Wednesday, December 14, 2011

My piece for the Guardian this week

We've all heard a lot about public sector mutuals: the government's vision of millions of public sector workers setting up shop as employee mutuals and selling their services back to the state.

In truth, progress has been slow. The Mutual Support Fund, launched at the beginning of December, has been a long time coming. Councils in particular have had other things on their mind over the past year. Overall, it is probably fair to say that public service mutuals have not, as yet, set the world on fire.

Is this about to change? Possibly. At a structural level, it is clear to that the public sector's days as a provider of services are numbered. Selby council, in north Yorkshire, now employs just 14 people. The rest are with external providers. This is the direction of travel and the new localism bill will make challenge to direct public provision a lot easier.

The question now, therefore, is who is going to take on services, update them and bring down their costs most effectively.

Let's be realistic here, the private sector is very good at organising councils' back-office services, mending the roads and collecting the bins. But there are areas where private companies are not so good – like providing social, community and healthcare services that bring together public resources with the energies of communities and individuals. This is, or should be, the "sweet spot", which mutuals and social enterprises can address.

One example of such a service is NAViGO, the ex-NHS service which was overall winner of the Guardian Public Service Award 2011.

But there are big hurdles to overcome for the future NAViGOs. The biggest by far is procurement. At the moment, the norm in public services is to run a tender process for virtually any service, even when one isn't strictly necessary. For the nascent mutual this can feel like climbing Everest. With no trading history or commercial skills, being pitted against experienced competition is a deterrent. Why go to all the trouble of forming a mutual only to get knocked out in round one?

There is, however, a way through the procurement conundrum, one supported by Cabinet Office minister Francis Maude – though, strangely, not one you hear so much about. Joint-venture mutuals – new ventures which bring together public sector staff with a seasoned external partner to set up a new company on a 50/50 basis – can run a procurement, not for the contract to provide but for a suitable external partner for the staff-led mutual, which will itself become the provider.

This transforms the staff's position in the procurement from one of nail-biting underdog to one of a judge in a beauty contest between different organisations hoping to partner the new mutual. Potential joint-venture partners can be selected, or dismissed, on the basis of their experience, skills and cultural match to the staff in the mutual.

This is arguably a far more attractive proposition not only for the staff, who also get help in setting up the mutual, but also for the public bodies, which will be able to transfer a lot of the start-up costs on to the new joint-venture partner.

Can this idea fly? Yes, if it is given the same amount of attention and support as the idea of stand-alone spinouts, with all of their attendant risks and complications.

Tuesday, December 6, 2011

To JV or not to JV...that is the question

How are we to get more people ‘stepping out’ from public services into Mutuals or social enterprises? One of the major stumbling blocks – of the many – concerns how groups of workers obtain an initial contract.

While there is nothing in the rules preventing the formation of a mutual or social enterprise by a Council, it is made abundantly clear in a paper on Procurement (just released by the Cabinet Office on its new Mutuals Information site) that the usual rules on procurement will apply to any aspiring spin-out.

This means, in effect, that if you’re a forming up a new venture to, say, run a social care service within your Council, you need to prepare for the possibility that you’re going to have to compete from the beginning with one or more existing providers – with all the tendering experience, financial muscle and reportable track-record they can bring.

There are however, five ways out of this for any group looking to spin out:

1. ‘Shadow’ company. Here you establish the venture, at first, as a kind of virtual-company, working within the Council ahead of a tender two or three years down the track. Staff are seconded in and there is an ‘arms length’ arrangement that mimics what it would be like to be legally separate. The idea here buy some time for the new venture to be gotten into shape for a competitive tender. You're not, of course, your own company, but you at least can operate more freely in preparation for competition.

2. Teckal company. Another approach is to set up a TECKAL company, one that just trades with the local authority and is still under its control . A TECKAL company has to do 90% of its business with the local authority and have an intention to remain primarily for that purpose only. The trouble with these is that they have to remain 'one client' companies in perpetuity - which is a bit of a limiter.

3. Joint Venture. An option increasingly under discussion is turn the procurement from a race you're in to be the provider into a contest for the joint-venture partner to help your staff group into a new mutual that delivers the service. You definitely continue to provide under the banner of a new JV mutual or SE - just not on your own. This will bring third party expertise and energy – but will mean you’re sharing control with a new JV partner.

4. Local Authority Trading Company. There exists 1990s legislation which allows LAs to trade so long as this is within their statutory purposes. This means an independent company can be set up with your staff in it – but that your company is wholly owned by the local authority whence you came. So not really an option for staff set on becoming employee-owned – but fine if the priority is simply to ‘spin out’.

5. Prove there is no market for what you do. For many services this are may well be possible, particularly those which are community-based, innovative or in some way unusual. You need to be confident though, so that the local authority feels safe from any external challenge. Some local authorities have also set up social enterprises in order to develop the local marketplace where they don’t feel comfortable with the range of alternatives to state provision, for whatever reason.

All of these provide a clear ‘way out’ for aspiring staff group of immediate open procurement of the service they run. However, all involve big compromises from all involved. It isn't just a ticket to freedom. The original idea of front-line being free, by right, to lead a spin-out – as happened in the NHS on Right to Request (2008-11) isn’t being envisaged this time around. Right to Provide (as it is being termed) is quite different to what happened with NHS spin-outs. It isn’t so much a right to provide as a right to tender.

What of joint-ventures? Much is being made of this as the real opportunity here. Instead of competing to run a service, what you get instead is a contest to partner with staff to set up a mutual. My hunch is that this is the option that most attracts the Coalition. Why? Because this involves other parties, including the private sector who can bring both cash and business expertise.

At the moment, there are relatively few live examples of such ventures actually happening. One reason for this, I am guessing, is that it isn’t really being presented yet by Government as the choice option for spinning out. The language is all about front-line workers emerging into newly minted ventures that they themselves have created. If the line was taken that joint-ventures were a preferred model, I am sure this would change.

And are they the best way forward? Well, joint ventures certainly solve some problems. The costs of setting up a spin out can be estimates at somewhere between 3% and 10% of first year turnover – and typically come in at somewhere between £250,000 and £500,000, all said. Plus JV is in many respects a more straightforward proposition. A JV, by its nature, can side-step a lot of the origination, developmental and commercial experience issues that dog new spin-outs. A well-positioned JV partner can turn an assault course into a relative walk in the park.

So, what’s not to like? Two things come to mind as possible obstacles. One is that a joint-venture is not the same as setting up your own business. You are not in control in the same way. It’s more akin to running a franchise than setting up on your own. Another is that you need JV partners which make sense for you, that share your values, which bring something to the party beyond what you bring yourself. Yes, a tender process should flush this out, but to even get to that stage, you've had to go through a lot on your own and it can be hard then to share the venture with new third parties that have come through a procurement process, people with whom you have no history.

Where do we stand? I am personally supportive of there being more JV spin-outs. I cannot see where the origination costs can come from otherwise. And, to be honest, I see a certain level of waste when it comes to the origination of spin-out businesses which could easily be absorbed by new JV entities eager to get into the game.

But it is the fact that JVs get around a lot of the difficulties around procurement that make it particularly attractive as a model. Otherwise, one is into all sorts of difficulties: When or whether to tender? How to set this up to give a mutual a chance of winning without breaking EU rules? How to create a clear pathway for staff which is not off-putting?

Therefore a JV will always get my vote ahead of the other main get-out option – the local authority trading or TECKAL company, which tends to more closely resemble its former self than feels comfortable. These entities are perfectly legal and achieveable and there are some great ones around but they do not give employees any more stake than was possible under state control. Which, if we're talking about employee ownership and its concurrent benefits, somewhat misses the point

Monday, December 5, 2011

Cry Freedom - why the stepped out leaders never want to go back - My recent piece for 'Third Sector' magazine

During 2011 we at Stepping Out have helped 25 leaders to cross the aisle from the public to the third sector, and their stories have inspired me to write a new book, published this week. How to Step Out’ is a guidebook for people in the public sector who want to take their service out as a mutual organisation or social enterprise.

What can be learned from these freshly-minted converts? Three things stand out. The first is that they have come into the third sector, with all its uncertainties, because of the unique freedom it offers: freedom from the senseless bureaucracy and brutal top-down management of the public sector: and freedom from its alternative - the hollow profit-grind of the private sector. For all of them, joining the third sector is like breathing mountain air after years of choking industrial smog. In the words of one of the newly liberated: “We are free – you cannot believe the energy and value this unleashes”.

The second bit of learning from this cohort of new third sector leaders is that good, old-fashioned leadership is absolutely key to seeing through major change. Convincing public sector workers to give up their ancient comforts for a life of competition in the free market is not an easy pitch. In their move from public sector caterpillar to third sector butterfly these leaders provide a masterclass in how to take people with you. You put yourself out there. You communicate until you drop. You listen. You engage people in the change. You put your money where your mouth is. Again, in the words of one recently stepped-out leader, ‘you have to make your case hundreds of times – then all over again’.

Another thing that can be learned from this group is that third sector providers should be involved in new-style public service provision in a big way. My book abounds with stories of how these organizations have achieved amazing things with former public sector services and saved public money at the same time. These leaders show us that the civil society sector is a viable alternative to the public and private sectors - not just a cherry on the cake.

