CCN Commercialism Report - Capita · for applying greater commerciality in the way local authorities operate. Just as the transitions in local government ... CCN Commercialism Report

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Introduction

Counties face the challenge of circumstance which causes us to question every aspect of the way we work. Time and again pressures have kindled in councils a spirit of enterprise that allowed even the most daunting financial challenge seem surmountable.

The survey conducted by Capita at the CCN Conference on council attitudes towards commercialism demonstrates this commitment to innovation and change as local authorities work to safeguard core services. Over 75% of senior executives questioned thought increased commercialism was either ‘fairly’ or ‘very’ effective when addressing the financial challenging facing their authorities. Over half put significantly increasing commercialism as either the most important or amongst the most important action their organisations would undertake to tackle their financial challenges. But the interest in commercialism was not simply defensive.

Commercialism does not solely mean increasing the number of functions a council contracts out. Instead it represents a commitment to creative entrepreneurialism, from changing the culture of our councils to generating revenues from a wider array of sources, to looking at the very structures we have in place to work with partners. Fundamental to this process of creative reinvention is reengineering the way local authorities commission services. 90% of respondents thought greater commercialism as either ‘important’ or ‘very important’ for successfully underpinning their approach to commissioning. Alongside the role within commissioning, counties saw commercialism as vital for maximising the value they can realise from their assets, another vital step in responding to funding reductions.

Working with a wider range of partners and with established partners, like Capita, in new ways was seen as powerful spur for applying greater commerciality in the way local authorities operate. Just as the transitions in local government funding have caused local authorities to change, partner organisations in the voluntary and private sectors are transforming to meet the needs of their public sector partners.

Fundamentally, the survey reveals county councils as both confident in the their capacity to innovative and possessing a firm commitment to maintain services in the face of the hard decisions that will need to be made as funding pressures intensify. As county and county unitary councils transform to meet future changes, whatever their final shape, it seems certain greater commerciality will be embedded into their organisational DNA.

Cllr. Philip Atkins Leader, Staffordshire County Council and CCN Spokesman for Public Service Reform

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Commercialism Executive Summary The challenges of the austerity decade are bringing forward council creativity as never before. One dimension of this is ‘commercialism’ – councils unlocking a spirit of enterprise to achieve financial and other objectives.

It is useful to understand the breadth of opinion about relatively new topics such as commercialism, which is why we commissioned a survey of CCN members.

As befits a world of localism, a majority of councils are very keen on the idea, while others have chosen not to go there. Our survey found that the main reasons why becoming a more commercial council is attractive are:

to support the development of ‘commissioning councils’

cultural change – becoming ‘more business-like’

generating income – a significant fraction of councils want to generate more than 20% of their income from commercial activity

to help local business be successful.

There are a variety of routes which councils will follow to achieve this, some growing their own, others working in partnerships with commercial and other organisations. Whatever the route, we will see more councils becoming more commercial, and we hope this survey will provide information and context for members and officers who are thinking about whether and how to achieve that. As such, this survey sits alongside our discussion paper on council commercialism which can be accessed here.

1. Introduction In autumn 2012, Capita, working with the County Councils Network (CCN), conducted a survey of CCN member councils.

That survey asked respondents to consider a number of ways in which local government might address ongoing financial challenges in the period 2015-2020 and beyond. Amongst these was ’Significantly increasing the commercialism of your council/authority, developing income streams and commercial activities in an entrepreneurial way, building the capacity of your organisation to bid effectively against others for work’. Here, 61% of respondents1 said this would be an effective2 solution to the financial challenges of the next decade, and 57% thought it a step their council/authority would take3.

For our 2013 survey, we’ve revisited the theme of commercialism, to examine whether councils still regard it as important, and – for those that do – why is it important, what they want to achieve with it, and how will they do so.

http://www.capita.co.uk/news-and-opinion/opinion/2013/creating-council-commercialism.aspx

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2. The role for commercialism A key message reinforced by this year’s survey is the definite role that respondents anticipate for greater commercialism in helping to address pressure on budgets across the local government sector. In line with the 2012 research findings, a majority of this year’s respondents (64%, rising to 77% of our senior leadership subset) continue to see significantly increased commercialism as an effective4 potential solution to the financial challenges facing their council/authority, although more think it will be fairly rather than very effective (see Chart 1).

Chart 1 – Addressing the financial challenges facing your council/authority:effectiveness of significantly increased commercialism as a potential solution?

