A National Audit Office report on the programme intended to encourage health organisation staff to form social enterprises has found no evidence of its value for money. But, argue Cobbetts LLP colleagues Kevin Jacquiss and Ross Griffiths, this disregards the achievements the programme could deliver - given enough time.

Inevitably, some have pounced on the NAO’s report into the Department of Health’s right to request programme as proof that the Big Society is doomed to failure; with no way to measure success accurately and no objectives in mind to begin with, this is surely a political experiment that should be put down to experience and consigned to the history books.

This would fail to take into account that people on the ground do, in fact, feel that properly mutual social enterprises are having a hugely positive impact on the delivery of services. 

While the report highlights that the Department of Health has not set out specific objectives against which to measure the success of transforming community services, there are measurable benefits to be achieved. Some of these are financial, but the most important are in health outcomes.

It seems obvious intuitively that positive outcomes will stem from greater engagement between people involved in providing a community service and their patients. Part of the difficulty for policy makers wanting instant change is that this engagement takes time to mature. A successful mutual enterprise will deliver some improvements immediately and others over a period of time.

New enterprises tend to be employee-led and to enjoy the benefits of a new start with a new brand and a management newly focussed on specific objectives and performance measures. Management are free to concentrate specifically on the particular service they have been tasked with delivering, and staff feel a new sense of ownership and responsibility.

The business plan of a new enterprise will typically show some immediate savings generated by the greater efficiency and lower overheads of smaller focused organisations and the removal of the cross subsidy which inevitably involves successful parts of a large organisation paying for the mistakes and inefficiencies of less successful parts. 

The extent of the savings at the outset may be limited by overheads imposed by the PCT under service level agreements; this is an issue which requires thought and negotiation at the time the enterprise is set up. However, the experience in relation to local authority services (where this approach has been in place for some years) shows that new enterprises reduce their overheads by finding new suppliers or renegotiating contracts over a period of time.

The NAO’s criticism that the new social enterprises lack firm objectives is reasonable in some cases but the best new mutual enterprises are firmly focused on using their ownership and governance structure to drive service improvement and community benefit.  Their objective is not to carry on delivering the services previously delivered by the PCT or to provide employment and pensions for the transferring staff, but to benefit the community by delivering services in an effective and accountable way.

This means that where service users are given a constitutional voice, the enterprise must be structured to make that voice effective in improving services and that its business plan must involve the generation of an evidence base from service users from which progress can be measured. 

Staff engagement can also be measured by reference to turnover, days lost through sickness and participation and engagement. Broader community benefits such as capacity building, workforce improvement and diversity, sustainability and awareness of environmental issues and volunteering will be natural results of a mutual structure which are capable of being reflected in a contract with the PCT and measured.

In practice – as a good example from the local authority sector, Salford Community Leisure, demonstrates – getting real community engagement with a new mutual enterprise is a three to five year project. The pattern is that the enterprise drives success in its early years from increased efficiency and staff engagement and uses that success to secure community engagement to push service levels still higher. 

A recent example of a new mutual enterprise embarking on this path is Care Plus in North East Lincolnshire, which began trading as a community benefit society registered under the industrial and provident society legislation on 1 July 2011. 

Its members are staff but its council of governors (which has a role in setting strategy and appoints the non-executive directors who serve on the board of directors) also includes community, GP and local authority representatives. It will deliver community services previously delivered by the PCT and adult social care services previously delivered by the local authority, but its purpose as set out in its constitution is community benefit and wellbeing.

Change will not happen overnight, but the implications of social enterprise in the health service are being taken seriously by successful mutual businesses with no previous connection to the public sector. 

The fact that the Co-operative Group has entered the market with its Public Service Mutuals initiative, for example, is likely to drive innovation among new enterprises, as it uses its own experience of engaging members and changing the performance of the organisation as a model in a public service context.

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