Tag Archives: mutuals

Councils consider mutuals and social enterprises among new funding models for youth services

Posted on 24/08/2011 | Leave a comment

By David Bicknell

The London Borough of Hammersmith & Fulham has  proposed a pilot scheme to set up an employee-led mutual to deliver services to schools and the council, with the council commissioning some services from the mutual for a four year period.  But what are other councils doing in the area of children and youth services?

This article about youth services on the Children & Young People Now site suggests that according to a recent study, when questioned about alternative funding models for funding youth services, 34 per cent of local authorities say they are considering social enterprises, 20 per cent are looking into youth mutuals and 15 per cent say they are currently considering outsourcing their entire youth service to another provider. Overall, only 37 per cent are considering any alternative models of funding.

The article quotes Sue Payne, chair of the Confederation of Heads of Young People’s Services, which brings together council youth chiefs, saying that CYP Now’s study highlighted that councils are “increasing the number of services they are commissioning.”

Payne said the study showed encouraging signs that authorities are seeking new funding avenues. “There are quite a lot of moves towards social enterprises and youth mutuals,” she said, adding that only a year ago very few youth services would have considered these options.

She added the point that that “You can’t just create good delivery systems overnight”. Although external providers had a strong track record in delivering information, advice and guidance, she said, this was not the case in areas such as targeted youth support.

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Hammersmith & Fulham mutual Pathfinder expected to launch in January 2012

Posted on 22/08/2011 | 1 comment

By David Bicknell

One of the Government’s flagship employee-led mutual Pathfinder pilots is now expected to be launched in January 2012 and be up and running by Spring next year.

The mutual, which is being led by the London Borough of Hammersmith & Fulham, but is part of a tri-borough business model with Kensington and Chelsea and Westminster, will have ‘social enterprise status’ and will deliver existing education support services to schools and some services back to the Local Authority.

A recent report on the mutual plan published by Hammersmith & Fulham proposes a pilot scheme to set up an employee-led mutual to deliver services to schools and the council (with the council commissioning some services from the mutual for a four year period). These services are currently delivered by schools resources division within the Children’s Services Department. The pilot proposal follows the council’s five stages of transition for staff wishing to develop so-called “New Ways of Working.”

The guiding principles of the proposed scheme are that:

• Staff and financial risk are transferred out of Hammersmith & Fulham

• The pilot will have the opportunity to develop its market share not only within the three boroughs, but much wider, such as with Independent Schools and Free Schools. The council says this will enable a more robust delivery model and further financial benefits through economies of scale

• A form of Mutual (John Lewis Partnership) model of staff ownership encourages business focus. It is intended that all staff will become shareholders, with shares allocated proportionally to responsibility/commercial value

• The mutual offers more than just delivery of the council’s medium term financial strategy plans, but presents opportunities for the Council to further benefit from the outset and again if the venture proves highly successful

• The mutual is part of the tri-borough merger and follows the principle of removing the direct delivery of discretionary services

One of the key drivers for the mutual is the council’s desire to drive a more “commercial” approach to service delivery whilst delivering efficiencies in line with its medium term financial strategy. It has  proposed that the Schools Resources Division which currently offers support to the Council as well as trading directly with Schools, offers a unique opportunity to pilot these ‘new ways of working’ whilst further driving efficiencies in Children’s Services.

To put the drivers into context, Hammersmith’s Schools Resources Division must deliver annual reductions totalling £475k of savings over the next three years; a 34% reduction in its baseline spending. It says, “Maintaining the confidence of schools through effective service delivery efficiencies requires creative solutions. This proposal provides an opportunity for piloting a ‘New way of Working,’ whilst exceeding the proposed medium term financial targets. It offers a broad package of services that by externally trading provide opportunities for expansion to deliver savings, whilst taking advantage of additional opportunities available through the tri-borough merger.”

It adds, “As part of the development of the business model, tri-borough partners in Westminster (WCC) and Kensington and Chelsea (RBKC) have identified opportunities to expand the scope of the mutual to provide IT services to schools in RBKC and WCC. Any tri-borough partnership will be subject to all the respective Cabinets’ approval, although the opportunity supports the joint strategy of progression for the three directly managed services.”

Although it is possible numbers might change, the report indicates that the proposed mutual “will be comprised of 21 Hammersmith & Fulham staff from the onset, with the additional inclusion of 12 ICT staff from Kensington and Chelsea (subject to RBKC Cabinet), and a further 7.8 ICT staff from Westminster (subject to Westminster Cabinet and further due diligence). Both Councils are expected to join the proposal between January 2012 and April 2012, depending upon the most appropriate timings for their respective Councils.”

