot be delivered with the same flexibility as a private company. The public sector has a legal responsibility to deliver services to all citizens, while remaining fully accountable and ensuring its actions are transparent and an appropriate use of public money.

As a result, public sector organisations are being squeezed from both sides: they are deemed by government to have invested in new service delivery systems without delivering the required step change in service and cost of service. On the other hand, in age of instant access to commercial services online, and the continuing social consequences of recession, citizens are still demanding an increasing level of service from their local authority.

The key difference here is that the customers of any public sector body (ie residents and local businesses) often cannot select who supplies their services - just as local authorities cannot choose their customers or the services they provide. Councils have a legal duty to provide their community with a full range of products or services: this makes service delivery inherently more difficult. For a private organisation, while customers do have a choice of going elsewhere, if a product or service is no longer popular, it is possible to introduce a new one. This isn't as easy for a local authority, health trust or police force!

Where public bodies really do have different priorities is in achieving the fine balance between delivering services, taking responsibility for citizens, balancing budgets and achieving year-on-year efficiency savings. In common with the private sector, there is a real need for strong leadership and a commitment to see everything through allied to outstanding communication. There is scope to share services and co-delivery, much the same as UK mobile telephony operators are doing to cut costs and reduce overlap.

In the public sector, the impact of the recession has taken longer to crystallise but it's clear that the next few years will be even more focused on cost reduction. It's worth remembering that local government has the best track record of any public sector providers on efficiency savings over the past five or so years.

Private sector view: Simon Downing, chief executive, Civica Group

Transformation is less about foresight and more about the response

Public sector organisations are clearly under unprecedented pressure to reduce expenditure, possibly by as much as 25% or more, while meeting new service demands and higher overall expectations. Many private companies, with their customers facing pressures and uncertainty as the country has dealt with recession, have likewise had to take difficult decisions in order to manage their costs.

Public and private can learn from each other's strengths. A private organisation's biggest advantages are flexibility and responsiveness, whether through action, ability to invest or in driving internal efficiency. Driven by competition, successful companies respond swiftly to market change to protect the business or to capitalise on new opportunities. In addition, the private sector ultimately has the benefit of a very clear measure across the organisation and for stakeholders – profit.

This clear focus on top line growth and bottom line cost management represents a more programmatic approach to efficiency, whereas the public sector has traditionally taken a strategic longer term view, introducing transformation programmes that take effect over some years and often involving consultation. In the private sector, it could be said that transformation is less about foresight and more about the response.

Choice is also an interesting aspect. Companies choose which products and services they supply on an ongoing basis. People look to their local authority or public body to deliver a service out of necessity, not choice. Authorities have some freedoms over the way some services can be delivered and therefore create 'citizen choice', but face many constraints on the services provided and the community served.

Underlying this, reputation or 'brand' management, which for a long time been a clear priority in the private sector, matters equally to public and private bodies. For both a strong reputation, typically built on long-term customer satisfaction, is imperative and conversely a damaged or poorly perceived brand can become a barrier to future progress. The language may differ but just as a private sector company needs to build its brand, so a local authority is equally focused on reputation, credibility and local identity.

Reversing a poor reputation is a much more difficult challenge that involves rebuilding relationships. As a result, it's imperative for the authority to retain trust and respect with the public (including the assurance that private sector partners will protect and enhance its reputation for service delivery and value for money).

The key to delivering 'more with less', is the core asset (and major cost centre) for commercial and public bodies – their people. Best use of existing staff, including tools such as new technology, can instantly increase efficiency: Civica, for example, has been able to redeploy resources within the company in areas where increased efficiency is needed. This is not as easily done in the public sector, often due to the complexity of decision making, but it is at the core of organisational efficiency.

Local authorities may find themselves spread too thinly because of the breadth of services they provide. Public organisations, like their private counterparts, may need to consider their core competencies and enlist external providers to assist with other non-core requirements. By taking a programmatic approach to desired outcomes, through much the same approach as private sector organisations, and benchmarking the quality and value of those services delivered by external providers, it is possible to strike an effective balance of efficiency and service.

