To stay employed in local government or to spin out?

[PantsOnYourHead]

Ok, I work in a fairly senior professional and management role in local government and have been with my current employer for almost 7 years. I manage a small highly professional team, who are great.

For the last three years we have provided services to the Council but our team has developed an external market for our services and currently produce about a third of our budget this way. The team have worked really hard to do this and we are proud of the quality of the service that we deliver.

Local government is under a lot of financial pressure at the moment and will be into the future. Our service could be cut at any point.

So an opportunity has arisen which might enable our service to "spin out" from the council into a separate organisation which we would run - probably a mutual owned by the staff that transfer and the council. We would still deliver services back to the council but it would be under a contract. Our pensionable service could be preserved and the staff would also benefit from a stake in the new organisation. In some ways it would be more stable than the position we are in currently.

I have talked to the idea to a couple of the team and they are keen. I'm also keen but I'm worried that I'm keen for the wrong reasons and perhaps not seeing the reality of the situation. The wrong reasons being that the CEX of where we work at the moment is an absolutely ghastly bully. She doesn't just bully me but lots of other staff as well and has done for a long time. I would love to leave but there are a number of family and childcare reasons why it is convenient for me and my team to remain in the area (rural and not many employers). I also think that if I left then it would be difficult to keep the service going.

So am torn. I would love to spin out and take advantage of the benefits it offers all my team but is my personal dislike of the senior management pushing me towards something that is untried and untested and wouldn't be beneficial for the team?

[TheDoctrineOfSnatch]

No - you started with a list of things you liked about the new idea. That's a good sign.

[MillyMollyMama]

Basically you will be a consultancy type operation without the risks of being truly self employed and needing to find work to keep your staff employed or making any self employed pension payments. It could be win win therefore. Work is provided for you and all you have to do is complete it. The problem is though, that you will only have one client. Is that ok, or could you branch out and find more work? Your employer wants you off their books to save employment costs attributable to them so it seems odd they will keep the pension going. Another win win in my view. It is massaging the figures really as you will be doing the work, but not on the payroll. (at least that us how it has worked around here). Forget about whose suggestion it is. Will it work for you and your team?

[PantsOnYourHead]

Thanks both.

Milly - the way it would work is that we would be guaranteed a certain level of income for perhaps 10 years from the council. We would also carry on the external work which generates revenue. Both the council and the staff would then benefit from that additional revenue. We would expand this area, hopefully.

In relation to the pensions, anyone who joined after transfer out would have a different pension not a local govt one so the costs to the council would reduce, which is the biggest cost saving for local government long term which is why the govt are encouraging transfers out at the moment.

The benefits could be great - more flexibility, more innovation, being able to build the brand. at the moment even though our performance is excellent there is no recognition of that from the top because she does want to admit what a good job we're doing.

We would all be able to have a stake in the business, develop professionally and self determine our own futures.

[OverAndAbove]

Well as you rightly say, the local government situation is dire at the moment and is only going to get worse. Is it a statutory service that you provide? There will always be a market for this in the private sector, for the reasons mentioned above. And ten years of work guaranteed - I imagine they will want cost savings, but you will probably be ale to reduce outgoings and overheads if eg pension costs are lower (not a good thing in itself though). I'm in a similar position in local government and would jump at this if I could!

[Gloria1969]

I am in a senior role in Local Government and haven't had a payrise in years. Also, the directorate in my department are all over 50 and are likely to hang on by their fingernails until their kids are all through Uni.
I am stuck because I treasure the work/life balance I currently have but am looking around for jobs as my younger child starts school in Sept, only 7 months away.
My advice for you is to go for this new opportunity.
Good luck!

[MillyMollyMama]

Pants. Will you not have to bid for the external work though? You surely will not just be given it? As I said, if you have guaranteed earnings and work, why on earth would you not take it?

My DH is a Consulting Engineer with 100 staff. No one guarantees him or his employees anything (work, earnings, profit, pension) and he has to pay into pension schemes for himself and his staff with fairly miserly returns. You would not have these worries. Any new staff would have to make arrangements for pensions like anyone else, but it appears they are guaranteed work!

I worked in local government for many years. The salaries have flatlined, but believe me, the pensions are stellar! Just to give you an idea, if you have £1,000,000 saved in a pension plan, and you purchase an annuity, your annual pension would be about £35,000 a year if you are lucky. You would truly be in a good position!

