Wednesday, May 4, 2011

Piece from today's Guardian on social enterprise spin-outs

What is it like to lead a service out of the public sector into a social enterprise or employee-owned mutual?

I recently spoke to four freshly-minted leaders of social businesses or mutuals. What they have to say is inspiring, but also reveals the major challenge ahead for the government, as it aims to create new employee-owned ventures.

Three big themes emerge. The first, emphasised by all, is the importance of leadership from the front.

One leader, a former director of local authority adult services who does not wish to be named and who now leads a new social business, warns that spin-outs will struggle unless senior players are prepared to put themselves on the line. Another, Andrew Burnell, chief executive of City Health Care Partnership, Hull, formerly part of Hull primary care trust (PCT), underlines the need for leaders to be resilient during a process of extrication which, for him, was "a drawn-out affair, difficult and at times challenging to one's sanity and patience".

Then there is the opposition, both overt and covert, from trade unions and, on occasion, from top management. This often takes a personal toll. Burnell felt that his passion for spinning-out led to him being labelled, as "blinkered". The former council director, meanwhile, found that his motivations came under attack. He also believes he was treated as a threat to a comfortable council monopoly: "I was disappointed but not too surprised at the deep municipalism that pervades a local public sector," he says.

Clearly, doing this isn't for the faint-hearted, even those who heed Burnell's counsel "not to take 'No' for an answer".

A third, more positive theme, common to all, is the increase in productivity, innovation and energy that being part of a social business engenders. Scott Darraugh, director of Social adVentures, which was part of Salford PCT, says things are now more productive. "There has been a cultural shift within the team. Staff are driven to take ownership, and that has to be better for the people we serve".

Kevin Bond, chief executive of Navigo community interest company, formerly North East Lincolnshire mental health services, says his new organisation has managed to make significant savings over the next three years without diminishing its service to the public – and has engaged staff and users in governance in a way "never possible before".

What can we learn from these leaders? The vital factor appears to be the benefits of freedom both strategically and operationally. Getting away from a much larger public body seems to have a powerful galvanising effect.

But warning signs abound. A trickle of spin-outs has not yet turned into a flood. Few councils, it appears, are looking seriously at this option, choosing instead to cut their inhouse services and tender them out.

What could speed things up?

First, public bodies need a "playbook". At the moment, according to the former director of adult services, councils don't know how to create and nurture spin-out businesses. Then, further assurance needs to be given around how pensions will work, how public bodies can avoid legal challenges if they create a spin-out and how the creation of spin-outs can be financed. And there is a real need for leaders – hundreds of them. There is no doubt that such people exist in the public sector. But the challenge is to convince them that spinning-out their service will do for them what it has for these four leaders.

It remains in the balance whether potential leaders of new mutuals are encouraged and nurtured – or made to walk through fire before stepping out.

• Craig Dearden-Phillips is founder and chief executive of Stepping Out, a business helping parts of the public sector become a social enterprise, and is a Liberal Democrat county councillor in Suffolk.

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