This is perhaps the most important point to make. The cold logic of long-term austerity – possibly running into the 2020s - means that old-style public services are, sooner or later, going to run out of road. They will either have to stop or be replaced with stuff that is cheaper and better. We have to be part of the answer, in my view. If we refuse to be properly involved, and remain in our historic comfort zone, we will end up as bystanders to probably the biggest privatization of public services in the developed world.

One final thing that really hit me hard when we researched this book was the total unanimity on one question: ‘Would you ever go back to the public sector?’ Nobody, not even the ones who have struggled since stepping out, would ever entertain the idea. This says volumes for what is good about the third sector. You might not see it that way, but this sector, despite all its irritations, is probably still one of the best places in the world in which to work.

Sunday, November 27, 2011

Why the Pension Changes Must Go Through

It's Sunday evening. I have just snapped off Five Live with John Piennar during a long rant by Len McCluskey of, I think, the Unite union banging on about pensions, how all this is ideological etc.

Like most unions, he's fighting the last war. The 80s were, tangibly, about checking the power of unions. The money spent on beating the miners could have paved Sheffield's streets with gold. This time, it not ideology but economics that are shaping the agenda.

Pensions are the visible tip of a lifestyle iceberg that we are just about now realising is not sustainable. We can't afford the NHS - or at least not the one we want. We can't have the police, armed forces or welfare policies we really want - we just can't. The money just isn't there. It actually hasn't been there for a long time - well before the banking crisis - it just that we thought it was. We simply used a lot of debt and, yes, banking profits (they are taxed) to fund ever growing public services.

The problem underlying all of this is is the productive capacity of our economy. Not just ours, the whole of Europe, bar Germany, and the US all have economies far weaker than the social settlement we have created on top of them. The solutions therefore are not to be found in the politics of protest - though I am glad to see people actually doing something.

Instead they are to be found in deep economic and social reform. There are three important elements here. One is investment. Not just lending to SMEs etc (that much is obvious) but proper investment in high end products and services. This is generational fix but it is one which has got Germany to where it is today. We have the brain power in this country, just a pathetic inability to turn this into profitable companies.

The second is public sector reform. The Government half-gets this. Indeed I come across many Councils which do get it and are moving from being huge corporate service deliver agencies to place-shapers. The role of Government is not to do but to make sure things are done in a way that they people want. It is to intelligently knit things together, not become the biggest employer of people, a situation found in many northern towns today. Where a job with the Council is people's highest hope.

The third is much harder to achieve - a shift in social preference away from debt. Thirty years ago, it was really hard to get a credit card. A mortgage you got on application. Being in debt was something you avoided if you could. Now we allow a disgusting market in exploitative debt to operate on our high streets. These Poverty-Machines exist in every town. One has even opened up in Bury St Edmunds. I can have up to a grand for a couple of weeks at an interest rate of nearly 5%. Why isn't this illegal? We have to regulate this industry and, ideally, close it down.

While I really worry about Britain, wee've a lot going for us - our geography and culture our language, our world position, our history and our creativity. We still have some of the best universities in the world. London is holding its own as a world city. There's definitely much to build on.

But my overwhelming feeling is anxiety. About an imbalanced economy, a fracturing society, a populace grown used to easy comfort, a closed polity and a public sector which is fighting old wars rather than changing itself for a new age.

For all these reasons, these pension reforms need to go through. They are just one element of putting things right.

Saturday, November 19, 2011

The Investment Principle

I was with a client of ours the other day and we were talking about a joint venture they were looking into doing. Like a lot of third sector organisations, they were big on vision and ideas but a little thin on practicalities. And I found myself saying what I often say to leaders of spin-outs.

Which is this: it's very bloody hard to grow a business without investment. Financial investment. Personal investment. A commitment and a choice to take the risk. An intrinsic understanding that you can only get massive results if you're willing ot make big calls. Let's call it the Investment Principle.

I have, when I think about it, tried to live my own life by it, whether I consciously called it that or not. I seek, where possible, to be an Investor. Why? Because the he stand-out people who I admire most are, for me, those who invest. They take risks with their time. They give freely - but selectively. They put their reputation and money on the line in pursuit of that in which they believe. Their impulse is to make big inputs, sure in the knowledge that exceptional result are only created that way.

The obverse of the Investors are the Conservers. I use this term deliberately. It's a frame of mind as well as a set of actions Conseervers' life-strategies revolve around protecting and maintaining a current position, not in enhancing it. It is defensive rather than speculative, closed rather than open in spirit. Conservers fight for their share of the cake rather than investing in a bigger one.

But this isn't a simple linear split. I suspect the distribution curve is pretty standard with most people being somewhere between the two poles with extreme Investors and Conservers as outliers. My guess though is that the people who make the biggest difference in the world , certainly socially, are almost all on Investors. These people are not 'born'. They make a choice about how to live. They know that the Investment Principle works - and they live by it.

Of course, Investment isn't just a one way street. Investments frequently don't pay off. In people, in relationships, in business. You get burned as much as you get it right. And investments that are not made judiciously, in people or ventures that are wrong to begin with, are not defensible either. Being investment-minded isn't about being a soft-heart. But it is about understanding the powerful link between investment and reward and making this, somehow, a feature in the way you operate.

Saturday, November 12, 2011

Why We Should Celebrate Circle Healthcare's Takeover of Hinchinbrooke

BBCs news this week was full of the story of 'private company' Circle Healthcare Ltd taking over NHS services. It's CEO Ali Parsa was challenged by Justin Webb on why it requires an outside organisation to make changes which could surey just be introduced by NHS without the need for a new provider.

Webb's question actually cuts to the heart of the matter here. The NHS can't do this. There is abundant evidence to show that it cannot deliver simple economies and is endemically incapable of dealing with lower growth in resource. The NHS could not, for years, balance the books at Hinchinbrooke. This is why, in desperation, it was tendered out. Without this, it is pretty clear that Hinchinbrooke was going to be downscaled or worse.

I say this because I have a bit of an interest. Hinchinbrooke isn't my local hospital but I know it quite well. It serves a series of small towns between Peterborough and Cambridge, both of which are important regional hospitals. It fits into that category of 'district general hospital (DGH)', which most of us rely upon.

The challenge is that the 'business model' for DGHs is under pressure from the double-whammy of regional specialist centres and the need for more primary, community and preventative services. Put simply, if I get cancer, I go to my regional centre (Addenbrookes). For most other things I go to my new-fangled GP surgery where they even perform minor ops. My local DGH gets caught in the pincer.

So, politics aside, this is a difficult business to be in. Which is why poor providers like Hinchinbrooke NHS Trust get found out very quickly. Hence, if we want DGHs to exist, we need for new providers with fresh approaches. The reason I am glad that Circle won it was that the delivery side of the business is half employee owned. The BBC, in its usual binary way, refused to focus on this, instead stressing the fact that it is 50% privately owned and backed by hedge funds.

And how else, I ask, is Circle to find the necessary funding to get Hinchinbrooke off its arse and working properly I wonder? The government is bust, in case nobody noticed. Circle have been able to bring new money to table. In addition, through its co-ownership model it is also bringing employees own energy to the equation, as co-owners of the company. Study after study attests to the benefits even of part-ownership like this.

Surely it's a time to set aside our ancient anxieties about risks and try new providers like Circle? Remember, there is nothing 'safe' in a failing NHS hospital which is losing money, probably causing more harm than it should and on the brink of closure. And there are savings to make, there always are. People who don't deal much with the NHS don't realise how god-awful much of the management practice is, how 1970s it all is internally and just how much scope there is for savings.

I have seen it all first hand and much of it is quite repellent: brutal, authoritarian, super-bureaucratic and self-interested. If Circle can raise standards, balance the books and raise productivity then their staff and investors are welcome to a profit.

Monday, November 7, 2011

What needs to happen to get the Mutuals show properly on the road

Last Monday evening, Stepping Out brought together for dinner a group of well-place people from Government, Finance (both social and commercial) and public service delivery, including two leaders of substantial 'spin-out' social enterprises.

The 'exam question' for the evening was 'How do we grow a new sector'? What will it take to encourage more social enterprises and mutuals to emerge and how will we encourage the ones that do to grow? The conversation centred around three themes: finance, politics and markets. All of these, of course, inter-relate but first, finance.

The general view in the room is that financial weakness - in the form of small balance sheets - is a disadvantage facing spin-outs tendering for contracts. There appears to be a truth that when tenders come up, this sector struggles to show the financial ‘leg’ necessary to get nervous public sector commissioners into bed. Instead they bee-line for safer-looking super-providers. Some would argue that social enterprises should be 'gifted' public assets in the form of property to address the balance sheet issue.

But others observe that it’s balance sheet strength, not property ownership that public service businesses need, and one of the paradoxes around finance into the spin-out sector is that there is quite a lot of interested money. The problems are, firstly, that these businesses don't yet have the relationships to bring the finance in and, secondly, that providers have, in some cases, been frozen out by plentiful 'free' money from government grants.

The second theme was politics. This centred around the question of the Coalition's real intentions around the mutualisation agenda. On the one hand, there is clear commitment to mutualisation but the ongoing story of change is mainly one of outsourcing to the usual suspects. While part of the problem is over-rigid procurement practices (which are beyond the immediate reach of government, by and large), there is also another problem, namely that there are quite starkly competing visions of public service reform across different parts of Government, which so far haven't been resolved into a single approach.

