Authorities considering commercial opportunities

12-10-2018

by Natalie Abraham, C.Co Chief Operating Officer

C.Co Chief Operating Officer Natalie Abraham showcases the first two years of business for CIPFA's consultancy service, and explains how the company’s experience can be used to help authorities considering commercial opportunities.

Background

CIPFA C.Co Managing Director Richard Harrison and I recently sat down with Rob Whiteman, CIPFA Chief Executive, and Dan Worsely, CIPFA’s new Chief Operating Officer, to celebrate C.Co’s successful first two years of business. We reflected on the current issues that councils are grappling with and how our experience of setting up a new company can be used to support the sector. 

I thought it would be helpful to share some of our considerations.

In a period where local authorities are facing unprecedented challenges, and where councils such as Northamptonshire are at risk of collapse, it has never been more important for authorities to re-think their offering and consider new ways to deliver. 

Specific drivers for change

Austerity and the phased reduction in the Revenue Support Grant is nothing new to local authorities. Section 151s have long been driving forward innovative practices to ease the budget pressures on front line services. But in 2018, it feels different. It feels increasingly real and at times very stark. 

Unfortunately this was something we all agreed on – but what we also agreed was that now is the time to drive forward the level of change the sector needs.

Our recent experience

In just two years, C.Co has provided a range of support across a number of areas, large and small: developing target operating models for services and organisations, delivering senior management restructures and forming business cases for change in a wide range of services – from facilities management to social care and everything in between. 

Given the diversity of our work, one of the questions CIPFA posed to us was whether or not there is a common theme when authorities come to us for support. The answer is simple – yes – more and more frequently we are being asked to help councils become more ‘commercial’.

And every time we’re asked how an organisation can ‘be commercial’, our first response is always to ask "what does ‘commercial’ actually mean to you?"

Defining what commercial means

I think we can all agree that ‘being commercial’ is nothing new. Even as far back at the 1800’s municipal companies were created to deliver large scale capital projects – however new approaches to commercialism, or being entrepreneurial, are increasingly the priorities for organisations on the hunt for new ways to meet the financial challenge. Operating in this different way is seen as an enabler for growth, a means of affording the increased pressures felt by changing demand profiles across services, and often seems more palatable than broad-brush cost cutting.

Yet, from our personal experience of setting up C.Co, our learning is that any ‘commercial’ activity has to be undertaken methodically, with eyes wide-open, and that commercial activity should never be considered a ‘quick-fix’. 

Let’s take a look at those top tips in more detail.

Take a methodical approach

Got an idea – great! Now consider how best to check viability, get the relevant feedback, design and test solutions and continuously develop the offering post go-live. Regardless of the type of venture or delivery model, everything must take place in the right order if you want to be successful.

For C.Co, collaboration is key. Any new concept or idea must be developed alongside areas of the organisation that may benefit or be impacted by the initiative. Further to this, ideas should be developed and tested by those who will benefit from it. Getting the buy-in and views from those who will be involved and/or those who will use the service is key. This ensures that ideas are not formed in fanciful isolation and that a suitable offer or solution is implemented which is appealing to the market and not to the detriment of staff morale or the local economy.

Similarly, it is only once an idea is properly formalised that any consideration should be made to the type of legal entity or governance required. So often we are asked to tell organisations what delivery model they should choose without the necessary preparatory work being in place. For us, it’s imperative that such strategic decisions are worked backwards from the original outcomes required to ensure solid foundations are built around strategic fit.

Go in with your eyes wide open

When considering commercial approaches it’s essential to ensure that all decisions are made based on hard evidence – often this is easier said than done with a whole host of legacy issues lending themselves to the reason that authorities sometimes struggle to understand the ‘true cost’ of current service delivery. However without this level of detail, authorities risk failure, often finding out too late that the proposed level of income required to make an initiative viable is suddenly too low to keep the venture sustainable.

Another essential element is to openly consider the state of the market that you are stepping into – for this, organisations must make an in-depth assessment of the potential gap they are trying to fill, what their competition looks like and what share of the market is available. Perhaps most importantly when working with public sector organisations, who traditionally represents local residents and businesses alike, is the impact this initiative will have on a local scale.

Being confident of, and honest about, such evidence reduces the risk of wasted effort, failure and/or public backlash. A clearly articulated case for change, through a business case or other equivalent document, should be used to evidence all of this information to ensure the correct decision is made. 

‘Commercialism’ should not be viewed as a quick fix 

The time needed to achieve a commercial approach shouldn’t be underestimated – any business decision takes time and once an idea is given the go ahead, the implementation period can be just as painstaking. Further to this, the ‘go-live’ of any new venture is merely the beginning. Once established it will require a robust workforce with the right skillsets and behaviours to support the continuous growth and development, from both an individual and organisation perspective, as new challenges and opportunities arise. Therefore, agreeing to undertake a commercial approach should not be seen as the end goal but a stepping stone to a new future.

