The Opportunities and Challenges of the Changing Public Services Landscape for the Third Sector in Scotland: A Longitudinal

Study
Year One Report: Baseline Findings

Voluntary Issues

THE OPPORTUNITIES AND CHALLENGES OF THE CHANGING PUBLIC SERVICES LANDSCAPE FOR THE THIRD SECTOR IN SCOTLAND: A LONGITUDINAL STUDY Year One Report: Baseline Findings

Professor Stephen P Osborne and Elric Honore Centre for Public Services Research, University of Edinburgh Business School & Sue Bond and Dr Matthew Dutton Employment Research Institute, Edinburgh Napier University Business School

Scottish Government Social Research

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This report is available on the Scottish Government Social Research website only www.scotland.gov.uk/socialresearch.

The views expressed in this report are those of the researcher and do not necessarily represent those of the Scottish Government or Scottish Ministers.

Crown Copyright 2011 Limited extracts from the text may be produced provided the source is acknowledged. For more extensive reproduction, please contact the Queens Printers of Scotland, Admail, ADM 4058, Edinburgh EH1 1NG. Email: licensing@oqps.gov.uk

Table of Contents
EXECUTIVE SUMMARY 1. INTRODUCTION Structure of the Report 2. 3 BACKGROUND AND CONTEXT METHODOLOGY Selection of case study and group work organisations In-depth case studies Three focus groups Analysis 4 THE CONTRIBUTION OF THE THIRD SECTOR TO PUBLIC SERVICE DELIVERY The Diversity of the Sector Approaches to Service Provision Other Features of the Third Sector Summary 5 CHANGES TO THE POLICY ENVIRONMENT The 2007 Concordat Challenges working across many different local areas Lack of a clear and cohesive policy steer and an accountability gap Increased Localism Community Planning Partnerships Perceptions of CPPs Other ways of influencing policy Policy Priorities Single Outcome Agreements Summary 6 CHANGES TO THE FUNDING ENVIRONMENT Funding Cuts Funding Cuts The Implications of Actual Funding Cuts The Implications of Potential Future Funding Cuts Tendering Short-Term Contracts Feedback and Dialogue with Funders Quality versus Cost Other issues in the tendering process Summary 3 6 14 14 16 21 21 21 22 22 23 23 24 26 27 28 29 30 30 31 32 32 34 34 36 37 39 39 40 40 41 42 42 43 45 46 48

7 THIRD SECTOR RESPONSES AND CHALLENGES TO CHANGING ENIRONMENTS Adapting Services Core Funding and Internal Capacity Diversifying the Funding Base Alternative funding streams Fundraising Social Enterprise Maintaining Competitiveness Competitors Summary 8 PERFORMANCE AND OUTCOME MEASURES Variability in Measurement and Scrutiny by Local Authorities Focus on Hard Outcomes and Added Value SROI and Other Measures Summary 9 PARTNERSHIPS The extent of partnership working among TSOs Success Factors Shared Goals/Ethos and Clearly Defined Aims Complementarity Equality Trust and Reciprocity Commitment Challenges in Partnership Working Investing in Partnership Formal versus Informal Partnership Working Partnership versus Competition The Importance of Partnerships in Facing Future Challenges Summary 10 PLACE AND RURAL ISSUES Summary 11 CONCLUSIONS APPENDIX A: AIMS AND OBJECTIVES OF THE RESEARCH APPENDIX B: PARTICIPANTS IN THE CASE STUDIES APPENDIX C: ORGANISATIONAL PROFILES APPENDIX D: FLEXIBLE INTERVIEW SCHEDULE FOR CASE STUDIES (2010) APPENDIX E: AGENDA FOR FOCUS GROUPS GLOSSARY

49 49 51 52 52 52 53 55 56 58 60 60 61 64 66 67 67 68 68 69 70 71 71 72 72 73 73 75 76 78 80 81 84 85 86 88 94 96

ACKNOWLEDGMENTS The research team would like to thank all the organisations and respondents who gave generously of their time in order to participate and make this research project possible. Also thanks to: Professor Ronald McQuaid at the Employment Research Institute, Edinburgh Napier University for his contributions to the report; Dr Colin Lindsay (previously of the Employment Research Institute) who led the first year of the project; Alec Richards at the Employment Research Institute for proof reading the report; Dr Kay Barclay at the Scottish Government and members of the Research Advisory Group for their support and guidance.

EXECUTIVE SUMMARY Introduction The Scottish Government has acknowledged that the third sector has a key role to play in delivering public services that are high quality, continually improving, efficient and responsive to local peoples needs. This work will inform future partnershipworking with the third sector. This research report outlines the findings from the first year of a three year longitudinal study examining the opportunities and challenges facing third sector organisations (TSOs) in Scotland in the delivery of public services. The first year of the research aimed to establish a baseline by which subsequent years of research could be compared. As part of that, specific objectives for the first year of research are summarised below: identify the role and distinctive added value of TSOs delivering public services; identify features of effective partnership-working between the public sector and TSOs; assess the impact of Scottish Government and local government policy and budget priorities on TSOs changing practice and management; track the impact of the economic downturn and budget limitations on TSOs roles in public service delivery; describe how TSOs contribute to progress on the Scottish Governments national priorities and national outcomes; describe how TSOs contribute to progress on Single Outcome Agreements and the work of Community Planning Partnerships; enable TSOs to articulate views on the appropriateness of funders oversight, evaluation and management procedures.

Methodology Year One (baseline) methodology involved qualitative research within 20 voluntary sector organisations based in Scotland. The methodology involved two key components: (1) In-depth case studies with eight TSOs and; (2) three focus groups involving a total of twelve additional TSOs. In-depth case studies were carried out within eight third sector organisations between December 2009 and May 2010. Case studies involved collecting appropriate documentary evidence including annual reports, policy statements and other organisational information. In-depth face-to-face interviews were carried out with staff at different levels of the organisation. These included: chief executives; other senior officers/managers; research/policy officers; business/planning managers; operational and line managers; and front line staff delivering services. The selection of staff for interview was decided in consultation with the main contact from the organisation (usually the 6

chief executive or another member of the senior management team) and actual staff interviewed varied depending on the size of the organisation and availability of appropriate functions. Twelve organisations were divided into three focus groups of four participants. Each focus group pulled together organisations with strong interests in particular areas. These included: (a) equalities; (b) social care and health care, and (c) employability/economic development/regeneration1. One representative from each organisation (usually the Chief Executive or a member of the senior management team) attended one of the focus groups carried out between April and June 2010 using a common discussion framework. The Contribution of the Third Sector to Public Service Delivery The third sector in Scotland is diverse covering many different types of services and clients, as well as being different in size, function, capacity and geographical spread. There were important differences between larger and smaller organisations in their capacity to compete for funding in a challenging economic climate. TSOs made a particular contribution to service provision through their specialist knowledge and expertise working with vulnerable, disadvantaged and hard-to-reach clients and providing specific services. This meant that they had the ability to fill unique niches in service provision. A distinctive feature of many services provided by TSOs was their person-centred holistic approach tailoring services to particular client needs. This is contrasted with some approaches taken by statutory services. TSOs had a specific ethos of providing quality values-based services focusing on improving the experience for clients. This was sometimes in antithesis to a costdriven funding environment. TSOs were also often rooted in local communities. TSOs were characterised as operating in a more flexible, responsive way compared with the public sector because they were leaner, had flatter management structures and were less bound by regulations. Some felt that the third sector was more innovative and creative, although tendering presented challenges to maintaining these features. Changes to the Policy Environment Whilst the principle of the 2007 Concordat (more local control over planning and services) was sometimes supported, the impact on TSOs in practice had been more problematic. For instance, some key issues identified included:

Note that in practice it was not possible to apply these categorisations rigidly and there was some overlap in the activities of organisations.

(a) Practically, negotiating with numerous individual local authorities and CPPs could be difficult in terms of time and resources for those TSOs delivering local services across multiple geographical areas, (b) Some felt that devolving greater decision-making to local authorities had resulted in policy that was unclear and lacked cohesion and resulted in an accountability gap where it was not clear whether Scottish Government, local authorities or CPPs have responsibility for policy, and (c) Increased localism and the focus on local needs may have resulted in a decreased ability to see the bigger picture of policy and provision across Scotland, including limited sharing of good practice across areas. New third sector interfaces in each Community Planning area across Scotland are being developed and will become the key mechanism by which the third sector interacts with the government. However, at the time this initial research was carried out, the way in which third sector organisations interfaced with planning was in a transitional phase, with CPPs being perceived as the key way in which the third sector were involved in community decision-making. From the point of view of many of the TSOs participating in this research there was some doubt over the effectiveness of CPPs in terms of being able to represent the whole of the third sector and the limited extent of TSOs influence on policy, leading some to deprioritise their involvement in CPPs. However, some TSOs felt they were able to influence policy more effectively through other means such as through partnerships with the private sector and other forums. This is an important issue that will need to be tracked through as this longitudinal study progresses. In terms of specific policy priorities respondents felt that: there were variations between local authorities; there had been a shift towards a more employabilityfocused agenda and finally; priorities were perceived to be focused on certain specified groups of clients at the expense of others. Single Outcome Agreements (SOAs) likewise were perceived to be subject to variations between local authorities and CPPs. Some found SOAs to not be specific enough in order for them to inform organisational policy. Changes to the Funding Environment Many TSOs reported that over recent years (in the last decade but particularly in the last 3 or 4 years) some funding had not kept pace with inflation although the same level of service continued to be provided with the effect of real term cuts. The impact of these cuts included employing lower skilled staff on lower wages and withdrawal of delivery of some services. Many TSOs feared future spending cuts of up to 20%. While some perceived this to be an opportunity to reduce dependency on public sector funding, many were concerned about the potential implications of such substantial cuts across the sector. These included vulnerable client groups becoming more marginalised and the loss of some third sector organisations and with them skills, knowledge and service capacity. 8

Competitive tendering and high levels of public spending had facilitated an expansion of the third sector over the last decade. However, while tendering created new business opportunities, it also raised a number of challenges for TSOs including: (a) Short-term contacts of one-year were reported to have become increasingly common. However, these created difficulties for TSOs in terms of increased bureaucracy and long-term planning as well as lack of continuity for clients; (b) Some felt there was a lack of timeliness in some local and central government funding decisions, with awards being notified some time after contract start dates. Some also felt that there was a move away from dialogue with funders around service funding and delivery outcomes which was compounded by disparities in power between funders and TSOs; c) Although cost and quality are emphasised in the Best Value framework, many respondents felt that the focus of many funders had become too targeted on cost at the expense of quality, and; (d) The tendering process also had implications for organisations in terms of organisational planning and staffing, security of employment for employees, staff morale and staff skills requirements. Third Sector Responses and Challenges to Changing Environments Many TSOs had adapted their services in order to comply with changing policy priorities, in particular, the employability agenda. Funding for core organisational activities were vital to TSOs in order to be able to sustain and grow their business. However, there were concerns that there would be less funding for core organisational running costs in the future and there were already reports that some local authority funders were unwilling to cover these costs. A number of organisations were considering how to diversify their funding base in order to become less reliant on public funding. Strategies included identifying alternative funding streams (aided by the expansion of open competitive tendering), fundraising (utilising their charities status with a view to ensuring longer term sustainability although the recession potentially presented challenges) and continuing to develop social enterprise activity (again often as a means to support the longer term sustainability of the organisation, by becoming more business-like or entrepreneurial and seeking to diversify income streams). A number of organisations had taken major action to reduce their cost base and maintain their competitiveness by restructuring their organisations, including making staff redundant, reviewing staff terms and conditions, increasing professionalisation of management and information structures; and diversifying staff roles and activity. Despite a policy to open up more markets to the third sector (as outlined in the Enterprising Third Sector Action Plan), some third sector respondents perceived that 9

the sector was not able to compete on an equal basis for contacts because of a lack of parity of esteem with other providers. Performance and Outcome Measures There was considerable variation in approaches, and therefore perceptions of proportionality, to monitoring and evaluation of services by TSOs across local authorities. There was a perception among TSOs that some local authority funders in particular were focused on measuring hard outcomes which did not capture the full range of added value of TSOs. Much of the work carried out by TSOs was often with clients who were hard-to-reach and/or who had complex issues, focused on prevention and had wider social impacts that were less easily measured. The focus on hard outcomes could lead to: contradictory incentives; the most vulnerable clients losing out because they were less likely to achieve quick and measureable hard outcomes, and: it did not easily recognise the work done by multiple agencies. It was felt by some that some funders did not understand the complexity of the work done by TSOs. At the same time, the focus on hard outcomes had resulted in radical changes within TSOs, including improvements in monitoring systems, staff training and greater efficiencies in the service delivery approach. Most organisations were keen to evidence the full extent of the work they undertook in order to show the value they added. While use of SROI was still fairly limited, many organisations were using other means of measuring soft outcomes, including existing measurement tools as well as devising their own tools and carrying out additional research. Partnerships Most participants had experience of successful partnership working. However, the extent of partnership within the sector and with other sectors may have the potential to increase in the future. A number of factors were identified that contributed to successful partnership working for service delivery. These included: Shared Goals/Ethos and Clearly Defined Aims having a shared vision and ethos and having clearly defined and identified shared aims Complementarity The extent that organisations complement each other in terms of expertise, specialisms and organisational cultures Equality Where organisations are roughly equal in terms of power, resources and terms and conditions of staff 10

Trust and Reciprocity Trust and sharing of resources between organisations Commitment The commitment of individuals at different levels within organisations to the partnership.

Partnership working presented a number of challenges for some organisations. These included: The ability of organisations to invest time and resources into partnerships Some respondents felt that informal partnerships were at least as important, if not more so, than formal ones and questioned the effectiveness of some formalised partnerships There was a perception that the tendering process, whilst purporting to encourage partnership, actually increased competition between organisations to the detriment of partnership working. There was some concern that this tendency would intensify in a tight funding environment.

Developing partnership working to a greater extent was perceived to be important in order to meet the financial challenges ahead. In particular there was a perception that more extensive participation in joined up working could also be beneficial for clients. Place and Rural Issues There were additional costs associated with providing services in rural areas. This was because of the dispersed geography and additional travel required as well as limited access to public transport. In addition, it was difficult to achieve economies of scale for (usually) relative small local services. Funding cuts had already resulted in one organisation providing a reduced service in a rural area. Due to the withdrawal of major public funding some families near poverty had become solely reliant on some TSOs. This created additional pressures, particularly for the smaller TSOs. The benefits of developing direct personal relationships between staff in TSOs and the local communities they serve was highlighted. Conclusions The third sector in Scotland plays a key role in delivering public services that are high quality, continually improving, efficient and responsive to local peoples needs. The sector has a number opportunities afforded by the policy context, such as the Enterprising Third Sector Action Plan and competitive tendering. However, it also faces a series of challenges relating to devolved funding, being involved in the policy process, managing in a competitive environment, and increasingly, budget constraints imposed on public services. 11

This research, which forms the first phase of a three year longitudinal study, has explored a wide range of opportunities and challenges based on case studies and focus groups with 20 TSOs in Scotland. The research found that the third sector has a unique and distinctive contribution to make to service delivery. TSOs tend to work with vulnerable, disadvantaged and hard-to-reach groups, engaging in preventative work and filling gaps in statutory services. Their focus is on the client and the provision of quality services and they are characterised as operating in a more flexible, responsive way than the public sector because they are leaner and possibly less bound by regulations. The sector is also very diverse covering many different types of services and clients as well as being different in size, function and geographical spread. The policy environment had created a number of challenges and opportunities for TSOs in Scotland. The key issues affecting them included: The Concordat and localism agenda and involvement in local decision making through the CPP Funding challenges and concerns about the impact of budgetary restrictions Shift towards competitive tendering and resulting challenges.

