Social value hybrids: Best of all worlds?

This is a guest post by Tim Cooper FRSA, senior manager and research fellow at the Accenture Institute for High Performance.

Social-value hybrids are an increasingly common feature on the UK public service landscape. These new entities encompass a broad range of organisational models — from mutuals and cooperatives to social enterprises, benefit corporations and industrial & provident societies — that are increasingly being spun out of the public sector as a way of reconciling fiscal austerity with rising citizen demands and the need for economic growth.

Why do we call them social-value hybrids (SVHs)? In researching these entities as part of a new Accenture report on hybrid public service delivery models, we have been struck by the fact that there is no single blueprint of success. As Mark Sesnan, Managing Director of Greenwich Leisure Limited (now trading as ‘Better’) put it to us, “there are as many organisational models in this space as there are individual companies.”

However, despite this diversity, SVHs appear to share five common characteristics: primarily, a social mission that guides decision-making at every level; autonomy from government but the delivery of a public service; a focus on the unmet needs of citizens, particularly from vulnerable groups; robust revenue-earning business models; and non-traditional enterprise structures, where profits are reinvested and employee ownership is common. In this way, SVHs focus on “what works” with capabilities and processes operating in service of their social mission.

The combination of these ingredients appears to deliver an appealing brew of both improved citizen outcomes and better economic outcomes, a central theme for Accenture’s global program, Delivering Public Service for the Future. For example, at Sunderland Home Care Associates, employee ownership contributes to an annual staff turnover of less than 5 percent, compared with an industry average of more than 20 percent in the United Kingdom. With continuity of care being paramount in such services, such statistics translate directly into better citizen outcomes. Furthermore, one study of employee-owned enterprises in the United Kingdom found that they generated employment growth from 2005 to 2008 at 7.5 per cent per year, nearly twice the 3.9 per cent growth rate of non-employee-owned enterprises.

However, if the early signs of promise are to grow into a permanent and more significant feature on the public service landscape, a number of enablers need to be in place. The following actions would provide a good place to start:

1. Adopt common standards: SVHs often struggle to attract investment. Banks can be wary of their unconventional organisational structures, and a potential skills deficit may hinder efforts to pitch successfully to investors. Mainstreaming common definitions and frameworks of “social return on investment” would help build a stronger case for public investment, while developing a private market would open up individual and institutional investment. Institutions such as Big Society Capital can help in this regard, but further ballast could be provided in the form of investment guarantee mechanisms (particularly at the early stages of SVH development).

2. Develop public entrepreneurship: the skills required to thrive in a SVH are hard to find. A commitment to a social mission must be matched by hard-nosed business acumen. Ensuring a pipeline of future skills must start early. Incorporating social entrepreneurship into school curricula is a step in the right direction. But beyond that, policymakers can target experienced public managers with “social sabbaticals,” using simulation exercises and gaming techniques to prepare them for a period of absence to test and launch their own social enterprises.

3. Incentivise smarter commissioning: SVHs often have difficulty breaking into new markets, given their size and (often) relative inexperience versus larger incumbents. But commissioning approaches need to recognise the wider networks and relationships that SVHs can foster within communities. As part of this, local councils may well need to enter into a more symbiotic relationship with their service providers in the form of secondments, management expertise or even infrastructure, both physical and technological.

4. Embed innovation in social-value chains: Creating innovation hubs that bring together public managers, social entrepreneurs and private-sector entrepreneurs operating in the same space can offer significant opportunities to start conversations, create synergies, and share best practices and innovation across the board. This interplay can be embedded in contracting and tendering mechanisms, introducing diversity of delivery provision in the rules of the tendering process. For example, requiring large-scale service providers to partner with third-sector organizations in service design and delivery can be a useful tool to foster the uptake of spinouts. Subcontracting—but perhaps more effectively co-creation—can enable the establishment of “social value chains” spanning across sectors. These social value chains would cement hybrids’ rightful place in the economy as drivers of economic growth and social benefits—the best of all worlds.

Tim Cooper FRSA is a senior manager and research fellow at the Accenture Institute for High Performance. He can be reached on tim.e.cooper@accenture.com

RSA 2020 Public Services will  launch a series of new report on public sector spin outs on Wednesday 29th May 2013. For more information please contact paul@2020psh.org.