Think hard before deciding to deliver former council services

Care staff must ask some tough questions before agreeing to take on services that councils no longer wish to provide

To avoid being seen as closing services, local authorities are likely to look to set up social enterprises or staff co-operatives to take on responsibility for services they no longer wish to directly provide. However, the management case for “externalising” services, often written within the constraints of a committee paper, is unlikely to deal with the commercial realities within which the externalised service will need to operate.

When a service is to be taken over by an established business there is a fair prospect that the decision to acquire the service will be based on a robust evaluation of its future prospects. However this may not be the case if the proposal is for a reconfigured “independent” in-house provider to take on responsibility – and liabilities – for the service.

Business proposition

Generally a service will be only considered for externalisation when it is unaffordable or unsustainable in its current format. It is therefore essential that staff groups who will be expected to take on responsibility for the services are provided with the resources and expertise necessary to evaluate the business proposition. Without this support they are unlikely to have the information essential for negotiating the detail of the proposition or to challenge the proposal if it is not commercially sound.

There is no shortage of business planning templates whose completion will offer some comfort that due process has been followed. However they should only be used once fundamental business questions have been formulated and answered. Is there a sustainable demand for the service or can one be created? If not, what needs to be done to make the service more commercially attractive? Can the investment be secured to make the changes, are existing users willing to experience these changes and are the staff prepared to make them?

How is the service to be managed? It will be necessary to set up administrative processes and to replace management and bureaucratic processes that will probably be unsuitable for the management of a small business and can be a dead weight as far as change, risk-taking and innovation are concerned.

Job security

Are staff prepared to accept responsibility for shaping and delivering a customer-responsive service? An inability to recognise or an unwillingness to accept that business success equals job security will be a shortcut to losing customers, contracts, income and the failure of the business.

How is the service to achieve a diverse range of income streams? Many private sector firms have closed as a consequence of losing their primary customer. The more customers a service has the more likely it is to survive if a contract is lost or customers cutback on their spending.

How is the business going to retain and recruit talented staff? Pay and conditions are important but so are the working conditions that will enable staff to apply their skills and to develop their expertise. A small independent business may find it hard to compete for staff against larger public or corporate organisations so it will need to work harder on offering a rewarding employment opportunity.

These business-related questions are clearly different to the political-policy-budgetary questions that will have been addressed as part of deciding whether to externalise a service. We are already seeing social enterprises operating in the public sector fail so it is clear that we need to ensure that the policy decision to externalise a service is supported by sound business and commercial planning by those who will take on responsibility for running the service.

Geoff Ettridge is an independent adviser on care services

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This article is published in the 15 April 2010 edition of Community Care magazine under the headline Think Before Deciding to Deliver Former Council Services