John Lewis checked out in NHS productivity drive

Posted on December 3, 2009. Filed under: News stories | Tags: , |

Health Service Journal | Alison Moore | 3 December 2009

Politicians of all hues are talking about public services being owned by staff – like John Lewis – to increase productivity. Alison Moore examines how this might work and, where staff cannot hold shares, whether just a sense of ownership is enough

John Lewis has suddenly become the politicians’ darling, with all three major parties talking of the role a “John Lewis approach” could have in improving public services.

The eponymous store has been held up as an example of employee participation and ownership, leading to high standards of service and staff engagement. And a key question for an incoming government will be how a partnership or mutual model could drive productivity in the public services.

How could this work in the NHS? An article in The Guardian recently said that “nurses and patients” could be involved in the way hospitals are governed. Cabinet Office minister Tessa Jowell said: “We think mutuals have a much broader potential across the public sector, especially now where they can become an expression of the new national soul post-credit crunch.”

Shadow health secretary Andrew Lansley has talked of “employee partnerships” running NHS organisations, with social enterprises as an alternative to the foundation trust model. And Liberal Democrat health spokesman Norman Lamb has said they would “turn every NHS hospital into an employee owned trust”.

But what is this likely to mean for the NHS? The politicians are not talking about giving employees a transferable share in their organisation which can be bought or sold, in the way that some large companies give staff shares as part of a bonus. DGH plc won’t be hitting the Stock Exchange any day soon.

And, despite the frequent use of the John Lewis tag, they don’t seem to be talking about employee ownership where profits are distributed to the staff. John Lewis staff get a yearly bonus which has been as high as 24 per cent of salary, plus a host of other benefits.

What is likely to be promoted is more a watered down version of employee ownership where the financial benefits to staff are far less but the organisations can, in theory, harness the energy and innovation of staff.

In other sectors staff ownership has been linked with a substantial increase in productivity. As the NHS faces years of financial stringency, this is enormously attractive to politicians wondering how to satisfy increasing demands for services with less or the same cash.

Staff would be “co-owners” – either by themselves or with other stakeholders – but this would be ownership “in trust”, with the aim of improving services to the community.

In policy terms, this marks a shift from challenging traditional NHS providers through competition to looking at how they can morph into organisations that are both businesslike and accountable.

Julia Manning, chief executive of Think tank 2020health, says the NHS could move away from the present model towards something more akin to what was intended in 1948: “We would be getting back to the original vision of the NHS with reduced political interferences.”

But would this pseudo ownership lead to the boost in productivity everyone wants to see? Or are the financial incentives of providing good service seen in real ownership models the driver of this?

There is some evidence that pseudo ownership can deliver some of the benefits of real ownership – and that feeling “a sense of ownership” can produce some of the effects of actually owning an organisation.

Staff participation

NHS Mutual, a study for the Nuffield Trust, looked at the relationship between employee ownership and the benefits seen in many co-owned companies. The authors concluded that for benefits to be delivered two further factors were necessary – HR management practices that foster staff participation, and a culture of ownership.

But do these factors also deliver benefits in the absence of real ownership? The answer seems to be yes but only up to a point.

The authors suggest a number of employee owned models for general practice and community health services. At the very least, greater staff participation is urged.

Circle, a private healthcare company that provides services to the NHS, has seen stunning productivity improvements in its Nottingham treatment centre since it opened in the middle of last year – in some areas, of over 20 per cent. This has been associated with very high levels of customer satisfaction, with 99.6 per cent of patients saying they would recommend the centre to families and friends.

Circle’s business model involves a high level of employee ownership but that has not been possible in the Nottingham case because many of its staff are seconded from the NHS.

Managing partner Ali Parsa believes staff engagement and a sense of ownership have been crucial in this productivity improvement. Actual ownership, he says, is “not such a big deal. What is important is a sense of ownership… that’s often about allowing people to do something”.

While that does not rule out NHS organisations developing this sense of ownership, he says the hierarchical culture is an issue: “I don’t think the challenge in the NHS will be structural – it will be cultural.”

He points out that innovations in other industries – such as IT – have come from incomers rather than incumbent organisations and have been associated with a drop in the barriers to entry. Would many of today’s technologycompanies have developed if the founders had had to buy a mainframe rather than a cheap personal computer?

But what sort of structure could give NHS staff that sense of ownership? The most talked about model is some form of social enterprise, a not-for-profit organisation where surpluses are reinvested in services but it is typically run by staff. Although there are some successful social enterprises in the NHS, their numbers are few and their establishment has been difficult.

