In my Opinion: Chartered Management Institute

Chartered Management Institute Companion Richard Steeves, CEO of Synergy Healthcare, discusses how to create value through partnerships.

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Last Updated: 31 Aug 2010

I'm firmly of the view that private and public-sector partnerships have enormous scope to improve public services. Unfortunately, problems arise from a two-way tension between the sectors. The public sector is inherently more risk-averse, wary of private-sector commercial experience and constrained by a public duty to achieve the lowest cost for the tax payer. The private sector is undoubtedly more commercially experienced than the public sector, but does not always use this experience constructively to create long-term partnerships.

Effective partnerships require both the commercial provider and the public-sector customer to be genuine stakeholders in the success of the service.

All too often, however, private-sector companies play a short-term game, provoked in part by price-focused contract tendering by the public sector.

This results in outsourced services that fail to meet their potential.

Well-publicised failures have included hospital cleaning, our children's school meals and the railway infrastructure - although there have been significant successes, including the NHS Lift partnership projects, building new infrastructure for community hospitals and other local healthcare needs such as GP surgeries. Synergy Healthcare has grown rapidly over the past decade by promoting a team-based approach to outsourced service management and development, and educating the public sector in the synergistic benefits of operating in this way.

One of the main pitfalls of working with the public sector is its over-reliance on prescriptive tendering to ensure that there is full risk transfer to the private sector. Outsourced services are characterised by lengthy contracts, often running to thousands of pages, which document method statements, performance management systems and payment mechanisms. This prescriptiveness undermines the partnership approach with the private sector and stifles future innovation and development of the service. It also delays the award of the contract - which can take up to three years.

The whole point of outsourcing is to take a service and develop it over the period of a long-term contract to the benefit of the public sector and its customers.

To achieve these results, however, the private sector has to act with integrity and engage with its public-sector partners as joint stakeholders in the outsourced service. In my experience, too many private-sector companies work at a primal level, behaving as though enterprise is a zero-sum game - tactical dealmaking that creates winners and losers from a fixed-value pie.

This is a characteristic that gives business and enterprise a poor reputation in the public sector. One could call it greed capitalism. In wealth-creating capitalism, on the other hand, all parties in the partnerships are stakeholders in the venture, be it private sector or private/public sector. These relationships are sometimes referred to as win-win arrangements, but this label belittles the value-creation of the approach and suggests commercial relationships are normally win/lose.

The term 'partnership' is universally used in private-sector tenders and marketing literature, but it is hard to find genuine examples of working partnerships that operate to their full potential. There are some obvious impediments to the various parties becoming genuine stakeholders in the service and creating the two-way benefits of teamwork. Public-sector managers responsible for awarding contracts are often under pressure, accountable to taxpayers as well as their customers; the easy choice is to award a contract on price alone.

Private-sector companies need to gain the confidence and trust of the public sector, promoting value creation with measured risk and accountability.

A well-designed service can be more expensive, but can also facilitate an improved overall economic performance by the customer, with lower operational risk.

When suppliers become stakeholders in their customers' businesses, they create an environment in which to invest in their own employees, infrastructure, and research and development. These investments are essential for creating long-term, sustainable services as well as a competitive advantage for their customers through innovation, differentiation and improvements in the price/value matrix.

Private and public-sector partnerships often fail to fulfil their potential.

Three principles are key. When services are outsourced, the primary focus needs to be on creating a service management framework that allows the stakeholders to manage the strategic, financial and operational development of the service over the life of the contract. Second, outcomes rather than inputs need to be specified at the start of the relationship and progress over the life of the contract. Last, all parties need to be willing to take the risk of signing up to a genuine partnership approach to an outsourced service. The public sector must allow the private sector a greater degree of freedom and more space for innovation, while the private sector must act with the utmost integrity and resist the temptation to take short-term gains at the expense of the public sector.

CV

Richard Steeves is the founder and CEO of Synergy Healthcare plc, a leading provider of surgical and non-clinical support services. He is also a non-executive director for an AIM-listed company and works with a number of young entrepreneurs starting new ventures. Steeves has a PhD in biochemistry from St John's College, Cambridge.

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