So, on the one side, you've got Academies and Free Schools, which is, effectively, guaranteeing a role for ex-public sector providers (heads) and taking a very phased approach (indeed) to the introduction of 'disruptive' players such as Free Schools and the private sector. On the other, you have a view, championed, it appears in the Treasury, of 'Black Box' public services that are simply more efficient and packaged off to the private sector, like the Work Programme and, what some fear, might have happened in the NHS under the first-read Health and Social Care Bill.

The third and final theme was markets. How to translate the narrative of a diverse base of providers of public services - large, small, private and voluntary - into a reality is a question to which there is not yet a truly clear answer. The reality may be that time may provide some answers all on its own as markets shape up. Alternatively, we might end up having to manage markets fairly proactively if diversity isn't killed off and replaced by a very powerful oligopoly which itself becomes very hard for Government to influence.

Therefore, to what extent Government should 'tilt the table' and if so how was one of the talking-points. There is a natural reluctance in many quarters of too much government intervention in markets of any sort. 'Best is best' is a common watchword in the world of public procurement. How to behave in markets is also a big question for spin-out organisations. Are they best, in the longer term, to partner up or even fold-in larger healthcare groups in order to gain efficiencies and achieve long-term stability? Or is this too much of a compromise that would water down their raison d'etre as socially focused organisations?

This one of the unresolved questions facing spin-outs in this sector, particularly as they come up head to head with organisations whose chief competencies lie not in actual service delivery but the winning and fulfilment of contracts, often with third party deliverers.

Overall, like with all discussions of this sort we didn't come up with a clear answer to how we grow this new sector. But we did have some pointers. One was ensuring that organisations seeking to bid can also show that they have access to capital if they succeed.

Another is an important message to Government around the need for a bit more help for this agenda if it's not to die an early death. This help consists of a clear message about pipeline and deal-flow. This translates into decent 'start-up' contracts to new mutuals and social enterprise - so that they can at least prepare properly for a more competitive market in the later 2010s and more proactive market-management to ensure that the public's interest in a diverse marketplace is delivered by Government.

Friday, November 4, 2011

Chairs and CEOs - what makes for a good relationship?

A big day is coming up for me. I will shortly make a planned exit from the chair at VoiceAbility. This will end a rollercoaster ride that started in a hired room at Cambridge YMCA in 1994 and ended with a multi-million pound social enterprise that touches thousands of lives every year.

I ended up as chair following a merger that saw the other side's chief executive brought in to lead the new organisation. A good choice, as it turned out. He has performed brilliantly, along with his team. While we couldn't be more different as people, we have functioned well as chair and chief executive. In 18 months together, we have got the organisation growing again after the stresses and strains of merger.

So what is the secret to a successful chair-chief executive relationship? I would point to three key areas.
The first is there has to be trust - no skulduggery, no games. As chair, you are the chief executive's public champion and private cheerleader. But you are also the person who has the difficult conversations behind closed doors. There's challenge in both directions - but always in private. Publicly, you're a team.

The second, is letting the chief executive do his or her job. Too many chairs meddle: they fail to realise that their value comes from being above the action, not in the middle of it. Bad chairs think they are the experts when it is in fact the chief executive who is doing the 70-hour week, living and breathing it all. In my view, it is the chief executive's job to set out to the chair and trustees what a decent strategy should look like. The job of the chair - along with the rest of the board - is to make sure the proposed strategy is robust and on-mission.

The third key to success is managing the board. Most chief executives feel anxious, on some level, about their board - I certainly was. In our sector, boards are afforded a lot of power, so the board is never far from the chief executive's mind. Also, you often see a culture clash of sorts between the executive team, which is small, cohesive and professional-managerial, and the board, which is normally larger, highly diverse and often less purely professional-managerial in its world view. In what can be an awkward interface, the chair-chief executive relationship acts as a kind of airlock between two distinct parts of the organisation.

I make no claims to have got all of this stuff right myself. Indeed, my failings come to mind as much as what I got right. I am not surprised by the fact that the chair-chief executive relationship tends to be viewed in our sector as a problem rather than something to be celebrated. But I think I now know what makes it work: relationship, role and successful management of the interface between executive managements and trustee boards.

Am I glad to be going? Yes and no. Yes, because the time is right for me. No, because I know the charity's best years are still ahead.

Wednesday, October 26, 2011

'It's the End of the World as We Know it (and I feel fine).

There's an old REM song, of this title and, today, like many people, with the world economy about to potentially crash into recession I feel, in the here and now, fine. Nothing seems that different. It's the same for many of my friends, be they in business or whatever. The crisis has the same feel to it as famine or natural disasters in other countries. We're concerned, sure, but worried, mostly not.

It's one of those things about economics - the fact that most of us have no idea of the intricate machine that creates the world as we know it. That machine is, so we're told, about to have the equivalent of a massive heart attack which won't kill it but could leave it in a pretty poor state.

So what do we need to worry about most? On a personal level, it is clear that we're looking at flatlining and probably declining personal incomes over the coming years. These will kick in unequally with the middle classes taking a hit but the wider working population probably finding it harder. In turn, this will affect Government income and we could see a haircut on Government spending that makes the Coalition's austerity programme look like a children's tea party.

What does this mean for public services? On the transfer payments side, it means huge cuts to welfare which again hits the most vulnerable hardest and risks social cohesion and, worst case, unrest.

On the delivery side, it means that the whole architecture around health, education, defence and local government spending is vulnerable, built as it is, on the basis of a economy that is essentially sound. If all of this becomes unaffordable, we're into a very difficult conversation about cut backs and the public sector settlement which, again, will make current changes to salaries and pensions seem very modest.

Where this would also take us would be a wider conversation about how we now deliver decent public services. If you go to any conference at the moment about this, there's a lot of talk of 'how we do thing differently?' - then everyone goes home and slices the salami. Or so it seems. This is because, on balance, it's politically and operationally a lot easier than the alternative - which is re-invention.

A crisis of the sort we're probably heading into will, one way or another, make it far more attractive to reinvent than cut back services. Careers - political and professional - will not survive if slash'n'burn is the the modus operandi. For those of us who have long been advocating a reinvention of public services this could end up being, our moment.

So spin-outs, community-based services, co-ops, innovations that allow decommissioning - all of these things could have a political attractiveness that is currently missing. The sadness is that it will take things getting really quite catastrophically bad before that happens.

So, while it could be the end of the world as we know it, there may be one or two reasons to feel fine.

Saturday, October 22, 2011

Thoughts on the Suffolk Gene Pool

No, this isn't a piece on the natural qualities of Suffolk people!

This week, Suffolk County Council appointed a new Chief Executive, a lady called Deborah Cadman. I have never met her but have heard very good things about her and am sure she is highly capable. So what I am about to say now is not in any way about her personally (in the unlikely event that you'e reading this, Deborah).

What I found slightly depressing about the recruitment of Suffolk's new CEO was the narrow gene-pool from which the short list (and no-doubt the unpublished long-list) was drawn. Chief Exec of a District Council. An interim CEO. Head of a regional quango. Etc etc. What we had were a bunch of senior local government people all going for one of the few plum local government jobs currently around (most people are, strangely enough, sitting tight).

So what's wrong with that? Don't we need someone who understands how local authorities work, can deal with politicians etc? Well, yes, I guess so. But, far more than that we need people who can really manage change. When I say 'manage change' I don't mean the usual bullshit about 'doing things differently' that you hear at every bleedin' conference you go to these days. I am referring to people who have a proven track-record in adapting organisations from one set of external circumstanes to another.

Why so? Well, I don't probably need to say too much here but we are looking at flatlining economy and a public sector funded through debt. It has to have money taken out of it in ways that minimise social damage. Paradoxically public bodies need to invest in order to do this.

Of course this requires political leadership and few politicians, when push to it, are either fully cogniscent of the challenge or, if they are, much inclined to do anything. Therefore we need executives working alongside them that can help to move the terms of trade and give politicians the templates they need to take to the public come election time.

Now in Suffolk, we had one such executive in Andrea Hill. She had precisely the right ideas but lacked the other side of the change-management skill-set - namely the people and implementation skills to give proper momentum to necessary change. This, coupled with a misogynistic media witch-hunt did for her.

So this time, we have gone for what we know. A solid local government line up, nobody too flash and a solid track-record in the era just gone. What was missing, in my book was anyone with a massive track-record in the kind of change we're about to go into.

Of course, this would have meant going beyond the public sector. We would have been looking at people who had transformed companies or led turnarounds. For that's where we are now in the public sector - in need of turnaround. Most of the people leading local government today have not done this - they are incrementalists, most of whom only have experience of managing noughties-era growth.

I wish Deborah Cadman the very best in her job. As I said, she comes with an excellent reputation and I have no doubt she was the right choice from the shortlist. I am only sorry that we couldn't have made this choice from a wider range of people, including from other sectors which have undergone role-reinvention.

Tuesday, October 18, 2011

My piece for Guardian Public Leaders Network 17.10.11

Many noble words have been spoken in the last couple of years about the future role of public sector mutuals and social enterprises as alternative delivery vehicles for public services. So far we've seen some interesting pathfinders and the rather anodyne open public services white paper which, on its own, will probably not be sufficient to turn a trickle of new ventures into a torrent.

