can one ceo really run three las? stephen giacchino director, mitie
TRANSCRIPT
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
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing
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?
Can outsourcing add value?
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
MITIECan 1 CE run 3
LAs?Can SS work?
Can outsourcing add value?
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
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing add
value?Lessons Learned
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]
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing add
value?Lessons Learned
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]
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing add
value?Lessons Learned
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?
Can outsourcing add value?
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
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing
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]
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing
add value?Lessons Learned
Manufacturing11.1%
Wholesale & Retail11.2%
Financial Services10.0%
Outsourcing9.1%Agriculture &
Extraction2.8%
Other Activities55.8%
Share of UK Output, 2009 (Gross Value Added)
Manufacturing8.4%
Wholesale & Retail15.4%
Financial Services3.7%
Outsourcing10.0%Agriculture &
Extraction1.5%
Other Activities61.0%
Contribution to UK Employment, 2009
[Source: Oxford Economics, April 2011]
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing
add value?Lessons Learned
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]
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing
add value?Lessons Learned
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
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing
add value?Lessons Learned
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
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing
add value?Lessons Learned
Four Social Partners Separate, ‘greenfield’
legal entity Platform for community
engagement Employee Ownership
MITIE Can 1 CE run 3 LAs? Can SS work?Can outsourcing add
value?Lessons Learned
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