The new third sector interfaces are in development and should help to address some of these challenges. Many TSOs had responded positively to the challenges faced by the changing policy and funding environments by: Adapting their services in order to comply with changing policy priorities Diversifying (or planning to diversify) their funding base by seeking alternative funding streams Fundraising Developing social enterprise Restructuring organisations and reducing cost base to maintain competitiveness. In terms of their experiences of performance and outcome measures, there was considerable variation in approaches to monitoring and evaluation of services by TSOs across local authorities and TSOs felt that funders were often too focused on measuring hard outcomes which did not capture the full range of added value of TSOs. Most participants had experience of successful partnership working and the research identified the factors that helped to support better partnership working such as shared ethos and clearly defined goals, complementarity and equality between organisations, trust and reciprocity and commitment at different levels. Partnership working to a greater extent was perceived to be important in order to meet the financial challenges ahead. In particular more extensive participation in joined up working could also be beneficial for clients. 12

There were additional costs associated with providing services in rural areas because of the dispersed geography and additional travel required as well as limited access to public transport. In addition, it was difficult to achieve economies of scale for (usually) relatively small local services. Policy makers and government have already identified some of the above challenges for TSOs in Scotland through policy documents such as the Enterprising Third Sector Action Plan and through the Third Sector Task Group and the Joint Statement on the relationship at local level between Government and the third sector. Whilst these are likely to have a considerable influence on the third sector, not all of the recommendations have had an impact on the TSOs who participated in the research in this first year of the project. As with other issues, these will need to be tracked carefully in subsequent years. This research will be followed up in the forthcoming year (2011). There are a number of important issues which will be tracked over this time, for instance, identifying if policies have had more of an impact over time, and what the impacts of anticipated budget cuts will actually be. The next phase of research will explore if and how organisations are adapting and developing in innovative ways to manage these challenges enabling them to continue to deliver essential services to the same high quality.

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INTRODUCTION
This report outlines findings from the first year of a three year research project examining The Opportunities and Challenges of the Changing Public Services Landscape for the Third Sector in Scotland: A Longitudinal Study. This work was commissioned by the Scottish Government and using qualitative case studies and focus groups aims to track the way in which a selection of third sector organisations (TSOs) respond to the changing opportunities and challenges over a period of three years starting from 2009/2010. The Scottish Government has acknowledged that the third sector has a key role to play in delivering public services that are high quality, continually improving, efficient and responsive to local peoples needs. This work will inform future partnership-working with the third sector. The first year of the research aimed to establish a baseline by which subsequent years of research could be compared. As part of that, specific objectives for the first year of research are summarised below: identify the role and distinctive added value of TSOs delivering public services; identify features of effective partnership-working between the public sector and TSOs; assess the impact of Scottish Government and local government policy and budget priorities on TSOs changing practice and management; track the impact of the economic downturn and budget limitations on TSOs roles in public service delivery; describe how TSOs contribute to progress on the Scottish Governments national priorities and national outcomes; describe how TSOs contribute to progress on Single Outcome Agreements and the work of Community Planning Partnerships; enable TSOs to articulate views on the appropriateness of funders oversight, evaluation and management procedures;

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A full list of objectives as outlined in the original specification are provided in Appendix A. Structure of the Report 1.4 Chapter 2 provides a brief overview of the background and context of the research. This includes a short outline of the third sector in Scotland followed by an overview of the key policies and contexts. The Methodology for the research is outlined in Chapter 3. The findings from the research are introduced in Chapter 4 with an examination of the Contribution of the Third Sector to Public Service delivery. This chapter examines the diversity of the sector as well as the distinctive approaches to service provision and other features of the third sector. 14

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Chapter 5 examines the impact on TSOs of the Changes to the Policy Environment. These include the impact of the 2007 Concordat, Community Planning Partners, Policy Priorities and Single Outcome Agreements. Changes to the Funding Environment (Chapter 6) looks at the impact of actual and potential funding cuts, as well as perceptions and experiences of Tendering on TSOs. Chapter 7 explores Third Sector Responses and Challenges to Changing Environments. This chapter examines: the way TSOs have adapted services in response to changing policy priorities; issues around maintaining core funding and internal capacity; how TSOs are diversifying their funding bases; the ways TSOs have sought to maintain competitiveness and; the challenges faced by competitors. Chapter 8 examines issues around Performance and Outcome Measures used by funders and TSOs in order to measure service outcomes and performance. This includes an exploration of the variability in measurement and scrutiny by local authorities, the current focus on hard outcomes and the impact on measuring added value by TSOs and the use of SROI and other measures among TSOs.

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1.10 Partnerships (Chapter 9) examines TSOs involvement in partnership working and includes the extent of partnership working among TSOs, an exploration of the factors associated with successful partnership working, some of the challenges presented by partnership working and the importance of partnerships for the third sector in facing future challenges. 1.11 Chapter 10 looks at place and rural issues and in particular at some of the challenges and issues facing delivery of services in rural areas by TSOs. 1.12 Finally, a Conclusion is provided in Chapter 10. 1.13 All quotes use generic pseudonyms which are intended to provide some organisational and respondent role context without identifying either individuals or organisation. However, please note that the generic pseudonyms cannot encapsulate the varied roles of TSOs, especially since many organisations fall into numerous categories, but they are provided for convenience. Appendix A and B provide more details about each organisation. Where quotes have been taken from a focus group discussion this is indicated in brackets after the quote (e.g. Employability FG where FG indicates focus group). 1.14 Interview schedules used in the fieldwork are appended (Appendix C and D).

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BACKGROUND AND CONTEXT

This section examines the policy background and context within which TSOs in Scotland currently operate. The Scottish Government is committed to promoting public services that are of high quality, continually improving, efficient and responsive to local peoples needs and has acknowledged that TSOs have emerged as key providers of such high quality public services2. The Government in Scotland has increasingly focused on the third sector in recent years with the then Deputy Minister for Community stating in 1999 that the third sector has enormous potential to help us to achieve our shared goals of promoting community developing and active citizenship3. More recently, the Scottish Government has acknowledged that the third sector will continue to be important in supporting the on-going public service reform agenda, particularly in focusing services on the user, and so promoting greater efficiency and delivering Best Value. Recent and continuing changes to how Scottish public services are planned and delivered have included a number of initiatives which are likely to have an impact on TSOs delivery of public services. These include: the 2007 Concordat between the Scottish Government; Single Outcome Agreements and Community Planning Partnerships; the Crerar Review; Best Value and Best Value2; The Enterprising Third Sector Action Plan (2008-2011); the development of public-social partnerships; and the over-arching context of the impact of the recent economic downturn and budget constraints. The 2007 Concordat 4 reduced ring fencing and devolved control of some budgets to local authorities (LAs) and Community Planning Partnerships (CPPs), thereby transferring the contract holder/funder from the Scottish Government to individual local authorities. This fundamentally changed the relationship between national and local government in Scotland. This aimed to promote progress towards the alignment of funding and activities within local authorities and other areas of the public sector with the Scottish Governments priorities and national outcomes. Four key tenets were included in the Concordat: Collaborative working and joint accountability the relationship between central and local government to be based on mutual respect and

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Scottish Government (2008) Enterprising Third Sector Action Plan 2008-11. http://www.scotland.gov.uk/Topics/People/15300/Actionplan 3 Scottish Parliament, 1999, col. 767 quoted in Dacombe, R. And S. Bach (2009) The Evidence Base for Third Sector Policy in Scotland: A Review of Selected Recent Literature, Edinburgh: Scottish Government Social Research. 4 Scottish Government (2007) Concordat between the Scottish Government and local government. http://www.scotland.gov.uk/publications/2007/11/13092240/Concordat

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partnership and enable local authorities to respond more effectively to local needs by reduced micro-management Finance and funding enabling financial decisions to be taken locally, reduced ring-fencing and being able to redeploy efficiency savings Reduced bureaucracy reduction in the number of funding streams and monitoring and reporting to central government and a more focused and proportionate inspection regimes Single Outcome Agreements to align local policy with overall government targets, taking account of local priorities.5

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Community Planning in Scotland is defined as a process "by which the public services provided in the area of the local authority are provided and the planning of that provision takes place". 6 Local authorities have a duty to initiate, maintain and facilitate this process A number of public sector organisations are statutory partners in Community Planning. These include the local authority, health board, fire, police, enterprise agency and transport partnership. In addition to the statutory partners, all Community Planning Partnerships (CPPs) involve third sector partners alongside some other public, voluntary, community and private sector partners. From 2009-2010, Single Outcome Agreements (SOAs) were to be agreed with Community Planning Partnerships rather than local authorities. Increasingly, Community Planning Partnership are engaging with TSOs and other stakeholders in decision-making and funding agreements at local level. The Concordat partners joint commitment to responding to the Crerar review7 indicates a commitment to reduce bureaucracy. This will lead to improvements in performance management and self-assessment across the public sector thereby enabling a more focused and proportionate inspection regime8 Best Value is a non-statutory duty on public service organisations in order to balance quality and cost considerations in improving the performance of public service organisations 9 . It aims to secure continuous improvement in performance taking into account economy, efficiency, effectiveness, equality opportunities and sustainable development. Best Value Audits 2 (BV2) is currently being developed and tested in order to supersede Best Value. The BV2 approach will seek to promote more proportionate scrutiny, encourage self-evaluation, and prioritise community engagement and partnership-working.

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Scottish Government (2009) Invitation to Tender Document: The Opportunities and Challenges of the Changing Public Services Landscape for the Third Sector in Scotland: A Longitudinal Study, Edinburgh: Scottish Government Research. 6 Local Government in Scotland Act 2003. http://www.legislation.gov.uk/asp/2003/1/contents 7 Scottish Government (2008) Cabinet Secretarys Statement on Scrutiny Improvement: Supported Briefing. http://www.scotland.gov.uk/topics/Government/PublicServiceReform/Independent ReviewofReg.CabSecBrief 8 Scottish Government (2007) Concordat between the Scottish Government and local government. 9 http://www.scotland.gov.uk/Topics/Government/PublicServiceReform/14838

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2.10 The Enterprising Third Sector Action Plan aims to support enterprising behaviour in the third sector so that it may play a full role in the development, design and delivery of policy and services (including the opening up of public sector markets to TSOs). As a result, a third sector funding package of over 90 million was made available over three years from 2008. This included the Scottish Investment Fund (30M) and the Enterprise Fund (12M) to provide investment funding for the sector as well as other funding to support the Action Plan10. The Third sector Action plan helped to open markets to third sector and gave support to TSOs to develop their capability and sustainability. It also supported the training of staff in third sector organisations in the tendering process and through the Suppliers Development programme and the guide to Tendering for Public Sector Contracts11. 2.11 The key actions of the Enterprising Third Sector Action Plan (business support, opening third sector markets and funding and investment for third sector) will be continued in the next phase of engagement and support, which is to be delivered via overarching outcomes focussed contracts. 2.12 The public-social partnership model involves the public sector and the third sector working together to design and deliver public services with the aim of improving outcomes for local communities. The government is also keen that the model will see the private and public sectors make greater use of third sector expertise and services12. The model is currently being piloted with 10 Public-Social Partnerships (PSPs) for a period of 2 years from 200913. 2.13 The Social Return on Investment model (SROI) is a means of understanding how TSOs (and other stakeholders) deliver social and environmental benefits. It aims to help TSOs demonstrate their impact more clearly as well as assisting funders and commissioners to make more informed investment or purchasing decisions. 14 SROI identifies and describes the social value being created through an organisations activities (and the investment needed to deliver them). Uniquely, it seeks to place a financial value on this social value. Using a set of financial accounting principles and standard calculations, SROI analyses produce, as part of a wider report, an index of social return. An index of 2:1 shows that for every 1 invested, 2 worth of social value is returned.15

Scottish Government (2008) Enterprising Third Sector Action Plan 2008-11 http://www.scotland.gov.uk/Topics/People/15300/Actionplan 11 Scottish Government (2008) Enterprising Third Sector Action Plan 2008-11 page 8, also see Joint Statement on the relationship at local level between Government and the third sector, September 2009, Scottish Government, Solace Scotland, COSLA and SCVO. http://www.scotland.gov.uk/Topics/People/15300/JointThirdSectorStatement point 28. 12 Scottish Government News Release (12/06/09) Public Social Partnerships Welcomed at: http://www.scotland.gov.uk/News/Releases/2009/11/23121830 13 The Public-Social Partnership Project website at http://www.pspscotland.co.uk/node/17 14 Scottish Government website (accessed October 2010) at http://www.scotland.gov.uk/Topics/People/15300/SROI 15 Scottish Government (2009) SROI Report Investing the Impact, Edinburgh: Scottish Government at http://www.scotland.gov.uk/Topics/People/15300/SROI/SROIReport

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2.14 The Third Sector Task Group was created in 2008 for a fixed term with a specific remit to improve coordination of third sector organisations in Scotland, local authorities in Scotland and the Scottish Government. With representation on the Task Group drawn from the third sector, local government and Scottish Government, the group worked across four main areas: Partnership examining how government and TSOs could work together effectively to deliver services within the context of Single Outcome Agreements, Compacts and Community Planning Partnerships. Funding relationships developing more effective and sustainable funding for the third sector Building Capacity increasing opportunities for TSOs to develop their skills and knowledge through collaboration and support Monitoring change evidencing the contribution of the third sector to Single Outcome Agreements, Community Planning and to measure the turnover of the social economy16.

2.15 The main output from the Task Group was the Joint Statement on the Relationship at Local Level between Government and the Third Sector17. This statement is signed by the Scottish Government, COSLA, SOLACE (Scotland) and SCVO and aims to contribute to establishing a successful relationship between the Scottish Government, Local Government and the third sector. The statement outlines recommendations on working relationships in relation to funding, shared services and Best Value, application processes for grant funding, strategic commissioning and procurement, re-tendering, European Procurement Law, monitoring, reporting and evaluation and partnership. 2.16 The recent economic downturn and current and future budget constraints are likely to have a significant impact on the third sector in Scotland. Indications from SCVO 18 suggest that the economic downturn has caused increased demand for frontline services provided by the voluntary sector in Scotland at the same time creating financial difficulties. Sources of public and private sector income, as well as donations and access to finance are increasingly under pressure. This was acknowledged by the Scottish Government which set up a Roundtable Meeting on Resilience in the Third Sector held on 14 April 2009 in order to discuss some of the issues. 19 The 2.2M Third Sector Resilience Fund aimed to support the third sector through the recession and mitigate the impact of recession on front line services.20 2.17 It is not yet clear what the overall financial and wider impact will be on the sector, although organisations are likely to face both challenges and
http://microsites.scvo.org.uk/taskgroup/Home/ViewInformationItem.aspx?i=912; Joint Statement on the relationship at Local level between Government and the Third Sector, September 2009, Scottish Government, Solace Scotland, COSLA, SCVO. http://www.scotland.gov.uk/Topics/People/15300/JointThirdSectorStatement 18 SCVO (2009) The Voluntary Sector in Scotland and the Economic Downturn: A review of publications. http://www.scvo.org.uk/ 19 Scottish Government website (accessed 2010) http://www.scotland.gov.uk/Topics/People/15300/Resilience 20 Scottish Government (2010) News Release 2.2M for Scotlands third sector. http://www.scotland.gov.uk/News/Releases/2010/02/15105819
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opportunities in the future. For instance, in 2009, the Accounts Commission for Scotland indicated the priority need for local authorities to achieve cost efficiencies through shared services and to view the establishment of effective partnership working though local Single Outcome Agreements and Community Planning Partnerships21. This may create new opportunities through increased partnership working, but is likely to create challenges for some organisations. There is speculation that the third sector could become more differentiated with organisations competing for grants, contracts, staff and donors. 22 There may also be downward pressures on pay levels of staff within the sector. Indications also suggest that it may be getting more difficult for social enterprise activity with SCVO reporting that self-generated income had fallen from 50% to 45% during the recession (between 2007 and 2009)23.