We have also seen consistent references by Francis Maude to the idea of partnerships between emerging spin-outs and the private or third sectors. This is an interesting concept but what might it mean in practice?

Most spin-outs have been standalone entities, often set up using government grants and loans to get them going. Now that state funding is no longer there to the same extent, it will become increasingly necessary to look elsewhere for cash and expertise.

This is where partnerships could come in. One possible vision of the future in healthcare is represented by Circle Health, a social enterprise which is part-owned by its staff and part by its managers and financial backers. Each new NHS spin-out becomes part of Circle with the employee share of the company kept at the same level – around 50%.

Two of the councils which we at Stepping Out are working with are seriously considering seeking partners for the spin-out of part of their in-house services – a joint venture as opposed to creating one that's standalone. The idea will be to ask charities and private sector organisations to compete – with investment and skills – to be the joint-venture partner for the new companies in exchange for a long-term contract and a stake in the company.

Speaking to people on the frontline about this, there are many attractions in the partnership model. If a well-known name is seen to be willing to risk its reputation on a spin-out, it encourages others to get involved. Likewise, staff and managers know that there will be support to fall back on. It is somehow easier to imagine this kind of scenario than hundreds of standalone mutuals and social enterprises spontaneously emerging from a cash-strapped public sector.

Of course, there could be problems, including a potential clash as the public service ethos vies to find a common agenda with the commercial side. This is difficult stuff and nobody should pretend there aren't some dangers but that shouldn't close minds to possibilities.

Given public discomfort about private profit in health and care services, this could become a big opportunity for the third sector, particularly with the so-called Big Society Bank on the horizon. After all, the public service ethos is, in many respects, very similar to that found in not-for-profits. If the better players in the third sector rival private companies in attracting investment for new spin-out ventures, it is very easy to see charities being selected as preferred partners over social enterprises and mutual ventures.

One logical question, of course, is why go to all this trouble? Why not just give charities and companies contracts to run the services themselves? Supporters of spin-outs would argue, correctly, that new spin-out ventures which are employee-owned, locally focused and not just a branch or a project of a national organisation would be a better partner to a local authority. They are more invested in the local area and better at involving communities and individuals in the co-creation of services.

Where this agenda is going remains to be seen. The jury appears to be out on spin-outs. While Cameron and his team remain enthusiastic, there is huge pressure, from the Treasury in particular, to create more efficient versions of what we've got, preferably delivered by the private sector.

For the spin-out agenda to get more traction, it seems necessary that existing players from charities and private companies get involved – and quickly – because the biggest danger for those already out there is that this movement remains small and peripheral. The next year or two is crucial. Partnerships appear to be a sensible way to press on beyond the first wave of early adapters.

Sunday, October 9, 2011

Why not Big Six-style public services?

I had an interesting conversation with my wife at the weekend. It was about a new conservatory. I don't want one, not until our business is in good shape and, even then, I can't say I wouldn't prefer just to whack £25k off our mortgage.

I suspect a version of this conversation goes on in most households at least a few times of the year. Our own position, of course, is one reason why the UK economy is looking so bad just now. If I were feeling a little better about the future, there would probably be Suffolk builders pulling up to my gate on Monday morning to start four weeks' work. My twenty five grand would soon be pinballing around the builders' merchants, homes, supermarkets and pubs of the town.

Instead, it sits stagnating in my offset-mortgage bank account, waiting for the financial bombs to drop. What we are seeing now - the closed shops, bars and cafes (outside London at least), the army of underemployed - is just the beginning of a long period of economic darkness, a long Autumn and Winter for the UK economy.

And we should not really be surprised. UK investment levels have been low for decades. We're relied on historic strengths in services, our language and fortunate geography to compensate for these deficits. Which we got away with for a very long time indeed, almost to the point where our we thought we were cleverer than the likes of Germany, with it's 'mittelstrand' (small and medium sized firms), its very old-fashioned banking sector, its focus on technical education and its social market economy.

What many of us would give to trade places with Germany today, even with its EU obligations? Consistent trade surpluses over many years meant, in effect that it, China, India and others were lending surpluses to consumers and Governments in the US and UK to sustain our public services and lifestyles long before our own economies were exposed as Ponzi-like.

I mention public services deliberately. The settlement we have now cannot continue. We're still running public services like it was 2009. Very little, so far, has actually been cut, in relation to the whole. Hardly any real reform has taken place.

What needs to be done? We are talking about three things. One is the much 'narrated' rebalancing of roles and responsibilities between individuals, the community and the state. This occupies a lot think-tank airspace but I see very little practically going on to recast public services along these lines. In Wigan, Bournemouth and Durham, they are mostly just shutting stuff down, charging for use or keeping them going on reduced lines. The fevered conversation you hear at just about every conference of public sector CEOs hasn't, so far, added up to much on the ground.

Another is breaking-down of large public sector monopolies and the pushing down of responsibilities to the lowest sensible level. Again, attempts to do this (in health) are being stymied by a mix of some badly drawnpolicy, abysmal communication and reflex conservatism on the part of the health establishment. The third is a new market in public services, which, if the Work Programme is anything to go by, looks like a massive slam-dunk for private sector giants, many foreign-owned and wearing the boots in term of their relationship with Government.

Here is where the fork in the road currently lies. I think the Tories' love for free markets is going, before we know it, to see a cartelization of public services into a 'Big Six' - like in the power industry - very quickly. Indeed, by the time we realise what's happened there will be no going back and we'll be stuck with a small number of disliked, unaccountable oligopolists, mainly foreign-owned, charging us what they want.

Ah, I hear you say, might this not actually do some good too. Is the power industry the right comparison? What about the supermarket sector where competition has driven innovation, quality and value? I hear this, and I don't dismiss it either. Genuine competition does bring benefits. One can imagine certain public service markets benefiting no-end from the freeing-up of the market.

But public markets cannot ever be 'free-markets'. Public goods tend to be limited in supply in relation to demand. The distrubution of public money always needs to reflect society's dialogue with itself, and maintain a link to it, through both politics and local public accountability. The patterning of public goods also needs to reflect the long-term goals of a society in relation to its challenges, in our case a challenging demography, growing regional disparity, a fragmented society and need for long-term up-skilling.

Therefore, we need intelligently set up markets which have powerful regulators and rules which reflect our long-term goals. In doing this, they must ensure that markets serve these. Rules are required to guarantee diversity of supply and prevent a handful of firms dominating a market through incessant take-overs. We ensure smaller firms can enter markets.

We say no to any provider, if the consequences of that are that this market is forever lost to a small group over-dominant providers. We ensure that any particular configuration is reservable and that no commissioning decision is going to permanently disadvantage the taxpayer in relation to the provider, however attractive the initial offer.

And, yes, this means being a bit more categoric about mutuals and social enterprises. This sector doesn't really have much chance in a free-for-all. Government commitment to seeing a strong mutual sector, backed by the will to see it done, is what is needed now if the diversity spoken of in the public services white paper is to be more than just a wish-list. Diversity needs to be deliberately created as markets need to be 'made'.

Otherwise we are truly headed, as a country, for bottom-feeder public services which are not going on any level to meet or be responsive to the needs of the country's economy or society. You simply wouldn't see the countries whose economies are going to lead the world in the next 20 years letting go of their strategic grip on public services markets in this way. The paradox of freeing up a system means that we must, at the same time, make it safe through proper supervision and regulation, as our experience in the banking sector has told us.

If that lesson hasn't been learned by now, and its application to public services been noted, then God truly help us.

Saturday, October 8, 2011

Why the Transition Fund for the third sector may not be such a good thing

Has the Transition Fund been a good thing? Obviously, if your bacon has been saved or your demise delayed, you'll say yes. But the answer is more complex: I think the fund has shown the sector at its best - and its worst.

On the positive side, the sector showed great mettle in squeezing a decent amount of cash from a necessarily stingy government. It also showed that, while the sector's star might not shine so brightly in these austere times, it hasn't waned as much as we feared. Anecdotally, I have also heard of great examples of charities using the Transition Fund not to rearrange deckchairs, but to invest in building a new ship.

However, two things have bugged me about the fund. The first is that it has given succour to those who believe they deserve by right to be bailed out. This culture of entitlement is the most unattractive trait I see in the sector. By creating a bailout fund, the government has unwittingly strengthened the hand of those who, instead of reacting to the crisis in funding, have sat on their hands, blocked change and told their chief executives to find more money. And then it has appeared.

The second thing is that for every organisation that uses the Transition Fund to reinvent itself, there appear to be 10 that use it to delay their deaths by a few more months - or until the next bailout fund comes along.

I am sorry, but you can't run a charity - any more than you can run a car plant or should be allowed to run a bank - on this basis: it's wrong. If your existence is in danger, the only legitimate use of the Transition Fund is as an investment in your long-term sustainability.

If it allows you to keep your head in the sand for a bit longer, it is failing to serve its function.
Some readers will think I'm missing the point here. Short-term cash is urgently needed to prevent thousands of our most vulnerable organisations from disappearing due to no fault of their own, and so on.

