Getting to Grips with Public Interest Companies

Ian Briggs

The recent announcement by Northamptonshire County Council heralding a move towards a ‘next generation model’ where four public interest companies are to be established to deliver front line services and leaving a core client organisation of around 150 employees adds to the growing number of councils (and other parts of the public sector) who are seeking to adopt this model. What is interesting here is that is goes far beyond the tired rhetoric of what is best, direct public provision or privatisation? The establishment of what are increasingly referred to as ‘public interest companies’ (PIC’s) has been slowing gathering pace in recent years, often quietly and tentatively by local authorities who may seek cost and value advantages in working with arm’s length bodies but wish to retain certain controls whilst at the same time offering freedoms to compete in open markets.

There may be a longer history to this model of provision than many may believe; however this approach does beg some interesting questions and exposes the relative lack of research and meaningful data as to the overall efficacy of the approach. Near the top of the list has to be what might this do to the market for services? Putting a potentially highly efficient, skilled and savvy organisation into the market place might be seen as a threat to any commercial provider who currently occupies part of this market space.  The example of an East Anglian council who established a comparatively small arm’s length company to manage property services some years ago has grown into a successful organisation that operates in many parts of the UK, trading services within a growing number of public and commercial clients. The efficiency returns for the growing number of public sector clients will be welcomed but it can potentially have the effect of diminishing the returns of existing commercial organisations – there may be no inference at all that the trading position is in any way illegal but where staff are transferred to public interest companies they do so with a great deal of knowledge and intelligence as to what both the client and community requirements are that can be both difficult and expensive for a commercial provider to obtain.

The second interesting question is one that can be summed as ‘mind-set’. The strategic leadership of public interest companies face unusual challenges; given that the shareholding is exclusively within the public sector that shareholder will have more than just an economic interest in success, it can and does demand more than economic viability. It must ensure that the needs of the public are met and that the social value of delivery matches the economic value, something that it can be argued is not always present in wholly commercial shareholdings. Reconciling this is a new challenge for those within PIC’s. In most recently established PIC’s most of not all staff are being transferred over from the public sector and work has to be undertaken to develop a mind-set that meets the challenge of delivering to a commercial agenda as well as a public one. Failing to do this successfully can be handicap hard to overcome and may be ultimately a cause of commercial failure. This leads to the third and crucial question. Even with a small and proficient client organisation are there the right skills there to create the conditions to enable the next generation model to prosper and provide successfully for the communities served? If the right depth of commercial analysis has been undertaken and the politicians driving the new model are confident that the model and market is correct are they able to act as an intelligent shareholder on behalf of the community? It may be no good having a fresh, hybrid mind set within the PIC if it is not matched with understanding and the correct support from the client organisation. Getting beyond a vanity decision and having a realistic expectation that anything as new as a next generation model provider will need a bedding in period to operate within the tensions between a commercial market and public expectation requires tolerance and understanding of councillors and senior managers.

With a growing number of councils actively exploring this approach there may be a lesson for those who are dithering – being late to the game could leave no space to enable PIC’s to be established as your neighbour has done it for you! Whatever direction this takes it is perhaps one of the most fundamental shifts we have seen since the days of CCT, no longer public bad – private good but a half-way house creating demands for new skills both within PIC’s and in slimmed down intelligent clients. Get in wrong on either side of this equation and retrieval could be more problematic than getting off the ground in the first place. That a growing number of PIC’s are already out there quietly getting on with it may suggest that the decision Northamptonshire has taken is not merely brave but one that is based upon sound good sense.

briggs

Ian Briggs is a Senior Fellow at the Institute of Local Government Studies. He has research interests in the development and assessment of leadership, performance coaching, organisational development and change, and the establishment of shared service provision.

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