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Don't know/not stated

Very ineffective

Fairly ineffective

Fairly effective

Very effective

All L/CM/CE/CT

Base: 86 (all respondents) and 53 (all respondents who are Leader/Cabinet Member/Chief Executive/County Treasurer), CCN/Capita survey of CCN member councils, 30 September-3 November 2013

2012n=89

19%

43%

16%

1%

22%

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However, the adoption of significantly increased commercialism is very much a ‘work in progress’. Whatever their views on the appropriate extent of commercial activity in local government (see below), none of our survey respondents believes that a desired level has already been reached in their authority. In this context, 45% told us that significantly increased commercialism remains amongst the few most important actions their council/authority is likely take in the next few years, if not the most important (see Chart 2).

Chart 2 – Addressing the financial challenges facing your council/authority:how important is significantly increased commercialism likely to be?

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Not applicable - we're already at the desired level ofcommercialism for our council/authority

The single least important action you take

Amongst the few least important actions you take

As important as any other action you take

Amongst the few most important actions you take

The single most important action you take

All L/CM/CE/CT


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There is clearly an appetite for significantly increasing the amount of income which councils generate. In total, 22% of respondents ideally want to generate more than 20% of their income from commercialism (30% of the senior leadership group), and 17% and 23% respectively feel that they will realistically achieve this (see Chart 3).

Chart 3 – Proportion of total income derived from commercial activity:currently vs. ideally vs. future likely [summary]

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Don't know/notstated

>30%

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<1%

0%

All L/CM/CE/CT

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>30%

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>30%

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0%

All L/CM/CE/CT


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3. Why become more commercial? Respondents who rated significantly increased commercialism as an important action5 (the ‘commercially positive’ group) were asked to assess the relative importance to their council/authority of four potential reasons for wanting greater commercialism across local government services. Only a minority (between 0% and 4%) say that any of the reasons we suggested are unimportant6. However, while three in four (74%) describe to better understand, and so better support, the needs of local businesses as an important7 reason for more commercialism, nine in ten (90%) say it is important to underpin a successful approach to commissioning (see Chart 4). Importantly, senior leadership respondents are significantly more likely than average to say that increased commercialism is important to underpin a successful approach to commissioning (98%, with 73% saying it is very important) and to change organisational culture (98%, with 76% saying it is very important).

Chart 4 – Importance – for your council/authority – of potential reasons for wanting greater commercialism in the local government sector

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To better understand, and so better support, the needs oflocal businesses

To generate profit, replace lost revenue from elsewhere,and/or keep down Council Tax bills in a creative way

To change the culture of your organisation, by adoptingsome of the attitudes, behaviours and features of good

commercial organisations to become more business-like

To underpin a successful approach to commissioning

Very important Fairly importantNeither/nor Fairly unimportantNot at all important Don't know/not stated

Base: 69 (all respondents who say significantly increased commercialism will be single most important action/amongst few most important actions/as important as other actions taken by their council/authority), CCN/Capita survey of CCN member councils, 30 Sept-3 Nov 2013

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Reflecting the findings described above, respondents as a whole most frequently identify to underpin a successful approach to commissioning as the single most important reason (39%) for wanting greater commercialism in their council/authority (see Chart 5). However, it’s worth noting that officers are three times more likely than members to say this (60% versus 19%). Conversely, members are more than twice as likely as officers to say that changing organisational culture is the most important reason (44% versus 17%).

Chart 5 – Potential reasons for wanting greater commercialism in the local government sector: most important reason for your council/authority

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To better understand, and so better support, the needs oflocal businesses

To generate profit for your organisation ... in a creative way

To change the culture of your organisation ... to becomemore business-like

To underpin a successful approach to commissioning

All L/CM/CE/CT

Base: 69 (all respondents) and 45 (all L/CM/CE/CT respondents) who say significantly increased commercialism will be single most important action/amongst few most important actions/as important as other actions taken by their council/authority, CCN/Capita survey of CCN member councils, 30 Sept-3 Nov 2013

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4. Ways of becoming more commercial Turning to ways in which councils/authorities might adopt greater commercialism, our research findings again reinforce the ‘work in progress’ nature of related activity. Asked to consider 12 potential ways of achieving greater commercialism, only a minority of respondents (in the range 3%-15%) told us they’d already taken any one step and didn’t need to do more of it (see Figure 4.1). In fact, all but two respondents reported that at least one of the suggested commercialism-boosting activities is underway or is planned8 in their council/authority, and nine in ten respondents (92%) note the ongoing or planned adoption of at least three activities (see Chart 6).

