Can one CEO really run three LAs?

Can one CEO really Can one CEO really run three LAs?run three LAs?

Stephen Giacchino

Director, MITIE

MITIECan 1 CE run 3

LAs?Can SS work?

Can outsourcing add value?

Lessons Learned

MY BRIEF

Who are MITIE and what do they do? Can one Chief Executive really run three LAs?

Can Shared Services offer the efficiencies needed? Can outsourcing support innovation and create efficiencies? What can we learn from the commercial sector?

MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing

help?Lessons Learned

PropertyManagement

AssetManagement

FacilitiesManagement

EnergyServices

63:37Private : Public

£1.9bnRevenue

61,906+

employees

23years of growth

TOP 4UK FM service

provider


help?Lessons Learned

MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing add

value?Lessons Learned

MITIE Social Housing

12% of Group

Revenue

MITIECan 1 CE run 3

LAs?Can SS work?


Lessons Learned

It is not new

And more seem to be on the way

It happens in HAs as well

In the private sector, it almost always happens post merger

YES

44 of the 50 largest HAs by

stock ownership share a CE

[Source: TSA, Regulatory and Statistical Return (RSR) for the year

ended 31st March 2009]

LGG, Shared Services Maphttp://local.gov.uk/lgv2/core/page.do?pageId=824307#contents-1

9 Unitaries from 44 councils

http://local.gov.uk/lgv2/core/page.do?pageId=824307#contents-1

MITIECan 1 CE run 3

LAs?Can SS work?


Lessons Learned

BUT

Private Sector

LESSComplex

MOREComplex

Public SectorVision, Mission

and Mandate

Business Agenda

Stakeholder Diversity

Governance & Accountability

PoliticsDistricts

HousingAssociations

Unitiaries / Shires

Can we really compare LAs to HAs and the private sector?

Role of the CE



YES

Other BenefitsNew career opportunitiesEasier recruitment and retention More investment opportunitiesScale for best-of-breed technologiesProviding service users with access to specialist staff

Nottinghamshire & Leicestershire County Councils

£2m p.a HR, payroll, finance

Bromsgrove & Redditch Councils £0.5m p.a. Management services

East Lindsey & South Holland Districts

£3.1m p.a. 5 back office functions

[Source: LG Group Shared Services Project, March 2011]

Oxfordshire CC £4.5m p.a. Back office

Herefordshire Council, NHS Herefordshire & Hospital Trusts

£5.4m p.a. Corporate support functions

[Source: CIPFA Shared Services Report, 2010]

“ …more than 200 projects either already up-and-running or under consideration, with some delivering savings to residents in excess of £3 million a year ”. [Source: LG Group Shared Services Project, March 2011]



Views of 101 Councils about sharing services with adjacent councils or other public bodies

‘Total Place is very much on the agenda, rebadged in its new iteration… Joined up public services should not be a question, I want it to be the norm.’

Bob Neil, Local Government Minister,

“..continuing with Total Place was ‘a no brainer’”

David Parsons, Deputy Leader LGA

[Source: YouGovStone Survey, May 2011]



BUT

Private Sector

LessEMOTIVE

MoreEMOTIVE

Public Sector Goal Alignment

Service Objectives

Identity

Control

Politics

Significant Challenges

MITIECan 1 CE run 3

LAs?Can SS work?


Lessons Learned

The question should be WHY…

…shared services ? …have 1 CEO ?

To cut costs To share R&D To capitalise on brand To focus on core competency To grow services / products To enter new markets

Because you don’t need more than 1One Golden Rule (shareholder value)Single Agenda (growth)Homogenous stakeholder groupTransactional Leadership is vested elsewhere


add value?Lessons Learned

YES

Manufacturing17.5%

Wholesale & Retail10.5%

Financial Services8.1%

Outsourcing8.0%

Agriculture & Extraction

3.0%

Other Activities52.9%

Share of UK Output, 2009 (Turnover)

Total UK Turnover = £207bn p.a.

60:40 private/public sector

Facilities & Property Management = £55.8bn p.a

[Source: Oxford Economics, April 2011]



Manufacturing11.1%



Outsourcing9.1%Agriculture &

Extraction2.8%


Share of UK Output, 2009 (Gross Value Added)

Manufacturing8.4%



Outsourcing10.0%Agriculture &

Extraction1.5%


Contribution to UK Employment, 2009

[Source: Oxford Economics, April 2011]



YES

Survey of 101 Councils (May 2011)84% believe outsourcing has been successful in achieving savings 58% believe outsourcing is critical to them achieving savings70% - the expected increase in levels of outsourcing63% believe that partnership is the most important factor in a public-private relationship

[Source: YouGovStone Survey, May 2011]



1980 1990 2000 2010 2015

Single Service

In-house Integrated FM Strategic Outsourcing

Bundled Services

ManagedServices

Cost Reduction Opportunities

Contri

butio

n to

clien

t’s

stra

tegi

c dev

elopm

ent

External

Investment Potential

AddedValue



1980 1990 2000 2010 2015

Cost Reduction OpportunitiesLow

HighHigh

Low

Con

trib

utio

n to

clie

nt’s

stra

tegi

c de

velo

pmen

t

External Investm

ent Potential

HighLow

Single Service

Managed Services

IntegratedServices

Bundled Services

StrategicOutsourcing

In-house Single Service

Integrated FM Strategic Outsourcing

Bundled Services

ManagedServices



Four Social Partners Separate, ‘greenfield’

legal entity Platform for community

engagement Employee Ownership



Restructuring cost base

And not…short-term gains

It’s about…

cost cutting

Creating strategic opportunity

Strategic goal alignment service scope similarity

Cultural fit geographical proximity

Political will political dictat

TRANSFORMATIONAL Leadership

TRANSACTIONAL Leadership

In Summary…In Summary…

The evidence suggests

you can have 1 CE, SS does work, and outsourcing adds value

one CE? share services?outsourcing?

WHY

There ISN’T a right or wrong answer

BUT

There IS a right question

Dr Stephen Giacchino

Director, Strategy and Corporate DevelopmentMITIE Group PLC

T: 0115 9407015E: [email protected]

Follow us on Twitter @MPM_Strategy

Documents

Can one CEO really run three LAs?