Public service mutuals, owned by their customers, employees or a combination, are gaining popularity as a way to provide consumer-directed social services with limited public funding with more consistent quality standards.
The rollout of the National Disability Insurance Scheme has already led to the creation of an employee-led public service mutual in South Australia. The state government first planned to sell off its Child and Youth Services agency, with the move to NDIS funding, but came around to the idea of mutualisation instead.
About 100 former public servants, including various social workers and allied health professionals, became employee-members of Kudos Services in November, and continue to deliver NDIS-funded early childhood early intervention services as they had been since 2013.
Example of women’s leadership, enterprise
SA Minister for Human Services Michelle Lensink said over 70% of former CYS staff voted to establish the new organisation, which gives them some voting rights as owner-members. “Of the 112 staff, 106 of them are women, making the mutual an outstanding example of women’s leadership and enterprise,” she added.
There are a couple of thousand co-ops and mutuals nationwide but this is the first and only time a group of Australian public sector workers have formed a workers’ co-op to keep doing the same job, under contract from the government. It has been done more in the United Kingdom, with mixed success.
As The Mandarin reported when the idea was explored in a 2015 Senate inquiry, proponents argue success relies on the purity of the business model. Advocates from Employee Ownership Australia and the Business Council for Co-operatives and Mutuals said the process had to be voluntary and lead to majority ownership by members – who could also include consumers – for the supposed magic to happen.“Research from the UK, where PSMs are more common, shows moving services out of government in this way can improve productivity, staff motivation and client engagement.”
There also needs to be effective governance; co-ops are not immune from the kinds of organisational malaise that can infect all organisations.
The best examples of employee-owned mutuals combine good corporate governance with the co-operative principles, with a mix of independent non-executive directors and skills-based elected employee representatives, who are usually the majority. Voting systems and other governance mechanisms represent the views of employees and allow them to hold the board accountable much as shareholders would.
Those that come out of government, like Kudos, are constituted with a guarantee ensuring the assets will continue to be used for their original purpose. They can be not-for-profit or charitable organisations, but don’t have to be.
Research from the United Kingdom, where PSMs are more common, shows moving services out of government in this way can improve productivity, staff motivation and client engagement, leading to better outcomes for the people on the receiving end of human services within the available funding.
Thin markets or outright market failure are key risks to the NDIS in particular. Proponents say the UK experience shows the best employee-owned or multi-stakeholder mutuals are also generally more responsive to changes in the market than other organisations, making the model well suited to the new era of consumer-directed funding via the NDIS and in-home aged care.
A 2017 research paper from the UK Chartered Insititute of Public Finance and Accountancy, commissioned by the Department for Digital, Culture Media and Sport, provides a window into the British employee-owned PSM sector, most of which delivers healthcare and social services.
The report notes common benefits like high staff satisfaction and service standards as well as simple decision-making processes, but also big challenges in the early stages of getting a PSM off the ground. One key finding of the CIPFA survey was strong enthusiasm among PSMs: “Participating organisations were unanimous in their belief that mutualisation was the correct decision.”
Last April, the same department published a “State of the sector” report on PSMs, prepared by Social Enterprise UK from a bigger survey covering 70% of the market, which confirmed these findings. It suggests 92% are profitable, about half have expanded since their launch, and 85% said “a happier and more engaged workforce” was the main benefit of turning into a PSM.
About 90% reported “faster or easier decision making than when part of the public sector” and 66% said they had developed new products or services in the past year. Common challenges were around the ability to win new contracts, access to finance, and maintaining a high quality workforce.
A convert to the co-operative cause
Obviously, PSMs don’t have to come out of government, and there is a limited supply of public-sector service providers that could be mutualised. For them to make a big impact on markets for publicly funded services, governments would likely need specific policies to encourage new ones to spring up, as the UK government did.
As the Aged Care Royal Commission begins its work investigating once again the stories of abuse, neglect and poor quality that have long haunted the provision of care and support to society’s most vulnerable members, one veteran of both government agencies and traditional publicly-funded social service providers hopes this ownership model offers a better way ahead.
Co-ops could be the key to a more successful and sustainable future for disability support, aged care and other social services like public housing, in the view of health and social services consultant Gillian McFee, who now chairs the BCCM’s Public Service Mutuals Taskforce.
Perhaps best known from her time as chief executive of a very large nonprofit aged care provider covering New South Wales and the ACT, then known as UnitingCare Ageing, McFee is now in “encore career” mode and is only a relatively recent convert to the idea of PSMs and co-operatives.
She spent decades working in health, ageing, disability and social services, moving to the aged care provider after more than 15 years with the New South Wales government, but now believes there is something special about the unique business model.