On one level, this is true: one hears many stories of councils, in particular, treating charities badly. Nobody would argue that there is never a case for financial relief or bridging funding for organisations that hit a difficult patch.

But what has been lost is any kind of mindfulness in the way that money is used: there was no requirement to invest; nothing to be repaid; little accountability (from what I've seen); and no really clear distinction between the most and least deserving. I know this was mostly down to the timescales - but I think this spending was done blindly and not in a considered way.

What will be the legacy of the Transition Fund? Ideally, one would like to think of it as a timely piece of investment that enabled our sector to retool for a new age - as indeed it is for the few who are investing their funding wisely. More realistically, I think it will be viewed merely as an extension to the opening hours in the last chance saloon.

Monday, October 3, 2011

Business as Usual is Not About to Resume

I had breakfast today with a friend and former Barcap investment banker who confided in me, over fresh cappuccino at the Commonwealth Club, that he was 'deeply pessimistic' about the future of the UK economy - and therefore also quite worried too about the charity and social enterprise sector in which we are both now active.

His view, and it isn't new, is that we all - including him during his time in the bank - grew convinced that we had, somehow, hit a new economic paradigm - one of continual growth. Of course, we know the rest of the story. We were, in reality, living beyond our means for a very long time, all fuelled by the Emporor's New Clothes of debt.

I am not so tribal or stupid to blame this all on Labour as the Tories are doing this week. All of us fell into the same trap. Sure, Labour could have modified it but their OTT spending was matched comfortably by excess elsewhere. We were all at it. Yes, all of us. Consumers too. Charities even. We all grew on the back of a surging economy. A doubling in the number of charities, no less.

We're now faced with not just a couple of years of pain before things perk up - but, probably, a decade's worth at least. There are no big levers to pull. Rates are as low as they can go. There's no oil or Big Bang to spark or soften the blow of an economy in which demand is now at a super-low. Neither is there money for tax-cuts. In fact, there's very little to lift things - that's the problem. The bottom line is that our economy in 2011 just isn't strong enough to support us at the level to which we're become accustomed.

This applies to public spending too. One in every four public pounds is borrowed. Yet the debate hasn't moved on from the 1980s in the minds of some of the defenders of the current system.

Take those people in Stroud last week who successfully got a court order to stop a social enterprise being formed to take forward former NHS services. They think those same services are 'safer' in the NHS. Folly. If we want to keep social and health provision at ANYTHING like current levels, we have to make a diminishing sum of money work a lot harder.

Getting it out of public sector monoliths is the first step in doing this, as we're trying to show with Stepping Out. Putting that money to work alongside community and individual resources is the new name of the game. People trying to 'save' public services need to realise that.

As we finished our cappucinos, my former banker friend ventured that our children will probably be 25% poorer than we were in our pomp. Public services 25% less well funded and so on. We're not used to that. And it will probably be this possibility - more than any other- that shapes public sector reform over the coming years.

Regardless of whether we like it, this means markets. These could be very open ones - like the Tories seem to instinctively go for - or, as I prefer, more managed markets that are regulated to guarantee diversity of supply and competition on quality as well as price.

We said goodbye. He has been chastened by the experience of recent years. But I have too. I grew a social enterprise when it was easy. I wouldn't like to try to repeat that feat today. We have a generation of leaders now who aren't used to coping with decline - and who lack the skill-set associated with it.

2012-20 will be a very different era for charities and social enterprises. Much less secure but possibly richer in opportunities for the well-positioned and most capable.

But for the rest, my friends' pessimism seems very well placed.

Sunday, October 2, 2011

Which is the Mark for Me?

In the next couple of months I will post my first year's results on the Companies House website. One of the most conspicuous things that you will notice (if you look) will be that while Stepping Out has made a pretty decent profit and put 20% of it aside to set up the Stepping Out Foundation, one thing is missing. Salaries. Because, in year one, I didn't actually pay myself. Or rather, I put the money I would have paid myself into paying back loan, reinvesting in the business and setting up the Foundation.

I could have been a social enterprise, had I wanted. It would have been oh-so-easy. Had I actually bothered to pay myself, rather than pay what I owe and reinvest, I would hardly have made a profit at all. A sliver of one. And, if I then gave half of that sliver of profit to a Foundation I could, with pride, declare myself to the world as an 'official' social business.

See where I am going here? What I am saying, I guess, is that it is quite easy to pass muster as social business without necessarily doing a great deal of good for anyone. Just pay yourself a decent whack of what would otherwise be profit and you're away. Then simply declare a small profit, give 50% of it away and give yourself a pat on the back, social businessman.

So why haven't I done this? I haven't done it because to do so would have been bad for our business. Stepping Out, like any new business needed to be profitable so that it could first survive and then see this profit reinvested in the business.

In year one, this was more important than paying me (and it takes an entrepreneur to understand this logic). I have lived, as most entrepreneurs do, on savings and by counting my pennies. I don't take a wage until it's safe to do so. But I know that if and when the business succeeds, I will do well enough from it to compensate for these early risks and privations.

Social enterprise logic - and I hear this a lot - is very different. There are normally fewer early privations. Indeed why should there be? For there is nothing down the road to point to as compensation. Therefore, to be reasonably expected to start a SE, , one has to to put oneself, as Founder, on a decent wage right from the off. But this is hard for the business: The enterprise then has massive need for cash to pay you ahead of secure revenue streams, making survival less probably and funds for reinvestment less likely to be there. In short, social enterprise can cut off the oxygen supply to new ventures which comes from entrepreneur's financial self-sacrifice.

I am saying this because I think it is time we opened our eyes to the fact that the term 'social enterprise' should not be restricted a corporate structure that discourages personal risk-taking by making difficult reasonable long-term reward for founders. Companies starting need to 'borrow' from their founders in every way. Starting businesses on full costs is simply very difficult - and dangerous for the business. It is only right and proper that is repaid generously to founders once the business is a success.

Fans of Ed Miliband please note, this is not 'something for nothing' behaviour . It is not greed which motivates entrepreneurs lany more than it is greed that makes it a requirement for social entrepreneurs to pay themselves good wages from the off. Indeed., how else are social entrepreneurs of the officially sanctioned variety to be compensated for their risk?

You will notice that there is rival 'Social Enterprise Mark' now available. It reads something like 'For Profit Businesses, Creating Shared Value'. It invites for profit businesses that can demonstrate tangible social value through the way they do business to join the social enterprise movement. Of course, at the moment, this is a shadow movement, outside the mainstream. For profit means, for many in this movement, that you're essentially in it for yourself, not social, at least not in the way they are.

I refute this. Why? Because I could, with one stroke of an accountants' pen, be a social enterprise tomorrow. And have a pocket full of money to go spend on a new car or two. But I care about my business and what it is here to do - socially & financially- a lot more than that. My business needs investment. Its Foundation needs cash (we pay 20% of profit into it). As an entepreneur - and yes a bloody social entrepreneur - I want to be free to create long-term value, not hemmed in by a structure that stops me doing that.

And for that reason, I know which Mark I will be using on our new website when it comes out later this month.

Thursday, September 29, 2011

Can we Talk About Something Interesting Please?

Last week I attended a meeting of Suffolk County Council of which there are five or six proper meetings a year. This was the week of a feared global banking meltdown, some pretty grim national figures on the economy and locally, a time of extreme stress as people struggle with the future.

We spent the first forty-odd minutes of this meeting discussing a change in the council's constitution pertaining to the right to speak of various councillors in relation to the public questions which take place at the start of the meeting. This discussion was tedious, to say the least, and I am proud to say that I spent nearly all of it writing on my Blackberry to a constituent whose life is being made hell by changes to council policy around social care!

This is a theme I know I have touched on before. Most people on the Council are comfortable-retired - members of the Jackpot Generation without mortgages and debt and in receipt of secure pensions. They don't have to work, they have defined income and few outgoings. Their kids, by and large, are older and they don't have many worries. And some, of course, are fairly narrow in their field of concern. There could be a nuclear war going on out there - but as long as the bombs didn't land on Suffolk, they would be happier discussing the condition of the roads in Saxmundham or street-lighting in Wickhambrooke.

Now I know what Councils are for. We're not about high-politics. We don't control the economy or affect the state of the world. We are here to worry about the roads and street lighting. But aren't we somehow supposed to bring some kind of awareness of the world we are living in into the room with us? Shouldn't we at least be focussing on how we can help kick-start the Suffolk economy as it goes through a period of strain? Or deal with the massive public service cuts we need to make?

Although the Andrea Hill era is now over, one thing it never was is boring. Each meeting felt like we were discussing the issues of our time. The need for public sector reform. The realities we need to face. That's one reason why Suffolk, for a short time, became interesting news to people on the outside. We were, at least, gripping the issues, as a Council. It made turning up as a Member interesting. There was plenty to say and to take away. The new leadership, while quietly dealing with our 'issues' as a Council has, very adeptly, kept discussion fairly low key.

So what have I done about this? Have I introduced a motion for discussion? No, not yet, but I intend to. Just to have a proper debate about what it is we're now doing as a Council to tackle the mountain in front of us. Andrea is gone - but how we're going to address the problems she correctly identified is as clear to me as mud. There is no strategy that I can see beyond keeping us out of the headlines for a while.