The anticipated launch date of the proposed mutual is 9 January 2012. Hammersmith & Fulham says this date is a realistic one and is confident of an April 2012 start although further work is being undertaken to establish if the timescale can be accelerated. Hammersmith & Fulham says the inclusion of the other two boroughs will significantly develop the schools market and provide the business with a larger base to manage its operations from.

Some other points are covered in the report:

  • “The Council envisages that all staff will transfer from the Council(s) to the new company under TUPE (The Transfer of Undertakings (Protection of Employment)) Regulations with the possible indemnity for the first twelve months redundancy in line with other outsourced contracts”
  • “In addition, the mutual will reinvest a percentage of its net profit back to the local authorities(where the business is receiving income) for the enhancement of learning for young people, as identified by the Councils. This will be enshrined within the contractual relationship between Hammersmith & Fulham (and other Councils) and the mutual for the four years of the pilot phase where the Council(s) is also commissioning services.”
  • “For the first four years of the mutual the other 50% net profit will be retained by the business to provide a profit for any partners and develop a growth fund and develop the business on a secure footing. Given the national circumstances it is envisaged that there is unlikely to be any pay awards or dividends to the mutual staff in the first few years of the business, although this will be determined by the business and its partner in line with the business progress.”
  • “At the end of the four year period the Council will be tendering the strategic contract and the mutual would be able to compete with other providers and may or may not win the contract. By allowing the mutual four years it can effectively build its client base and develop its offer to schools, such that it should have sufficient capacity to re-direct resources should it be unsuccessful in the Hammersmith &Fulham contract.”

Andy Rennison, Hammersmith &Fulham’s assistant director for schools’ funding and the future director of the mutual, said: “What we do makes a big difference for schools and while we have solid systems, a solid approach and strong brands as boroughs, the status quo is no longer an option for us. We are working against a backdrop of massive financial pressures and that, along with changes in government policy around academies and free schools, means we must fundamentally change the way we deliver our business if we are to survive and grow. Becoming an employee-led mutual gives us a real opportunity to take control of the agenda and further develop a strong and sustainable service going forward.”

Questions and Answers

Q. Who is the lead council on this?

A. Hammersmith & Fulham Council

Q.Do staff from all councils get the opportunity to go into the mutual to work? 

A. Staff from the three boroughs who are engaged in this specific area of work will get the opportunity to go in to the mutual

Q. Are the timings in the report up to date – i.e. when it is planned to be set up (September 2011) and begin (April 2012)? 

Yes, we aim to have it running by April 2012.The mutual social enterprise is currently in the process of being set up and the council plans to go to market in September to procure a private sector partner to assist with its establishment. The tri-borough mutual social enterprise plans to go live from the start of April.

Q. Has this been approved by all three councils and what are the next steps?

A. The proposal to set up a mutual social enterprise was part of the tri-borough implementation plans in education services for all three boroughs. H&F council has approved the option appraisal and initial business plan, which includes authority to go to market to procure a private sector partner. Discussions are still taking place in the Kensington and Chelsea and Westminster boroughs about the final arrangements and staff affected. A tri-borough staff consultation is planned to take place in October.

Hammersmith & Fulham Mutual Proposal Report

Tri-borough Proposals Report

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Mutuals and SMEs remain at risk of EU procurement rules despite government calls for change

Posted on 22/08/2011 | 3 comments

By David Bicknell

A recent article on EU procurement has raised the possibility of the risk of a challenge to the government’s plans to make procurement easier for fledgling mutuals and social enterprises still trying to get their feet off the ground.

There are also implications for SMEs battling to gain a foothold in government procurement.

The piece  argues that even though the govenment is trying to change EU procurement laws, that itself is likely to take a couple of years. So, it asks, if the UK government is making a proposal around mutuals now, what will it do regarding procurement in the meantime?

In the UK government’s recent formal response to the European Commission Green paper on the modernisation of EU public procurement policy, the government said:

The UK welcomes the Green Paper on modernising public procurement, and the commitment that proposals to simplify the public procurement directives will be published at the end of 2011 or early 2012. The UK strongly agrees with the Commission’s comment on the need for streamlined and flexible procurement procedures, so that purchasers can obtain high quality goods and services, while delivering value for money for the public purse. Radical simplification is needed for the benefit of small and medium-sized enterprises (SMEs), other suppliers and public purchasers alike.