Such an approach has the lasting benefit of creating a blend of deep expertise between public and private sector partners. It also combines public service values with focus, flexibility and responsiveness. The dividends for citizens, public organisations and their partners are likely to be very significant.

Summary: better or just different?
The downturn has led local authorities and businesses to take a hard look at their organisations. It's likely that the advent of the first coalition government in 70 years will provide further evidence that successful partnerships depend on learning more about each other's ways of working and respective strengths, identifying mutual outcomes, and working realistically towards them.

Mergers: a simple process?

Tue, 13 Apr 2010 09:58:14 GMT

Departmental agencies and non-departmental public bodies look ripe for merging in a bid to save money by the next government. On paper it looks simple but how will it work in practice?

Merging organisations is never as simple as it appears on paper and the process of merging public bodies is no less complex than in the private sector. As the cost is bourn by taxpayers, failure is even less acceptable.

With the impending clampdown in government spending, one area that will certainly get the attention of the next government is that of the number of departmental agencies and non-departmental public bodies (NDPBs).

There is a belief that condensing or merging some of these bodies into single organisations will enhance efficiency and reduce public spending. The Scottish 'simplification programme' is ahead of the game here, with its aim to reduce the number of Scottish public bodies from 199 to 120, with savings of £36m between 2008 and 2013.

But in merging, it is important to remember that agencies and NDPBs, were originally created with specific remits. So combining two or more such bodies will require a careful aligning of these differing remits or re-crafting a new set for a new age. This in turn often demands a change in how the new body is organised.

However, mergers are not merely about structural integration. Last week's article by Xantus on public sector M&A highlights that in the design phase of any restructuring, technology has been a dominant factor over the past decade. Yet the hardest part, and the one that most often derails the process, is human integration.

Key issues during transition

Recently we worked directly with one Scottish public body to facilitate its integration into a new larger body. In this particular instance, the key issues during the transition were to ensure it continued to deliver existing strategic objectives while preparing for change, and in creating a new joint board that could develop the vision and values for the new organisation.

However, mergers are not merely about structural integration. The harder part, and the part that most often derails the process, is human integration.

Starting at the top, the abilities and experience in change management of the team leading the merger needs assessing, and any gaps filled with personal development, or 'bought-in' expertise.

Then there are the consequences of restructuring when job responsibilities and capabilities may change. Following its merger with the Meat Hygiene Service we worked with the Food Standards Agency.

The FSA has embarked on a substantial change programme that sets out to ensure improved delivery, culture and structure. This has included the assessment of different capabilities at management grade 6 & 7 across the agency due to these management grades having a wider and more important future role to ensure delivery through others.

In delivering change in cases such as the FSA, where the number of managerial posts was reduced, the selection process must be both transparent and demonstratively fair. It is also important that training and support is provided for those who re-apply for jobs with expanded responsibilities. Getting this right will ensure the new organisation has the best people in place, suitably motivated, to deliver to its broader remit.

Gary Ashton is a director at ER Consultants

Challenge of charity partnership

Mon, 01 Mar 2010 12:27:24 GMT

Partnerships with large companies can make a big difference to charities. But should there be a better way of choosing which charity to support?

While having a charity of the year can be a very beneficial and worthwhile venture for both the company and the charity, so many smaller and less emotive charities lose out that it would surely make more sense to let individuals chose their own charity.

Being chosen as charity of the year by big companies means big rewards for the relevant charity but the vast majority of charities in the UK never become anyone's charity of the year. They are too small, too unfashionable, don't have enough regional branches or fail to match the corporate brief in some other way.

The competition to be chosen as a charity of the year, particularly by the major UK companies, is intense. There is a good reason for this as the rewards can be huge. Tesco's chosen charity for 2008 was Marie Curie Cancer Care and they raised £6.1m, which will allow far more people to end their life at home. The Tesco Charity Trust added £500,000 to existing monies raised. This year, Tesco has chosen the Muscular Dystrophy Campaign this year and hopes to raise £3m.

