Tag Archives: The King’s Fund

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

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

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