I actually really rate the new Leader of the Council and the new interim CEO. I think this could be an exciting time for Suffolk, I really do. But I think a desire to 'Keep Calm and Carry On' has superceded our genuine purpose as a Council - to be the voice and beating heart of Suffolk. With our membership, that is never going to be guaranteed, but that is what any good elected group actually should be, whatever the weather.

Sunday, September 25, 2011

Is the Coalition Serious about Mutuals and Social Enterprises?

It feels to me that we’re at an important point in the discussion about UK public services.

While there are always debates about the role of government as a provider, there is an emerging question that cuts through all of this – How do we create successful public services when the country’s economy is in a ten-year plus dip?

And if we are to open up public service markets, which I think we must, are these to be more like free markets - or managed ones in which a new ‘social economy’ – to include mutuals and spun-out public services - are given scope to emerge?

The answers will shape just how the social enterprise and mutuals sector shapes up – whether we see a steep or gently rising curve in the number of people leading spinouts.

How does it look to me? Mixed. While the Coalition Government are happy to support the ‘supply side’ around this agenda– by priming the early emergence of these ventures – it is not apparent yet as to whether the commitment is there is to a ‘social economy’ in public services as distinct from a pure free market.

Evidence to date suggest that while the Government likes mutuals and social enterprises, its larger concern is to open up markets - even if this means that new social enterprises struggle to gain foothold against larger, far better funded players, as Central Surrey Healthcare (Francis Maude's favourite mutual!) showed when pitted against Virgin-backed Assura.

To what extent the Coalition – or any successor Government – would be willing to manipulate public service markets - or even tilt the table - to favour social enterprise is still a question to be answered.

While nobody thought Maude should have been on the phone to Surrey telling Commissioners what to do, it surely was clear to him that something isn't working quite right in his intended world of Open Public Service. However, in his bones, Maude doesn't feel comfortable meddling with free markets. He is, after all, a Conservative first, a supporter of mutuals, second.

The hard truth is that for this sector to become established it need commitment on the part of government not only to the supply-side - initiatives such as the Mutual Support Fund are extremely welcome - but also the 'demand'. side.

What does this mean in practice? It means a more actively managed marketplace for public services. It means smaller providers being guaranteed a role as happens in the US. It means the Government saying, clearly, as a policy objective 'We want, as part of our commitment to open public service, a vibrant social enteprise provider sector - and we're willing to take the steps necessary to ensure the market delivers this'.

It is these last 13 words that are missing from the Coalition's current approach.

Let me be clear: I do not believe anyone should get a free lunch. I believe in a diverse public sector which includes the private sector. Most of the people leading spin-outs tend to share this view.

What they want isn't more money or subsidy from Government. Far from it. What they most want is a signal from Government that they take this sector, as a whole, seriously. Whether the commitment is to a much larger social economy sector in public services. Or whether we're going to be left to a system which, at the moment, means that many of our best organisations will struggle to win anything but the smallest of contracts.

That is the real question for those leading this agenda in Government.

Tuesday, September 20, 2011

The End of the Beginning

The Guardian has been getting all lefty today over the failire of Central Surrey Health to win a massive contract in its own backyard. This probably have doubled the size of the organization and would have been a feather in the cap of David Cameron’s Big Society.

But it didn’t happen. The private sector won it. They had a big ‘reserve’ - £11m to CSH’s £3m and all the backing of a big global brand. You could say CSH never stood a chance.

However, I say let’s reserve judgment for a while anyway. We don’t know about the bids. Nor was this CSH’s main contract. I admit, had this been their core contract the headlines would, quite rightly, be about the death of the mutuals agenda before it got out of the starting-block.

Let's remember, however, that it was a big new contract which would, I imagine, have been a big stretch for CSH - though probably an achievable one for a well-led organisation. CSH will surely bounce back from this setback. But setback it is. Just as it would have been for the private firm if it hadn't won.

Two things need to be remembered here. The first is that social enterprise doesn’t always win. There is only one system with a guaranted winner – and that is the monopoly that the NHS once was. To be successful as a business, the possibility has to exist that you might one day lose. It keeps all businesses – including social ones – honest and focused.

The second is that we need to be open to the idea that social enterprises may themselves need to partner with organizations which can access high levels of capital. There is a tendency in some quarters to view social enterprises as simply NHS Mk 2, a 21st century version of Bevanism, with the an accompanying sense of entitlement.

This is to miss the larger point that social enterprises need to be the very best and have the commercial prowess that allows their strength in culture, relationships and community to shine. There’s no point on being good on all of these things but hopeless on costs, growth and profit. Social enterprise means being first-rate at both.

Today's set back is not, as some might say, the beginning of the end for spin-outs - but the end of the beginning.

Being a social enterprise means being like any business - but just one better.

Monday, September 19, 2011

Time to Find a Chair

Soon, a road-trip that started in June 1994 will, for me, finally come to a halt. Sometime in the next few months, I plan to stand down as Chairman of VoiceAbility. Just to remind, I was the founding CEO of Speaking Up, one of the two organisations that came together to form VoiceAbilty in April 2010. Seventeen years of involvement will come to a close.

Of all that time, I probably enjoyed the earlier and late parts the most. I am a natural 'early days' person and my temperament and skill-set is highly suited to start-up phase of organisations. But I also enjoyed my period as Chair enormously, striking a powerful parrtnership with our CEO, Jonathan Senker, who came from the other organisation we merged with, Advocacy Partners.

It was my hunch, correct as it turned out, that Jonathan, not I, was the right CEO for the new organisation. I had actually hit a natural limit to what I could bring to the job while I could see that Jonathan had miles of road in front of him. I could see that he would lead us to a better place.

Which already, in less than two years, he has. While like all organisations we have had to take some direct-hits, he's steered the ship extremely well, addressed our deeper challenges and built a great executive team around himself. Although quite tough decisions have been required, I have been delighted with our progress, particularly when I look around at what is happening to other organisations.

As Chair, my job has been to supply the CEO with the correctly calibrated blend of support and challenge that characterises this relationship, at its best. Not always easy to get right as a former CEO, but I think we have both been pleasantly surprised by how well we have ticked each others' boxes. Of course, I was always going to be a 'transitional chair', helping to seal the merger and our Governance thereafter, then riding off into the sunset, as the new organisation consolidated.

We are now very near that time so the search for a new Chair is on. This is something we are taking very seriously. We all know how important the Chair-CEO relationship is to the overall fate of an organisation. The person who leads our Board will have to be somebody not only of high quality with strong commitment and connections but have a reasonable amount of time to develop the board itself.

Also, we are particularly interested in people with a lived experience of disability or being a carer, though this is by no means essential. And because we have charitable status, we need a person who can afford to do this for no salary.

Interested? This is, take it from me, a great organisation and opportunity. VoiceAbility is a growing organisation with a great staff team and a strong group of trustees. I am leaving because it is right to do so, not because I feel a pressing need to so do. I feel my own legacy, as one of the founders, is now safe and that I can move on now. Seventeen years is enough time. While i still bring something, I personally don't think it is quite enough. So the search is on now for a replacement.

If you think you might be interested, contact for a pack. Or if you want a chat with me, I am on @deardenphillips - or leave a message in the comments box.

Saturday, September 17, 2011

How Soon Is Now?

Anyone of a certain age knows the song of this title. Just as most of the men will have, at some stage, had a monstrous crush on Kate Bush (or still have one in some cases). There comes a time in your life when you recall 25 years ago a lot more powerfully than five years ago. For it is these times, between our sixteenth and our twenty-sixth birthday that fix us in aspic.

And I am not just talking music here. There's people too. Many of my key friendships are now about 20-30 years old. I make new ones, sure, but it gets harder as you get older. Knowing someone for 20 years ties you to them harder than a shared hobby, work or a liking for Jonathan Franzen.

For me, time counts. Every year longer builds the heritage, even if the friendship becomes more challenging, as indeed one of two have done recently, as certain male friend have crash-burned rather than smooth-landed into middle-life.

You know when you're in safe company. I met two old uni friends recently, just for a couple of hours, after work for snatched pizza in London and I felt 'home' in a way I realised I hadn't done for quite some time. I confess too that I felt myself taking the genuine interest in their lives that I often struggle to muster on a daily basis. Quite what that says about my 'quality' I am not sure, but I am being frank.

It's books too. My reading recently has taken me deep into the 80s, the time I feel I come from: David Peace's 'GB84', Martin Amis' 'Money', Umberto Eco's 'Name of the the Rose'. I fight the urge to re-read. What's new to find out, I ask?

My political antennae reflect the tuning of the period. I am still politically moderate, my young identity wrought against both Militant, on one side, and Monetarism on the other. And still feel angry by the divisive legacy of Thatcherism while also feeling, on some level, liberated by the energy-kick which her new settlement gave to the country . Twenty five years on I am still anchored in a mental seabed of left and right, good and bad, north and south - even though my boat has somehow accommodated elements of all.

Being able to remember 25 years worth of adult life can either be depressing or liberating. At times, I feel there is nothing really new, that most of what I am ever likely to feel, think or say has already been said. That my life will spool predictably forward, each year like a new Van Morrison album - slightly different to the last one but, basically, the same songs. All that feels new on these days is the high-fear that comes with responsibility and others' expectations.