SCVO (2009) The Voluntary Sector in Scotland and the Economic Downturn: A review of publications. http://www.scvo.org.uk 22 Harrow, J. (2009) Thistles, roses, thorns: some reflections on the third sector/government relations and policy expectations in economic downturn, ESRC/SCVO Public Policy Seminar Series Recession and the Third sector, 13 February 2009, Edinburgh. http://www.scvo.org.uk 23 SCVO (2010) Scottish Voluntary sector statistics. http://www.scvo.org.uk

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3 METHODOLOGY
3.1 Year One (baseline) methodology involved qualitative research within 20 voluntary sector organisations based in Scotland. The methodology involved two key components: (1) In-depth case studies with eight TSOs and; (2) three focus groups involving a total of twelve additional TSOs. Selection of case study and group work organisations 3.2 Following discussions with the Scottish Government and Project Advisory Group, a framework was developed for the selection of research participants. This was designed to ensure the establishment of a purposive sample of organisations working in different: policy areas (with a mix of social care, healthcare, and employability/economic development/regeneration providers); geographies (based in different locations across Scotland); scales (with a mix of larger and smaller organisations included); and to include some social enterprises. The selection of focus groups was based on similar lines with individual focus groups bringing together organisations with strong agendas in the following areas: (a) equalities; (b) social care and health care, and (c) employability/economic development/regeneration. 3.3 Potential participants were identified through a database of 685 possible organisations provided through the Scottish Council for Voluntary Organisations (SCVO). The final selection of possible organisations was selected in order to achieve the balance required by the framework (above). All organisations were then contacted and invited to take part in the research for a period of three years as either: (1) a case study carried out once a year; or (2) to participate in a focus group carried out twice a year. Most first choice organisations were happy to participate, with the few who declined being replaced by other suitable organisations. In this way, the participation of all Year One (baseline) organisations was obtained. In-depth case studies 3.4 In-depth case studies were carried out within eight third sector organisations between December 2009 and May 2010. Two initial organisations were invited to take part in piloting the research tools. These took place between December 2009 and January 2010. Feedback from the pilots informed the refinement of the research tools and methods used in subsequent case studies. 3.5 Case studies involved collecting appropriate documentary evidence including annual reports, policy statements and other organisational information. 3.6 In-depth face-to-face interviews were carried out with staff at different levels of the organisation. These included: chief executives; other senior officers/managers; research/policy officers; business/planning managers; operational and line managers; and front line staff delivering services. The 21

selection of staff for interview was decided in consultation with the main contact from the organisation (usually the chief executive or another member of the senior management team) and actual staff interviewed varied depending on the size of the organisation and availability of appropriate functions. A list of interviews carried out with each organisation can be found in Appendix A. A copy of the main interview schedule is attached in Appendix C. Three focus groups 3.7 Twelve organisations were divided into three focus groups of four participants. Each focus group pulled together organisations with strong interests in particular areas. These included: (a) equalities; (b) social care and health care, and (c) employability/economic development/regeneration24. 3.8.1 One representative from each organisation (usually the Chief Executive or a member of the senior management team) attended one of the focus groups carried out between April and June 2010 using a common discussion framework. A copy of the Agenda for Focus Groups is provided in Appendix D. Anonymity 3.9 In order to protect the anonymity of individual respondents who took part in the research, quotes have been labelled with generic job titles (e.g. Senior Manager, Manager, Officer). A brief description of the type of organisation is also provided after each quote. Additional background information on the participating organisations is provided in Appendix C. This is intended to give context to the overall report and individual quotes without revealing the identity of participating organisations. All organisations were happy to be identified as taking part in the research (although not necessarily to have particular opinions credited to them). All participating organisations were asked to approve the approach to anonymisation that has been used. A full list of participating organisations is available on the project website at http//www.thirdsectorproject.org.

Analysis 3.10 Thematic cross-case analysis of the year one (baseline) data was carried out. This forms the baseline by which subsequent waves of data will be compared in order to track changes.

Note that these categorisations were not applied rigidly and there was some overlap in the activities of organisations.

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4
4.1

THE CONTRIBUTION OF THE THIRD SECTOR TO PUBLIC SERVICE DELIVERY

The third sector as a whole makes an important contribution to the delivery of public services in Scotland across a number of sectors. With around 45,000 organisations employing 137,000 staff, the sectors annual income in Scotland was estimated to be 4.36 billion in 2008-0925. The Enterprising Third Sector Action Plan identifies an important role for the third sector in sustainable economic growth in Scotland through its contribution to solidarity, cohesion and sustainability (Ministerial Forward). In particular, the Plan and the Joint Statement recognise the sectors work with the most vulnerable groups: Third sector organisations provide services to some of the most vulnerable people in Scotland and as such have an important role in delivering better outcomes for our communities. 26

4.2

Of the 20 organisations who participated in the research, most were predominantly funded by the public sector 27 (see Appendix B) with just two classifying themselves as social enterprises (where a substantial portion of their funding is self-generated). This contrasts with the general picture in Scotland where across the whole sector in 2008-09 self-generated funding was the largest component of total income (45%), with public sector funding (43%) being the next biggest component.28 This reflects the interest of this research which is focused on particular sectors (e.g. health, social care and learning) which are heavily involved in public service delivery and thus in receipt of public sector funding. Participants in the research were asked for their views on what was distinctive about the third sector and what added value they thought their organisation and the third sector generally brought to public service delivery. Their responses fell into three general areas which are covered below: the diversity of the sector; distinctive approaches to service provision and other distinctive features, such as how TSOs operated.

4.3

The Diversity of the Sector 4.4 The third sector in Scotland is diverse covering many different types of services and clients, as well as being different in size, function, capacity and geographic spread. The TSOs that participated in the research included a wide range of organisations of different sizes, both local and national who worked across a number of sectors including health and social care, employability services,

SCVO (2010) Scottish Voluntary sector statistics. http://www.scvo.org.uk Joint Statement on the relationship at Local level between Government and the Third Sector, September 2009, Scottish Government, Solace Scotland, COSLA, SCVO. Point 2. http://www.scotland.gov.uk/Topics/People/15300/JointThirdSectorStatement 27 Based on information available on organisations websites and annual reports. 28 SCVO (2010) Scottish Voluntary sector statistics. http://www.scvo.org.uk
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learning providers and supporting a wide range of clients. A list of organisation profiles is provided at Appendix C. 4.5 The diversity across the sector was acknowledged by many of the research participants. Some felt that other stakeholders (including the Scottish Government) sometimes did not recognise this diversity: The important thing for government to recognise is that the third sector must be stratified. It is too big, too complex, too diverse, to categorise it only as the third sector. Senior Manager, Local Employability Provider 4.6 Some participants felt that there were big differences between large and smaller voluntary organisations in the way that they operated, with very big TSOs operating like private sector companies. They also felt that smaller organisations were more vulnerable in the current economic climate, particularly when competing with larger organisations. However, one national organisation took the view that it was their responsibility as a large organisation to help safeguard smaller organisations through partnership working (also see 9.20). Key differences between large and small organisations included that large organisations had developed more intensive and professionalised structures to pursue funding, improved organisational efficiency and customer relations to an extent that was difficult for smaller TSOs. However, the scale of large organisations also had an impact on their ability to work in smaller local areas: The big charities...have obviously much more the capacity for fundraising, PR and large scale campaigns. They are able to play the heart strings with individual donors UK-wide, but they do not fit as well at the middle level, say at a village or community level, like so many places are in the Highlands. This is where smaller voluntary groups can build an identity with their client group. Senior Manager, Health and Social Care 4.8 Therefore there were disadvantages and advantages associated with large and smaller TSOs. Particular differences in experience based on size of organisation are highlighted throughout the report where these arose.

4.7

Approaches to Service Provision 4.9 Many participants in the research mentioned that the particular contribution of TSOs to service provision was their specialist focus and expertise working with particular client groups and/or issues. In many cases, this meant working with vulnerable, disadvantaged and hard-to-reach groups of people, in some cases engaging in more preventative-focused work. Some felt that their particular specialist focus had the potential to fill gaps in the provision of statutory service because they dealt with clients that were often not dealt with by other services. Some felt this was particularly true of smaller organisations who were able to fill a unique niche:

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They have a very very focused approach, they work with a very small number of people, theres only a couple of staff but they fill a niche that no one else could as effectively for the people they work with. Senior Manager, National Health and Social Care Provider 4.10 An important role for some social care TSOs working with a broad range of vulnerable clients (from young to older individuals with specific care needs, to whole families in complex situations) was to work within communities to avoid the institutionalisation of clients rather than attempting to integrate them into a mainstream service provision. 4.11 In dealing with particular, often vulnerable groups, some respondents stated that a key feature of the services provided by their organisation was providing a person-centred holistic approach to clients, which tailored the service to a particular clients needs. In this example the respondent discussed providing learning tailored to the individual and providing support which other learning providers do not, such as pre-learning (e.g. getting clients ready to take up a course). The other thing that is distinctive as well is I think if you asked 500 learners or so what the service looked like they would all say something different because each person does get a tailored service. Senior Manager, Regional Learning Provider 4.12 However, although this approach made sense to several TSO practitioners, one respondent felt that it caused several clashes with the approach to casework employed by statutory service providers. For over 10 years weve had real problems in working on caseloads and doing panel reviews of clients due to work practice. By default we would follow what the client wants to do in their lives, while a social worker would rather advise a specific course of action. Senior Manager, Local Health and Social Care Provider 4.13 Several respondents also mentioned a particular ethos that existed within their own organisations. This was the provision of quality values-based services focused on improving the experience of the client, sometimes in antithesis to a cost-driven funding environment. Also see Cost vs. Quality 6.27-6.31. Ive always thought of the sector as quality of life is what we are about. Anybody in the local authority or NHS can provide a service. We are the ones that provide the service that makes the difference to the quality of life. Senior Manager, Regional Learning Provider 4.14 As part of this, some respondents felt that their organisations links with local communities were a distinctive feature of their approach, in particular contrast to the public sector: We are out there, we are reaching communities areas, communities target groups. (that) public sector services frequently cant reach or cant work with 25

in the same way. We are opening a gateway to them through partnership work. Senior Manager, Equalities FG 4.15 Links with local communities could also be facilitated by employing local people to deliver services, as a number of organisations did. This was also the case even within national organisations where services provided in specific local areas employed local people. 4.16 However, some organisations were examining their approaches to service provision in the light of the new, more challenging, economic landscape and considering whether they should continue to provide some services: Funding changes mean that we have to make choices. Do we continue to provide certain public services? Is this a market we want to be in? Over the past year or so we have made decisions to move out of providing services because of the funding. We are at a phase just now where we are doing a further review of services. Senior Manager, National Health and Social Care Provider 4.17 This raises questions about the extent to which the distinctive approach to service provision among TSOs can be sustained in the face of severe public spending cuts. Other Features of the Third Sector 4.18 A number of respondents felt that the third sector and/or their particular organisation operated in a different way compared with the public sector; in particular, that the third sector was much more flexible and able to respond quickly to changes, with flatter management structures and less bound by regulations than the public sector. This resulted in it being leaner and more cost-effective: [We are] much more flexible, much more responsive. You know there are cost savings, I can build capacity, I can take away capacity, that's another important thing to say for people losing jobs actually, but I can do that much, much more quickly than the local authority can do. That's part of the flexibility and things. Senior Manager, Employability FG 4.19 The third sector was also perceived by some to be naturally more innovative and creative: The people who work in the voluntary sector like that chief responsibility to try something out that's a bit different and maybe a wee bit more challenging. Senior Manager, Equalities FG 4.20 However, there was also a concern among some respondents that the tendering process reduced innovation and that the sector was already very lean and there was a limit to how far it could be squeezed.

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Summary 4.21 The third sector in Scotland is diverse covering many different types of services and clients, as well as being different in size, function, capacity and geographical spread. There were important differences between larger and smaller organisations in their capacity to compete for funding in a challenging economic climate. 4.22 TSOs made a particular contribution to service provision through their specialist knowledge and expertise working with vulnerable, disadvantaged and hard-to-reach clients and providing specific services. This meant that they had the ability to fill unique niches in service provision. 4.23 A distinctive feature of many services provided by TSOs was their personcentred holistic approach tailoring services to particular client needs. This is contrasted with some approaches taken by statutory services. 4.24 TSOs had a specific ethos of providing quality values-based services focusing on improving the experience for clients. This was sometimes in antithesis to a cost-driven funding environment. TSOs were also often rooted in local communities. 4.25 TSOs were characterised as operating in a more flexible, responsive way compared with the public sector because they were leaner, had flatter management structures and were less bound by regulations. 4.26 Some felt that the third sector was more innovative and creative, although tendering presented challenges to maintaining these features.

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5
5.1

CHANGES TO THE POLICY ENVIRONMENT

This chapter examines the key changes that have taken place in the policy environment in Scotland in recent years and the impact and issues these policies have raised for TSOs. The 2007 Concordat between Scottish Government and local authorities transferred greater control towards local authorities and fundamentally changed the relationship between national and local government in Scotland. The first section of this chapter examines some key issues for TSOs emerging from this including working across different local areas, clarity of policy, and increased localism. Community Planning Partnerships are the main mechanism through which local community planning is devolved and is a key element in recent government policy. Since March 2008 there has been a major programme of change in third sector infrastructure with the announcement that, from April 2011 the Scottish Government would no longer fund networks of Councils of Voluntary Service (CVs), volunteer centres, local social economy partnerships and social enterprise networks in their current form. This has led to the development of new third sector interfaces in each community planning area across Scotland, which typically involve the above networks. As is discussed in 5.20 below, the pre-existing infrastructure bodies received cautious, but positive, support from the third sector in Scotland. At this stage of this study, it is obviously not possible to predict either how effective any new interfaces will be or how they will be perceived by the sector. However, this is clearly an important issue to be followed through on in future iterations of this study. The main goal of the new infrastructure is to align the third sector with the Community Planning Partnerships (CPPs) and the Single Outcome Agreements. By March 2011 each local authority area will have a third sector interface. They will vary in legal form but will all fulfil four functions: Support to voluntary organisations operating in the area, both local and those national organisations that deliver services at the local level Support and promotion of volunteering Support and development of social enterprise Connection between the Community Planning Partnership and the third sector.

