Being more commercial

03-02-2016

By Lisa Forster, Finance and Transformation Advisor, CIPFA

The public sector landscape is changing. Austerity measures, increased demand for services due to demographic changes and a conservative government who wish to shrink the public sector are forcing authorities to look at alternative ways of delivering services. Basically it is about getting the most bang for your buck.

How to achieve this however is less clear. Standing still is not an option. What is essential is that entrepreneurial changes are made as these can deliver efficiencies, generate income and benefit local communities by sustaining their access to services.

Some of this includes establishing more commercial entities, either as a single local authority or in a partnership arrangement, which are leaner, meaner and more profit orientated than their predecessors.

Our findings have shown that although there is a great deal of enthusiasm around these arrangements, there can also be skills or knowledge gaps and culture clashes that limit the effectiveness of the service.

Changing the ethos of public sector entities is not all plain sailing, there can be a reticence to move towards a more commercial environment due to the dichotomy of operating ‘for profit’ against the traditional public sector ‘service’ culture. Change management programmes to ingrain a more commercial mind set along with re or upskilling staff in new technical skills is essential if these issues are to be addressed.

Let’s look at what skills would be needed in a commercial trading company, this would include (in no particular order);

Marketing expertise including website development
Procurement and contract management expertise (bidding and tendering for work, state aid regulations)
Accounting – preparation of statutory accounts returns to companies’ house
Tax returns i.e. computation of corporation tax, stamp duty liabilities, knowledge of gift aid for charities and VAT reclaim.
Costing and pricing – establishing breakeven positions, elasticity of pricing and profit targets.

In addition, strong communication skills are essential in the early stages to engage staff in the process and persuade them this is a positive development. When the arrangement is a collaboration the task can be more difficult if cultures, processes and ethos of two or more different bodies have to be aligned.

The above is a wide array of specialisms, and it is unlikely that all of these will be readily available in house. The skills issue has been recognised by a number of bodies. A recent Localis survey showed that over half of the respondents indicated that in house skill sets were the biggest barrier to council being entrepreneurial. Similarly the Society of London Treasurers noted that if local government is to receive more financial powers it needs the capacity and skills to make best use of those powers and this should be a focus of officers professional development.

One of the questions we are often asked, is where can we acquire these skills? Some of them may need to be bought in initially but for the longer term authorities should aim to ‘watch and learn’ so they become more proficient. CIPFA offers a range of short courses on these, from the generic ‘understanding delivery models’ to the more specific such as ‘contract management’.