Category Archives: Mutuals and social enterprises

Mutuals – A progress report

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A guest post by Carole Leslie of the Employee Ownership Association (EOA)

Today sees the publication of an inquiry by the All Party Parliamentary Group on Employee Ownership, which examines employee ownership in the public sector. Effectively, this is the first progress report of how the Government’s mutualisation programme is working.

There are mixed views on the policy; there is some criticism that it is no more than a front for cuts and job losses, yet there has been tremendous enthusiasm in many public service departments to explore the options.

Of course, there are several organisations that had already ‘spun out’ of the public sector and the spectacular successes of enterprises like Greenwich Leisure, Central Surrey Health and City Healthcare Partnership present a strong argument that employee ownership is a good model for public sector delivery.

Cross-party support for employee ownership

Many recognise the benefits; there may be differences in opinion regarding detail, but employee ownership is the one topic that unites all major parties in vocal support. So with this weight of support behind it, how is it all working?

Well, the findings were mixed. Most strikingly, there is a real lack of understanding within local and central government as to what ‘mutuals’ are and how the model could work. The inquiry found that employees and organisations didn’t know how to access support and advice and sometimes found that attempts to explore ‘spinning out’ were thwarted by senior management.

There was also concern expressed by union officials that they had been bypassed in the formulation of policy, and were not involved enough in the process. Indeed, when unions had been consulted and included from the outset, the journey to becoming an employee-led mutual was much smoother.

The political environment surrounding the policy was expressed as a major concern. How will employee-led mutuals sit with Government plans to bring more private sector providers (who can often achieve significant economies of scale) into the public sector?

Technical issues were raised. For instance, organisations may find themselves liable for VAT for the first time, which can be significant, especially when seeking cost savings. There was confusion over how commissioning will work and whether smaller organisations will lose out to better resourced larger organisations with professional bid teams. It seems initial concerns over individual terms and conditions appear to be getting addressed, which was a major obstacle in the early days.

For our sector, the most encouraging finding in the report is that once organisations are owned by their employees, the results are transformational. Immediate improvements are found in absence, wastage, productivity and employee engagement. All stakeholders reap the benefits: employees, service users, commissioning authorities and communities.

Let’s keep the momentum

In summary, employee ownership is achieving outstanding results in public service delivery. But there is a danger the policy will fall due to lack of knowledge and support. The Government has to find ways to help organisations explore new ownership models, and offer affordable advice and guidance to help them achieve the appropriate model. There is an exceptional opportunity here to change how our public sector operates, let’s not lose that opportunity by losing momentum now.

By Carole Leslie, policy director, Employee Ownership Association (EOA)

Carole Leslie

How do we save money whilst supporting civil society suppliers? Speaker videos

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As a follow-up to yesterday’s post, which reports the key points discussed at our latest public interest seminar, we’re delighted to supply visual accompaniment, in the shape of this video of speakers’ contributions.

After a short introduction from OPM’s chief executive Hilary Thompson, you can pick and choose from the other speakers by fast-forwarding to the following timepoints: James Allen, NCVO – 01:05; Sophia Looney, Lambeth – 11:21; Mark Luntley, Westmill Wind Farm – 21:12. Or of course you could get the full effect by watching the whole thing – it’ll be like being there!

Many thanks to all the speakers and participants for a lively and thought-provoking seminar. If you’re interested in coming to future seminars, please email seminars@opm.co.uk.

March 29 public interest seminar speakers from OPM on Vimeo.

By Satdeep Grewal, OPM researcher.

Satdeep Grewal

Saving money whilst supporting civil society suppliers: seminar report

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The latest in our public interest seminars series considered the Government’s focus on increasing the role of civil society organisations in public service provision, and explored whether, and how, this agenda can succeed in the current fiscal climate. We were joined by a panel of four speakers, bringing a breadth of perspectives from across the public and voluntary sectors:

  • Tom Shirley, Policy Lead for Mutuals at the Cabinet Office
  • Sophia Looney, Director of Policy, Equalities and Performance for the London Borough of Lambeth
  • James Allen, Senior Policy Officer at the National Council for Voluntary Organisations
  • Mark Luntley, Finance Programme Director at the Local Government Association and Chair of Westmill Wind Farm.

