Partnership working and shared services seem like attractive solutions to shrinking council budgets. But they bring risks as well as rewards
Local authorities up and down the country have been hitting the headlines as they reveal their plans to shave billions of pounds from their budgets. Perhaps unsurprisingly, increased outsourcing and partnership working are among the more popular ways of improving efficiency. There are undoubtedly benefits in streamlining services and enlisting specialist providers – but is there also a cost?
Take Suffolk County Council for example. It recently announced a £20m-per year plan to outsource adult social services. Swansea County Council has gone a step further, planning to outsource almost all of its services in the hope of slashing its £1.1bn budget by 30%. Meanwhile, Reigate and Kent councils are pushing forward with plans to link up on four services – finance, personnel, revenues & benefits and IT – in a move hoped to make £4m in savings.
These kinds of measures for budget reduction are clearly attractive and likely to increase. As the coalition government continues to make changes to cut the public deficit, it is likely that the number of local authorities embarking on new and different relationships will rise – along with the breadth of risks they face. If these partnerships are undertaken without proper commissioning and risk management skills, there is every likelihood that costs will rise and service quality will decrease.
Indeed, research conducted for our report Tough Choices highlighted that fewer than a third of public sector leaders (29%) felt able to deal with the kinds of risks associated with working with other organisations. So what are those risks, and what measures should council chiefs implement to minimise them?
First, there are concerns that the inevitable financial pressures faced by other public sector organisations will lead to services ‘falling through the cracks’ and failing to be provided by either partner. If efforts are not co-ordinated between organisations, ‘service vacuums’ might be created, with local authorities cutting services irrespective of what partners have decided.
To safeguard against this, tightly-drawn service level agreements and clear strategic goals will be invaluable. The creation of service committees, which encompass local public services and bring together board-level members from across partners, can also be beneficial. Ultimately, it is honesty and clarity that will ensure the positive impact of partnerships is unlocked.
A second, perhaps less obvious, risk for local authorities is the impact of both outsourcing and partnerships on staff morale. The integration required by partnerships, as well as the inevitable redundancies associated with service consolidation, raises questions from an employee’s point of view about everything from those potential job losses, to changes in workplace culture, roles and structure.
How managers handle the answers can make a critical difference to the working environment, and an open and creative approach is essential. It is important to address any potential issues from the offset, getting buy-in from all levels of staff and clearly communicating proposals to mitigate any negative impact of the new ways of working.
A further risk of linking up with other organisations – whether private or public – is if there is a disparity between the standards and practices of the two. Several steps can be taken to ensure that the reputation of one is not tarnished by the actions of another. Before making any agreements, both parties will need to clearly outline expected standards and ensure they understand those of the other parties. Once in place, agreements will need constant oversight. Before an authority outsources any service or function they have to know what the long-term organisational strategy and shape for both partners is, ideally for the next five years. Without this, they run the risk of outsourcing core services and capabilities which might, in the future, have to be brought back in-house at a higher cost.
Finally, many of these new agreements will involve parties that are not used to procurement and outsourcing, such as the third sector. It will therefore be important to not fall back into an arm’s-length procurement approach, treating them as traditional client/contractor relationships.Instead, it is vital to encourage dialogue that shapes service provision and to engage everyone in service design from the outset. This is more likely to end up in sustainable and resilient services.
It remains to be seen whether outsourcing and partnership working will bring the benefits local authorities hope, and many of the details and legalities have still to be determined. However, risk management should remain a top focus for local authorities as they move through 2011.
Andrew Jepp is director of public services at Zurich Municipal
