The Third Sector Research Centre recently finished examining 30 public service mutual spin-outs. Dan Gregory summarises the findings and concludes that culture is more important than structure - no matter what Francis Maude says.
Following his role in helping demutualise the building societies at the Treasury in the early nineties, Francis Maude has come to rather admire mutuals. While for decades, this term has referred to businesses owned by their members, it seems our minister for the Cabinet Office holds little regard for tradition and prefers to innovate, using the expression 'mutual' to describe more or less any enterprise which has spun out from the public sector, regardless of its ownership model. Indeed, innovation is one of the main reasons Mr Maude is so interested in spin-outs, describing the benefits as “less bureaucracy, better access to outside expertise and capital, and the huge boosts in productivity and morale… they reduce absenteeism, improve performance management, encourage innovation…”
Yet there is a danger that policy is being advanced on the basis of very limited evidence. Consequently, a research team led by Professor Fergus Lyon on behalf of ESRC-funded research by Middlesex University has undertaken an 18-month research programme into the nature and extent of innovation in public service mutual spin-outs. As part of this team, we looked at a sample of 30 spin-outs of different sizes, types, location and public service sectors and what we have found has some interesting implications for public policy. And Mr Maude in particular - with his rather ‘brave and courageous’ ambition for one in six public sector employees to work for mutuals.
Innovation is easier in social enterprises
First, this new evidence provides, arguably for the first time, some support for the recent policy ambition and rhetoric. The Cabinet Office’s Mutuals Taskforce previously sought to set out the case for spin-outs, but had to admit that “Most of the evidence tends to come from what is conventionally thought of as the private sector” and therefore could only lamely conclude that there “is no reason why public services should be different”. So our conclusion that innovation can indeed be faster and easier in social enterprises compared to the public sector should be welcomed by those who have been arguing the case for mutualisation of public services.
Culture wins over structure
Second, however, many of the most impressive innovations we observed were developed by social entrepreneurial leaders while they were still in the public sector. This perhaps heralds the return of the heroic social entrepreneur – a myth which has influenced the debate around social enterprise for some time but has rather faded in recent years. Our research risks reviving this idea by suggesting that the leaders of these organisations were in some way mavericks, already innovating to a significant degree in the public sector and merely unleashed further by their new freedoms. We conclude that a change in legal form, governance and ownership is not enough to drive organisational change or, in other words, “culture eats structure for breakfast”. This potentially weakens the value of our evidence - while these enterprises became more innovative, this may not be the case for other, less innovative teams. What happens if you unleash unnovation!? So policymakers should also consider how cultures of employee engagement and innovation may be fostered in a public sector context.
Social enterprise more popular than mutual
Third, our research established a clear attachment among the spin-outs to their identity as social enterprises and less so as mutuals. The concept of mutuality remains contested - while these organisations may have had an element of staff and user involvement in governance, the greater role of staff and users in decision-making was still just an emerging ambition. Social enterprise was perhaps more significant as most recent spin-outs made progress along their journey under Labour’s Right to Request programme, which was founded on the concept of social enterprise rather than a mutual ideal. This is worth noting for those who argue that spin-outs are this government’s Trojan Horse for privatisation. First, it was Labour and the Department of Health which enabled the vast majority of these spin-outs, despite what the Conservatives and the Cabinet Office claim. Second, these spin-outs are a relative sideshow in the context of outsourcing which has been happening anyway under successive governments. This government’s talk of mutuals and the VCSE sector may indeed be a misleading smokescreen of sorts (perhaps in probation in particular) but why construct a Trojan Horse which is meaningless in the context of a wider war already raging on the battlefield beyond the city walls? Policymakers might want to reflect on – given the public distrust of the profit motive in public services - whether a not-for-profit social enterprise agenda or an anything-goes mutual agenda is more likely to enable further waves of public sector spin-outs.
Passing power to the unwilling
Finally, our research has implications for the Big Society and people-powered services agendas. Spin-outs seeking to develop a culture of staff or employee ownership were often wrestling with how to give power to a group which may not instinctively want to seize this power, echoing national political narratives. Each major party seems keen on transferring power from the state to society in some way, although this varies in terms of transferring either assets; choice; ownership; accountability; or perhaps more dauntingly, transferring responsibility to pay for services or provide them. Politicians of all parties need to be clearer about what it is they want to transfer and how this can be supported, rather than simply expecting citizens to seize powers they are used to the state exercising on their behalf.