On other, better days, the super-stable nature of life in one's 40s feels comfortable and assuring. I have a life, a family, a structure, a place in the world. Yes, it's held together by the gossamer-strings of health and fortune, but, save for freak events, my life is probably as steady as life has been for anyone in any place at any time.

The challenge, at such times, is summoning the sense of possibility. Trying to believe that the next Van Morrison album will be different. That something you read might actually make you think afresh about life. That the next person you meet might change your life in some really quite unexpected way.

Friday, September 16, 2011

The Quiet Army of the Professional-Unemployed

It's not a problem that tends to be discussed in polite circles. But I am going to do it anyway. It's the new Quiet Army of people who used to have good jobs in the public and voluntary sectors who are not working.

These are not people who declare themselves out of work and go down the Job Centre. Nor are they the 'usual suspects' - the drongos who organisations tend to jettison early in a recession.

No, these are people of quality who used to be running things and who have great track-records. The recession is now eating into new territory - and nobody is safe.

How do I know? As a firm with a consulting offer, Stepping Out have experienced a massive spike in people who, for one reason or another, are available for freelance work. I'm talking about emails every couple of days.

Although people we hear fro are really impressive, we just don't have the volume of work to increase our pool just now. But what hits me is just how good many of these people are - they are not people who you'd expect to be prospecting for roles.

This is, of course, only the beginning. We are seeing a structural downsizing of both the state and voluntary sector. The gently rising curve of 2001-10 will, over the next two years, steeply plummet, leaving tens of thousands of people out of jobs. My advice to people in this position is threefold.

One is to consider switching sectors. Although the private sector isn't exactly booming, these firms are still hiring and spending.

Another is to think about downsizing or interim work. There isn't a massive market for senior third sector managers who earn 50k. There are thousands more jobs one layer down where there is a dearth of good people. Being in work is always better than being out of work - and allows a climb-back at some stage.

Finally, I advise people who are really capable to think about setting up in business themselves. It's extremely hard, especially at the moment, but if you can get through the first year, you're probably going to be OK. The rate at which organisations are shedding core people is creating some clear deficits in capabilites which have to be bought-in short-term. If you can define your focus, deal with the knock-backs and early solitude and create happy clients, it's likely that you'll emerge with a business on the other side.

I am considering a blog on how to set up a viable consulting business - but that would perhaps be shooting myself in the foot (which of course I am very good at doing). Another day!

Wednesday, September 7, 2011

How charities use and abuse consultants

It's coming up to a year since I set up my consultancy, Stepping Out, and I'm glad to say we've worked with about 25 clients - many in the third sector.

So what have we learned about how the sector uses external advisers?

Broadly, clients come in one of three types: Adventurers, Micro-Managers and Ditherers.

The Adventurers have a clear idea of what they want from you, yet are open to advice. They have a sensible, faff-free process for hiring you that respects everyone's time. They know you bring something new and welcome you into their world.

Crucially, the Adventurers roll their sleeves up too, learning from you as they go, rather than seeing you just as a hired hand. And should the project change, you can have a sensible conversation without them getting in a tizz. Trust rules.

At the other end of the scale are the Micro-Managers. Ostensibly, they want help, but their fixed ideas make them impregnable to advice. When searching for a consultant, they set up such a drawn-out process that many of the better ones walk away.

If they go on to choose you from the 50 consultants they have met, you're then handed a shopping list of stuff to report back on every week. If you can't comply, the relationship starts creaking. Raise this with them and they get very shirty. You seldom make any real money because they're always on the phone to you about something. In truth, the Micro-Managers get little value from external support: they may as well do it themselves and save the money.

But the trickiest group by far is the Ditherers. They seek outside help because they are lost in their jobs, fearful of the future and haven't done any new thinking for a decade. Which is fine, but their organisations are often in such a bad state that, as an adviser, it's impossible to know where to start. But you do start - and then halfway through (and this always happens) they shift the goalposts and you're back to square one.

Ditherers also tend to be easily distracted by day-to-day fire-fighting - and these days, especially, a general sense of despair as the abyss beckons. As a consultant, you end up in a bubble, struggling to gain any traction in the organisation. The assignment ends in a friendly enough way but with a vague feeling of dissatisfaction on both sides. The Ditherers then pick up the phone to another consultant and the whole dance starts again.

OK, these are caricatures and I am happy to report that nearly all of our clients are firm Adventurers. But we come across Micro-Managers and Ditherers in the third sector all the time - more than in the public sector, I have to say. Fortunately, one becomes more skilled at spotting them. Only Adventurers really benefit from external consultancy.

Before they splash out, then, I would invite readers of Third Sector to reflect on whether they are, in truth, an Adventurer, Micro-Manager or a Ditherer. You might save yourself a lot of money - and your advisers a lot of heartache.

Sunday, September 4, 2011

Big Judgement Day

On Tuesday I am going to be a judge at the Big Venture Challenge run by Unltd and the Big Lottery Fund where 41 entrepreneurs compete to be one of 25 selected for a chunky investment package.

As far as these types of competition go, I am impressed so far both by the calibre of the 41 and the way the whole thing is being run. It is professional, brings the right kind of people in as judges and avoids Dragons Den cliches, going instead for a constructive interview process.

The pack arrived last week and I was pretty dazzled by the diversity of stuff we're looking at. Alongside well-known social enterprises in the employment sector there are start-ups and early stage businesses doing everything from clothing for disabled people through to franchising opps for the unemployed.

Well done to Unltd and the Lottery for putting all of this together. It all reads like a compendium of the best emerging stuff in social enterprise right now in the UK, all overseen by judges who know one end of a good business from the other. The fact that the BLF is getting into social investment also deserves polite applause (they will get an ovation when they do it as a matter of course).

Any criticisms? Not really. Well, not massive ones. A few applicants look like they're just plugging financial holes, others looking for that one ;last big slug' of finance that we all probably know won't get them over the line to sustainability.

Others look at bit too fancy for my liking - lots of important sounding people on the board but not a single sale yet to point towards. I do have a bit of a thing about stuff that is web-based. Perhaps it's being from outside London, but some of the ones I see look like they might just work in Shoreditch but probably not in Shaw (that's a small town near Oldham, btw).

How will I approach the judging? Well, one thing to be sure I will be courteous. Anyone hauling their ass in front of a panel deserves to be given a proper hearing. No grandstanding or wannabe Peter Jones'.

Having done it myself before, I know it's bastard-difficult to get things across without some pillock trying to look good by tripping you up.

The only time I went in front of a bunch of smart-alec wan**rs left me with a longstanding distaste for their organisation (you can guess, I didn't get the backing!).

The other thing when looking at these things is to be aware that you can only ever know so much as a panel member. Even when the papers are great, the people and pitches clear, you're left with what is essentially a choice between two punts. I have often been as confounded by the success of certain things as I have by the failures of others I thought were complete bankers.

In truth, however smart, experienced or informed, nobody knows what's going to be a hit. Social investment will always be as much an art as a science.

Wednesday, August 31, 2011

Why I am in Business

Today I mark a year in business with a dinner. But not alone! I spent it with my new Head of Delivery, Rob Fountain who starts with us on 5th September.

Year One has been pretty good, though I have to say, tough as hell. It started brilliantly with a substantial contract with what is now NAViGO Community Interest Company – which we helped step out from the public sector in April.

When I look back, I am amazed at how utterly fortunate we were to win that contract. I will always be grateful not only to their CEO, Kevin Bond, for taking a a massive punt on us but also John Willis, the Associate Consultant who travelled every week up North to deliver it so brilliantly for us.

There is no doubt in business that you need not only luck but the right people willing to back you. Kevin could easily have said ‘Where’s your track record?’ or ‘Can you guarantee delivery on this?’ before committing. But he just had a feeling, believed in us and we tried to repay his faith with amazing delivery.

One of the best things about this business has been the clients we’ve worked with. All of them have left behind secure public sector management jobs to lead a new venture. All have taken on more responsibility, stress and leadership in the belief that a better public service lies on the other side of the divide. All of these guys and women are mavericks, people who don’t fit the usual public sector template.

But it isn’t just altruism guiding them. All want to breathe, all want autonomy and to declutter their lives of endless public sector routines. All want to manage and lead in the true sense, not just be a middle-management number.

A year into something you ask yourself ‘Why am I doing this?’. At a values level, I am, in my small way, helping to create the kind of public services I would like my own family to use. Entrepreneurial. Responsive. Customer-centred. Delivered with pride and care by organizations which think and act like great businesses, not vile bureaucracies.

On a personal level, I feel I have set myself free, able to operate in a company I control and which frees me to do the right things by my family and friends as well as by wider society.

This includes setting up the Stepping Out Foundation which in September will receive its first portion of profit from the business. The Foundation will be a small ‘angel’ fund to help very early, community based social entrepreneurs with the seed money to get out the blocks. The money will be small at first and grow as the businesses get nearer to the bigger blocks of funding now available for social entrepreneurs.

It is really aiming at people in the position I was as 24 year old trying to get the early Speaking Up going. Those early few hundred quid meant more than just money. No buggering about with forms, reports, a ‘Dragons’ Den’ – just a cheque and a card to say ‘Good luck’. They showed trust, belief, support and solidarity – which I needed as much as the money.