Even companies lacking the might of Tesco provide a a huge boost for charities. Santander has raised over £200,000 for Help the Hospices while CLIC Sargent's partnership with Chelsea FC over the past four years has raised over £2m.

But there are around 189,000 charities in the UK and most of them don't get a look in for charity of the year status.

Charity pitch

Charities involving children and cancer are the most popular choices for charity of the year. One very experienced member of staff from a health charity believes that if you get shortlisted, and staff vote, that vote is probably most influenced by the extent to which the charity pitch can make a person cry, followed closely by how wide the appeal of the charity is. Vulnerability seems to be a fairly consistent theme among winning charities.

Many charities are asked to put forward a proposal to become charity of the year but as one member of staff from a national charity said, 'It takes us a long time to prepare our proposal and there are no prizes for coming second."

Many large companies want tangible propositions like buying wheelchairs and find it more difficult to motivate staff to support causes which offer emotional support.

Rachel Kirby-Rider, director of fundraising and communications at Samaritans says: "Winning charity of the year is a real achievement for any charity and Samaritans will continue to apply for these partnerships.

"However, there is a lot of competition from other charities and there is a perception that it can be difficult to demonstrate how funding confidential helplines, like Samaritans, make a difference to individual people's lives. Another challenge is that mental health problems, depression and suicide are still widely stigmatised and misunderstood, making it hard for companies to align themselves to such issues; however there has never been a more relevant time to support charities in this field."

Another senior charity worker notes that being chosen as charity of the year is often driven by corporate criteria. The quality of the application and how recently a similar charity was supported are crucial factors and a charity is often asked to absorb a high proportion of volunteering, which they may be unable to do.

Joanna Woolcock from Crisis, the charity supporting the homeless, finds that when it comes to a vote for charity of the year, "our client group aren't often perceived as being most in need and homelessness is not an issue at the forefront of employee's minds when they vote. Despite being shortlisted by the company itself, at voting stage we lose to children's or cancer charities, hospices and those who are benefiting from high media profiles. Geographical spread also makes a massive difference, particularly with such strong emphasis on volunteering. We can't deliver a partnership with a high volunteering requirement and often our locations don't reflect those of the company."

Volunteering opportunities

A corporate fundraiser from a well known medical research charity is frustrated: "Our feeling is that we are not a very "sexy" charity and do not have a high brand profile for those companies wishing to be "seen" to be supporting a charity. The current vogue in many large companies is volunteering opportunities for their staff. It's pretty hard for us as a medical research charity to find a garden to makeover, a scout hut to paint or a patient to befriend but our work is still so vital! There are only so many volunteers you can squeeze into our charity shops or help at abseils and walks!"

There are causes which are small with a low profile, but fit in well with a particular company. Get Connected, although small, has had a great partnership with Carphone Warehouse for the past nine years because a helpline for young people and a mobile phone retailer have a natural synergy.
Not all companies have a staff vote by any means. Some charities of the year are just decided by directors and/or the corporate social responsibility department.

Although charity partnerships can be a very beneficial and worthwhile venture for both the company and the charity, because so many smaller and less emotive charities lose out, wouldn't it make more sense to let individuals chose their own charity?

I went into companies for over 12 years, talking to individual employees about giving to charity from pay. I was taken aback by the level of feeling within some organisations about how the charity of the year had been chosen. Mmany employees felt aggrieved that they hadn't been involved in that choice or that their chosen cause would never be elected as it wasn't a high profile charity. Individuals often shared their personal stories with me about why they wanted to help a particular charity and many of those stories have remained with me as they were very moving.

When I went into companies which matched or enhanced their Workplace Giving scheme, employees felt that their employer was backing their individual choice of charity and they often said how much difference it made to their view of the company.
Many employees want to give and give generously to charity. Companies interested in corporate and social responsibility should help them to do this.

Elena Joseph is head of charity liaison and new projects at Workplace Giving UK

It's simpler to share than reinvent the wheel

Wed, 28 Oct 2009 08:00:00 GMT

Many forget that a fundamental part of Total Place is the recognition and encouragement of similar programmes being run elsewhere

Much of the attention and coverage given to Total Place thus far has focused on the official 13 pilots chosen to lead on the project, which is understandable.