[tribpot]

This sounds like a fantastic opportunity for you. You're already winning a substantial part of your business externally, and you'd want to grow and diversify this client base to protect yourself from risk. Do you think you can do that? It very much sounds like you can, but I'm just throwing the question back to you.

Big question for me would be to what extent the CEX would have her revenge on you taking a high performing team away by trying to starve you of work. My guess is that you would have the status of 'preferred supplier' for some time, meaning you can't ditch them nor vice versa. (I've just left an organisation working in such a 'partnership', it was utterly dire but that was mainly due to the appalling bad management of what was always going to be a difficult client).

It's the innovation that would sell it to me. I am heartily sick of my (former) organisation's inability to sell its own skills to add value to our sector, so I've basically buggered off to do it through a private company instead. It's less attractive to me than the option I would have liked to have pursued, which would have been a sort of internal consultancy, but that option was firmly closed down by the current chairman. So this is what I can do.

I say go for it - there are a myriad positive factors, this is not just an 'any port in a storm' move to get away from the CEX.

[PantsOnYourHead]

Thanks all.

We wouldn't need to bid for the work - if it was below the eu procurement threshold (likely) if we went above then we could use a Teckal compliant structure to avoid them.

We would be looking to grow our business and fortunately our target market is growing fast with no other real competitors at the moment. We don't much significant marketing - it's all word of mouth. What we intend to offer is a bit ahead of the curve (slaps self for management bollocks). We would need to spread our risk as far as possible with a wide portfolio of clients.

As for the CEX , in one way I think she would be glad to get us out of the organisation so am relying on that to give the idea some impetus on the other had she would try to stitch me up in a moment, particularly in any contract. I'll need to be on my game in the contract negotiations.

There are so many things that I really think we could achieve with this for everyone, more security and not having to work in the most organisationally stupid place. I hate the waste of talent too - nobody gets promoted unless they are a stepford wife alike. Challenge and independent thought is practically heresy

I spoke to some of the team today about my misgivings and they were typically straightforward about the whole thing! telling me that I was being an arse to doubt that it was the right thing. I suppose I just worry about charting the right course for us all. They've placed a lot of trust in me and I want to do the right thing.

[MrsMargoLeadbetter]

OP - have you heard of Craig Dearden-Phillips? He has written a book about successful spin outs.

From a brief look it appears they'll send you a copy for free via yheir website. I guess they want to market their consulting services etc. howtostepout.com/

I'd go for it, it sounds exciting!

[PantsOnYourHead]

Thanks Margot (smile) - no I hadn't but I spoke to a colleague who has spun out and he provided consultancy for that. She said he was really good.

[StealthPolarBear]

Surely they have procurement protocols to follow?
All soundz a bit dodgy to me

[PantsOnYourHead]

There are procurement rules that we need to stay within - but why would it be dodgy? A mutual can't make a "profit" - any surplus has to be reinvested in the mutual. Mutuals have higher rates of productivity and efficiency. A spin out enables a high quality service to be provided but a lower cost.

[Joejoe2009]

But you wouldn't be able to use the Teckal exemption under an employee-ownership/mutual model - this would only be possible if the LA was the owner and exerted the same level of control over the business as it would if you were still a directorate of the Council. Also, it would limit the amount of work you could do for others - roughly only approx 10% of your business could be external trading.
The rest would have to be with the Council.

Even if you are below strict EU thresholds, the Council will still be bound by its internal/constitutional procedures, and would have to justify an exemption to directly award contracts to you without a competitive procurement process.

It's not to say that the concept of a mutual isn't a good idea. It can work (and you wouldn't be the first LA to do this). I've advised on a similar options appraisal (ultimately we didn't go down this route). You need political and high level officer support to go down this route. The Cabinet Office have a support team and guidance (and sometimes even funding) to explore public sector mutuals. Also the Employee Ownership Association can offer help. Is definitely worth looking at these.

Good luck!

[PantsOnYourHead]

Thanks joe - I alluded to but didn't make it absolutely clear that it would be partly LA controlled (51%), at least initially so would fit into the exemption that way.

We got procurement exemptions for this type of thing and wouldn't think of trying to go without member support, and they have been very good so far.