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.
Sunday, November 27, 2011
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.
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.
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.
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.
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.
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