Archived decisions

Hampshire County Council

Cabinet Item 9

21 July 2008

Efficiency and Corporate reviews: A Modern Business Providing Public

Services

Report by the Chief Executive

Contact: Andrew Smith ext: 7300 e-mail: [email protected]

1. Summary

1.1 The appointment of the Chief Executive on 18 December 2007 led to a discussion with the Leader and Cabinet about:

· the future shape and structure of the Chief Executive's Department


· the need for a review of corporate services across the Council; and


· the development of an approach to managing efficiency within the Council with a view to releasing resources and corporate overheads for redeployment to front line services

1.2 Since then consideration has been given to:

· responding to the opportunities and challenges from the Sub National Review


· developing a rural policy and strategy


· building new capacity for Building Schools for the Future (BSF)


· developing a county wide community safety strategy


· the emphasis needed to deal with increased personalisation of public services


· developing the Corporate Business Plan to focus on improvement and capacity to prepare the LAA.

11.3 It is therefore appropriate to consider how a review of Corporate and Central Services could take place, particularly alongside the accommodation and property reviews, elsewhere on the agenda.

1.4 This report therefore highlights:

· the preliminary outcomes from the consultants appointed in the autumn of 2007 to consider central services and efficiency


· the issues relating to the future shape and structure of the Chief Executive's Department


· the issues relating to a review of corporate services


· an integrated framework for efficiency


· suggestions for delivery for reviews


The report also responds to decisions already made by the Leader or Cabinet, which are included in Appendix 1.

1.5 The impact of the above on the organisation is significant. Change, development and corporate working has not been done on this scale since the reorganisation of the County Council in 1996/7 when the current corporate structure was (largely) created. However, repositioning the Council to respond to national and regional issues and continuing to improve the outcomes for citizens suggests that the Council needs to move from a four star local authority to a modern business providing public services. This has to be achieved in anticipation of a different financial climate facing local government in the coming years.

Recommendations

It is recommended that Cabinet:

(i) approve the report for implementation by the Chief Executive

(ii) agree the scope and terms of reference of particular reviews to be established on the basis of the report and that further reports brought back to Cabinet for consideration


(iii) authorise the Chief Executive to commission the use of independent consultants to bring external scrutiny and assist with the reviews where there is insufficient internal capacity or for specific specialised areas of work


(iv) instructs the Chief Executive to bring forward for approval revised organisation arrangements consistent with the outcome of the reviews

2. Mott MacDonald & RSE Report - November 2007

2.1 The preliminary report prepared by the consultants reviewed support costs and opportunities, identified by a benchmarking exercise, to make efficiencies. The report, while concluding that there are no glaring opportunities for improvement which could result in sizeable efficiency savings, did point to some useful directions of travel:

· increased self service

· better use of help desk/Hantsdirect

· shared services development

· intelligent use of outsourcing or internal reorganisation for transactional services

The report also suggested continuing with two other reviews: one relating to property which is elsewhere on the agenda; and the other relating to central procurement, which is included later in this paper.

2.2 The consultants properly identified that Support Services (administration, resources, IT etc.) exist across the whole Council. One likely area to reduce costs is to introduce greater levels of centralisation of support functions, and new ways of providing the service.

2.3 The conclusion the consultants reported was that we have eight themes worthy of development:

1. increased self-service

2. better use of help desk/Contact Centre

3. shared services

4. intelligent use/management of transactional services

5. implementation of FM

6. greater centralisation of procurement

7. centralisation of support services

8. cost reduction exercises

Each of the above themes should be included in the wider corporate and efficiency reviews.

3. The future shape and structure of the Chief Executive's Department

3.1 The Chief Executive has considered departmental reports detailing the strengths, weaknesses and areas for development within the following areas:

· Democratic Services (including Scrutiny and HATs)

· Legal Services

· Resources and Hantsdirect

· HR

· Economic Development

· Policy Unit

· Corporate Communications

A review of Democratic Services should be undertaken now to:

· conclude how such a function should operate alongside the Leader, Cabinet, Scrutiny and HATs

· identify what the function should contain in terms of roles

· identify the skills needed to support modern Member management and support and decision making

The potential to further exploit the Contact Centre should be developed immediately.