5.2

5.3

5.4

5.5 In the second section we examine TSO perceptions of CPPs - and other ways in which they attempt to influence the policy agenda. Finally, we review the impact of changes in specific policy areas on TSOs and examine experiences and perceptions of Single Outcome Agreements. 28

The 2007 Concordat 5.6 Most of the third sector representatives had found the effects of the Concordat between Scottish Government and local government a particular challenge. The Concordat reduced ring fencing and pushed control of some budgets to local authorities and Community Planning Partnerships29 thereby transferring the contract holder/funder from the Scottish Government to individual local authorities. A number of respondents acknowledged that the Concordat had resulted in opportunities for local planning and services to be tailored to local need. For instance, one third sector representative perceived the Concordat arrangements to be beneficial in terms of giving local authorities the discretion to prioritise. Another pointed out that while there may be some confusion at the local authority level in adapting to this change, it nevertheless has given a sense of shared purpose across the public and third sector in the delivery of services, particularly in the Highlands area: The Concordat and the NPF has made a massive difference. A colleague working as a civil servant described this perfectly as there being more involvement and intelligence in the conversations going on at local authority level. This is not a political comment; its simply that people can now see what direction we are working towards for the whole of Scotland. Senior Manager, Local Health and Social Care Provider 5.8 Also, it was felt that the approach to work promoted by the Concordat and SOAs, while being somewhat unclear, promotes a working culture in which providers are given the space to work out how best to meet the targets: [Skills Development Scotland] got all the providers together over two days, and then outlined what they wanted to achieve through it....When we met a year later, we all knew it was successful and making a big difference in the Highlands, and more importantly, we knew what part we had played in this. Senior Manager, Local Health and Social Care Provider 5.9 While some favoured the principal of the Concordat there were mixed responses to its impact in practice. Particular issues mentioned included: (i) problems working across many different local areas; (ii) Lack of a cohesive policy steer and an accountability gap, and (iii) issues around increased localism.

5.7

For instance the Working for Families Fund (WFF), to assist disadvantaged parents improve their employability, was rolled up into the Fairer Scotland Fund. WFF had covered 20 local authorities, but while most areas continued to resource the local WFF project after the Fund was no longer ring fenced, others local areas did not (e.g. Glasgow).

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Challenges working across many different local areas 5.10 The Concordat arrangements are reported to have created some practical challenges for national TSOs working in multiple areas in terms of now needing to negotiate with individual local authorities and Community Planning Partnerships separately. This represented a particular challenge for small, resource-limited TSOs. This latter groups perhaps deliver services over a limited number of areas, but even larger organisations perceived problems in terms of the time and resources available: The Scottish Government devolving the funding to local authorities means that for a national organisation with 17 staff and 3 people in fund-raising roles you then have to talk to 32 different local authorities...and look at 32 SOA and work how you are going to work. That is a challenge, instead of talking more centrally to fewer people. National Officer, Regional Learning Provider CS 6 Scotland Lack of a clear and cohesive policy steer and an accountability gap 5.11 The Concordat introduced a new relationship between Scottish Government and Local Government which is based on mutual respect and partnership where both Scottish and Local Government are politically accountable and financially responsible to the public30. However, some participants felt that this opened up the possibility of a lack of clear and cohesive policy steer and an accountability gap, where it was not clear whether local or central government had responsibility on some issues. 5.12 Prior to the Concordat, some respondents felt that the ring-fencing of funds allowed TSOs to quickly establish where government funding priorities lay. They felt that central government had provided a clear direction as to how money ought to be spent and what areas they considered important. Funding priorities would then feed through into each of the 32 local authorities allowing TSOs to have a reasonably clear understanding of where funding would be directed. Post-Concordat, and decision making has been devolved to each of the 32 local authorities making it difficult to navigate policy priorities. The Concordat has made it much more difficult to use central policy to get an indication of the direction of central funding. [In the past] central government gave direction very explicitly to local authorities about the intent of that policy and around spending in relation to that. Post Concordat there is much less central control on funding priorities and much more local control. Senior Manager, National Health and Social Care Provider 5.13 This also potentially resulted in what some referred to as an accountability gap where it was not clear who was actually responsible for devolved funding through SOAs and CPPs:

Joint Statement on the relationship at Local level between Government and the Third Sector, September 2009, Scottish Government, Solace Scotland, COSLA, SCVO.

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Now if you go to the Scottish Government and say youre concerned about [expenditure on a particular issue], they will say that is devolved... to the local authorities, they devolve it to the CPPs. It does create something, occasionally, of an accountability gap because if you then go to the CPPs theyll say: The Scottish Government doesnt fund us enough, so you get this ping pong of who is actually responsible. Senior Manager, National Health and Social Care Provider 5.14 One respondent suggested that although there were democratic arguments in favour of the Concordat devolving decision making down to a local level, it was also felt that this had made it very difficult for TSOs to use political policy to inform their decision making now that the role of the Scottish Government in local spending decisions was significantly reduced. I would prefer to see political direction if not attached to funding at least espoused more clearly...[In the past] separate funding streams were for very specific bits of work, whether it was violence against women or childrens services and they had really strong messages about those being the important issues. Tying it to funding is one way, but tying it to the more aspirational stuff in terms of the five strategic targets, 15 national outcomes, 49 local indicators, it does seem to be a mish mash. Senior Manager, National Health and Social Care Provider Increased Localism. 5.15 The increased localism agenda, where responsibility for allocating funding is devolved to the local level in order to meet local priorities, had resulted in what some perceived as the transfer of responsibility from Scottish Government to the local level, with Scottish Government taking a hands off approach and not exerting enough control over local policy. 5.16 Increased localism was viewed as resulting in CPPs and LAs only being concerned with meeting the needs of their local areas and not focused on wider national issues. Therefore, they were less able to see the bigger picture across Scotland in terms of policy and provision: One of the frustrations of the localism agenda is it really does cause huge problems for seeing a bigger picture... I think thats a real difficulty, not just for the national organisations and some of those have already shut down, but for the local areas, because they are limiting what could be delivered locally, by only looking locally. Senior Manager, Regional Learning Provider 5.17 These moves towards localisation were framed as having disempowered political leadership in the view of one respondent. Some felt that there was no longer the national political drive to push the rolling out of strategies throughout Scotland. National government was felt to have weakened its input into the shaping of public service delivery.

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5.18 This perceived lack of a sense of the bigger picture also meant that areas were not learning from each others experience and sharing good practice. Some felt it could also result in losing out on economies of scale. So now you can have the most effective programme going in one area and you cannot roll it out. So you cant get the economies of scale. You cant get the benefits that would accrue to people from the lessons learned in a pilot. Senior Manager, Employability FG 5.19 A respondent in one national organisation also felt that the emphasis on localism had led some CPPs to overlook national providers, even though these services were still being provided by local people. Community Planning Partnerships 5.20 New third sector interfaces in each Community Planning area across Scotland are being developed and will become the key mechanism by which the third sector interfaces with the government. However, at the time the research was carried out, the way in which third sector organisations interfaced with planning was in a transitional phase, with CPPs being perceived as the key way in which the third sector were involved in community decision-making. Therefore this section examines TSO involvement in CPPs before looking at other ways in which TSOs influenced policy and decision-making. Clearly, the role of the new interfaces will become an important element of this study in future years. 5.21 A key potential mechanism for supporting this role is the work that third sector intermediary bodies (traditionally, such as Councils for Voluntary Service) can undertake. As previous research 31 has indicated these bodies can play important roles, including developing the capacity of third sector organisations to engage with government, providing a conduit for contact between the sector and government and acting as an advocate and focus for third sector engagement with government at all levels. Equally this prior research also indicated that there is a potential for conflict between third sector organisations and these intermediary bodies if these latter bodies are perceived as competitors for resources and influence, rather than supportive mechanisms. In general, the third sector organisations in this study reflected both these views. The general, positive, tone best conveyed as cautious support. The role of these intermediary bodies is also being renegotiated in Scotland as interfaces between the sector and government. Whilst there was little direct evidence upon third sector views on this change, this is an important theme that will need to be followed through in future iterations of this study. Perceptions of CPPs 5.22 There were varying degrees of involvement in CPPs among the third sector organisations interviewed. Some were involved with just their local CPPs,
Osborne, S. (1999) Promoting Local Voluntary and Community Action. The Role of Local Development Agencies, Joseph Rowntree Foundation, York.
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some were involved with some CPPs within the areas they operated but not in other areas, while some (mainly smaller organisations) were not involved at all. 5.23 There were difficulties for individual TSOs in participating in CPPs, particularly smaller organisations, because of limited time and resources available to them. This was compounded by the difficulties of engaging with multiple CPPs across areas and CPP sub-committees within the same areas. Some felt that the structure of CPPs in some areas also created difficulties for the involvement of the third sector because of the existence of specific sub-groups: Theres only 4 out of the 12 neighbourhood partnerships that have voluntary sector sub groups... you know I don't feel engaged by the main partnership and...only 6 out of the 12 have employability sub groups so....theres a huge amount of work to be done....at grass roots level in terms of setting up the new structure. Senior Manager, Local Employability Provider 5.24 Some respondents felt that the structures of CPPs could not effectively represent the whole of the third sector in the community planning process, especially given the diversity in the sector, thereby limiting the sectors influence on policy via this route: I think there is actually no real consultation about what can be provided. So what happens is that there is probably one local representative representing all the voluntary sector who come from very very different disciplines and telling the community planning department what the voluntary sector want... Manager, Regional Learning Provider 5.25 There was also a perception that while CPPs attempted good practice in engagement across sectors, they do not explicitly recognise the potentially conflicting agendas across participants, nor offer a clear method for resolving these: There is supposed to be a range of organisations represented [on CPPs], but in reality there will only be a few. It is an attempt at user-involvement [which is] progressive and representative. But this is difficult in practice and there are clashes, as the representative can only truly represent their stake. Senior Manager, Local Health and Social Care Provider 5.26 On the whole, most respondents felt that their organisations had limited influence on policy. Of the few who felt it had been effective these were confined to some areas and did not extend across others: I think our involvementvaries across the country because we work in 24 of 32 local authority areas. I cant give you one definitive answer but the area where we are very active... I think we have a very good local voice There are other areas, where not just us but the voluntary sector generally have maybe struggled a bit to get round the table. Senior Manager, National Health and Social Care Provider 33

5.27 CPPs therefore did not appear to be perceived as an effective way for TSOs to influence wider policy. Some organisations even felt that their ability to influence policy had diminished with the onset of the community planning process. The experience of some in CPPs had led this organisation to deprioritise their involvement: I think its been a confusing experience, yes I think we felt quite excited by it and then I don't know that it has delivered the kind of representation and influence that wed hoped it would have in the early days. So we have probably de-prioritised our involvement in it to be honest. Senior Manager, National Health and Social Care Provider The new third sector interfaces are intended as a solution to these perceived problems of the current system of involvement. An important element of future years of this study will therefore to be track the effectiveness of these new structures against this baseline, as well as any new challenges that they may create. Other ways of influencing policy 5.28 Some organisations had found more effective ways to influence policy than through the community planning process. These included through partnerships with the private sector and other forums. For instance, one organisation was involved in various employability forums and felt they had a bigger voice within that because its all...like minded organisations. 5.29 The above perceptions of CPPs by TSOs suggests that there is indeed a need for new interface structures currently being developed in order to more effectively represent the third sector in policy making. At this stage of this study it was not possible to predict either how effective any new interfaces will be or how they will be perceived by the sector, but this is something that will be followed through in future iterations of the study. Policy Priorities 5.30 Respondents were asked about changes to the policy priorities of local authority funders in recent years. Firstly, respondents perceived there to be variations between local authorities in policy priorities. Secondly, they felt there had been a shift towards a more employability-focused agenda and finally, priorities were perceived to be focused on specific client groups. 5.31 In terms of variations between local authorities, a number of respondents felt that certain types of policy area were prioritised over others in some local authorities but not others: Authorities are taking different approaches...I know for example in [LA X] all support services were seen together in terms of learning disability, physical disability. Whereas [LA Y] for example is taking an approach that's less about traditional services and more about looking at ways to support peer support and preventative work. Manager, National Health and Social Care Provider 34

5.32 Many respondents felt there had been a shift in more recent years towards a more employability- and outcome-focused agenda. TSOs had responded by adapting the focus of their work to fit with these policy priorities also see Adapting Services 7.2-7.8. Amongst most of the social care organisations interviewed, this meant a change of focus from health-based approaches such as providing day-care and occupational therapy to focusing on employability: Over the years [name of TSO] was a glorified day centre. Whats happened in the intervening years is the realisation that employment is actually good for you and that people despite sometimes having severe conditions can progress further in their recovery in employability than previously was thought. So on the back of that, the employability agenda within the health and social care domain has grown in importance. Manager, Local Employability Provider 5.33 One respondent felt that there was too much emphasis on fitting in with the national agenda of employability when this was not necessarily appropriate to their clients. For instance, personal development rather than improving employment outcomes was often the main goal of their clients: [Theres an] obsession with employability as being an outcome and as being the only desirable one at the end of the day [Our] ethos is empowerment, and personal development is often the goal of many of our learners, and volunteers. I feel that we have to keep manoeuvring around that, particularly for funding streams so that it fits with the employability agendas. Officer, Regional Learning Provider 5.34 Policy priorities were perceived to be targeted to specific groups of people for example the under 25s, the over 50s, parents with addictions and BME communities, but this left others who did not fit into these categories unable to access support: We couldnt get that very broad funding, but what we did get was a variety of different funders... With [the] Working for Families Fund we did work with asylum seekers and refugees. Now we cant do that work unless the asylum seeker is under 25 and a parent. Somebody who doesnt fit into these boxes, we cant work with them...So if you are not a parent with an addiction, we cant work with you. Service Manager, Local Learning Provider 5.35 Some felt that this would have a negative impact on community cohesion, since some groups were being excluded from access to service provision in the community: A major issue here is, what if you dont fit in to a particular silo?... It is divisive if you are trying to provide cohesion and harmony with the community. Manager, Local Learning Provider

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5.36 Another respondent felt that certain groups who were vulnerable but not facing immediate crisis would not be helped because they were not prioritised: Funding streams are not available for this cohort [those who face moderate disadvantage]. That is the group that we have targeted that we want to assist... and whilst the people that are closest to the jobs market will be catered for and will be outcomes driven, (so) if we take somebody in, if we work with them and they get a job then we get paid. If they dont get a job then we dont get paid. That will be the reality of the marketplace. Senior Manager, Local Employability Provider 5.37 For some social care organisations, the commitment at National Level to pursue the person-centred approach (e.g. Getting It Right For Every Child and Same as You? 32 ), was also described as positively influencing the policy environment for TSOs, as it legitimised their approach to delivery of social services. Since the Concordat, these policies have become much more present at Local Government level, urging the service delivery system to change: Single Outcome Agreements 5.38 As part of the devolution of decision making to local authorities, Single Outcomes Agreements (SOAs) were established between central government and each of the 32 local authorities. Since 2009-10 the SOAs have been agreed between each Community Planning Partnership (CPP) and the Scottish Government (CPPs are made up of local authorities and UK and Scottish government bodies, for example the police, Skills Development Scotland, NHS and Job Centre Plus). The third sector is represented on each CPP through the third sector interface. CPPs agree their strategic priorities for their local area and express those priorities as outcomes to be delivered by the partners, either individually or jointly. The outcomes explicitly contribute to the relevant Scottish Government priorities as set out in the National Outcomes as well as local priorities. Hence local authorities and CPPs are required to work towards the fulfilment of relevant outcomes. 5.39 Some respondents in organisations were positive about the introduction of SOAs (at least in the beginning), for instance, in terms of local organisations working to the same framework, providing focus for an organisation to work towards and giving a competitive edge against other service providers. 5.40 However, as we have already seen in relation to policy priorities (many of which will be filtered through SOAs) there were variations within local areas between SOA priorities.
Getting it Right for Every Child - is a Scottish Government programme that aims to improve outcomes for all children and young people. http://www.scotland.gov.uk/Topics/People/YoungPeople/childrensservices/girfec; The same as you? A review of services for people with learning disabilities Scottish Government (2000) Learning Disability Services Review http://www.scotland.gov.uk/ldsr/docs/tsay-00.asp
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You have in theory local outcome agreements which are based on national priorities and you also have each of those organisations at a local level to work to a common crib sheet as it were. The reality is that they all work differently. they interpret the national and local agreements quite differently; there are different terms, different ways of doing things, different personalities. If you are trying to develop pan-Glasgow services then you are really going to struggle now. Manager, Local Learning Provider 5.41 At the time of their introduction in 2007, one organisation sought to ensure that targets set out under the SOAs underpinned organisational thinking. However, SOAs were viewed as being too vague to provide clear guidance to direct organisational decision making, so in spite of initial enthusiasm for meeting targets set out under the SOAs, it was felt that they did not contain sufficient detail to enable service delivery and care plans to reflect their aims. When that came out (SOAs) there was a real focus on the 15 Outcomes. But once it got down to planning, service delivery, care plans, outcomes for individuals, its difficult to make the connections. One of the problems is that disability wasnt seen as a separate strand of any of the OutcomesI think it took the sector a while to realise that we are contributing to the overall health and wellbeing of the country. Senior Manager, National Health and Social Care Provider Summary 5.42 Whilst the principle of the 2007 Concordat (more local control over planning and services) was sometimes supported, with new opportunities for local services to be tailored to local needs, there were also practical challenges.Some key issues identified included: (a) Practically, negotiating separately with individual local authorities and CPPs could be difficult in terms of time and resources for national TSOs working across multiple geographical areas, (b) Some felt that devolving greater decision-making to local authorities had resulted in policy that was unclear and lacked cohesion and resulted in an accountability gap where it was not clear whether Scottish Government, local authorities or CPPs have responsibility for policy, and (c) Increased localism and the focus on local needs may have resulted in a decreased ability to see the bigger picture of policy and provision across Scotland, including limited sharing of good practice across areas. 5.43 New third sector interfaces in each Community Planning area across Scotland are being developed and will become the key mechanism by which the third sector interfaces with the government. However, at the time the research was carried out, the way in which third sector organisations interfaced with planning was in a transitional phase, with CPPs being perceived as the key way in which the third sector were involved in community decision-making. 37