But the pilots do not, by any means, represent the only places where councils are working in partnership with local partner agencies to drive efficiencies and improve services.

A fundamental part of Total Place is both the recognition and encouragement of this sort of work elsewhere.

It was work done in Suffolk, Norfolk and Cumbria respectively – the 'pre-pilots' – that preceded the Total Place project, and work continues in all three areas. Although Total Place is ostensibly a project running until the Budget, the fundamental changes in service redesign that it is trying to bring about are very much for the long-term.

The number of these areas – now known as "parallel places" – continues to rise, as more and more local authorities tell us about the work they have done, are doing, or plan to do around the Total Place agenda. To name but a few examples: The 'Making Cambridgeshire Count' initiative designed to transform partnership working and public services; council and NHS partnership work in Herefordshire; Tower Hamlets piloting strategic commissioning; and there are many more.

The Regional Improvement and Efficiency Partnerships (RIEPs) have given strong backing to the parallel places, helping to link them with pilots in their area, and some have provided funding to undertake similar work. Both the South West RIEP and Improvement East have funded almost all of their councils to do so. Local authorities have been building effective partnership working for some time as a response to the economic downturn and other pressures they face and have grabbed this agenda with both hands.

Parallel places have the arguable advantage of not having to report back to Whitehall with findings from their work, as the pilots had to do within quite a tight timescale – although evidence from parallel places was used alongside that of the pilots for the submission to Whitehall to inform the pre-Budget report.

It is also up to the parallel places to decide on the scale of the work going on, the themes they want to look at in more depth, and the way they go about it. In Suffolk, for example, work began by concentrating on building trust between the leaders of local agencies, rather than with the counting of local public spend as in the pilots.

The result is that an increasingly rich and varied tapestry of work is developing and the IDeA, alongside the rest of the LGA Group, is working hard to try to link up the diverse work going on all over the country.

By informing places which other areas are covering a similar theme, offering thematic support from our national advisors on issues such as adult social care, children and young people, and community safety, we aim to spread the learning and stop others reinventing the wheel. The first of a series of thematic seminars specifically aimed at parallel places will be held soon, offering opportunities for people from areas working on similar themes to meet and share learning.

Local authorities do not have to "apply" to become parallel places – if they are doing this sort of work, they already come under that definition. If there are places which would like to explore the idea, we are happy to provide any support we can.

People are welcome to join the conversation around the work at the dedicated Total Place Community of Practice, which provides a private forum for people to learn and share information.

To join the CoP and for further information and case studies, visit Total Place or the the IDeA or contact and www.idea.gov.uk, or contact Rachel.litherland@idea.gov.uk

Rachel Litherland is the national advisor on partnerships at the (IDeA)

Location, location, location . . . and how to use it and share it

Fri, 21 Aug 2009 09:00:00 GMT

From flu pandemics, natural disasters and terrorism threats, it's no longer a case of 'need to know' but 'need to share; our expert panel heard during a recent roundtable on how geographic information might be better used

The need to respond to civil contingencies – from floods or 'flu pandemics to terrorism – is prompting public organisations to look again at how they gather and share data.

Geographic information is being used extensively by those planning security for the London 2012 Olympics, for example. But geographic information is also at its most effective when it supports, rather than supplants, the insights and experience of those on the ground.

During the 2007 floods, communities lost fresh water supplies because the electricity supply to water treatment plants was disrupted. But geographic information alone would not have linked a substation failure to the treatment plant, the need is for geographic intelligence which amongst other factors requires local insights.

We recently gathered a panel of experts to discuss the challenges faced by the public sector when it comes to gathering, and handling, location
information.

As last November's report by the Geographic Information Panel pointed out, too little government information (which it quoted 85 percent) is location based and is not being either connected or shared.

Improved risk management

The Place Matters report sets out a framework for using geographic information in the UK public sector, which it says will lead to better planning, improved risk management and better use of public sector resources. At the moment, though, such information is difficult to assemble or analyse reliably and there is too much duplication and too little re-use of the data.