Finally, with any form of commercialism comes risk. Organisations who are considering new ways of delivering services must be clear on their appetite for risk and choose a model which sits comfortably with this. It’s only natural for some ventures to be unsuccessful – the important bit here is to recognise that failure is ok. As long as organisations are able to take an agile approach to challenges and ensure they are prepared, should anything untoward happen. I say this as it sometimes feels as though some organisations are only prepared to recognise failing initiatives once it’s too late. Instead, any commercial activity requires a properly developed workforce who are constantly on top of performance and risk in order to react, adjust and adapt to issues as they arise, rather than sailing past the point of no return.

For C.Co, commercialism is not about simply trading services or innovative investments. We believe that having efficient and effective services must always come first; cost management is as critical as income generation. 

Being more commercial is not always straightforward, but we have found that applying commercial management principles when reviewing organisations or services often leads to the identification of opportunities and the delivery of quantifiable improvements simultaneously. And by no means is this dependant on changing delivery models, establishing new companies or fundamentally changing what organisations are here to do but quite simply, it’s about ensuring services are affordable, managed effectively and efficiently, and aligned to the outcomes you want to achieve.

CIPFA C.Co is a change expert delivering collaborative consultancy solutions for the public sector. To find out more about us or how we can support your organisation visit wearec.co or contact us on SpeakToUs@WeAreC.Co

Case Studies

London Borough of Havering, Education Traded Services

In 2017, C.Co worked with The London Borough of Havering (LBH) who wanted to explore delivery models for their education traded services to ensure they were optimised commercially and as cost effective as possible. 

With experience of designing and delivering alternative delivery models this was a perfect fit for C.Co. With an emphasis on engaging and collaborating with staff and customers, it was a fantastic opportunity to demonstrate our unique approach to collaborative design and development of business cases. Our collaborative approach not only gave LBH a greater understanding of the options available but also helped to start the change journey on a positive note by including staff, trade unions and customers in the exploration, prior to any decision making.

Our involvement with similar projects brought useful knowledge and insight into LBH, helping the council to negotiate the complexity of considering a spin out company. Our professional networks also meant we were able to help to open conversations with customers and potential partners thus ensuring LBH were left equipped and able to drive forward the opportunities we had identified.

Cheshire East Council, Service Delivery Model for Adult Social Care Provider Services

For 12 months commencing August 2017 C.Co worked with Cheshire East Council on an all-encompassing review to determine the optimum service delivery model for Adult Provider Services.

Central to the C.Co approach when developing this business case was the engagement and involvement of those closest to the service, i.e. the staff, service users and their carers. C.Co therefore devised an engagement programme in order to include these audiences in a co-production and co-design exercise to help inform the future design of services. 

Using this evidence, alongside the extensive performance, financial and demand analysis undertaken as a basis, we helped to build the case by identifying the best way forward for each of the services in scope. Whether that be in-house, commissioned from the market, integrated with partners, through a trading company, a mixed economy of the above or, should evidence show, decommissioned. We interpreted all of our analysis into a structured business case for change which we are now supporting through the decision making process.

City of Wolverhampton, Corporate Landlord Schools Catering and Cleaning Services

The City of Wolverhampton Council wanted to identify commercial opportunities for improvement with a spotlight on understanding the changing operating environment, the needs of customers and exploring where efficiency can be achieved and growth (commercial) opportunities explored. C.Co used a structured methodology to undertake the review. 

This involved:

  • Service baselining and analysis through data collection, observations and discovery meetings to develop an ‘as is’ picture of the service and key issues.
  • Research and benchmarking, including analysis of financial trends, demand and performance indicators, education context and best practice. 
  • Engaging with customers and stakeholders, including one to one interviews and survey questionnaires.
  • Market analysis.

We showed that, cost pressures and innovation within the market mean that the supply chain is likely to change significantly over the next five years. Providers who are most responsive to this, the most innovative, who can deliver the best quality services at the best price will prosper, those who do not, will not. In the face of this, we identified a series of opportunities for City of Wolverhampton Council to not only build upon the good practice to date, but also consider how it responds and adapts to this changing context.

Flintshire County Council, School Catering Services

Late in 2017 Flintshire County Council established a spin-out organisation for their school catering services. 

Operating in a unique market the organisation provided services to almost all schools in the local area. C.Co worked with the new organisation in the days leading up to the launch of the new company, assisting in the finalisation of the financial analysis, ensuring all implementation risks were identified and appropriately managed and that transition was fully supported.

After a successful launch, it was appropriate to revisit the first 100 days of trading, and in particular review the governance for the new organisation. This was to ensure it was structured and operating in a way which enabled the organisation to deliver the associated business plan. We worked with the Board to ensure all roles were understood and aligned to the success of the organisation. This was undertaken through an informal health check review, identifying opportunities and considerations for the medium to long term which would complement the new organisations ambitions.

CIPFA C.Co is a change expert delivering collaborative consultancy solutions for the public sector. To find out more about us or how we can support your organisation visit wearec.co or contact us on SpeakToUs@WeAreC.Co