The Challenges of
Diversification
Jon Slade
18th September 2015
In outline
Why
What
How
Why diversify? - Council
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Reduced budgets
Maintain more control than outsourced alternative
Potential for service delivery at marginal cost
Re-stitching the safety net
Solve problems
Ask yourself – why now when not previously?
And mitigate the risks this question identifies
• Cultural view: ALMO is a subsidiary of the Council business
• What do we really want?
 Add value at no cost to housing mission
 Solve problems for us
Why diversify? - ALMO
• Existing sources of income reducing, sometimes significantly –
 Organisations seeking sources of cross-subsidy
 Organisations seeking greater financial capacity
 Organisations to remain viable
• Customer needs increasing – and fewer places for them to turn
• Cultural view:
 A local housing business
 Part of the housing sector
 The Council a key stakeholder
• What do we really want?
 Do sexy stuff that interests us aligned to housing
 there’s no number 2.
RP sector in transition
• Big organisations looking to get larger
• Medium sized organisations seeking capacity/stability
• Small organisations trying to preserve their niches
• More – and maybe more drastic - changes following the Budget
• Diversification - PRS; market sale; keyworker; student; care and
support; health; training/employment; maintenance; new build
• Tension between being commercial enough to survive with no safety
net, and maintaining social purpose
• Competition – for-profit RPs; for-profit grant; predatory HAs; LAs
seeking to new build; ALMOs diversifying
ALMO sector in transition
• ALMOs heading in different directions –
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Continuing as management providers
Returning to the Council
Stock transfer
As partners of their LA often delivering a range of services
• Approaches to diversification –
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To help the Council achieve its corporate objectives
To make General Fund savings
To generate income for ALMO in order to offset management fee cuts
To spread management overheads
Better VFM generally
To improve service standards
Risks on the way in
• Be aware that:
 Appetite ≠ Capacity
 Enthusiasm ≠ Skills
 On BOTH sides: Council as Outsourcer, ALMO as bidder
• Limited expertise in new areas
• ALMO’s burning calories on rent/fee reduction
• Don’t say no to the owners
• Optimism Bias
• Poison chalices
Set-up, Implementation and Delivery Risks
• Public dissatisfaction with ‘outsourcing’ services
• Unions/staff if involves TUPE arrangements
• Fees charged prove insufficient to cover service delivery costs
• Reputation if goes wrong
• The challenges of cultural change
• Endangering your relationship with Members
• Adult Social Care issues if it goes wrong - e.g. safeguarding
What?
Diversification examples
New Charter Group
• Tameside stock transfer 14.5k homes – the original entity
• Aksa Housing Association – BME led 1k homes in Oldham
• Threshold – housing advice and support charity working with
homeless and vulnerable people
• Gedling Homes – 3.5k home stock transfer in Nottingham
• Academies – two secondary, one primary
• New Charter Building Company – R&M, refurbs, also new build
• Housing options and advice services – for LAs under contracts
• Quest Media Network – Tameside Radio, Tameside Reporter,
Glossop Chronicle
Barnet Group
• Barnet Homes – 13,500 home ALMO
• Your Choice Barnet – adult social care services
• Let2Barnet and Open Door* - accessing private sector
properties for rent to social housing tenants and private tenants
• Development – 100 new build homes a year for the Council,
plus stock purchases; surplus to subsidise homelessness costs
• Setting up Registered Provider subsidiary *
• Potentially exploring other models to enable more
affordable temporary accommodation, e.g. JVs
• New 10 year management agreement
* subject to final Board approval
More commonly in the ALMO sector
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Homelessness and housing needs services
Private lettings agencies
In-house maintenance operations – some selling services externally
New build development operations
Registered Providers with the Homes & Communities Agency
And normally focused on their existing LA area
Less common ALMO examples
• Moving beyond housing services
• Varies between organisations, for instance –
 Corporate facilities management
 Cross-tenure borough-wide ASB taskforce
 Adult Social Care services, e.g. Domestic Violence
 Benefits taskforce
 Energy schemes, tackling fuel poverty
 Local employment and training initiatives
 Disabled Facilities Grant – cross-tenure borough-wide
For example:
• South Tyneside Homes: a range of highways services
• Stockport Homes: asset management and maintenance services to
340 council buildings
• Wolverhampton Homes: CCTV
• St. Leger Homes: PRS property management
• Berneslai Homes: Empty homes
• Cornwall: New ALMO on leisure and neighbourhood services
• Richmond and Kingston Councils: arm's length joint children's
service.
ALMO’s can work in partnership
• Potential to deliver additional value
• Leveraging Council influence to support/manage diversification
• Which other partners might you sensibly involve?
 Housing associations
 Health trusts
 Developers and housebuilders
 Maintenance contractors
 Voluntary sector agencies
 Other ALMOs, other Councils
• The nature of the partnership – formal or informal?
How
Diversification done right
It doesn’t start with a problem/opportunity
• Build a relationship where diversification is
 Logical
 Feasible
 Desirable
 Deliverable
• Develop a shared view of what diversification means
• Develop a shared view on the roles, behaviours, outcomes that
make diversification more likely
• Be flexible
• Be prepared to start small
Managing the risks
• Accrue evidence of ALMO skills • No poisoned chalices
• Joint working
• Keep the ALMO’s day job front and
centre
• Is the business case researched
and robust?
• Be prepared to share risk and
benefit, it’s all your benefit
• Pared down outsourcing not
internal delegation
• Flexibility on both sides
• Devoted attention to project
risk
• Manage optimism bias
• Starting small
• Call on, learn from, successful
outsourcing
The challenges
• What diversification will your Council be prepared to consider?
• Can you demonstrate diversification will advance the LA’s priorities?
• Can you demonstrate the diversification won’t get in the way of
delivering core ALMO services?
• Can the ALMO access the additional resources needed?
• How can you (and/or the ALMO) ensure effective governance and
control, especially over separate subsidiary entities?
• How to manage risk and reward?
The lessons
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Trust
Partnership
Relationship provides platform
Flexibility
Outsource lite
Risk management front and centre
Let’s have a
heated debate
• Is diversification on your mind? Why?
• Why not?
• Do the risks and remedies ring true?
Jon Slade
jon.slade@campbelltickell.com
020 8830 6777 or 07943 49 63 63
www.campbelltickell.com
@CampbellTickel1