Figure 4.1 – Ways of achieving greater commercialism

Action

We’ve already done this and don’t need to do more (%)

This isn’t something we’ve done nor plan to do (%)

Taking a longer-term view of investment 15 5

Bringing in expertise for a fixed period to get things started 12 11

Recruiting people with relevant expertise into the organisation on a permanent basis 11 14

Changing remuneration structures so that higher earnings than now are possible for those who are delivering at the highest level

11 43

Creating our own commercial entity (such as an arms-length company or a spin out) 9 20

Making greater use of the commercial skills of elected members 8 15

Doing more to identify and unlock potential assets 6 3

Encouraging/allowing staff to think and work in an entrepreneurial way 6 5

Changing our organisational structure to reflect a more commercial approach 6 14

Changing our performance management to reflect a more commercial approach

5 20

Adopting a less risk-averse mindset 3 9

A partnering arrangement with a commercial organisation 3 18

Base: 65 (all respondents who rated their council’s/authority’s capacity to become more commercial)

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As can be seen from Figure 4.1, there is only one action with a particularly low planned take-up9: changing remuneration structures. However, those in the senior leadership subset are significantly more likely than average to identify changing our organisational structure, permanently recruiting people with relevant expertise and changing remuneration structures as planned10 actions.

Comment: Directors in Veredus, Capita’s executive resourcing business, have had significant recent success in recruiting commercial talent for the local government sector, even without adjustments to remuneration structures. However, our view is that there is a relatively limited market of people who can be tapped into in that way, and that sooner or later the issue of market-level remuneration is going to have to be addressed, for certain roles.

Chart 6 – Ways of achieving greater commercialism(ranked by actions planned)

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Changing remuneration structures (higher earnings potential forhighest performers)

Creating our own commercial entity

Making greater use of the commercial skills of elected members

A partnering arrangement with a commercial organisation

Recruiting people with relevant expertise on a permanent basis

Changing our performance management to reflect a more commercialapproach

Taking a longer-term view of investment

Bringing in expertise for a fixed period to get things started

Changing our organisational structure to reflect a more commercialapproach

Adopting a less risk-averse mindset

Encouraging/allowing staff to think/work in an entrepreneurial way

Doing more to identify and unlock potential assets

All L/CM/CE/CT

Base: 65 (all respondents) and 45 (all L/CM/CE/CT respondents) who rated their council’s/authority’s capacity to become more commercial in the future, CCN/Capita survey of CCN member councils, 30 Sept-3 Nov 2013

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Naturally, greater commercialism in the local government sector will depend on the capacity of councils/authorities to achieve it – for example, by offering products and services that others will want to buy, or having people with the necessary skills and expertise to create or maximise commercialism opportunities. Our survey findings reveal a fair degree of uncertainty among respondents about just how well-placed their council/authority is to become more commercial in the future, with only half (51%) describing their place of work in this way, and with more saying it is fairly rather than very well-placed (see Chart 7). However, a quarter of all respondents, and nearly a third of those in the senior leadership subset, say their council/authority is not very well-placed to become more commercial in the future, while a further one in four respondents overall does not feel able to assess their authority’s capacity.

Chart 7 – Capacity of your organisation to become more commercial in future?

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Not applicable - we're already at the desired level ofcommercialism for our council/authority

Not at all well-placed

Not very well-placed

Fairly well-placed

Very well-placed

All L/CM/CE/CT


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This question mark over capacity to become more commercial in future has some bearing on the frequency with which respondents say a particular activity is underway or planned in their authority (see Chart 8).

Chart 8 – Ways of achieving greater commercialism (ranked by actions planned)

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Changing remuneration structures (higher earnings potential forhighest performers)

Creating our own commercial entity

Making greater use of the commercial skills of elected members


Recruiting people with relevant expertise on a permanent basis

Changing our performance management to reflect a more commercialapproach

Taking a longer-term view of investment

Bringing in expertise for a fixed period to get things started

Changing our organisational structure to reflect a more commercialapproach

Adopting a less risk-averse mindset

Encouraging/allowing staff to think/work in an entrepreneurial way

Doing more to identify and unlock potential assets

All Well-placed Not well-placed

Base: 65 (all respondents who rated their council’s/authority’s capacity to become more commercial in the future), 44 (respondents who rated their council/authority as well-placed [very + fairly]) , 21 (respondents who rated their council/authority as not well-placed [not very + not at all]), CCN/Capita survey of CCN member councils, 30 Sept-3 Nov 2013

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Figure 4.2 highlights the Top 6 planned/underway actions most frequently identified by respondents in ‘well-placed’ authorities versus those in ‘not well-placed’ authorities. Respondents in the latter are significantly less likely than their colleagues in the former to identify encouraging/allowing staff to think and work in an entrepreneurial way, changing our performance management to reflect a more commercial approach and a partnering arrangement with a commercial organisation as activities underway or planned11,12.