We already have a bunch of people to back and it will be mainly focused on our communities out here in Suffolk. For while Stepping Out is social in a broad sense, the Foundation is social in a very specific sense and my aim is to grow it over time into a sizeable fund.

Thankfully, this year, I have something to put into the Foundation. Next year, I aim to make enough money to put a lot more in. I hope also to make a bit more for myself. I survived in Year One on half of what I normally make and have reinvested every penny of profit – bar what’s in the Foundation – back in the business. This will hopefully support our growth – but it may also buttress us during any difficult period ahead.

It’s this willingness to put everything into your business – your time, your energy and money you could go out any buy a conservatory with – that makes entrepreneurs different to other people. I know people who would sell their houses in order to save or grow their business.

Personally, I wouldn’t go that far, but I understand from where they are coming. Businesses get under your skin in a way that jobs seldom do. They are somehow an expression of our true selves – and become totems of our independence and spirit.

Whether I will be cracking the champagne or drowning my sorrows in a year’s time I really don’t know. That’s one of the best and most motivating things about being in business. Nothing quite spurs you on like uncertainty. Having one success under my belt already has helped me shrug off the fear of failure.

While I know it would be bad, I also know that I would survive and bounce back, somehow. If failure is a dirty word, you often fail to start in the first place. Knowing you can live with it, is actually quite liberating.

Anyway, tomorrow we start year two. Myself, Rob, our two superb Non Execs, our Associates and our financial backers.

Wish us luck!

Monday, August 22, 2011

Spinning Out Together

When I set up Stepping Out, I expected it exclusively to be about groups of public managers wanting to set up free-standing businesses. What I didn't anticipate was the appetite for partnerships between groups wanting to spin out and existing social businesses and charities. About half the calls we get at the moment are about this.

Why does it have appeal? Three reasons stand out. The first is that public managers are often well aware that they don't have the full set of capabilities to go it alone. And the idea of doing everything from scratch - setting up accounts, payroll, HR etc - is deeply off-putting. A partner who can bring know-how and some slot-in back-office functions has some appeal.

The second factor is that Councils and other public bodies feel a lot less nervous when a third party is involved. Having a 'name' organisation involved assures Councillors in particular that the venture is legitimate and that if a well-known name is willing to risk their reputation on a joint-venture project, they are safe to do so too. Plus, as risk averse organisations, councils like the idea that someone who know what they are doing will be helping to deliver the new service safely and on time.

The third factor, and this is crucial, is about values. Hardly anyone I speak to in public sector wants to go in with an organisation whose ethos is a million miles from their own. While they can envisage doing business and even delivering alongside an organisation set up purely for profit, the idea of being joint partners in an organisation which is clearly identified as money-making is, rightly or wrongly, a turn-off for most public managers - and, interestingly, Councillors too who need a simple 'good-change' story to tell to the voters that isn't 'privatisation through the back-door'.

How many of these conversations with come to anything we don't know, but I am struck by how many Councils, charities and social enterprises seem to want to work together on spin-outs. It's not a direction I anticipated but one which I can see a lot of mileage in.

Wednesday, August 17, 2011

What you learn when you work for yourself

It's approaching a year since I founded Stepping Out. Although it's my second time out on my own, it has felt like a debut because the foundation of Speaking Up (now VoiceAbility) was so long ago and, from fairly early on, it grew very quickly. I was not on my own for that long.

My intention this time is also to grow - but more slowly and with quality not volume as my focus. I also want to protect my life a bit and believe that good margins on a small volume are probably better than smaller ones on a larger one. Growth starts in September with our first employee. Rob came through 150 applicants and I have the blessing of having employed him before. So I know who I am getting. His quality and commitment are both incredible and I cannot wait for him to start.So I won't be a solo act for much longer!

What did I learn during my year as, in effect, a sole trader? I would point, if this is not excessive, to three things. The first is that you realise that your greatest resource is your time. I have become ultra-sensitive to how time is spent. An internal meter now tells me how well my minutes and seconds are being spent. Meetings, one finds, have to have a clear business benefit. Few go on longer than an hour. There is nearly always a focus and a decision. You know when it's over.
Ditto phone calls and emails. People in organisations often struggle to see this - indeed I did by the end of my time as a CEO. I would think little of a three hour senior meeting followed by a couple of interesting visitors - BANG - there goes another day.

The second thing I have learned is that clients crave a personal service they can trust. The experience of most people most of the time when it comes to the services they buy is mild disappointment. Whether it's dealing with BT, going for a meal on a Saturday or finding somebody to help their business, while the choice out there is dazzling, actually finding A1 service is very hard. Therefore the gaps in any market concern not what people obsess about - the uniqueness of one's offer - but the level of service offered. As a small business, you're in a strong position to offer incredible service and great value at the same time. This is what we have tried hard to do with Stepping Out, in a tough market place. And I believe this has helped us to achieve strong year one results.

The third piece of learning is that working for yourself is good for your personal development, confidence and all-round well-being. While you swim in a sea of uncertainty from month to month (I have no idea where income in October will come from), you also know that what happens in the business is nearly all it down to you. I find this reassuring, rather than worrying. Compared to, say, someone in a big firm or council, who has to wait on the decisions of others, I feel my future is in my hands. My 'job security' is a simple function of my attitude and activity, not a string controlled by a drunk puppeteer who neither know nor cares about me.

Further to this, I don't think one can underestimate the psychological benefits of having to get a grip on something, on yourself and push a business forward. Few people who do go it alone go back to a job - and i think this says something. Despite the hours and the effort, working for yourself seems to unlock a lot of human satisfaction. I am always, when I go speaking, evangelical about this, but the looks I get from my mostly-employed audience indicate that it's only something you understand once you've done it. Salaried people, however unhappy, can only see the risks involved and seem blissfully unaware of the risks of sitting inside organisations, going stale, losing confidence and waiting for the hammer to fall. Which increasingly now it does, of course.

So, what do you learn when you work for yourself. Three things: You care about time, you understand the importance of service and you grow as a human being.

So - what's stopping you?

Tuesday, August 16, 2011

On Cynicism

I have always been a slight cynic. Not in a sneering, told-you-so way, but in a rather regretful, resigned fashion. My cynicism comes and goes a bit, depending on what's happening and, frankly, what frame of mind I am in. Although I have always consciously worked by 'values', I often find these lofty flowers choked by the weeds of doubt about people and their essential natures.

Of course, human nature is a many and varied thing. I suspect that is what you learn as time progresses. Huge optimism, or indeed pessimism, is misplaced. Talking about human nature in a blanket way is a bit naive. My own journey has been, I suspect, one from being ultra-positive about motives and intentions - to a place where, on a good day, I can spot the subtleties of people's character quite well and reasonably quickly.

As one becomes more acquainted with the light and shade of human character, it is important, I find, not go negative, assuming people are just self-maximisers. Some people are, in many ways, assholes, but these traits often live side-by-side with other, more attractive ones.

When I look at the folk I really like, and seek to emulate, they are not necessarily the angels, but people who accommodate a variety of traits and, in a self-aware way, stay true to their essential nature while not being a slave to it. So I now like go-getting, self-promoting types, as long as this is leavened with self-awareness and a commitment to scraping off the rougher edges. In a way, I have a lot more time for this type of person than the unthinkingly generous.

All of this, of course, comes back to one's relationship with oneself. One of the attractions of Christianity, and of religion overall, is that it encourages us to embrace what C.S. Lewis termed our 'shadow self'.

It starts with the idea that we are flawed - which we all are - but also says it is OK to be this way as long as we take conscious steps to address it. I stop at the idea that only unconditional surrender to God will successfully address this issue - my point is more about the ultimate message that although we are all, to a point 'bad', we can also, simultaniously, not be a lost cause.

Work and life in one's 40s bring one up against one's nature quite a bit, I find. There's the back-breaking financial, social and emotional obligations of parenting and marriage. One is both trying to build a future and to live for today at the same time, aware of the half-time whistle about to blow.

It is tempting, often, to just look after yourself when you're carrying so much with you. You're also, as I have been saying, more worldly wise. You don't have the same blind-faith any more. You know that beneath any surface a lot more lurks, much of it never-to-be-know. And you have to navigate the iceburgs of human nature while appreciating both their beauty and their danger.

Go negative and you sail away from them altogether and you miss the best of life. Most of my 'highs', come through communion with others. But some of my lows have come through a dawning realisation that somebody isn't all I hoped they were and why-oh-why did I believe in them?

Overall, cynicism, while tempting and psychologically comforting is, I think, the wrong way to go. For you, for others, for happiness, for productive work - whatever. Societies based on deep scepticism tend to be low-trust ones and become self-fulfilling prophesies. But blind optimism is wrong too. We cannot base our society, our institutions or our workplaces on the notion that people will always do the right thing. This too is psychologically comfortable, but naive.

Instead we have to get comfortable with the complex reality of our 'grey' natures, the blend of whatever we have been born or nurtured to be. We also need to extend this comfort to our dealings with others.

Being human is, I am still learning, about accepting my own messiness and that of others. It is also about understanding that either delight or disappointment aren't the only two ways to feel about people.

And, finally, that if the cloud of cynicism isn't to settle, it is very important to work out where on the grey scale your key people are, and how you're going to deal with that.