One reason is that public sector organisations and departments tend to collect information solely for their own needs, without considering whether it can, or should, be shared. Too often, our panel suggested, the presumption is against sharing or linking data. There is a need for a paradigm change from "need to know" to "need to share".

The result, the experts suggest, is that decisions related to place might not be as well informed, or as effective, as they could be.

Given the state of the public finances, pressure can only grow to ensure that both the planning and execution of services are both efficient and effective. But unless public sector bodies consider location and know where to target their efforts, there is a real risk that spending will go to waste and not be fully optimised.

The experts and especially the geographers amongst them also believe that location information can be used to provide a much-needed boost to the economy, and promote "real efficiency gains" in public spending. This is especially the case in areas such as transport, where service improvements provide a significant economic multiplier effect.

Geographical information is also of enormous value to the private sector: property developers, retailers and farmers, need geographical information with to predict demand and fine-tune their offerings. The UK is a leading provider of geographical information systems (GIS) technologies and services, with location awareness a key part of our digital economy. But the public sector lags behind.

Sheer complexity of the situation

Central and local government holds spatial and location information for applications such as urban planning, providing services and for contingency and disaster planning. In addition, a vast amount of geographical information is collected every year by organisations such as the Ordnance Survey, the Met Office, the Environment Agency and even, through VAT returns and valuations, bodies such as the Treasury. However, for organisations that do share data it is the sheer complexity of the situation that often frustrates users: chargeable data is often well promoted but prohibitively expensive while free data is often hidden away and difficult to access. Our panel heard that from both a provider and consumer point of view it is difficult to ascertain what should be free of price and free to access.

However, such information is rarely shared, let alone connected. As a result organisations either have to assemble – and pay for – data that already exist elsewhere in the public sector, or plan services with less than full information.

"Part of the message of the location strategy is about developing good behaviour. It should not be 'not need to know' with data but 'need to share'," said one participant. There should be a culture of data sharing, albeit with the appropriate security and privacy safeguards.

Achieving this cultural shift, however, will take both time and resources. One reason is that collecting location data is expensive, and departments might not receive incentives for sharing – or even lose revenues by doing so.

Another, significant expense lies in maintaining data sets; a third comes in correlating information or putting it into a standardised format that other organisations can interpret. The Location Strategy report found that users of geographic information spend 80 percent of their time on collating and managing data and just 20 percent on analysis.

Or, as another expert puts it: "It is not just about location but about understanding what's happening – the who, what where and when. It is more sophisticated than just where events happen within a geo-location polygon."

This roundtable was sponsored by ESRI

What can the public sector learn from retailers?

Wed, 19 Aug 2009 09:14:00 GMT

While examples of good practices in public services are increasing, there is still an inordinate amount of organisational inertia, so what can we learn from the private sector where companies such as Tesco are masters of not only identifying but pre-empting their customers' needs

David Cameron believes the public sector has much to learn from Tesco. In a bid to increase customer satisfaction while facing savage budget cuts - more for less, according to George Osborne - public sector organisations might observe the way supermarkets have cut costs while sustaining, and even improving, customer service levels.

He may have a tendency to go for the headline-grabbing sound bite, but Cameron has hit the nail on the head. Experts have been expounding for years that the public sector should take inspiration from the private. But little progress has been made on effecting serious change in the complex public services arena.

While examples of good practice in public services are on the rise, too often public sector organisations suffer from lack of awareness of customer needs, cautious management and a widespread resistance to change. New initiatives are announced but allowed to stall, falling victim to organisational inertia. Critically, there is limited consequence for failure to implement these projects.

The same criticisms could hardly be levied at many quarters of the private sector, particularly the retail segment. Many retailers focus on identifying and pre-empting customer needs, adapting their practices to meet them.

Customer satisfaction is delivered while maximising efficiencies.

Supermarkets especially excel at squeezing more out of their organisations while leaving extra pounds in their and the customers' purse. Tesco has driven through continual customer improvements while scoring a significant increase to its bottom line, and Morrisons has achieved a remarkable turnaround in its fortunes. These organisations focus ruthlessly on implementing continuous improvements.