From the point of view of the TSOs participating in this research there was some doubt over the effectiveness of CPPs in terms of being able to represent the whole of the third sector and the limited extent of TSOs influence on policy, leading some to de-prioritise their involvement in CPPs. However, some TSOs felt they were able to influence policy more effectively through other means such as through partnerships with the private sector and other forums. Equally this involvement was not a priority for all TSOs. 5.44 In terms of specific policy priorities respondents felt that: there were variations between local authorities; there had been a shift towards a more employabilityfocused agenda and finally; priorities were perceived to be focused on certain specified groups of clients at the expense of others. 5.45 Single Outcome Agreements (SOAs) likewise were perceived to be subject to variations between local authorities and CPPs. Some found SOAs to not be specific enough in order for them to inform organisational policy.

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6
6.1

CHANGES TO THE FUNDING ENVIRONMENT

A significant theme to emerge from interviews with TSOs was the ongoing and anticipated changes to the funding environment. Almost all TSOs anticipated changes to funding as a result of cuts in public expenditure being discussed at the time by all the main political parties. Interviews took place prior to the May 2010 UK general election, so there was some uncertainty as to the shape of the political landscape after the election. However it was widely expected that whichever political party won the election, there would follow significant cuts in public spending so as to reduce the size of the public deficit. There was a widely held view that there would be cuts of up to 20% in the level of funding received by TSOs over the coming years. This chapter begins by examining the funding cuts (both actual and anticipated) that have been experienced by organisations taking part in the research, including the impact of these on organisations, staff, clients and the sector as a whole. In spite of the anticipated cuts in public spending, there was a widespread realisation that the previous decade had seen an unprecedented level of growth for TSOs as the process of tendering and contracting had created new business opportunities in the context of public spending. However, competitive tendering also created a number of issues for TSOs. These centred around short-term contracts, feedback and dialogue with funders, the tension between quality and cost, and the impact of tendering on the organisation, clients, staff and skills requirements. These issues are examined in the second part of the chapter.

6.2

6.3

Funding Cuts 6.4 The impact of the global banking collapse has precipitated a major public sector spending crisis in the UK in general and also in Scotland. Whilst the full impact of this on Scotland will not be known until later in 2011, it will undoubtedly have an impact upon the role of the third sector in providing public services. This section examines actual and anticipated spending cuts that have been experienced to date by TSOs participating in this research. The implications of these cuts again the impacts of actual cuts and the anticipated impacts of future cuts are then discussed. The picture at present appears mixed some third sector organisations reported that these cuts were affecting their existing contracts to deliver public services, whilst others suggested that they might represent an opportunity for innovation by the sector, if government sought to divest itself of some non-statutory responsibilities to the sector.

6.5

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6.6

Given the early stage of this process it is not surprising that this picture is confused but this is clearly a policy strand that will need to be followed through in detail in future iterations of this study.

Funding Cuts 6.7 Many respondents in TSOs reported that even prior to the recent recession they had faced a challenging financial environment. Respondents reported that their organisations had found that the funding received from local authorities to deliver services had not kept pace with the cost of providing the service. There had been a real terms decrease in the level of funding over the previous decade. The voluntary sector has already been hit by significant funding cuts. I think people if they watched the news they wouldnt know that cuts have already taken place. Weve had a 10-15% cut in real terms in our services over the last 3-4 years. So we have been reactive to that. We need to make sure that the services we deliver can be done within the budget cuts that have been imposed. So its a real change of priorities for us as an organisation. Senior Manager, National Health and Social Care Provider The Implications of Actual Funding Cuts 6.8 There were a number of effects of cuts in the availability of funding for services. There was widespread concern that a reduction in funding made it more difficult to get staff of a high quality leading to the use of less skilled staff who could be paid less. A senior manager within a care organisation, cited the use of assistant support workers in place of support workers as a means of cutting the cost of tenders. What has happened though is that the expectations on the delivery of care have been maintained while at the same time actually devaluing the carer by reducing the salary. Senior Manager, National Health and Social Care Provider 6.9 Discussion with TSOs suggests widespread awareness of the ongoing and future impact of cuts in public expenditure. It was clear from discussions with respondents that many already had first hand experience of the effects of reductions in organisational budgets. Falling incomes had provided the impetus for a reconsideration of the role of TSOs in the delivery of public services. Withdrawal from the delivery of some services came about as a result of budget cuts undermining the TSOs ability to continue to provide a high quality service. Price competition generated by competitive tendering was also perceived to have an impact on service quality. Many organisations had taken the view that the principles and ethos of their organisation were incompatible with providing services of a lower quality and would therefore withdraw from the provision of those services. Were being asked to do more and more for less and less weve done a lot of things to bring our hourly rate down so that we can compete but there does come a point where you have to say: actually no, we cant deliver quality 40

service for what you want to pay us In fact we did hand back a contract just recentlybecausewe could not say we are confident that we can provide a quality service herethe worry of course is that if we, who genuinely is a values driven organisation - if were not doing it, who is? Senior Manager, National Health and Social Care Organisation The Implications of Potential Future Funding Cuts 6.10 Many of the respondents were also anticipating significant cuts in funding in the future. For example one TSO felt they had responded well to limited funding in the last decade or so, but that there was a limit to the extent to which they felt they could continue providing services if budgets continued to be squeezed. 6.11 A number of respondents also expressed concerns for the impact on client groups with fears that some may become marginalised: I think that our client group gets more and more marginalised, because funding just gets diverted elsewhere. Senior Manager, Regional Learning Provider 6.12 There was also a fear among some that there would be a negative impact in the longer term if funding cuts lead to the loss of some TSOs. Specialists skills, knowledge and capacity could be lost and it would be impossible to get these back when the economic situation improved. If we do get more cuts there will be a number of organisations that go out (of business) and I dont know if there has been a proper assessment of the capacity that those smaller organisations bring and if there has been any risk assessment of that. .the voluntary sector could actually be really hard hit to the point where the skills and capacity is lost. Senior Manager, National Health and Social Care Provider 6.13 However, this was not a universal view. One respondent felt that the third sector was too large and needed to be reduced in size. Another felt that funding cuts would be an opportunity to reduce organisations dependency on public funding or to develop new, innovative, strands of work in areas that the public sector withdrew from. 6.14 Scottish Government policy is focused on enabling resilience and sustainability through encouraging partnership working, sharing knowledge and building capacity33. However, in spite of this, there is concern over the long term sustainability of the sector since although the sectors income has been rising, so also has its expenditure with a funding gap of 24M or 0.7% of the sectors income34. In the face of budget cuts third sector organisations feel that they are vulnerable and are likely to face many challenges ahead.

Actions proposed to take forward the issues identified at the Roundtable discussion on 14 April 2009 at http://www.scotland.gov.uk/Topics/People/15300/Resilience. 34 Dacombe, R and S. Bach (2009) The Evidence Base for Third Sector Policy in Scotland: A review of selected recent literature, Edinburgh: Scottish Government, point 2.6.6 page 21.

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Tendering 6.15 This section examines issues raised by TSOs around competitive tendering. This includes: short-term contracts; feedback and dialogue with funders, the tension between quality and cost, and the impact of tendering on the organisation, clients, staff and skills requirements. Short-Term Contracts 6.16 Although competitive tendering was widely accepted to encourage greater transparency in the bidding process and create new opportunities for business, there were also widespread concerns over its effects on organisational instability and staff uncertainty caused by having to re-tender for contracts. A senior manager within a large national disability charity described these issues: We have just come through a period of significant levels of tendering and retendering for services [creating] both opportunities and challenges, primarily challenges because [there was] a lot of uncertainty. A lot of anxiety [was] produced by that uncertainty for staff teams. It makes future planning for the organisation difficult because we are unsure if we still have contracts in 3, 6 or 12 months. Having said that tendering opportunities are opportunities to win new business. Senior Manager, National Health and Social Care Provider 6.17 Respondents from many organisations felt that there had been an increase in the prevalence of short-term, one year contracts. The rise of these short-term contracts was seen to be occurring in tandem with a reduction in long term contracts that would provide funding for between 3 and 5 years. The reported effects of an increase in the number of short-term contracts included: increased bureaucracy; more time spent on contractual and funding arrangements and; the need to do more funding applications in a shorter space of time. Vulnerable clients were also seen to be disadvantaged by short-term service contracts in as much as there was a lack of continuity and difficulties making long term plans to aid the client. A number of respondents reported that short term contracts also had a detrimental effect on TSOs staff morale as well as being a disincentive for a provider to invest in staff training and the development of the service. Some staff contracts had had to be shortened to reflect shorter contracts. To illustrate some of these points: Were being asked more and more to operate a one year contract...you cannot plan ahead and particularly when youre trying to provide a service to someone vulnerable, who has probably been let down by individuals throughout their whole life. You cannot plan a service on the basis that: we might be with you for twelve months, then dont know what will happen. Its also very hard to plan efficiently, to spend efficiently if you cant make a long term plan. That in itself doesnt need to cost any more in fact it can cost less because you dont have the expense of constantly re-tendering. Senior Manager, Health and Social Care Provider

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So the question for us is how much do we invest in people, in time, in services, so do we really want to spend lots on training and services if we lose a contract and they then become a member of somebody elses staff? Health and Social Care Provider 6.18 A further issue with current short term funding arrangements was what some reported to be the expectation that unspent money would be returned to the funder. Several respondents described situations where their organisation had delivered services to target and under budget and were then subject to demands from a local authority funder for the return of unspent funds. 6.19 The expectation by local authorities that TSOs were willing to return unspent funds rather than invest in the subsequent years service delivery was perceived to arise from two sources. (1) local authorities and other funders were often seen to view TSOs as substantively different from their private sector counterparts despite being involved in the delivery of similar services. By having a charitable mission rather than being accountable to shareholders, TSOs felt that they were viewed by some local authorities as having no need to retain budget surpluses for re-investment, and (2) some respondents also described a sense that local authorities were more willing to interfere in the activities of TSOs than they would with a private sector counterpart. To support such claims, a respondent cited the case of a local authority that sought to influence the wages that TSOs staff were paid as a means of reducing the cost of service delivery. As such, a number of respondents in TSOs thought that they were more subject to pressure from local authorities for the claw back of unspent funds. 6.20 There is recognition that the third sector needs to be able to plan service development and requires stability to train and retain staff. The Joint Statement indicates that As a general rule funders will aim to take a 3-year approach to both grant and contract funding35. The Task Group go further and recommend 5 year arrangements where appropriate to be introduced 36 . However, as the SCVO point out, and is supported by our research, Many current contracts fall short even of the current officially recommended three years.37 Feedback and Dialogue with Funders 6.21 Several respondents commented that their organisation had experienced significant financial difficulties as a result of funders delaying contract decisions or the payment of contracts. Respondents described a lack of timeliness in some local and central government funding decisions. A number of TSOs reported receiving notification of funding award several months after the start of the proposed service.
Joint Statement on the relationship at Local level between Government and the Third Sector, September 2009, Scottish Government, Solace Scotland, COSLA, SCVO. Point 2. Available at http://www.scotland.gov.uk/Topics/People/15300/JointThirdSectorStatement Point 7. 36 http://microsites.scvo.org.uk/taskgroup/Home/ViewInformationItem.aspx?i=912; Point 2.8 37 SCVO Fair Funding For Voluntary Sector Services downloaded 10/06/2009 at http://scvo.org.uk/cvo/Print/Print.aspx?al=t&Info=1570
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6.22 Another respondent felt there had been an actual change away from being able to negotiate with local authorities in some instances about how cuts are implemented: Were now being confronted quite often with cuts to our budgets...Once we would have had an opportunity to negotiate...and some local authorities are still doing thatHow can we restructure your contracts? What can you offer? Lets do this together. But some commissioners are taking a very different approach, under pressure from finance they need to chop money off us and this is what we are chopping. Senior Manager, National Health and Social Care Provider 6.23 It was felt that local authority funders held considerable power in relationships and their decisions and opinions were not open to question. In particular, some felt that the tendering process suppressed the role played by TSOs in shaping services as consultation with funders is not always feasible in a competitive climate. TSOs now deliver services that funders believe are appropriate and the on-the-ground knowledge held by organisations cannot be fed in. As a result one respondent for example felt that the creativity of organisations such as theirs had been suppressed. The minute you move into competitive tendering you shut down the dialogue and someone writes what they think that design should be. They put out to you and you write what you think that response should be and then they don't even speak to you. And they wont speak to you. And so that doesn't seem sensible in how you design a mutually benefiting system. Senior Manager, Employability FG 6.24 The issue of power relations arose during discussion around the activities of some local authorities. Several respondents described anxieties around challenging local authority funders where outcome targets were perceived to be highly ambitious. There was a concern that if they were seen to be questioning targets set by funders, that this would undermine their likelihood of securing future contracts with the funder. However it should also be noted that targets were, in some situations, developed in partnership with funders. As such, these targets were felt to more realistically reflect what could be achieved. Here, a respondent described the emergence of targets through collaboration and discussion with one local authority funder. I feel that the targets that we have, we have done that in partnership with funders. They havent said you must get 8 people into employment, four into college. What they have said is what is realistic? If we can get x amount coming in everyday, x amount moving into college, those are sustainable. Service Manager, Local Learning Provider 6.25 Several TSOs that held large government contracts noted another dimension to the balance of power between funders and TSOs. The rise of contracting as a method for the delivery of public services and the subsequent growth of private and TSOs to deliver government policy was reported to have created 44

an industry of service providers with a powerful lobby that was perceived to have the capacity and strength to approach the government on issues regarding outcome targets that were considered unattainable. A Senior Manager with one TSO which had a contract to deliver government employability services describes how their organisation had greater leverage in negotiations with government as a result of this. Having created this huge market, it now means that you have a body of organisations that are quite powerful. There is a trade organisation, so there is a way of communicating with government collectively which has grown as the market has grown. That gives us some faith that we are in the same boat as [X] and they are a multi-billion pound organisation that are going to have the same issues. Senior Manager, National Employability Provider 6.26 It should however be noted that very few TSOs that participated in the research held large central government contracts and were not part of a sector that had the resources to lobby government over such issues. For a majority their income was derived from smaller funding streams that did not place them within a more powerful sector. Quality versus Cost 6.27 There was a concern among respondents in a number of organisations that local authority funders were more focused on cost rather quality. Some felt that funding decisions should not only be based on price and that best value should be conceived of as more about the quality of services being delivered. For some, the tendering process had placed too much downward pressure on the price of services resulting in service quality being overlooked. The flaw is [that] in the whole tendering process social value and social benefit has largely been ignored in favour of price. Senior Manager, Local Employability Provider 6.28 Although procurement processes were supposed to value quality over price, one respondent believed that there was no obvious way in which quality was being assessed as a measure of the value of a bid. 6.29 The perceived lack of methodology for incorporating a measure of the social added value of TSOs was criticised for having led to contracts being awarded on the basis of price and thereby excluding the role of TSOs who found it difficult to compete on price alone. Some felt that the tendering process did not effectively take account of much of the additional work that goes into providing quality services: Its quite a commercial kind of process and youre talking about often quality services and peoples lives and those kind of elements that somehow get ironed out in the tendering process and...there are lots of things that are happening within quality services that take time and effort and you cant sometimes put a price on that. 45

