Will private sector involvement in mutuals make for a perfect partnership?

Although The Times today has been reporting that the Coalition might be getting some cold feet about its plans for public service reform – the Public Services Reform White Paper now looks as if it may be delayed in the wake of  recent discussions about NHS reform – there is little doubt that the role of the private sector in partnerships is being discussed.

The Guardian recently carried a piece in which Craig Dearden-Phillips, founder and chief executive of Stepping Out, a business helping parts of the public sector become a social enterprise, wondered  whether the marriage between public manager and the private sector will work?

“One concern is the compatibility of each side’s goals,” he says. “So far, public sector mutuals tend to be more focused on social rather than commercial aims. Few appear to have share capital financially worth much to staff. They tend to be defined by a passion for people, place or profession, and they often aspire to stay local and be more personal. Every person I have met who leads a spun-out organisation is motivated by social purpose. They identify strongly with public sector values – albeit ones that see a mutual or social enterprise as the appropriate vehicle for this.

“A private company, however, will, quite rightly, be mostly concerned with its shareholders’ or directors’ interests, and that will include a strong focus on growth, either by merger or acquisition and on cutting costs quickly.

“These are legitimate goals, and, arguably, the only way to create large organisations. But you can see a potential tug-of-war here, with one side driven by a growth agenda and the other living in fear of becoming remote from its community – and of losing control to a private partner.

“Can both sides meet at least somewhere in the middle, with private investors accepting the potential constraints on return introduced by being partly employee-owned and former public managers bowing to some of the commercial imperatives of  investors?

“As someone working every day alongside public managers, I hope we can find ways to bring necessary investment and expertise to the table. Unlike in continental Europe, this is unlikely to come from the state. So we need to examine closely how to do this while ensuring the values we hold close are upheld.”

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