The main priorities in the revision of EU public procurement policy should be:

To make clear that contracts could be awarded directly for a period of, for instance, three years, to employee led organisations/mutuals, to enable employees to gain experience of running public services prior to full and open competition

Reducing lengthy and burdensome procurement processes that add cost to business and barriers to market competition

Providing more flexibility for purchasers to follow best commercial practice, so that the best possible procurement outcomes can be achieved, and

Supporting measures to enhance SME access to public procurement, where such measures are non-discriminatory and are consistent with a value for money approach.

The full response is available here

The article goes on to suggest that changes should be made to simplify and harmonise ‘dynamic purchasing’ techniques such as framework purchasing agreements, which need to be made more flexible to benefit SMEs.

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Posted in Campaign4Change, EU procurement, mutuals, public sector, public services, SME

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Guardian Social Enterprise event to focus on solutions to move on from ‘brave new dawn’

Posted on 16/08/2011 | Leave a comment

The Guardian has published details of its Social Enterprise 2011 conference to be held in London on 8th November.

It argues that social enterprise was seen as a brave new dawn for service delivery but since the social enterprise unit was set up ten years ago, progress has been relatively slow.

The one day event “explores the facts about social enterprises providing public sector services. It provides candid discussion about the obstacles and practical solutions to the challenges the sector faces.”

The conference will discuss what the government is doing to scale up ambitious enterprises, and look at business models, finance and commissioning.  It will also take a close look at mutuals  from the point of view of service delivery rather than organisational structure. The reasons some mutuals have done so well is that they provide exceptional services and customer loyalty.  So what lessons can be learned from successful mutuals?

Here are details of the conference programme.

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Prioritise co-operatives and mutuals to redistribute and create work, says Lib Dems’ Simon Hughes

Posted on 15/08/2011 | Leave a comment

In  a piece in the Observer yesterday, Liberal Democrat MP Simon Hughes called for co-operatives and mutual businesses and social enterprise to be prioritised as part of a redistribution and creation of work.

In the wake of  last week’s riots, he argued, “A responsible economy is necessary for a responsible society. Building local, regional and national economies which provide the opportunity for all to participate in for fair reward will build much stronger communities. This will counter the appeal of the gangs and the get-rich-quick merchants. Other people and activity must now capture the energies and abilities of a generation that has greater potential than any we have had before.”

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Employee-led public sector mutuals get Baxendale Awards opportunity

Posted on 12/08/2011 | Leave a comment

It was probably inevitable given the interest in public sector mutuals and social enterprises in recent months that there would be some awards that recognise employees’ efforts in creating a mutual.

The Philip Baxendale Awards for Excellence in Employee Ownership, co-sponsored by the Baxi Partnership and the Employee Ownership Association, will feature a category, the Public Sector ELMO Award, which celebrates “the most impressive group of employees to have spun out of the public sector into an Employee-Led Mutual Organisation (ELMO), and who are showing progress in transforming the service to improve outcomes for their users.”

The closing date for nominations is 19th September 2011. You can read more about the awards here

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Applying the mutuals model to social housing

Posted on 11/08/2011 | Leave a comment

If there is one thing that the discussion about the Big Society and the Government’s Open Public Services White Paper has done, it is to open up the ground for debate on a range of issues around public services and how they should be delivered. The words ‘mutuals’, ‘co-operatives’ and the ‘John Lewis model’ are now never too far away from the discussion, as this housing network blog about mutual housing demonstrates.

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Mutuals: meeting the leadership and change management challenge of spinning out

Posted on 08/08/2011 | Leave a comment

A recent blog post by the Transition Institute discusses the leadership and change management challenges that must be met in spinning out of the public sector.

The post, by Sarah Ashley, argues that there are a number of themes that recur among those spinning out, including a need for leadership, transparency, language and perceptions.

On leadership, she says, “To instigate and complete a successful change, leadership is extremely important. Though change champions can steer change from any layer of an organisation, the project needs to be spearheaded by an ambitious, dedicated and highly motivated individual. This person must be fully committed to change, and will have to confirm, persuade and assure others to support the change.

“Spinning out of the public sector and change management is not an overnight process, but the change does need to be swift. Once the decision to change has been made, the change should move quickly and throughout the transition the leader must be flexible but resolute. ”

You can read the rest of the post here

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Mutuals: balancing the benefits of employee ownership and innovation with the risks and rewards

Posted on 05/08/2011 | Leave a comment

By David Bicknell

The excellent King’s Fund report released yesterday on social enterprise in healthcare made some interesting points on employee ownership and risk in social enterprises and mutuals.