Senior Manager, Equalities FG 6.30 Several respondents had experience of losing contracts to larger organisations that offered to provide the service at a lower cost. Although the process of competitive tendering may result in greater efficiencies through competition on price and quality, it was also felt that the social aspects and benefits of the service had been lost. It was a service [where] local people give meals to local people and mental health issues could get picked up and lots of things happened along the way, a much more localised kind of community service. And then they brought in a huge big organisation to do the meals and so it all became frozenand then some of the human contact gets cut out, its much cheaper, you don't have to speak to people [you] stick frozen meals into the deep freeze and that's them fed. Whereas the system where it perhaps cost a bit more was they had social interaction with people. Senior Manager, Equalities FG 6.31 The Best Value model puts emphasis on both quality and cost.38 The Social Care Procurement Scotland Guidance consultation document recognises the importance of quality and continuity of services39. However, the overwhelming feeling from the respondents in our research was that the emphasis was on cost over quality. Other issues in the tendering process 6.32 This section examines other issues where it was perceived that tendering had impacted upon TSOs capacity to deliver public services. These include the impact of tendering: on the organisation; on staff; on clients; and on the skills requirement of staff. 6.33 Some respondents raised the point that the tendering process was costly and time consuming for both themselves and commissioners. A couple of organisations reported that their staffing levels in HR and finance had to be increased in order to manage tenders. For instance, one respondent described how their TSO created two full time posts for the purpose of writing tenders. 6.34 Another respondent noted that short-term funding made the development of long-term strategy problematic: Its quite difficult when you have short term funding to ask what are our assumptions that allow us to build up 5 year projections? And to ask what are our capacity needs? What are our investment needs? What do we need to invest in to support our ambitions for growth?. 6.35 Many front line staff and managers were concerned about the impact that funding both cuts in funding but also timely notification of award - had on
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http://www.scotland.gov.uk/Topics/Government/PublicServiceReform/14838 The Scottish Government (2010) Consultation on Draft Social Care Procurement Scotland Guidance, Edinburgh: Scottish Government, page 22.

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staff, particularly morale, especially since notices of redundancies could not be issued40 until awards were confirmed. Also in terms of staff morale, probably 50% of the team have had issues of redundancy notice posted to them because we knew we had a duty of care to them that we have to inform the team of what the likelihood will be of unemployment. Morale is affected because how are you supposed to continue for our learners if in 2 or 3 months time they dont have a job... Manager, Regional Learning Provider 6.36 Some felt that short-term funding also had a negative impact on clients in terms of lack of continuity and uncertainty in the on-going provision of the service. This issue was particularly discussed in the field of Social Care where, as pointed out above, the most important aspect of the work was felt to be through developing relationships with service users. This process amounts to a substantial initial investment, which does not represent hard outcomes, and also an ongoing preventative dimension, which is also difficult to measure or schedule. While short-term solutions involving volunteers to cover the gaps between funding cycles have been explored by some TSOs, these have been described as unsuitable. The problem is that a lot of these services [i.e. in particular a family support service] run from week to week or from month to month which makes forward planning difficult to do. The people we support have very challenging lives and do not tend to trust statutory services, so for a voluntary organisation to stop, it then takes a long time to build up the basic relationships...Sometimes it takes that investment of a year or more to build working relationship with families really needing care...At present what we have is families being hesitant about developing these relationships as it is possible the services will disappear, and the communities themselves become hesitant. Senior Manager, Health and Social Care FG 6.37 Lack of parity of esteem was also mentioned by some respondents whereby they felt that other services and funders did not understand the services that are provided by the third sector and that these are delivered by professional staff. This also had implications for TSOs, for instance, in one organisation there was a concern that salaries within the organisation had not kept pace with inflation and that was disadvantageous in terms of retention of skilled staff. 6.38 It was noted by a number of respondents that specific skills in tendering were becoming essential. This could be problematic for some organisations, particularly smaller ones with fewer staff resources. A number of organisations stated that they felt the strength of many of its staff were in their lived experiences with their local communities and these staff did not always have the skills required for tendering.
40

Many organisations were required to give staff who were coming towards the end of contacts notice of redundancy. If awards were not notified within this timescale then redundancy notices were issued to staff.

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Summary 6.39 Many TSOs reported that over recent years (in the last decade but particularly in the last 3 or 4 years) some funding had not kept pace with inflation although the same level of service continued to be provided therefore with the effect of real term cuts. The impact of these cuts included employing lower skilled staff on lower wages and withdrawal of delivery of some services. 6.40 Many TSOs feared future spending cuts of up to 20%. While some perceived this to be an opportunity to reduce dependency on public sector funding, many were concerned about the potential implications of such substantial cuts across the sector. These included vulnerable client groups becoming more marginalised and the loss of some third sector organisations and with them skills, knowledge and service capacity. 6.41 Competitive tendering and high levels of public spending had facilitated an expansion of the third sector over the last decade. However, while tendering created new business opportunities, it also raised a number of challenges for TSOs, including: (a) Short-term contacts of one-year were reported to have become increasingly common. However, these created difficulties for TSOs in terms of increased bureaucracy and long-term planning as well as lack of continuity for clients; (b) Some felt there was a lack of timeliness in some local and central government funding decisions, with awards being notified some time after contract start dates. Some also felt that there was a move away from dialogue with funders around service funding and delivery outcomes which was compounded by disparities in power between funders and TSOs; (c) Although cost and quality are emphasised in the Best Value framework, many respondents felt that the focus of many funders had become too targeted on cost at the expense of quality, and; (d) The tendering process also had implications for organisations in terms of organisational planning and staffing, security of employment for employees, staff morale and staff skills requirements.

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7
7.1

THIRD SECTOR RESPONSES AND CHALLENGES TO CHANGING ENIRONMENTS

Changes to funding and policy environments present the third sector with both challenges and opportunities, some of which are considered here. Firstly, we examine how TSOs have responded by adapting their services to fit with changing policy priorities. Secondly, the challenge of maintaining core funding and building internal capacity is considered. Thirdly, we examine the ways in which organisations are diversifying their funding bases. Fourthly, we look at significant organisational restructuring that has been undertaken by TSOs in order to maintain their competitiveness, and finally, the challenge of competitors both from the public and private sectors is considered.

Adapting Services 7.2 Many of the TSOs had responded to changes in policy priorities by adapting their services. As outlined in the section on Policy Priorities, this meant focusing more on particular groups of clients and/or on employability issues. In one organisation this meant working with a narrower range of client groups than they had previously done. Many people who did not fit into funding categories but who still required support were being excluded from programmes because policy dictated that programmes be used to support only certain client groups. A respondent from this TSO described how there was a need to be very specific in criteria. That they have to be of a certain age and have to live in a certain postcode before they can access the service. We have had to be very specific as to what we do (Manager, Local Learning Provider). However, other TSOs had widened the range of clients that they worked with and this widening of organisational activities was, in some situations, linked to new opportunities created by competitive tendering. As an illustration, this TSO was exploring opportunities to secure funding that would mean broadening their current area of specialism (a particular client group and a specific issue) to work with the same group in a more employability-focused way. Yes we are specialists in what we do, but again we have to change what we do in order to secure funding. For instance, Im going to do a presentation for [X organisation]. They have such high rates of clients in terms of disability allowance and incapacity allowance. So...we could get a contract working with this network of people and develop them through different mechanisms. As an organisation we need to look outside the box a wee bit further. Manager, Regional Learning Provider 7.5 A number of organisations had also adapted their work to take account of the policy funding focus on employability:

7.3

7.4

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I find what it has done is it has pushed us into areas of service delivery that we wouldnt have done otherwise because of the outcomes approach. So for instance, the employability agenda with young people who have substance misuse is one that comes much higher up for us than it would have because there is so many opportunities for funding programmes around destinations, that we have not previously have seen ourselves working in.... Senior Manager, Equalities 7.6 While competition to provide services may, in conjunction with aspects of the procurement process, have led to a reduction in the unit cost of providing services, this has also created opportunities for some TSOs to expand their activities. A respondent from a social enterprise described how through the tendering process they had been developing systems that could offer the right kind of employability support, not just to people with mental health problems but across a wider range of people disadvantaged in the labour market (Senior Manager, Local Employability Provider) This divergence of approaches and reactions within the third sector whereby some organisations had diversified and others had continued to work with long held client groups also reflects different leadership styles within organisations. Some chief executives had implanted growth strategies designed to spread the activities of the organisation across a wider client base. This was implemented so as to spread risk associated with supporting a narrow client group were policy priorities to change and funding be moved away from that group. The Senior Manager of a large employability TSO described seeking to develop a balanced profile activity that sought to minimise reliance on a small number of large funding streams and spread the organisations activities across a range of activities. By spreading the type of activities that the organisation undertakes, the cycle of re-tendering could be better managed. Spreading activities has meant involvement in employability contracts, regional regeneration and public and private housing associations. However, not all organisations advocated this approach. One Senior Manager felt that organisations needed to protect their core service delivery and make sure that their brand was coherent and focused. As such, they had continued to focus on providing support to their core client group. Another organisation flagged up the tension between adhering to the organisations core mission and that of meeting policy-influenced contracts as being difficult to navigate. The big challenge is getting the funding which allows us to do the work we think needs to be done. When we started in 1997, there was 5 of us, but now we are 28 staff, so it means much more pressure on having to find funding to keep the organisation going. 0n bigger contracts, such as X and Y, this involved more recruiting and working in ways we werent aligned with. But as the funding ended we were faced with having to shrink back our staff pool, while also being engaged in work which was not close to our philosophy which was a very difficult period. However, it made us refocus on our values as an organisation. Senior Manager, Local Health and Social Care Provider

7.7

7.8

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Core Funding and Internal Capacity 7.9 One of the key challenges mentioned by a number of respondents was to be able to sustain and grow their business. A number of respondents mentioned the importance of continued funding for core activities. There was concern that if core funding was cut any further then smaller TSOs in particular would face problems in maintaining capacity (e.g. for developing bids and associated paper-work related to administering projects) as well as struggling to meet staff costs while grant decisions were being made. And right now for delivering on a tendering exercise our critical mass isnt enough....We have the models, we have the know-how how to do it really well. But to deliver it on a tender we would need 3 months lead time just to recruit and get staff in place to actually deliver, because our staff is working to capacity at the moment. Thats a real challenge. Senior Manager, Health and Social Care Provider 7.10 Several senior managers raised the issue of local authorities questioning the extent of the inclusion of central costs in tenders. This position did not take into account the need for TSOs to have HR and finance functions and comply with various health and safety and insurance regulations to which they are legally required to adhere. Local authority objections to the inclusion of central costs in tenders were not however just about whether such costs should be included at all but also about the level of those costs, as outlined by a senior manager with a national care organisation: The question is more about the level than about the existence of costs. They understand that. Because we are not talking about a business model for profit, we are talking about operational overhead. For example I dont directly run any of the services but my salary is paid for in proportion to all of those services. So there is no extra profit if you like. We are still supposed to break even which we didnt do last year and which we wont do this year. Senior Manager, Health and Social Care Provider 7.11 Objections from within local authorities and other funders as to the inclusion of these operational overheads in the tender were reported to be fairly widespread. TSOs argued that it was unreasonable for these costs not to be met since they were unable to cover these costs from elsewhere and were unable to provide servies without meeting these costs first: Some funders say we wont cover central costs and they say it quite bluntly. And our question to them is how do you think this service is going to be delivered? Senior Manager, Regional Learning Provider 7.12 The experience of some of the respondents therefore indicates that Local Authorities may not be making sufficient provision for TSOs to generate operating surpluses and cover their core costs. This may not be happening across the board, and potentially presents major challenges for TSOs in sustaining their activities into the future. 51

Diversifying the Funding Base 7.13 Many organisations were considering how they might move forward to best meet the challenges presented by the current policy and funding environments. A number of organisations were considering how to diversify their funding base to become less reliant on public funding. One in particular felt that it was a good opportunity for their organisation to reduce their dependency on public sector funding. Strategies included: (a) Alternative Funding Streams; (b) Fundraising, and (c) Social Enterprise activity. Alternative funding streams 7.14 A number of organisations were seeking to reduce their dependency on a small number of large grants and were seeking to spread the risk between a number of different sources of income and funding streams. 7.15 A central driver in the search for alternative funding streams was the way in which the contracting model, through the use of open competitive tendering, opened up the process of bidding and allowed TSOs to see who was winning and losing business. The contracting process has become more transparent because of requirements to openly tender and as a consequence the search for alternative funding streams has become more competitive and more professional. This respondent from a large national employability TSO described a move away from a reliance on ESF to winning a large central government employability contract, but that this also brought with it challenges: I heard [name of CEO] say that we have now moved from ESF and we are predominantly delivering bigger tenders and prime contracts. But the challenge I think here for the development team has been that you cant simply switch off one line of funding and switch the other on. Significant infrastructure and different types of services that had investment from various types of funding including the ESF. Going forward into the new programme we still had those projects and services. So we still have ESF there, it just doesnt make up the same proportion of the business that it used to. Manager, National Employability Provider Fundraising 7.16 Although many of the organisations that participated in the research had charitable foundations, the dominance of competitive tendering for income meant that many traditional fundraising activities received less attention. Income derived through the delivery of public services was, for almost all organisations that participated in the research, considerably more than that which was attracted through traditional fundraising opportunities. 7.17 Nevertheless, there was recognition by some TSOs that a charitable status brought with it opportunities for fundraising. One organisation in particular hoped to ensure longer term sustainability by pursuing a strategy to raise funds through charitable fundraising activities and become less dependent on existing funders: 52