Working for a social enterprise and competing for contracts may be more risky than working for an NHS organisation: enterprises can fail and staff can end up without a job.

Former King’s Fund senior fellow Richard Lewis, who is now a director at Ernst & Young, says staff may be making a trade-off between the empowerment such organisations can offer and the risks they may entail.

Social enterprises may also be short of capital – the assets of the NHS organisation may not follow them – and may depend on the revenue from contracts. “It seems to me that if social enterprises are going to survive in health, they need a sort of heroism – it is not for the faint-hearted,” says Mr Lewis.

Then there are questions of governance and propriety. Is it right to hand over NHS bodies to staff? What about the public voice? Can it be assumed that staff will always run an organisation for the public good and the structure will resolve conflicts between their interests and those of the patients?

This question is often unresolved in other parts of the NHS, such as primary care. GP practices are often owned by employees – but do they act in the best interests of patients in every way?

Peter Hunt, chief executive of Mutuo, which promotes mutual organisations, points out: “GPs are a fantastic example of producer capture. We would not want to replicate that.”

Partly, the answer lies in commissioning and monitoring contracts – and the public accountability of commissioners.

But partly, it is about what bit of the market an organisation is working within. A social enterprise run by staff could compete against other providers on a level playing field and with its accountability delivered through the contracting system.

But that might not be appropriate where a monopoly exists. Mr Hunt says different governance may be needed in these cases, with some form of public representation. This, of course, amounts to a foundation trust model with multiple stakeholders and members as stewards of the assets of the organisation.

Foundation Trust Network director Sue Slipman sees the cross-party interest in mutualism as being about extending the model into other public services rather than changing the foundation trust model.

“The appeal for politicians is around a localism agenda,” she says, adding that politicians may not have realisedfoundation trusts are run on the mutualism lines they are talking about.

Can this multiple stakeholder model deliver the sense of staff ownership that seems to drive productivity? Foundation trusts have often been criticised for not doing enough with their staff governors. Ms Slipman argues they are still a work in progress.

“Some have done more than others with this different group of stakeholders but all of them are trying hard to engage their staff,” she says. “Most people think the model works and they want to continue with it.”

She says foundation trusts have realised improvements in productivity and generated surpluses to reinvest in patient services. However, she warns the demands for taking money out of the system will be so large over the next few years that even the most efficient organisations may not be able to do enough to satisfy them.

Increasing staff representation among governors would be one way of boosting staff engagement and sense of ownership, although this would mean diluting the power of other stakeholders and could be seen as reducing public power.

As Mr Hunt points out, once power and rights are granted to a group, it is very difficult to take them away.

It is more likely that foundation trusts will have to look even harder at their staff engagement and motivation without changing their structure – and that could involve some form of financial incentive, although not at John Lewis levels. And it will require visionary chief executives who are prepared to cede power to groups of staff.

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The nuts and bolts of setting up a social enterprise

Posted on November 16, 2009. Filed under: News stories, Social enterprise | Tags: , , , , , , |

Pulse | 16 November 2009

Emma Wilkinson takes a look at what social enterprises can do for PBC

What is a social enterprise?

Social enterprises are businesses, but unlike limited companies that make profits to line the pockets of shareholders, they are driven by environmental or social principles, and surplus funds are reinvested to further those goals. So the community benefits from any profits made.

The Social Enterprise Coalition ( says there are some 62,000 social enterprises in the UK with a combined turnover of at least £27bn.

Mo Girach, social enterprise lead for the NHS Alliance, says: ‘There are three elements to social enterprises. They are designed to tackle social objectives, such as health inequalities. Any profits made are reinvested in the local community. And local people and staff have the ownership of their services.’

If you generate the bulk of your income from trading and use most of your profits to further social or environmental goals, your organisation might be classed as a social enterprise.

Models for a social enterprise include:

• A community interest company (CIC) – a legal form created specifically for a social objective, overseen by the CIC regulator to ensure it does not deviate from its mission and that its assets are protected (

• Industrial and provident society (IPS) – this is the usual form for co-operatives and community benefit societies, and is democratically controlled by members.

• Companies limited by guarantee or shares – these can have a social mission written into their memorandum and articles of association, but are not regulated.

• Group structures and charitable status – in these cases the tax breaks associated with charitable status can be an important factor.

How do they differ from a limited company?