Legal Services, HR and Economic Development should be part of the wider Corporate Review.

The Policy Unit should be refocused on two principal functions: corporate improvement, and partnership management and engagement.

4. Corporate and Central Services Review(s)

4.1 The purpose of this section is to consider the organisational changes that should be considered in the light of the appointment of the Chief Executive. With some exceptions, the corporate functions of the Council were last reviewed over ten years ago at Local Government Reorganisation in 1996. There are some 4,000 staff, a net revenue budget of over £100m, capital projects of around £100m and receipts in excess of £40m. There are also some very significant external suppliers and providers involved in corporate and central services activities.

4.2 Corporate Services - Arguments for Change

4.2.1 Since 1996 we have had:

· a major review of Social and Education Services into Children and Adult Services;

· a fundamental review of the Council's Performance and Assessment Frameworks;

· the introduction of Leader and Cabinet model for governance;

· the emergence of the `efficiency agenda' as key to future service changes and (re) deployment of resources; and

· the refurbishment of Ashburton Court which allows us to review efficiencies in both our accommodation and running costs

4.2.2 The County Council has shown great resilience and capacity (its four star and excellence rating are evidence) to develop and improve over the last ten years. However, for different reasons including:

· the interim management arrangements that exist in major corporate functions (e.g. Property, Business & Regulatory Services);

· the limited or fixed funding for specific corporate and democratic activities (e.g. Scrutiny and HATs);

· efficiency and its future importance, and a new dimension to national performance assessment; and

· increasing complexity and modernisation of services will require strong levels of support from Corporate Services.

It could be argued that a review should be undertaken quickly, to create a platform to move the Council forward and assess how to continue to deliver high quality corporate and central support services at lowest cost. The concept of `shared services' for many corporate services never existed over ten years ago and today poses a new set of challenges and opportunities for such services, particularly its extension to in-house capacity.

4.3 Chief Executive Function

4.3.1 The Chief Executive has already indicated that the model for future corporate management of the Council should be around a Chief Executive's Department with a focus on Corporate Management and Business Change, Project Delivery, Performance, and Policy and Communications. The management of the other significant functions (e.g. Legal Services) currently in the Chief Executive's Department need to be reviewed on how they should be organised and positioned in the future in a new structure.

4.3.2 The landscape of local government has changed quickly. Increasingly, the Council requires capacity to work on LAA and MAA development, PUSH, regeneration and business change. Skills and capacity that need to be reflected in the terms of the Chief Executive's function.

4.4 Interim Arrangements

4.4.1 Interim senior arrangements have been made in PB&R, which contains significant corporate and central services and has over 3,000 employees. A national advertisement has been published to recruit a Director of Corporate Services who should be appointed before the interim arrangements come to an end (December 2008). The future long term viability of the Business Services function (and arrangements for similar management approaches to other functions not currently in PB&R) needs to be considered and resolved. Members have often commented upon the need for commercial acumen and business planning to be extended to other central and corporate services.

4.4.2 Some large Councils have also moved to more integrated corporate services - both to reduce costs, including management, and to spread overheads. While structural alterations to management arrangements and services themselves rarely produce any significant benefits, there does appear to be a number of both strategic, operational and cultural reasons for considering a quick and in depth review of the central and corporate functions of the Council. The focus will be on removing duplication and simplifying the management structure.

4.4.3 There are also a range of other policy, management and performance issues that need to be considered, including the appointment of a new Head of Policy which is being filled on an interim basis. Responding to our recent CPA on the issue of building more corporate and central capacity in the delivery of safety and wellbeing in the community should be part of any wider review.