Key points from the speakers

Tom Shirley provided an overview of the Coalition Government’s vision for public services: a diverse market in which new organisational forms, including those with multi-stakeholder models of ownership, are able to flourish. Such organisations will vary by business model, membership and legal form; from charities to social enterprises and mutuals.

Evidence suggests that mutuals in particular benefit from increased employee commitment, higher levels of innovation, and higher productivity. Empowering frontline workers puts them in a better position to re-design services to better meet the needs of the communities they work with.

But is this all possible given the current economic climate and public sector cuts? James Allen drew attention to the financial context in which voluntary and civil society organisations are currently operating; many organisations are facing reduced levels of donor engagement, lower demand, and lower levels of financial reserves.

Taking on public service delivery could be a significant risk for civil society organisations, which may not have the financial resilience of the private sector or the freedoms of the public sector (for example in having to pay VAT). Additionally, the pace of change that the Government is expecting in promoting new suppliers is a real challenge.

Yet despite these issues, there is an unmistakable desire from many civil society organisations to come together and drive to make public services more responsive, more personalised, and embedded at the heart of the communities that they serve.

Two speakers shared their experiences of working in mutual organisations, but in very different contexts:

Sophia Looney discussed Lambeth’s ambitious move towards becoming a Cooperative Council. Over the last two years it has worked to define a set of core values centred on co-production, and the aim is to look at all services and work to develop a sustainable approach to delivery that incorporates a range of models, including mutuals.

There are challenges associated with this transformation at Lambeth; it has required a huge shift in the culture of the council and an effort to make all staff respect, understand and treat citizens as equal partners, and it will be ongoing work over the next few years.

Mark Luntley shared his experiences of being a member of Westmill Windfarm, a cooperative with 2,500 members, each with one vote and equal voice. Mark’s experiences at Westmill raised a number of interesting issues concerning mutual ownership; in particular, there are challenges around determining the size and scope of such organisations – do mutuals only work when they are close to the communities they serve? There are also issues in achieving coherence across public service provision, particularly in light of the localism agenda.

Questions and comments

During discussion, important questions were raised as to what success could look like and about who should make key decisions about public services if the market becomes more diverse and if powers are devolved to public sector employees. For example: who would ‘referee’ where different rights (e.g. to provide, to challenge) come into conflict with each other?

The challenges around shifting the culture of the public sector towards a more equal relationship with citizens and the fast pace of change were acknowledged. Nevertheless there was a general consensus that the move towards new forms of public service provision was positive.

The discussion closed with a summary from Lord Best, the Chair of OPM’s Public Interest General Council. The commitment of the Government to diversifying the supply of public services was overall perceived to have definite potential, but questions were raised about the viability of maintaining principles of mutualism (for example) whilst also achieving economies of scale, which naturally tend towards much larger suppliers.

By Kate Allman, OPM researcher.

Kate Allman

Saving money whilst supporting new suppliers: seminar briefing paper

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On Tuesday 29th March OPM will be hosting a seminar to explore the vitally important issue of how public services can simultaneously achieve significant spending reductions whilst supporting civil society organisations to become providers.

Speakers include Tom Shirley, policy lead for mutuals in Francis Maude’s team at the Cabinet Office, Sophia Looney, Director of Policy, Equalities & Performance, London Borough of Lambeth, and James Allen, senior policy officer at the National Council for Voluntary Organisations (NCVO).

At the time of writing there were still a few places remaining, and you can find out more details by clicking here. In order to get the debate started, we’ve pulled together the short briefing paper below, which highlights some of the policy background and a few of the key questions we’ll be looking to cover.

Briefing Paper – OPM seminar 29 March

Protecting organisational culture with employee ownership

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The Parfett family could have made a lot more money by selling their business to a large competitor.

