Efficiency, reform and the third sector

I’m told that Holyrood readers enjoy a challenge, so here’s one to chew on.

Imagine that you are responsible for commissioning public services in your local area.

You are presented with clear evidence that the work done by a third sector organisation is both of extremely good quality and highly effective, in the sense that not only does it support individuals and communities to achieve positive outcomes, it also has the potential to dramatically reduce demand for more intensive and expensive services further down the line.

Imagine that you are then presented with evidence that this organisation is operating at an optimum level of efficiency: there is little or no management or administrative fat to trim; workforce costs have been reduced to a level well below those of a public body, but not so far that the organisation’s ability to attract and retain suitably skilled and experienced staff is compromised; and unit, revenue and overhead costs – and their drivers – are accurately identified and closely monitored.

Now, imagine that your budget, as it stands, won’t quite stretch to buying what this organisation can offer.

Do you: (a) get tough, and insist that the organisation lowers its costs to suit your budget, even though you are aware that this will impact on its quality and effectiveness; (b) sigh deeply, and buy something in the same broad territory from an organisation that comes in cheaper, but can’t guarantee the same results; (c) take a deep breath, put on a crash helmet, and present a paper to committee recommending the closure of a hefty slice of comparatively poorly-performing in-house provision in order to free up resources?

Like any good Cosmo quiz, this scenario is far too black-and-white to reflect the complexities and subtleties that complicate the real world. Not all third sector organisations can produce such compelling evidence; it won’t always be a straight choice between weak in-house services and triple-A-listed external alternatives; there may be other courses of action to take, beyond the three options outlined (the most obvious one being, keep looking until you find a way to deliver the same or better results within budget – and good luck with that one).

And yet the nature of the choices facing public bodies in the light of the Christie Commission can all be located within this broad arena: short-term savings versus longer-term payback; internal upheaval managed by you, versus external upheaval managed by somebody else; striving to invest in something really good, or making do with something that’s just good enough.

What concerns many of us in the third sector is that ‘tough’ resource allocation decisions are already being taken – but too often without the key element in my scenario that should help to guide the process: performance information.

We know that financial pressure is being applied to many successful third sector organisations to the point at which their effectiveness, and even their viability, may be compromised. We know of services awarded high quality grades by the national regulator that have been transferred to providers with much poorer track records, as a result of cost-driven tendering exercises. And we know that in some areas, direct provision is being prioritised at the expense of the third sector in the absence of any comparative review of the track record of each in delivering quality, outcomes and Best Value.

Long before either Christie or the Independent Budget Review hove into view, Audit Scotland had this to say: “…we found that baselines were in place for costs, but not for activity and quality; performance measures were not routinely being used; and reporting of efficiency savings was not supported by performance information on the quantity and quality of services provided…There is therefore a risk that reported efficiency savings might actually be cuts in service because it is not clear if they have resulted in fewer or poorer quality services being provided.” If Christie is to be implemented, this needs to be remedied as a matter of urgency, or we will find ourselves moving further away from its ambitions rather than closer towards them.

This is particularly the case for the third sector, where austerity-related cuts are arriving on top of three or four years of pretty ruthless competitive tendering, in response to which most providers in the sector have already exhausted the ‘efficiency’ avenues now being explored in the public sector: de-layering management, stripping out back-office waste, revising skill mixes, and so on. There’s nowhere else for them to go now, apart from slicing into front-line terms and conditions, and taking the consequences.

More fundamentally, we should be questioning whether the efficient delivery of individual services is still a priority – what Christie is talking about is whole-systems efficiency, where inputs are calibrated against outcomes across the whole terrain of public service, not just within each specific outlet.

After all, what’s the point of pursuing optimum efficiency in the running of a public institution, if third sector community support can help people to stay out of it, at a lower overall cost, and all the happier for it?

Annie Gunner Logan is speaking at Quality Scotland’s Voluntary Sector Conference, 8 November, John McIntyre Conference Centre, Edinburgh http://bit.ly/pyPj5i