Social enterprise: why are people talking about it so much?

Social enterprise: why are people talking about it so much?
Cliff Mills, Local Government Chronicle
19.09.12

The main reason is that there is an increasingly urgent search for an alternative option, beyond the familiar choice between public and private ownership.

Why are people talking about social enterprise so much?

The subject of social enterprise seems to be much in discussion today. The main reason for this is that there is an increasingly urgent search for an alternative option, beyond the familiar choice between public (state or municipal) and private (public limited company, mainly) ownership. The coalition’s health White Paper expressed the desire to “create the largest social enterprise sector in the world”. The Cabinet Office’s Mutuals Support Programme aims to provide “professional support to new and developing mutuals”; and according to Social Enterprise UK’s State of Social Enterprise Survey 2013, there are 70,000 social enterprises in the UK employing 1 million people, with proportionately more start-ups than SMEs, a greater increase in turnover, and greater optimism about growth in the next two to three years. Social enterprise and mutual ownership seems to offer a promise of something different.

The urgency of this search has increased because of the current state of public finances. As well as trying to make money go further to meet increased demands, services which are perceived to be lower priorities are experiencing unprecedented cuts. Consequently the state is looking to off-load direct financial commitments, of which a major one is the wage bill for public sector workers. In February 2011 Francis Maude expressed an ambition for 1 million public sector workers to move to mutuals. “Externalising” or “spinning out” services is the agenda; and enabling them to become social enterprises and mutuals may sound more palatable and meet less resistance than privatisation.

Are there more fundamental causes to this agenda?

Yes there are. Even without the financial constraints caused by economic and demographic factors, the old model of public service delivery – essentially a centrally-driven, command and control approach, designed to discharge statutory responsibilities assumed by the state and local government in the post-war years – was looking increasingly out of date. In recent years there has been a drive to introduce a customer-based approach to service delivery more familiar in the private sector, where it is perceived to have led to increased efficiency and commercial success. However it is an approach which is increasingly open to question in delivering public services today, where it is important to engage service-users in order to change behaviours, in order to reduce demand and hep to control costs.

In addition, in many areas there has been a lack of meaningful mechanisms of accountability to users and citizens. The traditional model of service delivery is based around an approach which treated those for whom the service existed mainly as just recipients or consumers, and gave them no meaningful rights to influence future services, and hold service-providers to account. The introduction of personalised budgets starts to bring service-users some economic power through an element of choice, but they do not enable the service-user to contribute directly to the improvement of their local service, or to build a collaborative relationship through which their valuable insight as a service-user can be captured for the benefit of others in the community.

Does social enterprise really have something to offer today?

If the social enterprise agenda consists of an exercise in the state and local government becoming commissioners, and continuing to control services by outsourcing to organisations claiming to be social enterprises, then no; that would be simply re-arranging furniture.

But the opportunity to create robust and sustainable social and mutual enterprises has a great deal to offer in terms of a new model of public service delivery. For this to happen, a number of things need to underpin this broader development:

A gradual transfer of ownership and influence from the state to citizens. Staff, service-users, citizens and communities need to take ownership of needs and problems, and the means of addressing them. The state needs to let go, and allow and enable them to do this;
robust arrangements which ensure that services are delivered for public and community benefit. This requires clear and binding purpose commitments on the new organisations;
require services to operate on a realistic commercial basis. Social and mutual enterprises trade. This means that if they are to survive, income needs to exceed expenditure, year on year. This means having a robust and commercial business plan, which constantly aims to make a profit, but with a view to securing the future sustainability of the service and a reinvestment of any surplus in the service and the community itself;
direct involvement of service-users, staff, citizens and communities in shaping future services and monitoring current delivery standards;
a collaborative approach through which service-users and staff work together in co-designing services and co-producing better outcomes;
protecting assets including accumulated knowledge and financial reserves for the benefit of the current and future generations.

This much more holistic approach, rather than a transactional one involving a transfer of staff and services into an off the shelf corporate entity, is much more likely to provide a mechanism for citizens and communities to take responsibility for their own and their children’s and grand-children’s well-being, happiness and prosperity and to work collaboratively to achieve them. If that vision is deliverable, then yes, social enterprise has something to offer today.

How is this to be achieved?

First, it will not be achieved by taking existing services and staff, dropping them into some new corporate entity vaguely labelled “social enterprise” or “mutual”, and then leaving them to be commissioned (or not) by the holders of rapidly diminishing budgets. There is also a danger that services are “spun out” at speed to meet short term goals without proper consideration for long-term sustainability. Where this happens, social and mutual enterprise will get a bad name, and in the event of subsequent failure or yet more re-organisation, service-users and staff will be the ones who end up paying the price.

If the public sector is to have a vibrant future beyond traditional state or municipal ownership, it needs:

a strong basis of ownership by staff, service-users, citizens and communities;
a clear and binding legal commitment to trade in a commercially efficient way for community or public benefit;
a modern approach to governance which combines executive and non-executive directors appointed for their skills and track record, with accountability to the owners;
a radical new culture centred on engagement and collaboration at grass roots level; most likely a redesign of the service-delivery model; and a style of leadership which seeks the best outcome in the public interest through a collaborative and listening approach.

This is only likely to be achieved where staff, service-users, citizens and communities are proactively involved in the process of development of their new providers. This all takes time, and as well as coming up against the need for short term results, has to happen within the confines of EU procurement requirements.

How can this be done? See next week’s column by Chris Brophy.

Cliff Mills, Consultant with Capsticks Solicitors LLP, and Principal Associate with Mutuo

For the other articles visit LGCplus.com/SocialEnterprise