Tough challenges for new enterprises delivering public services

The delivery of public services has been transformed in recent years, most significantly by cross-party consensus that it is best placed in the hands of “those who know best” – the health, care and social workers in the frontline.

The NHS in particular is being prepared for the transfer of controls to groups of practitioners and, under proposals in the Coalition’s Health White Paper, of commissioning away from Primary Care Trusts to GP consortia.

What some people criticise as back-door privatisation, many others call “John Lewis-style partnerships”, with a very real sense of empowerment for the staff who will own and run them.

New powers mean new responsibilities

Fair enough – but with empowerment comes responsibility. The new social enterprises that spring from these proposals will have to address the practicalities of being a business and running an independent organisation.

It will not be easy. The challenges facing the leadership will range from moving outside the familiar support structure of a large organisation to embracing new principles of ownership and governance and understanding the compliance obligations all independent businesses face.

Even if ownership and governance issues are quickly dealt with, matters like establishing contracts to deliver services and negotiating terms and conditions – especially pension arrangements – will be crucial and central to success.

First, get the basics right

More often, though, it is the basics of a new enterprise that cause most difficulty, not because they are ignored, but because their importance is not realised until problems emerge and it is too late.

Among the requirements most frequently under-estimated are the provision of appropriate IT to record financial data and supply management reports; the tax status, and particularly the VAT status, of contracts; putting in place all the necessary registrations and notifications for VAT, payroll and the payment of employee expenses; an office infrastructure that includes IT and administrative support, and the very different help the management of a new business needs compared to a department of a large institution.

It would be unrealistic to expect the new enterprises to meet all these challenges.  Many are exploring franchising or shared service models, where the back-office function is pooled with others. This could lead to federations, mergers or simply a pattern of collaborative working. No matter: we are up with developments and ready to support whatever emerges, innovation or evolution.

Edward Finch is Partner in our Charity & Not-for-Profit Team.