William Eichler 13 April 2016

The road to self-sufficiency

The chancellor is upending the way town halls are funded. By 2020 grants from Whitehall would have dried up, and councils will be forced to rely on the cash they can raise themselves. Regardless of whether you view this as a political project driven by neoliberal ideologues or as a necessary response to profligate public sector spending, the fact remains: councils are being set adrift on the rough seas of the market, so they are going to have to learn how to swim.

Traded services is one response to this tough, new world. In essence, it involves councils morphing into agile commercial actors and offering their services on the open market at competitive rates. This way, the argument goes, they will be able to generate their own income, becoming, in effect, public sector entrepreneurs.

Essex County Council is one such ‘entrepreneurial council’. I spoke to Jonathan Coyle, the director of the council’s Traded Development team, in order to learn more. ‘Traded services is the team that looks at opportunities for us to generate profitable revenue for the council,’ he explains, ‘and that profitable revenue is then reinvested into frontline services.’ This, he argues, can help councils balance their budgets.

Two and a half years ago, Jonathan and his team of three full time employees set up what they call a ‘business incubator’. This is a mentoring tool designed to help the council operate more like a private sector business. They identify a department they feel could be more profitable, and they transform it, as Jonathan says, from ‘a civil service-type operation to a commercial entity.’ This is not privatisation—the services remain in the hands of the council. But they are taught how to operate more efficiently.

One of the success stories of Essex’s Traded Development team is Place Services. A part of the council’s planning department, they provide a range of environmental assessment, planning, design and management services across the public and third sector. One of their more high profile projects was carried out alongside Castle Point Borough Council; Place Services were part of the team that worked on the development and delivery of a mountain bike course there for the 2012 Summer Olympics.

A couple of years ago Place Services was costing the council money. Then, in January 2014, it entered the Business Incubator where it was transformed into a commercial enterprise. ‘It required a net subsidy from the county council. It now returns a net surplus,’ Jonathan says. ‘In just under two years,’ Place Services head Emma Woods explains, ‘Place Services has seen the positive effects of the Business Incubator and now has a culture of profitability and sustainable growth underpinning the business.’

The word ‘culture’ seems to be the key. Explaining what his team did with Place Services, Jonathan said: ‘we developed a more entrepreneurial mindset, we developed the ability to listen to and understand the needs of customers and we have put in place a performance management framework that incentivises people to do that.’

The Traded Development team does restructure the departments they are working with, which can mean reducing the work force. They also implement new systems and processes. But for Jonathan, the most important part of their role is changing the culture: ‘the thing that it always involves is developing the people.’ The message is: for a council to be entrepreneurial it needs to be peopled with entrepreneurs.

Jonathan is keen to distinguish his team’s approach from other attempts at commercialisation. ‘Commercialisation in the public sector often fails,’ he explains, ‘and in my view the reason why is you bring people in from the outside who will go round telling the professional teams within the public sector body how poor they are at what they do.’ This is not, he says, what they do in Essex. ‘We start from the opposite point…we build the people up rather than knock them down and that’s the fundamental principle behind the success that we’ve had.’

There can, at times, be a tension between a public sector ethos and commercially-oriented approaches. Not so with traded services, Jonathan assures me. His team has a strategy that governs everything they do. ‘That strategy has ten guiding principles and the first of those principles is that we will not do anything that is not consistent with the values of Essex County Council.’

When they assess a service before putting it through the Business Incubator, one of the key points Jonathan’s team considers is whether the tension between trading with the outside world and meeting the needs of Essex County Council can be managed. It is crucial, they stress, that business is done ‘in a way that doesn't do violence to [the] ability to deliver the services to Essex.’ If it is decided it can be, the service is considered a good candidate for the incubator.

The figures speak for themselves. The Traded Development team costs £300,000 per annum to run. Place Services now has a turnover of £1.9m. Two other graduates of the incubator have had similar successes. Essex Outdoors, which provides outdoor learning opportunities to educational facilities, now works with 44% of the county’s schools market and delivers a turnover of £3.4 million. And finally, Essex Legal Services employs over 100 fee earning staff and delivers a turnover of £10m, thanks in part to Jonathan and his team.

It requires change. Not the kind of change that sees services farmed out to private corporations but, instead, the kind of internal changes which help departments run better. ‘Change is obviously a scary thing,’ Jonathan admits, ‘but actually people see our success and they see it as something they want to be part of.’

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