It said: “Evidence from other sectors (the commercial industry, and other public services to a lesser extent) largely focuses on the employee ownership model. In the UK, there is considerable evidence based on the John Lewis Partnership, a major retailer and the UK’s largest employee-owned organisation. However, much of the literature in this field is from the United States, where a significant proportion of the workforce (more than one-fifth) is financially involved in their organisation.

“Literature from the private sector is predominantly supportive of employee ownership, and suggests that there is a positive link between employee ownership and productivity, innovation and job satisfaction. This literature is based on the argument that, by giving employees a stake in their organisation, they will be more engaged and potentially more productive.

“However, Ellins and Ham report evidence that suggests that employee ownership may slow down decision-making and generate a risk-averse culture. A review of the literature by Matrix Evidence also suggests that any productivity gains are not immediate, but become stronger over time.

“The relationship between employee ownership and staff engagement is quite complex. It has been suggested that employee ownership does not automatically lead to greater staff participation, but that staff participation is necessary for the development of a successfuland productive employee- organisation. The literature suggests that the main benefit of employee ownership is greater staff involvement in decision-making, which is associated with a stronger tendency for organisational innovation. However, the direct link between ownership and staff satisfaction is much less clear.

“In commercial industries, employee-owned firms tend to have a lower risk of failure. They are able to create jobs quickly, and are at least as profitable when compared to conventionally structured businesses. Further, a survey by the Social Enterprise Coalition found that social enterprises were twice as confident of future growth compared with small- and medium-sized enterprises (SMEs) (48 per cent as opposed to 24 per cent of SMEs). Additionally, since the recession began, 56 per cent of social enterprises have increased their turnover from the previous year (compared with 28 per cent of SMEs).”

The other week when David Cameron launched the Open Public Services White Paper, he suggested that the Civil Service (and perhaps other
enterprises too) would need to adopt a risk-taking culture.

“The biggest challenge for the Civil Service is to try and adapt to this new culture and also a very difficult thing to do, and an easy thing to say, is that actually civil servants will have to take some risks. We all know that in business it is very easy to award the contract to Price Waterhouse. They’ve done it before, they’re an enormous organisation, they won’t fail. I think there’s a similar tendency within the Civil Service. It’s safe to keep it in house and deal with one of the big providers.

“If we really want to see diversity, choice and competition, we have to take some risks and recognise that sometimes there will be a new dynamic social enterprise that has a great way of tackling poverty or drug abuse or helping prisoners go straight, and we do need to take some risks with those organisations and understand that rather like in business, when you have a failure, that that doesn’t mean that the Civil Service has done a disastrous job.

“In business, we try new things in order to do better, and when they don’t work, we sit back and think, ‘How do we do that better next time?’ We do need a sense of creativity and enterprise in our Civil Service which is clearly there….a change of culture, perhaps a different attitude towards innovation and risk and a sense that that will be a good way of driving performance.”

Interesting then that a blog post in the Harvard Business Review site discusses risk and argues that taking a risk is not immoral – as some might argue – and that “the world is full of people who sit on their high horses disparaging risk and risk takers. They counsel caution in order to gain moral stature, all the while making use of a thousand innovations made possible by the very people and practices they shun.”

It’s not the people who shun risks who are the saints, the author, Dan Pallotta, says. It’s the ones who dare to take them. Good piece – worth a read.

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NHS mutuals and social enterprises will need more support to succeed, says the King’s Fund

Posted on 04/08/2011 | Leave a comment

By David Bicknell

Healthcare think-tank, The King’s Fund, has produced a new report on social enterprise in healthcare which suggests  that there  are many practical challenges facing organisations in making the transformation to becoming a social enterprise or mutual.

These include including access to NHS pensions for new staff and the vulnerability of smaller organisations to failure, particularly given the change in payment mechanisms from block contracts and grants to an ‘any qualified provider’ model. Some will fail or, at best, become subcontractors for much larger businesses.

The King’s Fund report adds that  any qualified provider presents an opportunity for social enterprises (and other emergent providers) to enter the market. The Cabinet Office has stated that social enterprises can be a ‘force for innovation’, which need support through more intelligent commissioning.

“All providers will need to be better at demonstrating outcomes, particularly those delivering non-clinical services such as advocacy and support, where outcomes are much harder to measure and prove, the report says.