Tesco's strategy is dedicated to listening and responding to the consumer. It collects extensive data about customer preferences, which guides managers in making decisions on stock, display and pricing. It allows shoppers to feedback on their shopping experience by text, phone or email, with personalised responses forthcoming almost immediately.

Indeed, such an approach has its echo in the public sector. The NHS runs "national patient surveys" and local initiatives where patients may give instant feedback on their experiences and provide suggestions for improvement.

Tesco's senior managers may spend a week working in stores, but we recently met an NHS Mental Health Trust human resources director who had just finished working an early shift on one of the wards, seeing first hand the challenges facing frontline staff.

But these are two of the few examples of deep engagement with the customer experience in the public sector, which often struggles to progress innovations similar to its private counterparts.

There may be no shortage of teams and individuals gunning for and designing operational change. But, institutionally, there are barriers to that change, with the consequence that its execution is poor.

At Alvarez & Marsal, working with the corporate and public sectors, we see change programmes that would take weeks or months to implement in the corporate world take months or years in the public arena.

Faced with imminent and far-reaching budget cuts, the public sector must change its way of changing. Organisations need leaders who will dismantle the numerous institutional and cultural barriers that stand in the way of change. Small steps will transform their organisations into responsive institutions focused on efficiency and customer satisfaction.

Anticipating tougher financial conditions is critical. This year, many retailers have cut costs by a pessimistic 10 percent.

Monitor, the regulator of NHS Foundation Trusts, says that Trusts expect real increases of 3 to 4 percent a year, when the reality is more likely to be near zero.

The public sector needs to be realistic about the revenue picture.

Public service providers should learn from retailers that monitoring habits and interaction with its services will help identify the most effective methods for meeting the public's needs. All of this needs to be underpinned by measurement. While the public sector is increasingly evaluated from top to bottom, there is less focus on measurement and amendment of everyday activities.

The challenge is great. But, by scrutinising their private sector cousins' successful operational practices, public sector organisations could improve service levels while operating at lower cost.

Malcolm McKenzie is a managing director and David McCartney a senior director in the Performance Improvement practice of Alvarez & Marsal

Liverpool Direct boss extols shared platform

Thu, 30 Jul 2009 09:50:00 GMT

The chief executive of Liverpool's joint venture with BT extols the virtue of a shared platform

Advocates of shared services have had cause for frustration. Sir Peter Gershon provided a major boost for the cause in his 2004 efficiency review, but progress has been limited: most central government departments have been in no hurry to share systems or processes with others, and while there have been initiatives in local government these are matched by the caution shown by many authorities.

But as public finances tighten the pressure to find efficiencies will intensify, and authorities will have to think seriously about how to cut operating costs.

David McElhinney, chief executive officer of Liverpool Direct, believes the model he describes as a "shared platform" could offer a viable option for many bodies. Setting up a shared service is a collaborative process that can take a lot of time to get right, and be hindered by sensitivities over surrendering control to another public body. But a shared platform is already in place and available for a client organisation to begin using the service.

McElhinney acknowledges the similarities to an outsourced service but says a shared platform is different, in having been built specifically to provide economies of scale to public sector bodies. He talks in terms of high quality technology and tools that can help organisations extract more value from their business - claims most businesses would make for a similar service - but draws extra credibility from the fact that Liverpool Direct is a joint venture between BT and Liverpool city council.

Liverpool Direct has been around since 2001, initially to provide front and back office services for Liverpool city council. It began marketing itself to other authorities soon after, but has taken some time to find takers for the service. It is only over the past couple of years that it has found momentum. "We've been seeing more activity in the past two years than in the previous six with the shared platform," McEllhinney says.

Liverpool Direct now has contracts with four other councils, two central government departments, over 10 third sector bodies and quasi non-governmental organisations, a police service and 300 schools. Liverpool remains its biggest customer; its business includes the second largest revenues and benefits operation in the UK, taking in about £300m per year of the former and paying out £350m of the latter.

