It is thin client time for local authorities as their BMI reduces - The new operating model for Local Authorities- it was our idea!

Suffolk council plans to outsource virtually all services

http://www.guardian.co.uk/society/2010/sep/22/suffolk-county-council-outsource-services


In the early winter of 2007 I was sitting in a pub connected to a hotel adjacent to Newcastle Race Course drinking a very pleasant of Black Sheep when I saw the light.  I was sitting discussing our days work with WSP Group's head of UK Local Government Consultancy John Nicholson.  Myself and John had been commissioned to work with North Tyneside Council to review its Highways and Open Spaces Services.  The project had a joint remit, the first being a best value review of the services and two a proposal and indication of the willingness of the private sector to undertake these services.  The reason I share this story with you is that it is the first time I really understood the concept of a local authority being a "thin client"

In our work we have determined that North Tyneside (NT) wanted to get themselves into a position whereby they became a true representative of the Customer (Resident, Business or Tourist).  With our proposal we were able to get the Council, Elected mayor and workforce to a position whereby NT would purely become a commissioning agent, "a thin client" NT would outsource the services, set challenging targets, qualitative output measures and reduce cost and improve service delivery.

This was the first time I had proposed a "thin client" the Customer representative in this case being NT being the commissioning agent.

It therefore came as no suprise when I read this morning that Suffolk County Council had seen the light and was looking to become a professional commissioning agent outsourcing many services.  As someone who has trawled through badly written local authority contracts whose outputs measures were limited and mainly quantitative and the contractor was running rings around the local authority I understand the concerns that many of the merchants of doom bring forward at this time.

The key to delivering a professional service via outsourcing is to get the contract right.  You do not need to have the brain of Carol Voderman to understand that the private and charity sector can deliver services at a fraction of the cost.  Whilst they can deliver services cheaper than "in house/DLO" type operations unless the contract is right, clearly specified and managed the customer experience will suffer.

The secret to good commissioning is ensure that the customer focus remains and one contract service outcome that should be included within every contract is to ensure "that every outsourced service provider ensures that their services spends more time with the customer"   This measure will ensure that by spending more time with the customer that customer experience and perception will increase.

The notion of the "this client" is one every organisation that has a high management overhead should look very carefully at.  The "low hanging fruit" which many claim does not exist in the public sector does exist.  This includes most of the transactional business on the front line.  I have advised many local authorities that this transactional business is best done elsewhere and retain the real skill in house if you have any doubt on the ability of the service to deliver.

One such example is Housing Benefits. Lets call this a 4 stage process (1) Customer Advice, (2)Data/Doc Collection (3) Assessment of the Claim and (4) Payment - It is clear that stages 1,2 and 4 are transactional some engineers would call this a commoditised element.  Looking at this four stage process it is fair to say that Council's area of expertise is the assessment and may wish to retain this process in house whilst they outsource the other stages.  Stick to your CORE service and expertise and outsource the rest!

Whilst I am on the subject of housing benefits there is massive scope for improvement is service and cost savings here as each English district council enforces a system which is generic against a set of rules which are generic regardless of where you live.  Its time for Housing Benefits services to be joined up!

The success of the outsourced National Pandemic Flu Service where the Department of Health was the "thin client" and private sector delivered the service proves that where competition exists amongst suppliers then outsourcing really does deliver.

Integrate, Integrate, Integrate

Whilst reading the Sunday papers I acknowledged commentators waxing lyrical on the failure of the Facility Management Group Connaught rapid fall from fame and eventual administration and loss of hundreds of jobs in the West Country.  It was very sad to see this fall from grace from a team that I held in the highest esteem.

Connaught were one for my former clients.  I also knew them well from my time as a National Executive Representative on the national Council of the British Institute Facility Management.

The Sunday newspapers gave many reasons for the failure of the Group, the final straw being the lack of credit and cash to purchase supplies in order to continue to do their jobs.

The failure of Connaught reminded me of the failure of property services company Erinaceous in 2007.  Erinaceous like Connaught was a darling of the stock market.  They grew quickly mainly through organic growth but through acquisition.  They acquired companies quickly, paid off directors, paid some in shares but others is cash then operated them as separate parishes with everyone having a structure of management and overhead .  It is clear that no effort of integration was made as managers were concentrating on the day job rather than the change management work required to integrate these companies, merge back office activities, people, process and technology.  It was far from clear whether leaders in Erinaceous were competent in the day job let alone being able to complete this change management and integration.  Eventually the servicing of debt of Erinaceous had run up buying companies and the failure to derive savings from integration and the gambling on organic growth brought them to their knees.

My work with Connaught highlighted and exposed a similar story though let me say I found Connaught management a competent team unlike those I met at Erinaceous.  My work in the responsive maintenance division showed that virtually every contract was being run in an entirely different way.  Each contract had its own management structure, own customer relationship management system, its own methodology of “getting the jobs” out to the lads/girls on the tools and its own set up of incentives for growing business.   My first finding was simply that the there was no customer focussed integrated pull off the shelf way for delivering good customer service at the right price.  Every contract had a overhead which I recommended early on should be shared into a simplified structure.

Connaught had developed at FM customer relationship management system which was top notch.  It integrated with clients CRM systems, allocated jobs based upon metrics and skill set of workers via PDAs.  However, this only was evident in 50% of the contracts, some of the acquired businesses, and large contracts still worked on a paper based system.  Contracts varied between 2 jobs per day to 4.5 per day.  This must of been impossible to manage from the centre, recommendation 2 integrate, integrate, and integrate quickly.

The output was simple integrate back office activities, share contract resources established shared service control centres to drive out costs of contracts and up the workforce productivity.  Our report was straight forward, integrate and integrate quickly but recognise its not someones day job, after all the old adage is where an empire is built they are hardly likely to want to give back the crown.

I can only judge by reports I have read from both Connaught and the Administrators is that this integration never took place and the winning and financing of contracts became a dark art of creative bidding, it was alas this bidding and failure to drive out costs through integration that brought Connaught down, as it brought down Erinaceous three years earlier.

It is more interesting to see the challenges of failure to integrate and perhaps pay too much for “dog end” businesses is the RBS/AM Ambro failure which has cost the UK taxpayers millions in bank bail outs.

My advice is always ask the question “what is the real cost of integrating this business and it is reflected in the purchase price, contract bid prices and do we have the skill sets in the business to deliver it.  The were many parish leader disputes in both Connaught and Erinaceous all of which did not add value to the bottom line so seek your integration resource carefully

Alas in the case of Connaught and Erinaceous the answer was no!