The key difference is that a social enterprise is set up to fulfil a social goal rather than a financial goal. But social enterprises are businesses and need to make a profit to be competitive, remain afloat and to keep investing in their social vision. They are not an easy option for someone wanting to avoid the legal technicalities and governance arrangements of a limited company.

Dr Mike Dixon, chair of the NHS Alliance, says: ‘It’s a way of setting out business principles but making sure the business is there for the patients and not for shareholders.

‘The steps to setting one up are similar to those for a limited company – you need a lot of advice, you need to decide your basic vision and what sort of partnership it’s going to be, and who is going to be a part of it.’

Mr Girach adds: ‘A true social enterprise has in its constitution that profits are reinvested and there are no shareholders. That is a key point. There might be shareholders but that is in terms of ownership rather than profit so they are more social enterprise members.’

What are the advantages for PBC?

Setting up a commissioning group under a social enterprise model means GPs are less likely to be accused of lining their own pockets – a suggestion that has surfaced repeatedly in the past few years. It may also be an easier route for organisations wanting to work as both provider and commissioner.

Dr Dixon explains: ‘It shows that the profit motive is not an issue but at the same time gives a businesslike approach.

‘There’s another element that’s quite important if you are a commissioner.

I think it allows a certain blurring of boundaries when it comes to also having a provider role.

‘Social enterprises are becoming more common in PBC – not rapidly but PBC has been a slow process – and they are very logical.’

Richard Oliver is business manager at Nene Commissioning, a not-for-profit community interest company of 76 practices in Northamptonshire that started life as a limited company.

‘Trying to get 76 practices under one umbrella is a challenge and there was a huge amount of discussion about the structure that might be suitable. We started off as a limited company because it was a known legal entity but we decided that didn’t reflect why the organisation got together. So we looked around to see how we could demonstrate it wasn’t just a money-making exercise for doctors but that it was about patients.

‘The model that most clearly suited what we already had but that could move us into the social enterprise arena was a community interest company. We retained nominal shares and there is limited liability but at the same time the money is retained for use in the business.’

Any disadvantages?

Disadvantages to being a social enterprise may have more to do with misconceptions surrounding their function rather than a problem with the business model itself.

‘I think people don’t understand the calibre of credibility and true benefits they bring and think they’re small businesses,’ says Mr Girache.

‘The other problem is commissioners don’t embrace social enterprises and tend to go with what they know, for example the foundation trust, which are mutuals.

‘There is a lot of work to be done between commissioners and providers in raising awareness of social enterprises. This is something the Department of Health’s social enterprise unit is working on.’

Dr Dixon agrees: ‘A lot of people see social enterprises as rather woolly and something done by people in socks and sandals rather than business suits, but that’s not true and there are lots of examples of successful social enterprises. Look at John Lewis.

‘The other thing is that there are people in social enterprises who are not as they seem. It is easy to be a wolf in sheep’s clothing. If it does take off we will have to look very closely at social enterprises and check people are who they say they are – not one thing masquerading as another.’

Why has the government been so keen on social enterprises?

It is not just the current government that is keen on PBC groups setting up social enterprises, with the announcement of a £100m pot for health and social enterprises in 2007. The Conservatives have also hinted they may be the way forward, with talk about social responsibilities as well as a focus on the ownership agenda.

‘I think there are a number of reasons the Government is keen on social enterprises,’ says Mr Girache. ‘The ownership factor is a big reason. Being able to say to people “over to you – deal with it”. There is an incentive for people to get a little bit back and also a feeling that in some policy areas, such as health inequalities, things haven’t moved. PCTs have been working on these for 20 years and sufficient progress just hasn’t been made. Social enterprises are an alternative.’

So what are the first steps in setting one up?

Nene commissioning’s Richard Oliver says the first thing to do if you are interested in setting up a social enterprise is to make sure the PCT is on board with the proposed change. Then you need to decide what kind of organisation you want to be.

‘Do a lot of preliminary work before you see a solicitor as there is a lot of information out there, for example on the Social Enterprise Coalition website, to inform your decision. Then you need to get legal advice, and I would recommend choosing a solicitor with national experience.’

Dr Mike Dixon adds: ‘You need to form the right relationship first before you do anything else. There is no point hoping to gel with practices that don’t talk to each other.’

Are there any pitfalls?

With the appropriate business and legal advice and a clear plan of what the company wants to achieve, the process should be fairly straightforward, but there are potential problems to consider before taking that leap.

‘People often think social enterprises are not businesses but a form of charity that doesn’t have to make a profit – this is nonsense,’ says Mr Girache.