Instead, they voluntarily took a 20 per cent cut and sold it to their employees. Why on earth did they do this?

First, a little background. As part of a recent Employee Ownership Association (OPM and Parfetts are members) event, OPM trustees visited the Parfetts head office to see how other companies put employee ownership into practice. Employee owned Parfetts is a cash and carry grocery supply company based in Stockport, near Manchester. Since its founding in 1980, Parfetts was a 100 per cent family-owned business. In 2008 the family sold 55 per cent to their employees. The family plans to sell their remaining 45 per cent to employees at a later date.

An uncertain future

Steve Parfett and his brother Robert are the second generation to run the company, following their father Alan. No family member appeared likely to continue running the business, so a few years ago the family looked into options for business succession.

The obvious choice was selling it to another business in the industry. But after researching many options, employee ownership arose as a very likely candidate.

Why employee ownership?

The overriding reason the Parfett family ultimately decided on employee ownership for the future of the company they worked so hard to create was because they wanted to do what was best for their employees. They wanted to retain the family-owned culture.

Directors and employees at Parfetts told us that the company is known for their excellent, friendly service. Although we didn’t talk to any customers, Parfetts sales figures suggest they must be doing something right with £290 million in turnover last year during a difficult and competitive climate.

If they had sold to a large conglomerate, the jobs of many employees, especially managers and senior executives, could have been at risk. As the Parfetts’ website says, selling to a competitor:

‘… would inevitably have left employees working in a very different organisation and vulnerable to any cuts or changes that a new owner might make. Therefore, the over-riding consideration was that the longer term interests and security of employees was taken into account. The family and board also wanted the company to remain a successful business where customers receive excellent levels of service and employees are treated with respect and rewarded for their contribution.’

The benefits of employee ownership

Moving to employee ownership can keep out external influences that might adversely affect an organisation. This is not to say that organisations should not seek external advice or ideas that may help it; indeed, this is often required. But external parties or new owners may not always have a full understanding of the customers, other relationships or nuanced reasons for doing things a certain way.

For Parfetts, if they had sold to an outside owner, the family culture may have been destroyed. Giving employees control of their organisation through ownership will help maintain the practices and culture of this successful company.

Employee ownership can also benefit employees by providing an incentive to increase productivity because they have a share in the results. One of the employee council representatives at Parfetts told us that while he does not have any hard data, anecdotally, he has seen improved employee performance and morale.

Many organisations, especially in the current climate, focus on short-term profits. So we are encouraged to see a private sector company like Parfetts take a long-term view of employee and customer benefits through employee ownership.

Some literature

If you would like some evidence for the benefits of employee ownership and examples of other organisations’ experiences, read our reports, New models of public service ownership and Shared ownership in practice.

For information on how to become an employee owned organisation read How to become an employee owned mutual – An action checklist for the public sector, written by the Baxi Partnership, Field Fisher Waterhouse, OPM and the Employee Ownership Association.

By the trustees of OPM’s Employee Share Ownership Trust (ESOT): Ricci Pleszkan, Leigh Johnston, Justin Kary, Sarah McDonell, Diane Beddoes

Francis Maude launches new guide to setting up public sector mutuals

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Last night we launched a ‘how to guide’ for public sector organisations looking to become employee–led mutuals, written by specialists at OPM, Field Fisher Waterhouse LLP, the Employee Ownership Association and Baxi Partnership.

The guide ‘How to become an employee owned mutual – an action checklist for the public sector’ (available for free download here), provides a road map for public sector organisations. It covers the steps required for organisations considering adopting a mutual ownership model, and shows how employees can give their new enterprise the maximum chance of success.

At the launch at the House of Commons, Cabinet Office Minister Francis Maude spoke enthusiastically about supporting public sector workers to set up new enterprises and his desire to encourage a wide range of new models. Newly appointed chair of the Prime Minister’s Mutuals Taskforce Professor Julian Le Grand also welcomed the guide and stressed his commitment to helping to remove barriers facing new mutuals.

