"To enable successful spin-out enterprises there is a need to deal with the opportunities, risks, restrictions and freedoms while securing bold, entrepreneurial leadership."
KAREN CHERRETT, LOCAL GOVERNMENT CONSULTING, PA CONSULTING GROUP
Guardian: Public Leaders Network
11 November 2011
Customer-focused care and a sense of entrepreneurial dynamism are mutually supportive in social enterprise spin-outs, argues PA's Karen Cherrett.
Successful social enterprise requires the best of both worlds – a mix of social ethos and entrepreneurial spirit. Can this be achieved in public sector spin-outs?
Successful social enterprises are proven to deliver high levels of user satisfaction through engaged and empowered staff delivering social value and commercial success. This balance is vitally important: the social ethos provides for a value-driven, collaborative, customer-focused culture; an injection of entrepreneurial spirit ensures the social culture does not diminish the need for financial viability in an increasingly competitive market.
Successful social enterprises offer higher levels of user satisfaction, often providing better and more personalised services without increasing cost. For example, Salvere, a social enterprise spun out of Birmingham city council, cuts through some of the red tape of assessment by offering a unique online matching service to link clients' needs with available support. It offers the same service to clients with personalised budgets and assessed needs as well as those in the open market who choose to purchase additional help for themselves.
This diverse mix of clientele enables Salvere to offer services at fixed-price bands that are competitive in the local area. The company adds value by providing advice in selecting the right package of help, ensuring clients understand how to employ and manage support workers as well as assure clients that the support on offer is of the right standard (assessed and regulated by Salvere). Operating as community interest company employees, clients and support assistants are offered a £1 share in the organisation and a voice in how the company is run.
The social ethos of delivery is perhaps already embedded in many public sector organisations, and partnership and collaborative working appears to succeed best when it is driven by the same socially inspired outcomes. Making this social ethos financially sustainable is the crucial differentiator for successful social enterprises but is still a challenge for many of them.
Inspire Leisure in Littlehampton is typical in this respect. It is a leisure trust spun out of a council- run service in 2002 as an industrial and provident society with charitable status. Its social aims are to bring culture, sport and the arts to a range of people who would otherwise not be able to afford access to such activities.
Some 76% of its funding comes from the 1.3 million paying customers it gets each year for services it provides through working with partner organisations, for example, the town council, schools, sports and community groups. The balance of funding is provided through a five-year funding arrangement with the council. The challenge facing this and many similar spin-outs is to ensure that future income generation and business growth is sustainable in a difficult economic climate.
This uncertainty also means that even long-established organisations need to look beyond traditional boundaries between public, private and voluntary service operating models. Some, like Age UK, are already doing this through establishing trading arms to develop greater flexibility in income generation and reduce dependency on grants and donations.
There are challenges in this approach, not least in accessing finance and new markets. PA is working with a well-established social enterprise with a strong track record in delivering advice, training, employment support and a range of other services for new UK residents. The organisation has ambitions to expand its learning services to increase its access and attraction to commercial, private and public sector customers.
It operates as a company limited by guarantee with charitable status but recognises that this business model sets restrictions on how it can flex itself to adapt and grow in a less grant-dependent future. Finding ways of securing product development investment, developing a go-to-market strategy and encouraging existing customers to see it differently as well as attracting new customers in a competitive environment presents challenges to existing capacity, skills and thinking.
If it is difficult for established organisations, it is much harder for new spin-outs that do not have commercial expertise to complement the social ethos. Achieving the best of both worlds is made even harder by the prevailing risk-averse culture and hierarchical reward mechanisms in many public sector organisations – which do not naturally lend themselves to breeding entrepreneurial business managements. If spin-outs do not address this early enough, the end result is that social enterprises will collectively be unable to make a significant contribution to essential service improvements alongside the necessary reductions in public spending.
Social enterprise works best where the cultural, governance, economic and market conditions are right and ready. To enable successful spin-out enterprises there is a need to deal with the opportunities, risks, restrictions and freedoms while securing bold, entrepreneurial leadership. If these challenges can be addressed (which they can be) and a balance achieved between social value and commercial success then a win-win can be achieved. However, those involved should not be under the illusion that it will be an easy win.
Karen Cherrett is a local government expert at PA Consulting
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