Healthier Together Conference

Is small still good?

The nature of cross sector partnerships in

service delivery

Tony BovairdINLOGOV AND TSRCUniversity of Birmingham

Conventional wisdom for some years (e.g. Beecham, Christie) has suggested that:

Transactional services have big economies of scale, so should be centralised at county, regional or even national level, but subject to competition and regulation

Personal services have few, if any, economies of scale, should be ‘commissioned’ (often procured externally) and increasingly co-produced with users and communities (often through TSOs)

Infrastructure-heavy services should seek flexible solutions, which can be delivered with other services and partners to ‘sweat the assets’ in service hubs (at different spatial scales) (so other assets can be ‘left to the community)

Regulatory services should be determined by ‘economies of scope’ – at what scale can ALL specialisms be hired necessary for a function?

But the analytical goalposts have moved ...

‘Transactions’ are now seen to be holistic, with a ‘social component’

‘Personal’ and ‘infrastructure’ services are seen to have multiple outcomes and therefore ‘commissioning’ is multi-stakeholder

Regulatory services can now be partly externalised

Economies of scale can be reaped by partnerships, not just by mergers

Organisational differentiation and integration Adam Smith: greater efficiency

through specialisation (‘division of labour’), which allows more expertise to be developed

Differentiation can therefore lead to economies of scale

But then there’s a need to integrate these differentiated units in some ways – e.g. through reporting to the same manager, joint staff, joint meetings, shared targets, etc.

Specialised providers can set up different units and :– Exchange within a company – low autonomy, low risk– Trade in the market – high autonomy, high risk– Or form a partnership – medium autonomy, medium risk?

Management often goes in a series of waves of differentiation and integration (Lawrence and Lorsch, 1967)

So what does ‘scale’ now mean? Economies of scale: where an increase in inputs

brings a larger increase in returns ... (e.g. handling all customer contacts in one system?)

... but an increase in WHICH inputs? Up to now, there has been major attention to inputs

made by or paid for by public agencies This is misleading in terms of the ratio of outcomes to

costs in the community ... (e.g. the extra time taken by housing clients to get their repairs done through a multi-purpose joint venture call centre)

... but we would need to measure user and community inputs in the future if we wanted to take account of this

Warning: many empirical studies suggest constant returns to scale, others also find diseconomies of scale – but major problems with data and functional form

Informal economy outputs

Informal social value-adding outputs

Value-adding outputs in market, public and third sectors and in civil society – how big are these different circles?

What’s going on ‘out there’?

Formal volunteering

Private and third sector

market outputs

Public sector outputs

Informal social value-adding outputs

Economic, Social, Political &Environmental Value Added

REAL Value for Money is about the OVERALL supply chain for outcomes

Source: Modelling Birmingham – the conceptual brief

Why ‘user and community co-production’?

After 10 years of Best Value and ‘Transformation’, we’re MUCH LESS CERTAIN that we are doing things the best way – but still uncertain about what ‘better’ looks like (the outbreak of ‘humility’)

We now realise that service users and their communities know things that many professionals don’t know … (‘users as thinking people, communities as knowledge bases’)

– E.g. co-design of services, co-authors of user manuals

... and can make a service more effective by the extent to which they go along with its requirements (‘users and communities as critical success factors’)

– E.g. self-medication, self-management of long-term conditions

... and have time and energy that they are willing to put into helping themselves and others (‘users and communities as resource-banks and asset-holders’)

– E.g. peer support (Knapp et al, 2010); expert patients programme

TSOs in the community are a key mediator of these relationships, often without being appreciated by commissioners or providers

Different types of co-production Co-governance of area, service system or service agencies –

e.g. neighbourhood forums, LEPs, HWBs, school governors Co-commissioning services – e.g. personal budgets,

participatory budges, devolved grant systems Co-planning of policy – e.g. deliberative participation, Planning

for Real, Open Space Co-design of services – e.g. user consultation, user-designed

websites, Innovation Labs Co-financing services – fundraising, charges, agreement to tax

increases, BIDs Co-managing services – leisure centre trusts, community

management of public assets Co-delivery of services – peer support groups, expert patients,

Neighbourhood Watch Co-monitoring and co-evaluation of services –user on-line

ratings, tenant inspectors

Economies of scale?

Importance of ‘economies of scope’ and ‘economies of learning’ Only in 1980s did importance of economies of

scope become widely appreciated – savings which occur when the RANGE of activities undertaken by an organisation (or partnership) increases (because they have joint costs) – e.g. where the ‘meals on wheels’ staff check and report back on wellbeing of meals recipients

... and importance of economies of learning – where savings occur over time as staff AND users learn how to co-produce the service better – e.g. getting inquirers to have details with them when they call the call centre, getting ‘meals on wheels’ deliverers to respect agreed time of delivery and users to wash yesterday’s reusable tray and dishes

– means we should avoid disruption - ‘churn’, ‘initiativitis’

Implications of economies of scope

Activities which gain from being done together SHOULD BE done together – either in a single multi-purpose organisation or in a ‘seamless service’ in a partnership

May be daft to SEPARATE activities which naturally have ‘joint outputs’ – transactions costs of separating them may override economies of scale – e.g. joint needs assessment rather than single needs asssessment

Economies of scope in commissioning and provision

Synergies in processes, activities, outputs or outcomes? – then economies of scope may be more important than scale

Commissioning: High synergy commissioning services for people with complex needs? – Move to specialisation and scale likely to be highly cost-

ineffective Provision: High synergy at all stages of providing

personalised services?

– Move to specialisation and scale likely to be highly cost-ineffective?

What’s the unit of analysis?

WHERE are we looking to achieve economies of scale and economies of scope?

At the level of the:– service?– organisation?– service system? (E.g. all services for adults with

mental health issues in Kent)– the local public sector? (E.g. all public agencies

working in Kent)

Where does this leave cross-sector partnerships in service delivery?

Average London Borough has 245,000 population and spends 50% of its budget on fewer than 10,000 people (Barry Quirk) – 4% of population

120,000 problem families said to cost nearly £8bn to public purse (Eric Pickles, 17.10.2011) – by spending £14,000 per family on a more co-ordinated service, the state could save £62,000 on each. Should we let contracts one at a time to support these families? Commissioner costs?

OR what about 30 different services in 8 different public sector organisations?

OR what about forming a FamilyRing network for every 10 families, taking the families out of most public services – £140,000 p.a. per FamilyRing? How much would a provider demand to run such a contract? Commissioner costs?

OR one public sector organisation with all functions for families with multiple problems?

OR a partnership/consortium of service providers who can offer full range of services? AND a partnership/consortium of all service commissioners?

Don’t throw away your old partnerships just yet!

Conclusions All change …

– … with huge risks – … but risks from both change and ‘non-change’

Distrust all current statements about economies of scale – mainly based on sectional interest

Scandal of not including all costs borne by citizens in our ‘social cost-benefit’ analyses

Economies of scope not well understood – or even seen as important

Economies of scope may be much more important than scale – both in commissioning and providing of many public services

Needs experimentation – none of the current relationships are well understood, none can be regarded as ‘reliable’

Experimentation needs resource – for design & evaluation but also for resilience (e.g. ‘last resort’ intervention plans and contingency budgets)

Contacts

Tony Bovaird

Institute of Local Government Studies and

Third Sector Research Centre

T.Bovaird@bham.ac.uk