The guide has already been given a strong thumbs up by public service professionals. Speaking for OPM, colleague Phil Copestake stressed that it is designed to give practical insights to people in public services who are embarking on the transition.

Practical is the keyword here. Leaders of transitions have a demanding role and there are difficult choices along the way, but the process shouldn’t be any more complicated than it needs to be. Many of those attending the launch had either been through the journey or are on the road, and there was a lot of swapping of ideas and experience over cups of tea.

At OPM we’re really keen to continue to hear about new triumphs (and challenges faced, too) as part of our commitment to providing a up-to-date evidence base and supporting further development in policy and practice. So do please get in touch if you have insights to add to the body of knowledge.

By Hilary Thompson, OPM chief executive.

Hilary Thompson

Seminar in March: saving money whilst encouraging new suppliers

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We’re really pleased to announce the next in our Public Interest Seminar series. On Tuesday 29 March we’ll be looking at the crucial issue of how public services can both save money whilst also building positive relationships with civil society organisations, including charities, social enterprises and mutuals.

The Coalition has clearly signalled that it wants to see civil society organisations taking a bigger role in public service provision and achieving the goals of a Big Society. But how can this be made feasible in the context of the most severe spending cuts in decades?

As local authorities and other commissioning bodies look to reshape services at extremely rapid pace, how can strong relationships with civil society organisations be built and maintained? What actions, practices and behaviours are needed – both on the part of commissioners and civil society providers themselves – to square the circle? What kind of relationship between commissioners and civil society organisations is (a) desirable and (b) realistic? How would the system need to work?

Confirmed speakers include:

  • Tom Shirley, policy lead for mutuals in Francis Maude’s team at the Cabinet Office.
  • Sophia Looney, Director – Policy, Equalities & Performance, London Borough of Lambeth – and responsible for Lambeth’s innovative programme to become the UK’s first ‘co-operative council’ (see here for details).
  • James Allen, senior policy officer at the National Council for Voluntary Organisations (NCVO).

The seminar will be held in the evening – 6:00 pm for a 6:30 pm start, finished by 7:45 pm – at our offices at 252B Gray’s Inn Road, London, WC1X 8XG, a ten minute walk from King’s Cross. The seminar is free, but places are limited so please do let us know as soon as possible if you would like to attend, by emailing seminars@opm.co.uk.

Employee-owned mutuals: the most pressing issues

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The Social Enterprise Coalition Right to Run event last week was an opportunity for public sector employees to get practical support around creating new social enterprises and mutuals. OPM’s chief executive Hilary Thompson led one of the workshops and writes here about the issues raised by participants.

My workshop focused on the employee ownership model specifically, and attracted a lot of participants with a real thirst for understanding the options and key choices. Attendees were from a range of different public services and were mostly at the stage of finding out more about the potential journey. There was strong interest in:

  • How to combine employee ownership with a strong social purpose.
  • The benefits that employee ownership can bring, how these balance against perceived risks in moving out of the public sector and how to achieve longer term success.
  • Transferring employment terms and conditions (and the extent to which the TUPE regulations are an issue or barrier).
  • How to engage with decision-makers in the ‘parent’ body or with commissioners, who are often both new to the right to run agenda themselves and also preoccupied with other priorities like implementing budget reductions.

EOA case studies and OPM’s own research (for example our report Shared ownership in practice, and the case studies of five public service mutuals) provide examples of how different services have achieved a positive transition. But local negotiation is always important, so whenever working with leaders of potential mutuals we encourage them to identify key stakeholders and decision-makers and to open informal discussions with them as early as possible.

In relation to the points in the list above, Government policies are of course critical in shaping the appetite of public service professionals for change. Some specific new policies are emerging – for example on contracting with the public sector and, according to media stories, on transferring public sector pensions – but it’s the overall balance of policies that matters. The imminent public service reform white paper will help to fill in the some of the gaps in the current picture.

