Making the most of mutuals

6 Jul 11
Alan Edwards

The public sector needs some timely advice on how to set up a mutual. Guidance is required for both the corporate centre and business managers

The National Audit Office report on the early experience from NHS mutuals and social enterprises makes some timely points. It mirror CIPFA’s own call for the need for more clarity about the process of spinning out existing business units into mutual or social enterprise structures.

The NAO concludes that the Cabinet Office should ensure emerging mutuals and public sector commissioners are given appropriate information and support, including clear objectives and a means of evaluating success. I have been making this point to the Government’s Big Society Ambassadors and the Office for Civil Society.

While there are lots of guides to the type of mutual or social enterprise (albeit that most of them start with a preconceived preference for one structure over another) there is very little on how a local authority or the prospective social entrepreneur should go about forming such a venture.

Craig Dearden-Phillips the well known social entrepreneur, made this very point in a recent Guardian article. He called for a ‘playbook’ for would-be social entrepreneurs. Quite rightly he raised the question: ‘What is it like to lead a service out of the public sector into a social enterprise or employee-owned mutual?’

It’s not just the would-be social enterprise managers who need some guidance, the existing public sector owners of those businesses also need some assistance. The NAO report is critical of the lack of business cases for the first NHS social enterprises and the retention by the health service of some significant business risks.

In my discussions with local authority chief finance officers I have been making the point that this needs to be a top-down and a bottom-up process. Guidance is needed for both the corporate centre and the business managers.

For the centre, the process can be compared to that in major corporates managing an innovation pipeline. A tiered sifting process is needed to rigorously test business cases for the proposed spin out. Alongside that, the business managers need increasingly robust business plans that demonstrate they can survive and thrive in a new world.

The public sector CFO must be at the heart of both processes. Without CFO support, the government’s aspirations for more public services delivered by mutuals and social enterprises will not succeed.

The public sector has lots of experience of similar moves to arm’s-length and external business organisation. What makes this different is the range of organisational options and the partial advice that can be offered about the most appropriate solution.

CIPFA is writing a definitive unbiased guide to the types of mutual, social enterprise and charitable structures available. What is needed now is similar guidance on the top-down and bottom-up process to make this real.

In short we need the definitive playbook so that potential leading authorities and social entrepreneurs are encouraged and nurtured – and not, as Craig Dearden-Phillips suggested, ‘made to walk through fire before stepping out’.

Alan Edwards is international director at CIPFA. The institute is holding a workshop on mutual and social enterprise approaches at its annual conference today in Birmingham

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