Another large customer is the Security Industry Authority, for which Liverpool Direct handles all the processes for licensing security staff, including the production and dispatch of identity cards and running the organisation's contact centre. It has also made inroads into the Building Schools for the Future programme, providing the technology in eight new schools in Liverpool, and has begun to provide services for registered social landlords, with recent deals with London Quadrant and Helena Partnerships.

McElhinney says Liverpool has claimed benefits on two fronts from the venture. BT provided the original investment; the operational savings have accrued to the point where in 2007-08 the city received £19.5m in cash benefits, through areas such as increased debt collection and reducing overpayment of benefits.

The city also has a 20% stake in Liverpool Direct, and while McElhinney says the details are commercially confidential, he confirms that Liverpool gets a return. He also expects the business to increase over the next couple of years as we move towards the end of the current comprehensive spending review period. "We are seeing more activity in the marketplace," he says. "People are seriously concerned about the future financial landscape and want to build more value as they move towards 2011."

This article is also on the Kable website

Individual budgets and the third sector

Tue, 31 Mar 2009 13:57:00 GMT

With individual budgets the emphasis is on providing a quality service to users, something the third sector does well, so what's the problem with public sector commissioners?

Proponents of individual budgets as a part of public service reform usually argue for them on the grounds that they bring greater engagement from service users and allow them to tailor services around their own individual needs and aspirations. Put another way, individual budgets result in better outcomes because they unleash service users' potential to co-produce and personalise services themselves.

But there is another creative force that individual budgets could unleash – that of service providers. For years the basic complaint of third sector organisations providing public services has been that we are good at engaging with service users, but bad at engaging with public sector commissioners.

Service users trust us and like us, commissioners distrust us and misunderstand us. Where we get the chance, we can deliver high-quality services that service users want.

But more often than not, commissioners design contracts that practically exclude the third sector, or that tie third sector organisations down in a straightjacket of required outputs and processes, backed up with excessive, bureaucratic monitoring, or that are preceded by a forest-worth of pre-qualification questionaires and invitation to tenders.

Individual budgets could break that mould. Crudely speaking, we are good with clients but bad with commissioners. Crudely speaking, with individual budgets the first quality matters, and the second does not.

Crudely speaking, individual budgets could dismantle one of the greatest barriers to third sector provision of public services – the fact that the relationship that really matters is the one between commissioner and provider, and that in the third sector's case it is often not a happy one.
Individual budgets could, then, be the key for unleashing the third sector's potential in all kinds of public services, from long-term health conditions to employment, from mental health to education.

Clearly, however, they are no instant panacea.

Firstly, many third sector chief executives would be worried about the impact individual budgets could have on their beneficiaries. Would the real motivation behind these reforms be simply to drive down costs – potentially at the expense of service quality?

Would individual budget holders really have access to the support they would need to make the most of their budgets. Support such as advocacy, brokerage, or information provision? Could the reforms result in an increase in exploitation – in the example of social care, either of the budget holder or of the budget holder's family carers?

Secondly, third sector capacity issues would remain. If the capacity to write a tender or negotiate with a commissioner would become less important, others would become more so (the ability to gather market intelligence, or to market services to large numbers of potential clients, for instance).

Many third sector chief executives will have put considerable resources into ensuring that they do have the capacity to secure block contracts; for them the shift to individual budgets would necessitate significant and potentially painful organisational change.

And some specific capacity issues are likely to persist, such as the ability to work in partnership. Those dreaming of working in splendid isolation with their individual budget-holding clients – with no need to engage the evil commissioner or the evil private sector competitor – could be disappointed. Indeed the benefits of working in partnership to create coherent packages of support could become all the greater.

How do we tackle these issues? How do we ensure that individual budgets (already raising their heads in a variety of areas) are an opportunity for our beneficiaries and our organisations, rather than a threat?

The key is what we do now.

Rather than allowing the individual budget agenda to happen to us, we need to make it our agenda. Our agenda in two senses: an agenda that we have shaped, and one that we are ready for.