The King’s Fund says its findings echo those of the recent Co-operatives UK report, Time to Get Serious (Bland 2011), which identified the factors that will be important in establishing mutuals and co-operatives across UKpublic services.

These include concentrated business planning and support – during both the implementation and operational phases – and long-term commissioning and political commitment to nurturing the development of the social enterprise model.

“Assuming that social enterprises are to be embedded as health care provider organisations, they need time to evolve and to emulate the levels of customer service, quality and innovation seen in organisations in the commercial sector. Social enterprise directors spoke at length about the benefits available to them; however, the extent to which they are exercising these freedoms to innovate or grow is unclear,” says The King’s Fund report.

“Transferring out of the NHS now has additional risks, because organisations will not be protected by the long-term contracts that were initially available through the Transforming Community Services programme. The social enterprise directors and foundation trust chief executives we interviewed gave a clear message that the most significant feature of social enterprises is their focus on engaging staff in decision-making, rather than offering a package of incentives.

“However, some felt that staff engagement can be achieved without formally changing the ownership structure of an organisation. Giving staff a stake in the organisation they work for needs to be combined with much deeper engagement in decision-making than has traditionally been the case in the NHS, particularly when it comes to empowering frontline teams.

“Changing an organisation’s culture is much more difficult than altering its structure, but is essential if further improvements in performance are to be achieved. This has implications for workplace relationships, and requires leadership styles that foster collaborative and inclusive approaches to problem-solving.

“There are a variety of options for NHS providers to reap the benefits of the social enterprise model – namely greater staff engagement, flexibility and autonomy, and flatter decision-making – without major organisational upheavals. For example, models such as multi-professional partnerships – extending GP partnership models to others in primary care/social and community care or in secondary care, and multi-professional chambers within foundation trusts – build on the benefits of service line management in providing autonomy and flexibility to clinical teams.

“Providers, whether NHS, private sector or not-for profit, cannot wait for the commissioning intentions of clinical commissioning groups to become clear. They need to be proactive, working with others to design high-value services that no commissioner could refuse to buy. Social enterprises are well placed to do that. However, whether the government’s vision of the largest social enterprise sector in the world will be realised depends on the motivation of NHS organisations, their ability to overcome barriers and realise the benefits of social enterprise, and whether social enterprise is sustainable in the long term. The opportunities are there; the question is whether staff and their leaders want to take them.”

The King’s Fund’s recommendations for the future development and sustainability of social enterprises delivering NHS-funded care include:

  • Miscommunication and misinformation has hampered the establishment and operation of social enterprises in health care. The Department of Health must continue to take responsibility for ensuring the accurate dissemination of information about social enterprise and the Right to Provide programme, as well as broader developments in NHS terms and conditions and the support available to emergent social enterprises. This builds on its existing programme of workshops, sitevisits, case studies and networks.
  • Social enterprise directors should establish and maintain an open dialogue with staff and external stakeholders in the setting-up phase and throughout operations. The values of social enterprise and employee participation should be reflected in what the organisation does from its inception. Staff engagement is especially important during challenging periods or when making difficult decisions.
  • Central government, the Department of Health and directors of health care providers should not assume that setting up new organisational structures will automatically generate greater staff engagement. Staff engagement is a necessary pre-condition for the successful development of a social enterprise, but will not be achieved solely as a result of structural reforms. Other providers can potentially gain this benefit without major organisational upheaval, through developing strategies for staff engagement.
  • The protection afforded to social enterprises through long-term contracts at the beginning of the Transforming Community Services programme is no longer available. In these challenging economic times, and with the government committed to provider competition, social enterprises may be more vulnerable to failure. It is essential that social enterprises develop the necessary business orientation and flexibility to innovate that will be necessary in a more competitive environment.
  • Social enterprise leaders should be supported to develop the necessary skills and competencies through national development programmes. The Social Enterprise Investment Fund should continue to provide expertise, advice and support.
  • The guarantees and provisions of the earlier Right to Request programme should be continued. Arguably, the programme has been successful because of its commitment to guarantee pensions for existing NHS staff, as well as the investment in awareness raising and development support, the contract guarantee, and backing from the centre for individual applicants when faced with local, regional and trade union opposition.
  • It is likely that the benefits of social enterprises in health care will be seen in the longer term, with potentially limited impact in the short term. To achieve this long-term impact, there needs to be greater certainty around commissioning priorities. It is vital that the government and Department of Health commit to a long-term support programme and commissioning strategy for emergent social enterprises.

The report’s author, Rachael Addicott, has written this blog

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