4.5 Economic Development - create capacity and integrating factors

4.5.1 Most departments now play a part in economic development alongside the Economic Development Unit (in Chief Executive's Department). Business Services, Environment, Estates, Supplies, HR and Recreation & Heritage and Children's Services all add to a rich mix of economic, cultural, artistic and business enterprise along with the other County Council functions.

4.5.2 As we develop policies responding to the South East Plan, PUSH, the skills agenda, apprenticeships and place shaping generally, it is worth considering how we organise our economic development activity into a more cohesive set of workstreams and outcomes. This should be considered alongside the need to improve our performance not just as a Council but across our geographical area and with partners. A review of key workstreams, outcomes and impacts, together with a model of how economic development can best be delivered and managed across the Council should be a priority. Increasingly the County Council will need to respond to area, multi-area agreements and partnership led functions. The impact on how we organise ourselves should be examined. Of more importance could be how we develop our capacity to promote skills and learning opportunities consistent with a competitive economy.

4.6 Property - Regional Leadership

4.6.1 The management of Property, Asset Management, Design and our national and regional leadership on construction procurement has led to a strong performing team with a very significant external client base (alongside schools). The development of `shared services' and the building of further public-private partnerships with Councils across the region needs to be explored. This remains a central corporate service which will also be an integral part in the multi-million pound development of Building Schools for the Future (BSF) with Children's Services. How this function should be organised will need to be resolved before any final and permanent management arrangements are put in place, and to replace the Director of PBRS or other Heads of functions. Whether further capacity should be built in house (by staff recruitment or development) or around more public private partnerships is central to developing a future direction of travel. The development of the South East Centre of Excellence (SECE) and the partnership with MACE are significant developments for the future.

4.7 IT

4.7.1 The challenge for IT Services has been about maintaining or reducing its cost, whilst at the same time being at the forefront of innovation. IT is central to many functions of the Council and the redesign of business processes. It will be important to test the effectiveness of IT in the future, and how well its skill base fits with business change requirements of the Council and how its existing model of organisation relates to the central and departmental services of the Council. A short, in depth review of how this service could be organised for the future will be an essential step in taking the wider corporate review forward. A new focus on improved access to services, lower costs for transactions and development, and an improved delivery function would be relevant outcomes.

4.8 Legal Services

4.8.1 The Council's Legal Services is a significant part of the (existing) Chief Executive's Department and is an important part of the Council's response to its statutory service provision and in support of key service functions. The organisation of Legal Services as part of a larger corporate services function needs to be explored, as well as its integration with other procurement, property and service functions.

4.9 Democratic Services

4.9.1 Democratic Services is arguably at the heart of the decision making process and key to the smooth organisation of the Council's business. The Leader/Cabinet model and the role of HATS, scrutiny functions and

development alongside support for Cabinet have all been introduced with no significant structural alterations to the style and content of this function. Most of the funding for HATS and Scrutiny is of a one-off nature or fixed, whilst the significant growth in the number of education appeals coupled with a significant reduction in income due to government charging changes, have limited Democratic Services capacity. A model of what Democratic Services should contain and how it should be structured for the future is required, to best integrate Member, Cabinet, scrutiny and democratic involvement at the lowest possible cost. A refocus to define core activities with associated people development in this function and broadening the appeal of the roles should be considered.

4.10 HR

4.10.1 The integration of HR into the Chief Executive's Department was completed in difficult circumstances. The debate about its location in the management structure probably camouflages the importance of its core functions: HR support to departments, training and development, Pay and Benefits and HR Resourcing and recruitment. The development of Organisational Development and Design functions and capacity has been an ambition for some time. This could equip the Council with more capacity to influence how work, business process and organisational capacity can be developed, in a cost effective manner, across the professional, technical and services functions. Arguably, the scale of the challenge facing the Council in terms of business efficiency and potential headcount reduction requires this specialism to be developed within the organisation and located where it can maximise its contribution. The appointment of an HR Director at CMT level is a welcome development that should be matched by a robust strategic HR plan for the Council and its functions. Different business models, with partners, agency and external providers are now all widely available for consideration as greater capacity exists in the market. Recognising the separation of HR policy from HR transactions and processes could provide a useful way of integrating both functions with other central services. It is anticipated that the review of HR will begin in September.

