The sobering reality of mutualisation

Enticing, appealingly romantic, a world of new freedoms? That's one vision, the one laid out by the present government, of public sector mutuals – spin-outs from existing public organisations, where employees can take over their services and creative a happy, more motivated workforce. The reality, of course, is quite sobering , as is acknowledged in a new publication from the Public Chairs' Forum and the Institute for Government thinktank, which explores how Arms Length Bodies might deliver their services differently. In the guide, Adrian Brown, a fellow at the institute, says that while it may be relatively straightforward to spin services out from a public sector, this will work best where the basic business model remains the same – "which implies that it wasn't broken in the first place". More difficult, he says, will be the setting up of totally new services, through combining previously independent services or completely redesigning operations. "This kind of risk-taking is not for everyone and might be especially difficult for those used to the relative safety of the public sector," writes Brown. Chris Banks, chair of the Public Chairs' Forum, and a former managing director of Coca-Cola GB, as well as former chair of the Learning and Skills Council, writes that mutualisation is unlikely to be the whole answer, but may be part of the answer. Banks has written about how mutualisation might work in further education and Lord Adonis, director of the institute, uses the example of city academies. On launching the first 12 Pathfinder mutuals projects in August, the cabinet minister Francis Maude said mutuals would unlock an "immense amount of pent up frustration among literally thousands of frontline public sector workers". Since then the John Lewis partnership and the Co-operative – the largest consumer mutual organisation in the world – have become paraded as pin ups for the new way. But as we reported last week, both companies have advised caution . Peter Marks, chief executive of the Co-op says he worries "about people who talk about the mutual model as a panacea," while Patrick Lewis, partners' counsellor at John Lewis advises time and care. "This requires very long-term commitment to setting an organisation up in the right way and then to support it, support it, support it," Lewis says. While mutualisation, or "going mutual" as the IoG calls it, can help to deliver more efficient public services, there are pitfalls as well as benefits, and mutualisation has to be thought about in the context of specific organisation and its objectives – not a one-size-fits-all "panacea". "Everyone who runs an ALB should seriously consider whether employee mutuals would help them to improve the efficiency and effectiveness of their organisation," says Banks. One key issues identified was the very concept of leaving business to staff. In truth, setting up and sustaining a successful mutual requires a number of groups including commissioners and financers as well as staff, the institute says. In practical – and less romantic, terms – those embracing mutualisation can choose from a number of models including limited liability partnerships, joint venture models and community interest companies, which ensure companies assets and profits are dedicated for community purposes. Working out the best business model will be important. While setting up and redesigning operations will be difficult, as Banks acknowledged, start ups will have less "legacy" issues to deal with, the reports says. Overall much is to be had but employees and partners need to be aware of the reality beyond the idea. Drawing on lessons learned from the mutualisation of British Waterways, Martin Hurst, director of Defra Estates and Arms Length Bodies, said: "Converting your organisation to a mutual practice is more resource and time intensive than you can possibly imagine. Complexity is multiplied when property is involved. There is a need for clarity on why you are doing this early on – set success criteria up front." He added: "It is necessary to do as much due diligence as you would do in the private sector and it can be hard to work out what you are getting for your money in terms of risk transfer."