As social enterprises for care get promoted in England, such that they literally get ‘bigger and bigger’, now’s a sensible time to task who exactly benefits and what’s at stake.
Like personal budgets or PFI, a discussion with the public is unlikely to be forthcoming in the near future. Nonetheless, it’s possible to make some inroads into this complicated narrative. At the beginning of this parliament, the Department of Health declared its vision that the NHS should be the “largest social enterprise sector in the world” through the liberation of foundation trusts, and handing over services to NHS staff. Enhancing the role of social enterprises and mutuals in public service provision was right at the heart of the Coalition Government’s vision of the “Big Society”, and part of the aspiration to move one in six public sector jobs into staff-owned companies.
In a somewhat provocatively titled article in the Health Services Journal, “Norman Lamb: Mid Staffs would never have happened at a mutual”, Health minister Norman Lamb suggests that acute trusts could improve staff engagement by becoming social enterprises and argued that the culture problems seen at Mid Staffordshire Foundation Trust would never happen in a mutually-owned company. It is not any surprise to anyone who has worked as a clinician in the last decade in the NHS that understaffed services, perhaps cut back as a result of ‘efficiency savings’ to help address ‘the funding gap’, have been the major threat to patient safety in NHS hospitals and Foundation Trusts.
The Berwick Report discusses safe staffing ratios, and staff engagement is a pervasive theme in the whole analysis. And yet curiously the document “The Care Bill explained: Including a response to consultation and pre-legislative scrutiny on the Draft Care and Support Bill“, which indeed calls Mid Staffs a “watershed moment in care”, does not mention social enterprises or mutuals once.
The famous Norman Lamb/Chris Ham review is due to report imminently.
Meanwhile, the Cabinet Office ‘Mutuals Information Service” has a feeling about it of “Well done on setting up your first mutual!”
“Setting up a mutual is a major achievement… However, the transition from the public sector can bring significant challenges… The biggest challenge that comes with leaving the public sector, though, is having to operate as a business. In the first year, you will be focussed on delivering your service and making your mutual work. However, as you build your experience and look to the future, you should start to think about opportunities for expansion and growth.”
All organisations involved in care have have had a tension between board members acting as representatives for particular membership groups and ‘experts’ charged with driving the performance of the organisation forward.
Social enterprises are non-profit ventures designed to achieve both social and commercial objectives. Although trading for a social purpose is hardly a new phenomenon (Hall, 1987), the growth of social enterprise has been a key feature of economic activity in both developed and developing countries.They are hybrid organisations that have mixed characteristics of philanthropic and commercial organisations (Dees, 1998).
According to Alter (2006), social enterprises are driven by two forces:
“first, the nature of the desired social change often benefits from an innovative, entrepreneurial, or enterprise-based solution. Second, the sustainability of the organisation and its services requires diversification of its funding stream, often including the creation of earned income opportunities (p. 205).”
It’s already known the accountability and transparency (corporate governance) mechanisms of social enterprises aren’t always necessarily “fluffy”: see for example this interesting discussion of “asset locks”. Co-operatives have long held to have three groups of participants, according to Johnston Birchall and Richard Simmons (2004). They are: those “true believers” who can be persuaded to train as potential board members, those who can be formed into a kind of club who believe in the aims of the organisation and will participate through voting, attending annual meetings and social events, and supporting campaigns such as fair trade, and a third group which is quite ambivalent.
Birchall and Simmons review that the best way to encourage active participation amongst membership is to reinforce the values of mutuality, engage widely with the community, and to make accountability central to corporate governance and strategy. And “non-uniform engagement” is a well-documented issue with NHS Foundation Trusts (FTs) too. Nonetheless, managers in FTs have described using members of public to give their governance a sense of legitimacy (Allen et al., 2012):
‘They are seen as a very important strategic weapon . . . the governors and their influence into the community, is really, really key’
Multinational corporations have an interest in working with the community too. The construct of ‘corporate social responsibility is important for such corporations to gain ‘competitive advantage” through “value creation” (Husted and Allen, 2007). The European Commission identifies corporate social responsibility as: “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (Commission of the European Communities 2001).