‘You need to think who your competitors are and what you have over them. Social enterprises focus on quality rather than feeding shareholders’ pockets.

‘The other thing is to do proper market research. You will have to deal with some aggressive providers and if you don’t understand the market and what your niche is, you will fail.’

Dr Dixon advises: ‘Don’t expect organisational form to be the solution to everything and don’t be too optimistic about what you can achieve; be realistic.’

Mr Oliver adds: ‘When it comes to legal advice, make sure you only fund what you need to as you can incur a lot of costs.’

What about funding?

To get off the ground, in addition to PCT resources, there are various sources of funds for social enterprises, including patient capital, grants and favourable loans, details of which can be found in the Good Deals 2009 Social Investment Almanack.

In June 2009, Social Investment Business took over the management of the DH’s social enterprise investment fund, and along with Partnerships UK is responsible for the £100m fund (£70m is now left) for start-up and existing social enterprises in the health sector over the next three years.

But the NHS Alliance would like to see more incentives to catalyse the social enterprise model.

Dr Dixon explains: ‘There are sources of funding available, for example from the social enterprise unit at the DH, but we produced a report three or four months ago pointing out there should be preferential treatment for people funding social enterprises in the form of tax advantages, the ability to get capital and VAT relief, in order to make social enterprises build a bit faster. It needs to be pushed further.’

Richard Oliver says: ‘Our funding comes through the PCT like any other PBC cluster and is based on population size – which for us is 650,000.

‘The advantage of being so big is that our money is pooled so we can fund a team working on our behalf rather than having to do it ourselves in house.

‘We looked at it and realised there was no way we were going to be able to do that and the day job of looking after patients, but by pooling the resources we can have a much bigger team – there are 10 people here – running the PBC side of things.’

Emma Wilkinson is a freelance journalist

More information

The Third Sector has published The Social Investment Almanack to showcase the different types of social investment.

It includes a comprehensive directory of social investors, finance providers and support organisations as well as many examples of different models.

Good Deals 2009: The Social Investment Almanack Deals 2009: The Social Investment Almanack


Focus on… social enterprise

Pulse | 13 November 2009

This month’s Focus on… looks at social enterprise models and what they can do for PBC. Here, Rebecca Chaloner outlines the Department of Health’s commitment to the concept.

Social enterprise models are about connecting with and investing in communities, empowering staff and working in partnership to deliver innovative services.

The social enterprise sector is diverse, with more than 6,000 schemes estimated to be delivering health and social care in the UK. This figure continues to rise as growing numbers of health and social care professionals investigate social enterprise as a viable option to tackle unmet needs and address health inequalities.

Sharing the same public-sector ethos as the NHS, social enterprises reinvest surpluses into services and the community and run on business principles that improve quality and efficiency.

Clinicians are committed to delivering high-quality patient care, and some may feel frustrated by a system and processes that restrict their ability to achieve the change they desire. Social enterprise, with its scope to innovate and be flexible to local need, is one way to empower clinicians to deliver care that is truly responsive to patients’ needs.

Social enterprise is not for everyone, nor is it for all services. However, it is an important option for those looking for a way to deliver a wide range of health and social care services as we move towards a more responsive, modern and targeted healthcare system.

Social enterprise is a way for PBC groups not only to support the commissioning of services but also to provide services in a way that enables them to address unmet local needs. It also offers the potential to forge a new partnership between professionals, users and the local community.

The Department of Health wants to ensure that social enterprises are in a position to add value to current services and that commissioners, through a range of providers, can offer choice and quality to patients, as well as value for money.

In line with its commitment in the NHS Next Stage Review, the department is encouraging the creation of new social enterprises to deliver primary and community services. To facilitate this, PCT staff have been granted the ‘right to request’ to set up a social enterprise from their PCT. This allows staff to explore setting up a social enterprise to deliver services if they believe that gaining the independence and flexibility will enable them to improve services and outcomes for users. The department is now working with a number of ‘right to request’ proposals and supporting them in developing their ideas to transform services.

The journey towards establishing a social enterprise requires determination and vision but there is support available through the £100m social enterprise investment fund (SEIF). The SEIF provides business advice as well as seed funding for start-up social enterprises and development loans for existing businesses. The fund is available to anyone in England operating, or wishing to start up, a social enterprise in health and social care.

The department is committed to supporting social enterprise as a way to increase social cohesion in communities, improve health and wellbeing and reach beyond traditional means of delivering care.

Rebecca Chaloner is head of the Department of Health’s Social Enterprise Unit

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