By Hilary Thompson, OPM chief executive

Hilary Thompson

Mutual support?

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The mutual model for organisations delivering public services is getting a lot of publicity, but is there a missing piece to this jigsaw?

Patrick Lewis, partners’ counsellor at John Lewis, and great-nephew of the original John Lewis who founded the best known employee-owned company certainly thinks so. His view is that time, care and commitment are required in setting up this type of organisations – but that support is the key.

We can’t expect public service managers and leaders – usually recruited for very different skills – to suddenly become experts at selling and structuring a new organisational form, marketing services in a competitive market and dealing with different forms of employee engagement and decision-making.

The recent report by the University of Birmingham into bids to set up social enterprises to deliver health services found that people leading initiatives of this sort felt isolated without the necessary support.

That’s not to say that there is no support for setting up mutuals but rather that too much of it is focused on the shape of the organisation and the legal and financial side rather than on the people ‘holding the ring’ who are vital in terms of energy and focus in making things happen. For the mutual sector to further flourish this needs to be addressed.

To help support new models of ownership, we are hosting accelerated learning groups for leaders and managers of organisations interested in or soon to become a social enterprise or mutual organisation.

By Bob Baker, OPM senior fellow

Bob Baker

What do you do if senior leaders are undecided about local authority mutuals?

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The first in an occasional series of posts from a member of OPM’s roving mutuals team

Presenting a new idea to your manager can be a scary proposition – especially if you don’t know your manager’s views on the subject. But to progress, you sometimes have to take the first step and make the case for change.

I’ve had the pleasure – and it really is a pleasure – of running workshops for a number of local authorities whose staff are thinking about whether mutuals are right for them. Workshop participants have included frontline staff, commissioners and service managers, and heads of service from different departments.

One question that comes up in every single case is: how can we go any further until we know what our senior managers and politicians think? (There are plenty of other questions, but I’ll leave those for future posts.)

It’s not surprising that council leaders usually haven’t made up their mind about mutuals, because as a reform programme it’s still in its infancy, and there are serious questions about the impact on staff, services and outcomes that can’t be avoided and take time to consider. But is nothing possible until decisions have been made?

Three scenarios

When it comes to senior backing I think there are basically three scenarios.

First, is where leaders are driving the agenda themselves. The most high-profile example of this is Lambeth’s Co-operative Council, which has been consistently and visibly championed from the outset by the leader of the council Steve Reed, the chief executive and the senior management team. Many of the Cabinet Office’s ‘mutual pathfinders’ have had strong leadership backing too.

Second, there are authorities where there is deep-rooted scepticism about the idea of mutuals among leaders, possibly born out of fear that shared ownership is no more than privatisation by the backdoor.

Third, are councils where leaders are neither actively hostile towards mutuals, but nor are they giving much support (yet) to developing them. This is usually because they’re still making up their minds, or aren’t quite sure about the implications of mutuals. This is where the majority of authorities seem to be at the moment.

To the staff member or manager who’s fired up by the idea of developing a mutual, the third scenario can be just as frustrating as the second. It can seem like there’s a bit of a vacuum and where ploughing time and effort into something goes nowhere.

We know from OPM’s research and practical experience that backing from senior people is vital to build a successful mutual. But the ‘Right to Provide’ announced by Francis Maude in November – while not on the statute books yet – makes it more likely that if frontline staff think they could deliver their service better as a mutual, their voices will be heard. More important than where a proposition comes from is how compelling it is.

No matter which situation you find yourself in, a number of key ingredients are crucial for developing a strong mutual proposition. You’ll need a thorough options appraisal to test whether a mutual is right for you and, if so, which kind. You’ll have to make sure that your mutual will be a viable business. And you’ll have to raise awareness among all staff and others who might be affected, and bring them on the journey with you.

Success can be as much about ‘making the case to’ as ‘waiting for a steer from’.

By Phil Copestake, OPM principal

Phil Copestake