Figure 4.2 – Top 6 planned/underway actions by capacity to become more commercial in the future

Well-placed Not well-placed

Encouraging/allowing staff to think and work in an entrepreneurial way Adopting a less risk-averse mindset

Doing more to identify and unlock potential assets Doing more to identify and unlock potential assets

Adopting a less risk-averse mindset Bringing in expertise for a fixed period to get things started

Changing our organisational structure to reflect a more commercial approach

Changing our organisational structure to reflect a more commercial approach

Changing our performance management to reflect a more commercial approach Taking a longer-term view of investment


= Encouraging/allowing staff to think and work in an entrepreneurial way

= Recruiting people with relevant expertise into the organisation on a permanent basis

Base: 65 (all respondents who rated their council’s/authority’s capacity to become more commercial)

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A degree of doubt over commercialism capacity also has some bearing on how respondents answered our final two questions (see Chart 9).

Overall, more agree13 (42%) than disagree14 (15%) that they work in a ‘commissioning council’, but a further one in five respondents neither agree nor disagree – and the same proportion says they don’t know. On the one hand, this pattern of response may reflect an assumption on the part of some survey participants that we at Capita see ‘commissioning’ and ‘commercialism’ as synonymous with ‘outsourcing’ (for the avoidance of doubt, we are very clear about the distinction):

The Council of the future will be a mix of direct and contracted provision that is commissioned and managed strongly and with good commercial nous and grip – it will be folly to state that the Council is simply a commissioning council as this will be politically unacceptable to many Labour politicians who cringe at such statements. Chief executive

We have not gone down the route of contracting work out to Capita-type organisations, although of course we use contractors to deliver services like highway maintenance and 85% of adult care is by private contractors. Leader

It is just one of the possible options for delivering effective services. The cost and quality of the service is more important than who provides it. Opposition member

Chart 9 – A commissioning council?

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Strongly disagree

Tend to disagree

Neither/nor

Tend to agree

Strongly agree

Base: 86 (all respondents), CCN/Capita survey of CCN member councils, 30 September-3 November 2013

I would say that we are now a ‘commissioning council’

42%

15%

Those who disagree (n=13) now are also more likely to disagree (n=6) than agree (n=3) that they’ll be a commissioning council within the next five years

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On the other hand, the survey findings indicate a lack of consensus within the sector as to what ‘commissioning council’ and ‘commercialism’ actually mean:

I think we need to be clear at a local authority level what our definition of commercialism actually means. This is as important to debate with members as it is officers because understanding if it is about profit, or being able to operate in a commercial market, are often confused. Chief executive

Commissioning council is (in my view) much overused. Don’t we all commission in some way (internally or externally)? Some do it better than others but they may not be the ones that describe themselves as commissioning councils – it’s a way of working through systematically. County treasurer

Define commissioning and commercialism simply will help, we spend too long discussing what this means without actually doing anything. County treasurer

Either way, respondents working in ‘well-placed’ authorities are significantly less likely than those representing ‘not well-placed’ authorities to disagree that they are a commissioning council (9% versus 33%)15.

5. What next for local government commercialism? The area of increased commercialism of councils is an area where we feel particularly qualified to help, and some of our successful commercial models (such as joint ventures which have been invested in to achieve the desired outcomes) stand as testament to that. Our leadership businesses (such as Veredus and Capita Learning and Development) and our consulting business (Capita Consulting) have a range of offerings to help councils become more commercial in their outlook.

If you would like to discuss any of these ideas, as we develop our own thinking, we would be pleased to hear from you.

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Endnotes

1. Base = 89; CCN/Capita survey of CCN member councils, 25 October-9 November 2012

2. Combined very + fairly effective

3. Combined certain to take + very likely + fairly likely to actually take this action

4. Combined very + fairly effective

5. Combined The single most important action ... / Amongst the few most important actions ... / As important as any other action ... you take

6. Combined fairly unimportant + not at all important

7. Combined very + fairly important

8. Combined ‘we’ve already done this but we need to do more’ + ‘this is something we plan to do’

9. ‘This isn’t something we’ve done nor plan to do’



12. Indicative finding: small base sizes

13. Combined strongly + tend to agree

14. Combined tend to + strongly disagree

15. Indicative finding: small base sizes

Documents

CCN Commercialism Report - Capita · for applying greater commerciality in the way local authorities operate. Just as the transitions in local government ... CCN Commercialism Report