We are not a part of the public sector, we are a charity, we have huge opportunities to go and act like a charity, so we can, for example go out fundraising in a way that other organisations probably cant so I think the main opportunity for us has been to actually rediscover our roots as a charity, which is something I am personally very keen on. It means that we have an opportunity [to] develop our own services and be less reliant on something a local authority wants to commission and it means that we have an opportunity to engage more with the general public and say look, this is the service that we are providing- its important Senior Manager, National Health and Social Care Provider 7.18 However, several large TSOs discussed the way in which the recession had affected their charitable funding streams. Corporate fundraising and direct mailing were seen to be two areas that had been affected. The two that we have seen the biggest hits on have been corporate, where a corporate body have said we havent got the money to spend on that at the moment and also direct mailing. Where people might have given us a tenner, now they are only giving a fiver. Senior Manager, National Health and Social Care Provider Social Enterprise 7.19 The debate about the nature and impact of social enterprise in Scotland is a complex one. For many organisations this was not so much about becoming a new type of organisation called a social enterprise, but rather about embedding a distinctive approach to management within their organisation. The core of this approach is to seek sustainable income streams from mission critical and/or non-mission-critical activity, rather than to rely upon grant income alone. It also embodies a vision of a more business-like and entrepreneurial approach to organisational management. A number of respondents, for example, mentioned that they were considering the possibility of developing social enterprise activity in order to build the longer-term sustainability of their organisation: So we have to start thinking about where is our main stream core funding is going to come from? How can we attract that kind of funding? I have some long term plans for the organisation which I cant even begin to develop until I stabilise the foundations of the organisation. But those long term plans are about long term sustainability. Its about developing social enterprise activity, its about developing the training and consultancy work that we do. So that we dont continually wholly rely on grant funding. Senior Manager, Regional Learning Provider 7.20 A small number of the organisations who participated in the research were already self identified social enterprises. A representative of one of these felt that their status was beneficial in terms of engendering a business-orientated attitude, giving them more leverage with funders, and being less dependent on external funding:

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I think it gives you a different way of looking at the world. Because we have to deal with employers a lot as well asthe local authorities. Employers areone of our stakeholders in the sense we get work placements and I think we started taking some of the skills of having to negotiate with business people right from the word go. Which is quite short and snappy and no beating around the bush, no long meetings or anything. And I think that's helped us a lot you know, when working with employers ... Senior Manager, Equalities FG 7.21 One Senior Manager in an organisation also felt that social enterprises were less dependent on external funding and more aware of the dangers of the lack of diversification of income streams, compared to traditional TSOs. 7.22 However, social enterprise did present challenges: Well I think the obvious challenge is running a business and providing a support environment. They don't often go hand in hand because you have the challenges of time scales and product delivery, you have customers who expect a perfect product and they wont accept a shoddy product just because it happens to be produced by somebody with a mental health condition.. Senior Manager, Local Employability Provider 7.23 Importantly, many TSOs espousing a social enterprise orientation were also acutely aware of its limitations, especially in the grip of a period of global recession: And it's a real business and weve got to have investment and its not for profit, so it varies from year to year....And we would never ever become self sufficient with, from our trading income, that just wouldn't happen. Senior Manager, Equalities FG 7.24 In reality, the dichotomy between social enterprise and traditional TSOs is probably a false one. It is true that there are two extremes to the continuum. At one end, there are those self professed social enterprises that embrace this as their identity. It offers them a distinctive niche in their work with the government and a cohort of peers who share their values. At the other extreme are those TSOs wedded to grant-based revenue as the only sustainable income source for the sector and who believe that the commercialisation embedded within a social enterprise culture is counter to the values and mission of the TSO sector. Between these two extremes are probably the majority of TSOs who all engage in elements of social enterprise activity. This might mean adopting a more business-like approach to their contractual work with government, the adoption of an entrepreneurial approach to income generation or service delivery more broadly (including using non-mission critical activity to generate a surplus), or simply being opportunistic in when to use the social enterprise label in bidding for contracts. It is also important to clarify the different concepts of social entrepreneurs who embody the individual creativity that is often seen as totemic for the sector, and social enterprises that are a way of understanding organisational activity.

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7.25 In understanding the totality of the contribution of the TSO sector to Scotland it is important that this more complex level of analysis is appreciated. Very few TSOs actually engage in no social enterprise-type activity. Equally only a proportion of these would self identify as social enterprises. It is important is to clarify the impact of a more business-like approach to income generation and service delivery by TSOs as a whole. Maintaining Competitiveness 7.26 Several of the organisations that participated in the research had recently undergone significant internal restructuring. Restructuring took place for several reasons including: improved efficiency; better communication between senior managers and service managers; the loss of staff who were considered unsuited to adapting to the change of culture brought about by contracting; and greater focus on the strategic aims of the organisation. Although the way in which each organisation undertook their restructuring exercise differed, it was clear that a primary driver was the radical change in the culture of TSOs brought about by the use of competitive tendering, opportunities for the delivery of public services and the subsequent need for organisations to be efficiently managed. 7.27 Four organisations had taken major action in order to maintain competitiveness. In one organisation this had included a major organisational restructure in order to lower costs and maintain competitive rates. This included making a number of staff redundant and creating a flat, lean structure and changing existing staff terms and conditions. They were also reviewing the viability of all of their services. Ultimately our aim is to support more people in high quality services...the challenge to that is to compete at the moment and particularly over the last year we've had to you know radically look at our cost structure and financial model in order to be able to still compete in what is a very competitive market in terms of a cost perspective. Senior Manager, National Health and Social Care Provider 7.28 Change in the strategic approach in another organisation was underpinned by organisational changes. The new structure was perceived to be more efficient, better able to collect and disseminate management information and manage budgetary decisions. And in terms of the organisational structure we have put a huge amount of effort into trying different structures. We have as leaner structure as the organisation has ever had...So its very easy for information to come in and go out and for us to make decisions. There has been a shift to evidence based decision making and to be very cognisant of the money that we need to carry out those decisions. Senior Manager, National Health and Social Care Provider 7.29 Changes outlined here in response to the need to maintain competitiveness may be characterised as the increasing professionalisation of management 55

and information structures within large TSOs. These changes appear to have happened relatively recently, in the last 5 years, and have seen the loss of several senior staff considered not to have adapted to the new reality of contracting and tendering. Support for these changes appeared strong across all management levels and there was widespread understanding of the need to provide an efficient, professional service whilst ensuring that the TSOs founding values and ethos were maintained as guiding principles. The balance that the third sector have to walk is, can we stick to our values and ethos and at the same time be more business like? It means that the approach we take to working with clients means that we have to improve the quality of that but it doesnt mean we necessarily move away from people focussed individualised service. There are some things you dont change because of the values of the organisation and other things that you would change to improve the way we work. Senior Manager, National Employability Provider 7.30 To understand how organisational changes affected the delivery of services, several interviews were conducted with operational staff within the employability TSO. There appeared to be greater flexibility in the organisation of office staff with a core cohort of staff working across several different projects leading to administration staff having a greater depth of experience across multiple projects. There had also been improvements in staff training and new opportunities for staff to diversify their roles. 7.31 One small TSO had adapted to the constraints of balancing their core aims and values with the current changes in policy and funding by creating multiple organisational structures which involved developing smaller sister TSOs and sharing both resources and acquired expertise. Limiting the organisation size helped to maintain a person-centred approach, while still developing capacity for public service delivery across the organisations. 7.32 Cost considerations are a key principal (along with quality) in the Best Value framework. Therefore, while no respondents mentioned this specifically (although tendering was cited frequently) this may be partly behind organisations driving down their costs in order to maintain competitiveness. For instance, the Joint Statement suggests that third sector organisations (and local authorities) should always look for better and more efficient ways of organising themselves in order to deliver Best Value and maximised capacity within the sector41. Competitors 7.33 A number of respondents across different organisations felt that there was prejudice against TSOs by some local authority funders. This took the form of viewing the third sector in a different light to potential contractors in the public and private sectors. In relation to the public sector, some respondents felt that statutory services did not have to jump through the same hoops as the
Joint Statement on the relationship at Local level between Government and the Third Sector, September 2009, Scottish Government, Solace Scotland, COSLA, SCVO Point 16.
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voluntary sector in terms of making their case. In addition, a number mentioned that the public sector did not have to factor in the full cost recovery for their services to the same extent that the voluntary sector had to which led to unfair competition, especially since some local authority funders were perceived to be unwilling to meet these costs. This led to what some believed was a lack of a level playing field with public service providers a point made by a number of respondents across different organisations. These respondents felt that many public service providers did not factor in full cost recovery into their cost calculations of providing a service and so could potentially provide a service cheaper than those in the voluntary sector. They felt there was a lack of recognition among funders about these issues and a lack of transparency about public sector service costs. The other challenge we have is that when we tender for things we have to make sure that we are covering our costs. We are not in it to make a profit, because we are non-profit organisation, but we have to make sure we cover our costs....When you are competing with other public service providers, such as NHS, such as local authorities, they dont put their full cost recovery, because they dont know what their full cost is...They dont take into consideration their rental costs for their offices, HR costs, Finance Officer costs. All the overheads are provided through their main body and they dont have to cost that in, its just there - that cost is absorbed somewhere else. So you are not competing in an equitable kind of way. Senior Manager, Regional Learning Provider 7.34 Some of these experiences would appear to be contrary to one of the objectives of the Enterprising Third Sector Action Plan which is to open up more markets to an enterprising third sector42. 7.35 Some respondents also felt that there was a defensive attitude to funding as the public sector sought to protect their own public services. It was felt that clients would suffer because of this as local authority departments did not always have the skills to deliver the services that they were now providing inhouse. The ways in which local authorities made their funding decisions in light of budget constraints was questioned. At one of the focus groups it was debated as to whether the local authorities actually ever considered the benefits of not keeping services in-house: But are they ever required to do you know a real weighing up of the benefits of keeping it in house and the benefits of putting out? Or do they just jump to the conclusion that in-house is going to be quicker, its easier, it keeps all their lot happy? But its public money so what they should be being asked to do a full analysis of what would the best use of this money be so that weve got a chance to get in thereI certainly don't know that its happening. Senior Manager, Employability

Scottish Government (2008) Enterprising Third Sector Action Plan 2008-11 http://www.scotland.gov.uk/Topics/People/15300/Actionplan page 6-9

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7.35 The type of organisations that TSOs were now engaging with had also changed as a result of the move to tendering. The Government has been looking at creating more opportunities for the private sector in public service contracts43. This has impacted on some third sector organisations, with one respondent outlining an example of where it was now facing international competition for tenders. TSOs are also competing with larger private sector agencies. TSOs may be subcontracted by the private sector but concern was raised that they did not share the same ethos and culture. However, some also felt that funders perceived potential private sector contractors more favourably than the voluntary sector: I think that in contracting in the public sector as a whole, that one of the barriers to the third sector, whether its about our particular area or not, is that you are viewed differently to the private sector in a way that can work against you and we can see this in the day rates that [X] or anyone else can charge. There is an in-built assumption: Oh its the private sector and theyve got big infrastructures to look after and theyve got all this expertise, therefore its justified...Im not accusing anybody of thinking that consciously. Its deep in there and thats a culture change that has to shift. Senior Manager, Local Employability Provider 7.37 A number of respondents stated that they would like to see parity of esteem of the third sector with local authorities and other service providers where there is a recognition of the value of the third sector and that services are provided by professional staff. Summary 7.38 Many TSOs had adapted their services, in some cases by broadening and diversifying or in other cases by narrowing the range of services provided in order to comply with changing policy priorities. Others changed the focus of their work in particular, towards the employability agenda. 7.39 Funding for core organisational activities were vital to TSOs in order to be able to sustain and grow their business. However, there were concerns that there would be less funding for core organisational running costs in the future and there were already reports that some funders were unwilling to cover these costs. 7.40 A number of organisations were considering how to diversify their funding base in order to become less reliant on public funding. Strategies included identifying alternative funding streams (aided by the expansion of open competitive tendering), fundraising (utilising their charities status with a view to ensuring longer term sustainability although the recession did negatively affect this avenue in some cases) and developing social enterprise activity (again often as a means to support the longer term sustainability of the organisation,

43

Harrow, J. (2009) Thistles, roses, thorns: some reflections on the third sector/government relations and policy expectations in economic downturn, ESRC/SCVO Public Policy Seminar Series Recession and the Third sector, 13 February 2009, Edinburgh.

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by becoming more business like or entrepreneurial and seeking to diversify income streams) 7.41 A number of organisations had taken major action to reduce their cost base and maintain their competitiveness by restructuring their organisations, including making staff redundant, reviewing staff terms and conditions, increasing professionalisation of management and information structures; and diversifying staff roles and activity. 7.42 Despite a policy to open up more markets to the third sector (as outlined in the Enterprising Third Sector Action Plan), some third sector respondents perceived that the sector was not able to complete on an equal basis for contacts because of a lack of parity of esteem with other providers.

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8
8.1

PERFORMANCE AND OUTCOME MEASURES

This chapter examines issues around measurement of performance and outcomes of services provided by TSOs. Senior managers were asked to discuss the mechanisms by which their services were monitored and evaluated by funding bodies. Evaluation of service delivery may be built into delivery contracts and may place requirements on the service provider to establish minimum staffing ratios and deliver specific outcomes for service users. Contracts also specify expected outcomes required of service providers. In addition to these measures, some local authorities would also conduct annual audits of outcomes to ensure that service providers were meeting their contractual obligations. On the whole, respondents were supportive of the principal of measurement, in particular in order to evidence the value added and contribution of the organisation. However, a number of issues were raised which are covered in this chapter. Firstly, there were differences in the monitoring and evaluation regimes implemented by funders. Where funding to provide a service had been secured from a local authority, there was considerable variation across different local authorities in approaches to monitoring and evaluation. Secondly, many funders were focused on measuring hard outcomes which did not always capture the added value provided by the TSO. Finally, the use of SROI and other tools to measure added value of TSO is examined.

8.2

8.3

Variability in Measurement and Scrutiny by Local Authorities 8.4 Local authorities fund a variety of services supplied by TSOs. Many of the large national TSOs that participated in the research held contracts with more than half of Scotlands local authorities. Local authorities are therefore important providers of funding for services supplied by TSOs. Interviews with senior managers in TSOs suggest that there is considerable variation across local authorities in the way that services are monitored and evaluated. Several of the large national TSOs working across a number of local authorities were critical of perceived inconsistencies in the evaluation criteria used by different local authorities. For instance, this senior manager with a large TSO commented on the variation across local authorities. Do you know its so varied and you know we obviously work across 24 local authorities at the moment and it is so varied. You have some commissioners could tell you how much you spent on Post-its probably and others would be struggling you know to really tell you how many service users youre supporting. Senior Manager, National Health and Social Care Provider

8.5

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8.6

There was also variation in the perceived proportionality of external security by local authorities. Some were perceived to be fairly minimal in their scrutiny, while others were over-concerned with small details. Another large social care TSO working across many local authorities contrasted inconsistencies in approaches to monitoring with their experience of monitoring from central government statutory organisations such as Her Majestys Inspectorate for Education (HMIE) that was perceived to be pretty solidthey are clear about what it is that they are looking at. This clarity was contrasted with the bureaucratic structures imposed by some local authorities on service providers who were required to supply onerous paperwork and comply with local inspection routines that varied across local authorities.

8.7

Focus on Hard Outcomes and Added Value 8.8 Respondents across many TSOs felt that the structure of funding requirements was focused on measuring hard outcomes. These outcomes were often quantitative measures of activity such as number of clients into work or training or number of hours attending training or education activities. A key point made about the focus on hard outcomes was that these did not capture the range and breadth of work being carried out by TSOs, often with hard-to-reach and/or vulnerable clients who needed significant inputs before moving into outcomes such as employment. Other issues raised by respondents about the focus on hard outcomes included: that it produced contradictory incentives; that the most vulnerable clients were losing out because they were less likely to achieve quick and measureable hard outcomes, and: it did not easily recognise the work done by multiple agencies. It was felt by some that funders did not understand the complexity of the work done by TSOs. However, some organisations used alternative methods of measurement to measure soft outcomes, including existing tools as well as devising their own tools and carrying out additional research.

