The real potential of new public service organisations

This is a guest blog written by Hannah Jameson, Head of Research at the IPA.

Hannah Jameson, IPA

Three years ago it would have been hard to imagine the extent to which mutuals, co-ops and social enterprises would come to dominate the public service reform debate. A financial crisis that was not anticipated by government has led to a significant decline of public trust in both markets and the state. Organisations that are seen as different to both have risen to the top of the policy and political agenda.

For policymakers, politicians and practitioners that have been wrestling with the challenge of improving public services over the last twenty years, this is a golden opportunity. A greater diversity of providers, it is hoped, will bring much needed innovation. Where private providers have been helpful in finding ways to make public services more efficient, this new wave of delivery organisations are expected not just to find better ways of doing things, but thoroughly question the outcomes public services should be trying to achieve. Do we just want fewer post-operative overnight hospital stays, or patients who recover more quickly and return to a better quality of life?

It is a huge challenge for these new organisations, which face considerable demands of their own. They may have more autonomy, freedom and flexibility, but generating innovation and sustaining it over a period of time will require new cultures, systems and leadership that make innovation and service improvement everybody’s business. At the same time, new organisations will be subject to the same market pressures as any other public service provider, and will have to quickly reach a level of performance that enables them to compete with other providers when contracts reach their renewal time.

Yet with all the attention focused on new ways of delivering services, in health, education and local government, the question of how to improve those parts of the public sector that will remain in direct state ownership is left unanswered. Targets, league tables and other means of centrally driven public service improvement seem to have fallen out of favour, but what will come in their place? Once the public sector has adjusted to the reduction in public spending, what should public services look like in five, ten and fifteen years time, and how will they get there?

Free schools may unleash new and creative ways of educating children, but they are small in number and are unlikely to be able to answer the UK’s need for a rapid increase in the number of young adults who leave the education system confident and capable of learning throughout the life course. Health mutuals can show how to harness the expertise and insight of front line professionals for more responsive and effective health services. However, large hospital trusts, publically owned, are likely to continue to deliver a large amount of our health services for the foreseeable future.

New public service providers can and will find ways of improving outcomes for service users, their families and communities. But their potential will only be realised if some of these innovations are adapted, trialled and adopted by the wider public sector; if the lessons they learn and the best practice they develop is understood by public service managers wherever they are.

To take just one example; foundation trusts were originally designed on mutual principles, with ‘owners’ or members, from the public, workforce and service users represented in the trusts’ governance structures. Yet analysis carried out by Nuffield, the IPA and others shows how little has been made of this. Could the evidence of the performance, innovation and productivity gains achieved by smaller scale public service mutuals, and the lessons on how to practically harness the potential of ownership be used to stir a new wave of reform in foundation trusts?

Achieving this is no mean feat. Knowledge networks are notoriously weak in the public sector, but they are essential if new public service organisations are to have a real impact on public service delivery. A recent survey of public sector innovation by NESTA showed that 70 per cent of those questioned believed that they had developed a new to sector innovation. Analysis of the examples given showed this was far from the case, but weak networks meant that people were working in isolation, unaware of what others were doing. The Transition Institute could have an important role to play, not just connecting new public service providers together, but connecting them with other parts of the public sector that are working on the same challenges.

At a time when resources in many parts of the public sector are in short supply, and citizen demands and expectations are rising, it is vital that the pace and scale of innovation increases. New public service organisations will benefit the wider public sector through increasing plurality, but in the absence of a clear public service improvement strategy from the top, there is an opportunity for these organisations to help drive change across the public sector from below.

Hannah Jameson, Head of Research at the IPA.