Michael O’Toole looks at what the public services market place means for the culture and ethos of charities

Across the charity sector there is an awakening to the opportunities arising from the open public services agenda and commissioning.

However, particularly for new entrants to this market there are some important questions which should be addressed.

To compete; does a charity need to take a different view of risk and consider a greater performance and incentive based culture? How should opportunities to partner or take on a supply chain role with the private sector sit with our charitable ethos?  Are collaborative models of delivery the answer and where has this worked?  

With all of these issues, how should charities’ governance understand this environment and support their organisation to use their unique offer to take advantage of this agenda?  And finally, how can a charity balance the role of providing a voice to service users, meeting supporters’ expectations and fulfilling contractual commitments to public sector commissioners at the same time?

First of all, the language of public service commissioning is robustly commercial.

Charities need to focus on identifying commercial opportunities that reflect their charitable objectives. It is crucial that a charity doesn’t fall into the trap of chasing commissioning revenue streams for their own sake.

These opportunities must provide a charity with the platform to fulfil its mission. In fact, this is one of the unique strengths of our sectors’ offer. The fact that meeting charitable objectives rather than driving profit out of public services is central, means that there should be a much better alignment of purpose.

So charities can offer commissioners a strong cultural fit and shared outcome ambitions.

I believe that this cultural alignment also provides a competitive advantage through better longer term approaches. For example if you are a charity working with offenders, you understand that many clients require complex, long-term support. A private provider, driven by profit, will face the often shorter-term shareholder imperative which may make such longer-term approaches difficult.

When considering how to compete in public services markets which are becoming more and more competitive, the sector should adopt different methods.

It should ask itself - can performance rewards play a role in business development and operational delivery? Can trustees better understand commercial risk and accept the need for a greater tolerance? Can investment decisions be considered in commercial terms? These are all questions which charities’ executive teams must support boards to be able to consider. In some cases the makeup of boards may need to develop. Charities may need to bring in legal, contract management and sales skills.   

When considering models of delivery and flexibility it is clear that some new thinking is required.

Given the scale of much of public services contracts; delivering directly may not always be viable. A role in a supply chain might be right, but this must be entered into carefully.

The performance management regime in a supply chain can present challenges and it is crucial that charities are equipped with the right skills and technology.

Likewise, working in collaborative models is a complex and potentially risky route, but one which can be highly effective. I will explore this area more in a future blog.

Charities must balance their roles in campaigning and providing a voice while fulfilling contractual commitments to public sector commissioners or prime contractors and that is not easy.  

But we have a powerful asset in on our sector and that is our relationship with service users and experience in achieving outcomes – often with the disadvantaged – and that offers a huge value to public services.

After all these customers are often the most costly for the public purse.

Aligned with charities’ ability to mobilise social action we can creates a highly valuable, unique offer to the marketplace. But charities must take care that their existing governance, culture and operational approach does not inhibit the opportunity to fulfil the massive value they offer public services.  

Michael O’Toole is the crown representative in the Cabinet Office for the voluntary, community & social enterprise sector