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What public sector leaders really think about outsourcing

The Hay Group’s director of public sector consulting, Phil Kenmore, talks to PSE about public sector fears of private partnerships.

Many public sector leaders speak in nothing but positive terms about increasing their involvement with the private sector, noting the potential savings, expertise and service improvements promised by their new partners.

It is usually only the trades unions voicing serious disquiet about the potential consequences of outsourcing, privatisation, and public-private partnerships.

But many public sector leaders are much more sceptical and worried than they let on, if new research is to be believed.

A survey conducted by management consultants Hay Group showed that 44% of public sector leaders think more private sector involvement will damage services, and the same number think such partnerships don’t deliver value for money.

Just under half think key skills will be lost to the public sector, and 60% think the trend towards outsourcing and public-private collaboration is damaging workforce morale. The survey results were uncovered as part of research done for Hay Group’s ‘Relationship Counselling’ report.

Profit motive

The central fear of public sector leaders, according to the company’s director of public sector consulting, Phil Kenmore, boils down to the profit motive. It is widely felt that earning as much money as possible will be a greater incentive than delivering good services on residents’ behalf, thus leading to cost-cutting, standardisation, and services being run with the wrong ethos.

He said there is a widespread view that, inherently, the profit motive would “damage the private sector’s ability to focus on the services”.

He went on: “That’s a public sector mindset and it raises quite a lot of suspicion and fear of the partnership. ‘If it’s fundamentally about profit making, how can they be focused on delivering better services?’”

There is not always evidence to back up these suspicions, Kenmore said, but they are seriously ingrained and can in themselves damage the prospects for collaboration between the public and private sectors, leading to cycles of distrust.

Failure always receives more publicity than success, he says, and so poor media coverage of lasting partnerships may explain the lack of confidence from the public sector.

He added: “The strength of the fear in the public sector is quite surprising. Lots of the failures are publicised, whereas the successes aren’t.”

Public face

One of the most interesting issues is the disparity between how public sector leaders behave in public, and how they honestly feel in private. Many leaders are outwardly supportive of partnership working, which conflicts with the findings from this survey. Leaders are under pressure from the Government to innovate and be more efficient – which private sector partners say they can offer – while with shrinking budgets, any way of keeping services open and the public happy will be jumped at despite lingering concerns.

Kenmore said: “Every public sector leader knows they have to drive greater efficiency and value for money. Very probably the answer to that is going to be passing the risk of these services to the private sector. Maybe there’s an element of them thinking: ‘This is something that we’re going to have to do in part, so we might as well make the best of it. But I’m not convinced in private this is going to deliver effective services.’

“The reason why partnerships are so powerful is because they allow sharing and for some of the risks of expenditure, planning and delivering operational services to be borne by the private sector. Their part of that trade-off is a profit basis. The trade-off for the public sector is the loss of control but on the other hand, hopefully, more efficient service in terms of value for money as well as outcomes. The big challenge is whether they can define and manage the outcomes.”

Regardless of personal preference, private partnerships, social enterprise spin-outs and voluntary group take-overs are becoming increasingly necessary to keep some public services afloat, both statutory and non-statutory.

Almost all traditional local authority functions have been outsourced somewhere in the country, most commonly for back office functions, but also in waste management, adult social care, call centre operations, and increasingly in other areas too – highways, street cleaning, cultural services and libraries, leisure, and so on.

It is only really child protection and children’s social services that remain relatively untouched by outsourcing, due to the sensitivity of these functions and the consequences of any service failure.

Many local authorities have toyed with the idea of outsourcing virtually everything – becoming enablers, rather than deliverers – including Suffolk, Bury, Barnet and others. Most have faced widespread local opposition and reversed their stance, but there is little public understanding of how much private sector involvement there already is in delivering many council services. The story is similar in the other parts of the public sector examined in the report, including healthcare and the uniformed services.

Relationship counselling

Facilitating successful partnerships, Kenmore says, is about ensuring the focus is not solely on the quality of the contract. Spending time fostering good relationships between the two sectors can help both parties to understand their different ways of working and to mutually agree on how the outcomes should be reached.

“Where things go wrong, it’s not about the contract, it’s often about the relationships and the way they’re working together. It’s important to make sure people are focusing not just on getting contracts signed, which is very important, but on how they are going to have a commissioner-supplier relationship,” he said.

The transition from running services to commissioning and overseeing them can be difficult to adjust to, meaning clear communication is essential to manage working relationships.

He added: “If you start with suspicion, you might start with a premise of ‘it’s all about the contract being buttoned down’. Yes, make sure you do that properly but don’t ignore the fact that you need to be able to work with these people. The procurement process is there for a reason, but it doesn’t encourage exploration of things like shared values and culture, it focuses on the process of procurement, making sure that is even and open and transparent.”

Smaller scale partnerships can often be more successful, Kenmore suggested, due to closer involvement when working together. This can lead to more discussion and time taken to understand different values, fostering a deeper understanding of each sector’s values and approaches.

Kenmore said: “It might be council rubbish services, or it might be some element of social care, but I think that’s where the majority of discussion has happened properly: at a level where the people who are commissioning and running the service are quite close to each other. That makes quite a big difference.”

Catch-22

Another reason partnerships with the private sector can prove challenging for public sector leaders is a lack of experience of working in this way. The shift requires different skills and behaviour, which have not been traditionally required in the public sector.

Until these leaders have a commissioning mindset, successful partnerships could continue to elude them, Kenmore says. But achieving this mindset is only possible through experience of the commissioning process, meaning leaders can be stuck without either experience or success. However, growing financial pressure that means the risk can no longer be borne alone by the public sector.

Kenmore said: “That’s a big challenge, ab-solutely. In order for successful working, public sector leaders need to be able to have a commissioning mindset, focused on outcomes. But that’s exactly it; they’re not skilled yet in those areas.

“The private sector has things to learn about delivering public services and public sector leaders have something to learn about how to commission for outcomes. There’s something from both sides that needs to be learnt.

“As partnerships improve, that knowledge will spread through the sectors. The private sector needs to understand the culture and values of public sector leaders. It’s a two-way street, they’ve both got to engage properly.”

This means that successful partnerships may require a certain amount of time for public sector leaders to feel confident in their new positions, assimilating a new mindset to ensure continued, quality provision of services.

Flexible career paths

Public sector leaders have also voiced concerns that their skills and abilities could be lost through these partnerships. Kenmore said the thinking was that it would “denude the skills” of those in the public sector.

He suggested that while they may lose operational management skills, public sector leaders could gain skills in commissioning from the experience of procuring services from the private sector.

“Why could it not be the case in the future that more public service leaders have career paths that have periods in the private sector?” Kenmore asked, positing a model where leaders work in both private and public sectors, dependent on the type of skills they seek to use and develop.

He concluded: “If we saw a lot more of that shared career path, then the skills wouldn’t be lost and people would end up with a broader base of skills. Historically it’s not the norm, generally people stay within their sector; but that could change.

“I’d be very surprised if that happened quickly, but you can imagine over the next five to ten years that that might become the norm.”

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