4.11 Hantsdirect

4.11.1 The scale of the change process, and the potential benefit of building more capacity in Hantsdirect, for transactions, information, access and more extensive `opening hours' offers a direct route to business process redesign that could fit alongside other functions mentioned above. Work to identify the direction of travel on this function is required, to establish how the infrastructure of Hantsdirect can be exploited by the County Council and its partners. An examination of a programme for `channel shift' and its impact on costs would be part of this review. Fundamental to this issue is the development of a `customer services strategy' which focuses on outcomes and service.

4.12 Shared Services

4.12.1 The development and review of the Council's corporate and central services also begs a common question about the model of provision. In modernised local government there is now a more strategic question (particularly in the

context of further Local Government Reorganisation) about how functions should be organised to inform and directly relate to how we consider our corporate services for the future and the part they play with partners.

4.12.2 This requires both a practical answer and the development and challenge of different business models for different services and access channels. Arguably this concept is at the heart of the `improved two tier model' for the future. Internal `sharing of services' would be a useful first step in the process.

4.13 Procurement Functions

4.13.1 It was agreed in December 2007 that as part of this wider corporate review

there was a need to consider the organisation of both corporate and departmental procurement functions and the balance of responsibilities between these arrangements. The question of technical skills, commissioning abilities and value for money are directly connected to this discussion. So far they have been based around the Supplies functions because historically that function was responsible for the bulk of the Council's commodity purchasing. The development of more sophisticated procurement (and commissioning) arrangements beyond commodities and into most services and the agenda around the benefits of market shaping and value for money suggest that this function needs a review, not only to consider how it is organised corporately but also to ensure its contribution to the wider efficiency review is maximised.

4.14 Recruitment and Skills Development - capacity for the future

4.14.1 A number of the central and corporate functions are also the home (in local government terms) of scarce key skills and capacity that often differentiates Hampshire's ability to deliver service improvement innovation and capacity. However, our ability to retain, develop and recruit in these specialised and important areas needs to be considered alongside any options or models for developing and organising functions for the future. A self analysis of these issues and a review of our dependence on key skills and professions should be undertaken to inform future organisational solutions for these services. Continuing to develop our HR strategy alongside our workforce is a strategic issue where significant further workstreams could be developed.

4.15 Integration in Support Services - A Review Programme

4.15.1 A great many of the central and corporate functions are also linked to the models of organisation that we have in service departments. Indeed, many of these functions are key to effective service delivery. There are other services relating to Risk Management and customer complaints which require relocation and integration with other services rather than a major review

4.15.2 There is also the continuing need to consider how Support Services sit alongside performance and technical services and the business models that we use. Would a wider reorganisation of certain Support Services make sense? More innovative models around `internal providers' and agencies for generic functions and staff are now more common place.

The case for a corporate and central service review is significant. The following reviews would require consideration:

· establish permanent senior management arrangements in PB&R

· determine the scope and management of a refocused economic function

· review the organisation and management of the IT function

· consider how Legal Services relates to other functions and its role in a corporate services department

· remodel Democratic Services

· finalise the HR organisational arrangements

· determine the scope and shape of the role and contribution from Hantsdirect

· identify the real opportunity for shared services within and external to the Council

· review the procurement function and its relationship to other activities

· create a new management structure for the central functions of the Council

4.16 Key Objectives

4.16.1 The balance of the arguments in this section would strongly support a short and in depth review of at least the functions mentioned above. Moreover, any review process should serve to support specific business objectives such as:

· Are there alternative models of organisation which would reduce our business overheads and costs?

· Is it possible to integrate corporate and central services, build capacity and reduce our management costs?