Recent examples of the failure of private providers to deliver NHS services, such as Serco with its contract for older people’s services in Cambridgeshire and Peterborough CCG, have led to a greater desire within the NHS to see commissioning in terms of how a provider can deliver a long-term business model with greater social value, going beyond the cost-effectiveness of their work. That’s where social enterprises come in so handy for multi-national companies, and vice versa. And as you progress down the ‘You too can set up a mutual’ aspirational route, you as a member find yourself less interested in real persons and real patients, but get more bogged down with the “bottom line”. Though the field is young, it’s clear private equity want a slice of the action: the “Socially Responsible Investment” is an investment process that integrates social, environmental, and ethical considerations into investment decision-making (Crifo and Forget, 2013).
From a somewhat corporate perspective, Antony Bugg-Levine, Bruce Kogut, and Nalin Kulatilaka gave a neat description of the “social impact bond” in the Harvard Business Review in 2012:
“Another innovation, the social impact bond, deserves special notice for its ability to help governments fund infrastructure and services, especially as public budgets are cut and municipal bond markets are stressed. Launched in the UK in 2010, this type of bond is sold to private investors who are paid a return only if the public project succeeds—if, say, a rehabilitation program lowers the rate of recidivism among newly released prisoners. It allows private investors to do what they do best: take calculated risks in pursuit of profits. The government, for its part, pays fixed return to investors for verifiable results and keeps any additional savings. Because it shifts the risk of program failure from taxpayers to investors, this mechanism has the potential to transform political discussions about expanding social services.”
However, this approach has already been likened to a ‘private finance initiative’ for social enterprises. The critical issue then becomes “he who pays the piper calls the tune”, and membership engagement becomes even more murky. Any steady income source can have its drawbacks. For example, according to the “crowding-out hypothesis”, an increase in one source of revenue, such as a government grant, can lead to a decrease in revenue from other sources, such as private donations (e.g., Weisbrod 1998).
So in answer to my original question, private investors stand to benefit while public sector budgets get cut (which could be easier to hide anyway through integrated care or ‘whole person care’ in the next parliament), and what’s at stake is that membership engagement gets worse as the social enterprises get bigger and bigger. But would this policy plank, in fact, prevent another Mid Staffs as Norman Lamb would perhaps like us to believe?
Selected readings
Allen, P., Townsend, P., Wright, J., Hutchings, A., Keen, J. (2012) Organizational Form as a Mechanism to Involve Staff, Public and Users in Public Services: A Study of the Governance of NHS Foundation Trusts, Social Policy & Administration, 46(3), June, pp. 239–257.
Alter, S.K. (2006) Social Enterprise Models and Their Mission and Money Relationships. In A. Nicholls (Ed.), Social Entrepreneurship: New Models of Sustainable Social Change: Oxford University Press
Birchall, J, Simmons, R (2004) The Involvement of Members in the Governance of Large-Scale Co-operative and Mutual Businesses: A Formative Evaluation of the Co-operative Group, Review of social economy, LXII, 4.
Bugg-Levine, A., Kogut, B., Kulatilaka, N. (2012) A New Approach to Funding Social Enterprises, January–Harvard Business Review, February, pp. 119-123.
Crifo, P, Forget, V.D. (2013) Think Global, Invest Responsible: Why the Private Equity Industry Goes Green, J Bus Ethics, 116, pp. 21–48.
Dees, J. G. (1998). Enterprising nonprofits, Harvard Business Review, pp. 55-67.
Hall, P.D. (1987) A historical overview of the private nonprofit sector, In The Nonprofit Sector: A Research Handbook. Powell WW (ed.). Yale University Press: New Haven, CT; pp. 142–175.
Husted, B.W., Allen, D.B. (2007) Corporate Social Strategy in Multinational Enterprises: Antecedents and Value Creation, Journal of Business Ethics, 74, pp. 345–361
Piercy, N.F., Lane, N. (2009) Corporate social responsibility: impacts on strategic marketing and customer value, The Marketing Review, 9(4), pp. 335-360.
Weisbrod, B.A. (1998), The Nonprofit Mission and Its Financing: Growing Links Between Nonprofits and the Rest of the Economy, in To Profit or Not to Profit: The Commercial Transformation of the Nonprofit Sector, B. Weisbrod, ed. Cambridge, MA: Cambridge University Press, pp. 1–24.