First, shaping the agenda. This is a prime example of where the third sector's power to campaign should come to the fore. We need to ensure that this is not about cost-cutting but about empowering the disadvantaged, not about slashing services but about improving service quality.

And we should be fighting that battle not just where individual budgets are already starting to happen, but where we believe they could improve services elsewhere – in employment support, mental health or education, for instance. So where individual budgets are happening, we need to make them happen on our terms.

And then we need to make them happen elsewhere.

Second, we need to be ready for individual budgets. We need to have in place the business models that will allow the sector to thrive.

That is why, for instance, Acevo is working in partnership with Demos to provide workshops for social care providers on how they can change the way they work to cater more effectively to individual budget holders.

That is why we are working again in partnership with Demos to provide workshops for Acevo members to consider what other areas of social policy individual budgets might be applied to next.

The introduction of individual budgets should be a third sector agenda. We need to make sure it is. If we can do that, the third sector will be the winner and more importantly, so will the causes third sector organisations stand for.

Ralph Michell is head of policy at Acevo

Taking the private out of PFI

Thu, 05 Mar 2009 15:55:00 GMT

The tentacles of the credit crunch have insinuated their way into school, motorway and hospital building plans. Even supposedly safe, government-backed private finance initiative (PFI) projects now struggle to find banks willing to lend them money. That almost certainly implies a further drain on the public finances - and another blow to plans to use infrastructure spending to soften the recession's impact.

More than £6bn-worth of PFI projects need to find bank funding this year, from big one-off deals, such as the £1.25bn M25 widening, to dozens of smaller Building Schools for the Future schemes. In a normal world, banks would provide all this money. But one senior banker, Laughlan Waterston of PFI funders SMBC, estimates there are now just 10 or so banks lending to PFI deals, from a high of 20 to 25 a couple of years ago, and only six or seven lending in large amounts. Total bank lending to PFI this year, he believes, will be "up to £2bn". State institutions such as the European Investment Bank will fill some of the gap. But a huge shortfall, tallying billions of pounds, remains.

This has led to speculation that the government will soon announce it is directly funding PFI projects. Most in need are the largest schemes, such as the M25 deal and Greater Manchester's £600m waste project, which have struggled for months to put together clubs of banks willing to provide funding. The Treasury could make up the shortfall between what's needed and what banks can pledge - up to £400m on the M25, for example.

But ministers would rather not pump in money directly and thus make a mockery of the "private finance" part of PFI. Doing so would also imply that any and every deal would be bailed out. Instead, the Treasury is likely to lend money for a few years, hoping that the cash could be replaced with conventional bank lending when normal conditions return. Or it may guarantee bank lending for a time. The Treasury will also be encouraging councils to put in more of their own money. Greater Manchester will probably do so, and public bodies behind further education college and regeneration projects are increasingly dipping into their own pockets.

Most councils, however, won't have the money. They've already been hit by banks charging higher margins to cover their cost of borrowing. Though councils have been helped by interest rate cuts, they can still easily pay 0.5% more than expected for bank finance. Small change? On a £150m schools deal, that's another £750,000 a year - over £60,000 a month - at a time when budgets are being stripped bare.

So it's largely up to the Treasury. It hopes to take only a short-term hit to its finances, but even that's a gamble. No one knows when, or if, the funding market for PFI deals will return to normal. Even if more banks re-enter the market, many financiers believe the margins charged for PFI funding will never return to previous levels. That implies either a further drain on the public purse, as the Treasury gives councils money to compensate for more expensive finance, or, quite simply, fewer projects.

None of this is good news for the government's plans to boost the economy through infrastructure spending. In the short term, it doesn't mean much. Last year's £3bn acceleration of infrastructure projects ignored PFI as too complex to be speeded up, and focused instead on small-scale projects such as refurbishing schools. But PFI was supposed to help longer term, and even that now looks doubtful. Councils facing up to costlier finance could scrap projects, or at least take longer to put them together, while the added complexity of mixing in government funding will act as another brake. No one is talking about a complete collapse in PFI, but it will be a slow grind.