· Do we have an effective alignment of skills and resources in our central and corporate functions to face the agenda and challenges the Council faces?

4.17 Business Improvement and Integration

4.17.1 Common to most of the above is the need for the County Council to:

· Consider how it organises itself to provide integrated senior management for corporate functions at the lowest cost and best value;

· Review, as the national performance assessment framework changes, how best the County Council can equip itself to contribute to an area based and risk assessed view of its performance;


· improve service outcomes in the context of fewer resources and increased personalisation of services;


· Evidence how well equipped we are at the centre of the organisation (and in departments) to strongly improve for the future and build capacity in our key corporate functions.

4.17.2 The Council's management arrangements make extensive use of Project Boards and other cross departmental working. These should be reviewed and rationalised.

4.18 Integration of Reviews

4.18.1 The review of the Scrutiny function and the effectiveness of HATS should be completed under the umbrella of this wider review. This ensures a coherent approach that has changes in democratic function and engagement with the business model at the centre of the Council's Corporate Management. Similarly, the next stages of the Strategic Property & Efficiency Review (now called Hampshire Workstyle) should also be seen to be inter-related to secure the maximum benefit(s) for a review of corporate services.

4.18.2 In addition to the above, the Council should have a more robust plan for efficiency and maximising value for money. While significant progress has been made, it is likely that further improvement will be difficult - hence having a disciplined approach will bear more fruit. There is also an issue of building capacity for future leadership in this area.

4.19 Review Process

4.19.2 In some areas work is well advanced (e.g. property & HR), in others (e.g. central procurement) work has yet to start. In some cases `a light touch' review will be appropriate, in others more resources and time will be needed. The overall timetable is to conclude the review by December 2008. The Chief Executive would like to make extensive use of CMT and other senior colleagues in the process. The Leader proposes to set up a small member Panel to work with the reviews.

5. Efficiency Reviews

5.1 The most obvious approach would be to:

· link the Efficiency Reviews to our three year financial strategy and HR strategy;


· develop a `scorecard' approach for a review programme


· build review team(s) and capacity to undertake the reviews


A separate report is being prepared for Cabinet in September. Consideration will be given to which areas of activity will focus in these reviews. Subject to the capacity issues raised in 4.19.2, consultants may be used in specialised areas.

5.2 Corporate Cohesion

5.2.1 This approach would therefore equip the County Council with an integrated framework which:

i) focused on corporate reviews;

ii) integrated these reviews with a developing efficiency programme;

iii) aligned the flexible working and accommodation strategies for property with the wider organisation opportunities;

iv) recognised the development work going on to build increased capacity to improve around the Corporate Business Plan.


v) recognised the interaction and importance of the relationship between corporate and central services and front line service delivery.

vi) Recognised that strong and effective HR policies and programmes will also lay a stronger foundation to build capacity for succession planning and development for the future.

Section 100 D - Local Government Act 1972 - background documents

The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report.

NB: the list excludes:

1. Published works

2. Documents, which disclose exempt or confidential information as, defined in the Act.

None.

APPENDIX 1

Approvals already agreed

Executive Member Policy & Resources

7 December 2007:

1(a) The arrangements for the interim management of Property, Business & Regulatory Services (PBRS);

(b) The Director of Property, Business & Regulatory Services (and from 18 December 2007 the Chief Executive) and the Director of Human Resources being authorised, subject to the agreement of the Leader, to make other consequential changes to management arrangements in PB&R;

(c) The Director of PB&R as the incoming Chief Executive bring forward in due course the terms of reference for a corporate review of central functions.

28 January 2008:

1. Approve the reviews to be undertaken by the Chief Executive referred to in the report relating to HR and legal resources, capital receipt generation and corporate efficiency improvements including IT Services.

2. The Chief Executive brings forward to the next meeting the terms of reference of a corporate review of the Council's central and corporate functions.

3. Subject to the agreement of the Leader, the Chief Executive make the required interim changes to the Chief Executive's functions as necessary and until the review is implemented.