Thursday, November 18, 2010

From my piece in yesterday's Guardian

Last week, Cabinet Office minister Francis Maude said the government would encourage different forms of organisations for public sector staff taking over services, and more details are expected soon on the government's plans for new mutuals. By Christmas, we are likely to have seen the announcement of about 30 social enterprises from the public sector "pathfinder" programme, on top of the 30 or so organisations formed by NHS staff.

So this is a timely moment to examine the mutuals and social enterprises stepping out from the public sector.

Successful spinouts from the public sector tend to be led by outstanding individuals. It takes people who are willing to do two jobs at once (business as usual; plus, leading the divestment) and can see future benefits in terms of better, more flexible services, an engaged workforce and user community. They can recognise the hidden social and commercial value of a great business locked inside a large, cumbersome public body.

Mostly, spinouts involve quite big chunks of public business, many with a potential turnover of £20m or more. With some courageous exceptions, this is not a world of small teams of social workers making a go of it on their own. Within the current health and social care economy, the costs and risks stack up more comfortably if ventures are of a reasonable scale.

In addition, the spinouts are all relatively specialised. In areas such as mental health services, domiciliary services and community health services, specialism gives these new ventures a clarity of focus that, in time, will allow them to compete and expand into new places.

But how will these new social businesses fare in the world outside the public sector? That will depend particularly on how quickly they adjust to proper competition. While protected initially, these ventures will, within three years, be playing on a level field with other sectors.

My worry is that the public sector "deal" they step out with, including Tupe regulations on transferring staff and higher pensions costs, will remain unchallenged and these businesses, freighted with public sector culture and costs, will crash faced with cheaper competition in three years' time.

Another factor will be access to commercial capital and knowhow. This is lacking in most of the senior teams coming out of the public sector. They are, on the whole, passionate about clients, brilliant on operations, superb on practice/clinical governance issues, but lacking in capacity to understand the emerging shape of the market and to build investment cases around these. Filling this gap will be a major requirement.

Then there is the extent to which these new businesses can properly exploit the freedoms offered by no longer being part of a "big machine". There is hidden value to be extracted by being a smaller, leaner organisation. It means fewer meetings, leaner operations, improved absence and performance management, less bureaucracy, effective financial control and a healthier culture. The list could go on. But all these benefits depend on how quickly the managements of these ventures make the vital mental shift required from the skills required to succeed in the public sector to those necessary to win in business.

In developing these organisations, we must be grown up about reward. The people leading these businesses need to know that the personal and professional risk they are taking will be rewarded in time. So let's have open discussion on this.

There should be earlier help to establish the viability of particular social enterprise ideas. Rather than starting with a "right to request" we need to begin with the more hard-nosed question of what does and doesn't make commercial and operational sense.

For those seeking to step out of the public sector there has probably been no better time – but we must learn from those already out here and make it clear that survival will not be easy.


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