“I come with a background from traditional public sector and not-for-profit organisations, and I’ve seen all the changes that are happening, particularly around the NDIS and aged care,” she told The Mandarin.
“I’ve had fundamental questions about the ability of traditional, hierarchically based organisations to actually deliver the quality of care that’s needed within the funding parameters available. So that’s what’s landed me onto co-operatives and mutuals.”
Late last year, McFee led a delegation of Australian service providers, academics and policy wonks to the UK, including four board members from SA’s pioneering PSM, Kudos Services, to have a close look at what might be, if the idea takes off here.
She says her experience confirmed her view that when it’s designed and governed well, employee ownership drives high levels of staff and consumer engagement and fundamentally changes organisational culture for the better. But it’s not the only model of membership.
The delegation also visited “powerful examples” of modern multi-stakeholder PSMs – human service providers where the clients were owners, often along with staff, when that makes sense.
One particularly good example she saw was Rochdale Burroughwide Housing, which was formerly part of local government and is now owned by tenants and employees. McFee says it was “spine-chilling” (in a good way) to hear of their enthusiasm, higher productivity and sense of community.
“We observed how power has been transferred to tenants and employees, so they are behaving as citizens and owners with accountability built in at all levels of governance. There’s an investment that’s being made in their development, and they are deeply engaged in the co-ownership and co-production of how that housing service is being run.
“They’re seeing fewer issues of aggression and violence, their maintenance bills have gone right down, because people are actually being treated with respect and things are not being done to them in a sort of passive way; they’re becoming part of the solution because of their co-ownership of that housing agency.
“So it’s actually, really, quite powerful when you see these organisations actually working.”
As the delegation listened to stories from proud employees and tenants at the event staged for their benefit, the chief executive who led the transfer of RBH out of local government sat down the back. “It was the tenant and employee representatives on the board who did the talking. Now, you show me where that happens in traditional not-for-profits here, in the NDIS or in aged care. There wouldn’t many.”
McFee does not suggest the UK’s mutuals program could or should be transplanted into Australia but she does believe it offers lessons for policymakers, business owners and the community sector:
“When the authorising environment changes, and people start to think about empowering people, particularly employees and consumers, then something different happens and you get a very different culture in these organisations.”
Co-ops and the NDIS
McFee argues employee ownership “aligns well” with the idea of consumer-directed funding, as in the NDIS, which is intended to provide choice and control to recipients of services funded by government.
One interesting example is the Supported Independent Living Co-operative, a Sydney-based NDIS accommodation provider, which acts as a hub for a series of “family governed homes” for people with disabilities, with staff representation on their boards. SILC has both individual and corporate members, some of which are structured as co-operatives themselves, making it an enterprise co-op.
The Co-operative Life is an employee-owned community care provider established in 2013, which has plans to expand into regional areas and, according to McFee, is exploring the idea of becoming a “networked enterprise co-operative” with some similarities to SILC.
“The layers of bureaucracy, which is what you tend to see in public service organisations and more traditional not-for-profit organisations, makes it more difficult for workers at the front line to actually be empowered in meeting the needs of the people they’re providing services to,” she says.
“So, when people are actually co-owners and they get to understand how the business works, and particularly the financial metrics, they become more agile and responsive and accountable to their fellow workers and the people they serve.”
Compared to her experiences of large providers, this is like turning the organisation upside down so that providing care at the local level, meeting the needs of consumers and being responsive comes first, with the “backbone” of administration there to facilitate and empower employees.
“That’s fundamentally very different from what we tend to see in health and social care in Australia, where they do tend to be larger and more hierarchically based organisations.”
McFee also thinks the mutual model can overcome an “assymetry of information” that often leaves clients, their family members and carers feeling overwhelmed by a large machine run by executives of big social service providers and government bureaucrats – like she was for much of her career.
“When you think about the NDIS and aged care, and some of these very hard-to-use platforms that are largely government-run and government-owned and have been designed in the interests of providers and governments, they’re not very easy for consumers to use.
“So I think the other interesting thought, when you talk about innovation and change in our social care system, is the notion of these platforms actually being community-owned and being able to connect people who need care much more easily with workers who want to and are able to deliver that care.”
She holds out hope that the growth of these “platform co-operatives” can also strengthen markets for social care and help to overcome workforce shortages, by offering a more attractive and satisfying form of employment.
The idea of PSMs is still new in Australia and would likely require some government encouragement to take off, as it did in the UK, but McFee thinks it is starting to gain ground here.
“What was very obvious to us in the mutuals we met with, was that the public service ethos is actually very closely aligned with a mutual ethos, because it is about acting in the public good,” she says. “That runs deeply through their veins and hasn’t changed as a result of them becoming an employee-owned mutual and running the business outside of government.”