8.9

8.10 The focus on hard outcomes as a means of evaluating the progress of TSOs towards contractual targets has led to a fundamental change in the landscape within which TSOs operate. There has been greater competition between TSOs, improvements in staff training and monitoring systems and greater efficiencies in the delivery process. These changes were broadly welcomed by respondents from a range of TSOs. There was however also a sense that such changes had come to place a disproportionate value on outcome variables that could be measured whilst lessoning the importance of soft outcomes that were considered of equal importance. Although the measurement of learner hours or job sustainability provided relatively simple and convenient variables with which to measure progress towards targets, such measures were not perceived to be an adequate reflection of the added value brought by the work of TSOs. 8.11 Across interviews with a wide variety of TSOs, there was widespread agreement that the added value of the activities performed by the TSO went beyond the services for which they were contracted to deliver. There was a 61

view that these additional outcomes were not being adequately recognised by funders or, crucially, rewarded. For instance, much of the work of many TSOs is more qualitative, such as wider social impacts on communities and society, preventative work, or working with clients with complex problems not easily captured by the current approach of measuring outcomes. This makes it harder for TSOs to accurately evidence much of the work they are doing, yet it was something many were keen to do in order to provide evidence for all the work that they did as well to help show clients the progress they had made: The outcomes of the approach itself is problematic. A lot of the work is not terribly well defined by target driven outcomes its much more social outcomes which are hard to evidence...it does force the work sometimes into fairly artificial categories in order to meet the funding targets to get money through to evidence you are doing a good job, particularly if the area you are operating in is not statutory duty and most of our work isnt, most of our work is about prevention.... so I think we end up with an issue around trying to squeeze what we think are meeting the need into very narrow outcomes required for funding.... Senior Manager, Equalities FG 8.12 By not measuring soft outcomes or other ways in which an individual could be considered to have made progress, there was a perception across many TSOs that the full extent of the value they added to the delivery of contracts was not being recognised. For example, a respondent from one organisation felt that there was no mechanism for measuring the value added for the way in which employment training for the unemployed would have outcomes that were consistent with national performance targets, the SOAs. 8.13 One effect of existing performance and monitoring approaches was perceived to have been a lack of recognition of the deeply entrenched problems faced by some client groups. During one focus group it was suggested by participants that current monitoring arrangements were encouraging a focus on those clients that required less support to ensure that outcomes could be achieved and measured more quickly than would occur if the client needed more intensive pre-employment support. The focus on attaining quick, clear results with clients had, it was argued, led to those with some of the greatest need being overlooked in the pursuit of targets. For instance, the outcomes-focused approach encouraged competition between services for groups of clients who can easily have measureable positive outcomes: Everybody is fighting for the same people. Everybody wants to enrol them on their books so they can count them in terms of positive outcomes. Thats all they want to do. Theres not a real commitment to helping people where they are at because the funding structure actually doesnt ...theres no recognition of the work that is needed, so...its really important that that is recognised and properly funded. Senior Manager, Equalities FG 8.14 Hard outcome measures were also causing disquiet among TSOs when there was a need to refer a client on to another organisation before a hard outcome 62

had been achieved. The variable nature of a clients progress means that one organisation can spend a lot of time working with the client before they move onto another provider where they then quickly achieve an outcome. By structuring and rewarding client engagement in a way that only recognises a successful outcome, there may be a disincentive for an organisation to either provide a high level of early intervention if it is known that there will be a subsequent referral to another TSO which will receive credit for the outcome. The organisations in our network all do slightly different things but at different stages in peoples lives. Somebody can move onto another project from here called [X] and we would see that as a really positive outcome in a sense that it's a lifes journey that theyre going on as well as trying to get employment... sometimes it just takes another project to actually do the finishing off bit and suddenly it just clicks for somebody because somebody else will be able to do something that you cant do. Senior Manager, Equalities FG 8.15 The key point here regarding performance and outcome measures was that the client journey, from early intervention to employment, may require the involvement of several organisations each with a different specialism in different parts of that journey. 8.16 Part of the difficulty in getting a wide range of funders to recognise the additional outcomes generated by TSO activities, was a perceived lack of understanding of the complexity of the issues faced in moving some hard to reach client groups closer to work or training. Many respondents felt that certain funders did not appreciate the range or depth of the support that some client groups required. For instance, while time spent with clients did not count towards outcome targets this was considered a vital step in moving to meeting targets: So part of looking at the outcomes is realising there has to be some prelearning activities and some pre-learning outcomesit helps make decisions about the next steps, to inform choice, giving somebody impartial guidance in their own home isnt just a kind of we just went round and said do you want to go on that course? No, you sit down and explore the range of options. Its all work. Its all time. And none of that is actually counted by any funder. Like some of the stuff happens by magicsometimes it would be nice if they could give recognition to some of the stuff that happens. And I think that a lot of people know it. They are caught by what they have to count..but at the end of the day what are they actually measuring? Officer, Regional Learning Provider 8.17 However, the focus on hard outcomes was not universal or inevitable among all funders. For instance in spite of pressure on TSOs to work within monitoring arrangements that emphasised hard outcomes, one respondent described working with one local authority funder in order to accommodate the soft outcomes that arose:

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Because we are working with a client group that is furthest away from the labour market there is less pressure on us to achieve hard outcomes as such, it is more important for us to engage with individuals and encourage them to sustain in the programme. Service Manager, Local Learning Provider 8.18 There have been initiatives to promote greater streamlining of reporting, for instance BV2 seeks to put greater emphasis on outcomes and to produce a more streamlined scrutiny landscape44. The Enterprising Third Sector Action plan also acknowledges that the evidence of the value added by the third sector through its provision of quality services is incomplete. One of the means promoted is by developing the means to provide a better evidence base through the use of SROI and helping the third sector develop its own evidence45. The latter point is echoed in the Joint Statement which promotes greater streamlining of reporting through increased emphasis on selfassessment in third sector reporting to local authorities46. SROI and Other Measures 8.19 Most organisations were keen to evidence the full extent of the work they undertook in order to show the value they added. While all respondents were aware of SROI its use was still fairly limited. However, many organisations were using other means of measuring soft outcomes, including existing measurement tools as well as devising their own tools and carrying out additional research. 8.20 It was clear that there was little use of the Social Return on Investment (SROI) approach to measuring the added value of TSOs. SROI was considered to be an experimental and little known methodology that had not gained widespread acceptance among the TSOs that participated in the research. 8.21 However, a number anticipated that they may use it in the future, while one was already beginning to look at the model for one of their services. One organisation had used SROI and were pleased to be able to show the added value of their work. However, there was some scepticism within the organisation (and within other organisations) as to the influence this would have. This was because they thought local authorities did not want to see evidence of the added value of their work because the authorities would then be under more pressure to provide additional funding to the TSOs. I think the difficulty with SROI or something of that ilk is that its useful for us to promote that in terms of this is what we do for every pound that the [funder] gives us. We had a SROI done recently and its 6.70 something for every pound that we get. I mean that's terrific you knowbut in terms of recognition
http://www.scotland.gov.uk/Topics/Government/PublicService Reform/14838 Scottish Government (2008) Enterprising Third Sector Action Plan 2008-11 http://www.scotland.gov.uk/Topics/People/15300/Actionplan Page 29. 46 Joint Statement on the relationship at Local level between Government and the Third Sector, September 2009, Scottish Government, Solace Scotland, COSLA, SCVO Point 16.
45 44

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by local authorities and such like Im not sure that they would want to totally embrace it because I think it could mean that they would need to put more money where their mouth is. Senior Manager, Local Employability Provider 8.22 One TSO that had incorporated social accounts into their annual report had done so to enable the range and breadth of their work to be fully described. Social accounting was seen to be an important tool for gaining wider recognition of the work of the organisation and for improving relations with funders who were made aware of the range of work undertaken by the TSO. What social accounts has helped do from our perspective as a company is to show what else we have done on top. Not just in employability but in regeneration and sustainability, you get a lot more in-depth feedback from the customers and it gets shared around. It definitely helps with recognition. Senior Manager, National Employability Provider 8.23 There were a number of issues raised around the SROI model and its potential for use in the sector. For instance, some felt that SROI was not being used to evidence procurement decisions. Rather price, as outlined previously, was the main concern. It was also felt that although the SROI statements are interesting for an organisation, it is impossible to compare organisations because of the different client groups and the different services provided etc. Others felt that SROI might only be useful once it was clearly decided what the added value of the third sector was and it was suggested that this might include flexibility; responsiveness; being able to deliver services much more rapidly than local authorities; and willingness to provide services beyond those outlined in a contract because of the charitable purpose of TSOs. 8.24 The costs for TSOs associated with implementing SROIs would also have to be considered, in particular because of the perceived complexity of the model and the additional resources required to implement it. One respondent actually felt there had been more interest in SROI from the private sector than the public sector and that the Scottish Government needed to be more active in promoting the model. 8.25 A number of organisations were using alternative methods in order to evidence the work that they did, in particular in order to capture soft outcomes. For instance, several of the organisations were either already using or trialling some existing tools. Among those mentioned included HGIOCL2 (How Good is Our Community Learning and Development), Weavers Triangle, the Rickter Scale47. Others were also carrying out research or developing their own tools. 8.26 A number of respondents felt that there were challenges in measuring the progress of the organisations client groups. For instance, there was a diverse range of clients including some with learning difficulties; and some whose literacy skills meant they could not complete a text-based evaluation. Another

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See Glossary.

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issue raised was that the progress of clients was often not linear in a way sometimes assumed by monitoring tools: A lot of services have a tunnel vision: we start at point A, we are going to build a point B, we are going to build a point C. And its going to go like that. With our client group it doesnt work like that. They may start quite confident, and then something happens, they might have something with their condition or whatever it might be, their confidence takes another knock. And they are not going to go straight line. They are going to go here. Senior Manager, Regional Learning Provider Summary 8.27 There was considerable variation in approaches, and therefore perceptions of proportionality, to monitoring and evaluation of services by TSOs across local authorities. 8.28 There was a perception among TSOs that funders were focused on measuring hard outcomes which did not capture the full range of added value of TSOs. 8.29 Much of the work carried out by TSOs was often with clients who were hard-toreach and/or who had complex issues, focused on prevention and had wider social impacts that were less (and less easily) measured. 8.30 The focus on hard outcomes could lead to: contradictory incentives; the most vulnerable clients losing out because they were less likely to achieve quick and measureable hard outcomes, and: it did not easily recognise the work done by multiple agencies. It was felt by some that funders did not understand the complexity of the work done by TSOs. 8.31 At the same time, the focus on hard outcomes had resulted in radical changes within TSOs including improvements in monitoring systems, staff training and greater efficiencies in the service delivery approach. 8.32 Most organisations were keen to evidence the full extent of the work they undertook in order to show the value they added. While use of SROI was still fairly limited, many organisations were using other means of measuring soft outcomes, including existing measurement tools as well as devising their own tools and carrying out additional research.

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9
9.1

PARTNERSHIPS
Partnership working is a key tenet of Scottish Government policy in the delivery of public services. In particular, strategic partnership working is a key element in the Scottish Governments support for the third sector. This includes developing a series of strategic partnerships with national third sector organisations around shared outcomes48. This is taken up more specifically by the Task Group that seeks to promote sharing of services between third sector organisations, between third sector organisations and the public sector and between third sector organisations and the private sector. The aim is to delivery efficiencies and innovative synergies in the way the services are designed and delivered49. A shared services approach is also encouraged to produce Best Value (Joint Statement50). This section looks at third sector involvement in partnership working, particularly for the delivery of services. It examines what factors contribute to successful working partnerships and identifies some of the challenges faced by third sector respondents. Finally, this section looks at perceptions of partnership working for the future.

9.2

The extent of partnership working among TSOs 9.3 Most organisations were involved in some form of working in partnership with other organisations. The concept of partnership was interpreted broadly by many respondents with many different types of partnership being cited. These included partnerships with; funders; public sector providers; private sector; and other TSOs. The types of partnerships included both formal and informal partnerships for: service delivery; provision of training; consortium; partnership forum and referral partnerships. The extent of partnership working was very varied between the organisations. Some felt that partnership working was more limited in the third sector than perhaps between/within other sectors, and that this would need to be developed in order to face the challenges of an uncertain funding future also see The Importance of Partnerships in Facing Future Challenges 9.38. We talk of partnership an awful lot, have done for years. When I started to work for [the organisation] as a member of staff it would be we talked about partnership and wed go and sit in various fora and meetings and groups and all the rest of it [but] when push comes to shove, I am responsible for the funds, the projects and services and the staff [and] if another organisation is sitting there and we have to go head to head I think in reality, real partnerships, its superficial.
Enterprising Third Sector Action Plan page 31 http://microsites.scvo.org.uk/taskgroup/Home/ViewInformationItem.aspx?i=912; Point 3.3 50 Joint Statement on the relationship at Local level between Government and the Third Sector, September 2009, Scottish Government, Solace Scotland, COSLA, SCVO Point 41.
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9.4

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Senior Manager, National Health and Social Care Provider 9.5 Some of the participants did not feel that in relation to developing partnerships they had got the confidence yet to take it to that stage in many areas (Senior Manager Employability). However, generally participants were positive about partnership working with most organisations being able identify at least one partnership that they perceived to have worked well.

9.6

Success Factors 9.7 Respondents were asked to identify success factors that contributed to a successful partnership for the purposes of service delivery (or factors that caused partnerships to fail). A number of critical factors were mentioned. These included: Shared Goals/Ethos; Clearly defined aims; Complementarity; Equality; Trust and reciprocity; and Commitment.

Shared Goals/Ethos and Clearly Defined Aims 9.8 A number of respondents mentioned that it was important to have a shared vision or ethos between partnership organisations. Partnerships were made more difficult to maintain and to be effective where these were not shared: Weve come with a common purpose which all partnerships should be of course, a common purpose, a common aim and a clear shared set of values and that's working really well. Senior Manager, National Health and Social Care Provider 9.9 In addition, having clearly defined and identified shared aims was also identified as important by a number of respondents in developing effective partnership working. In this example the organisation was working in partnership with the NHS: Weve signed up to a very clear statement and shared management agreement and its working very well now... Senior Manager, National Health and Social Care Provider 9.10 The success of a partnership to deliver services to disabled people in rural areas of Scotland was also attributed to a focus on the need for a common vision around shared values and principles. One of the things that started the partnership working well was that we had a meeting of minds around a vision, we kind of shared values and principles... Then because of the tendering process we had a very clear set of rules of engagement. We knew what we were being contracted to deliver and what we werent being contracted to deliverall along the line there was agreement about values, principles and practice. Agreement about the reporting and methodology, and space created to discuss what the results were. Senior Manager, National Health and Social Care Provider 68

Complementarity 9.11 Successful partnerships were perceived by many to be more likely where partner organisations complemented each other in a number of respects. This included where each partner could offer a particular expertise and specialism to the partnership that added value to the service. This also had benefits for both organisations in being able to access funding and offer a service that individually they could not have provided as well as providing new areas of working for each of the organisations: I think...each of us could focus on the areas where we have the expertise and the specialism, but then again it was about not reinventing the wheel...It [also] allowed us to become engaged in an area that we havent been traditionally been engaged in before... that individually we might have not been able to...We have been able to put together this more comprehensive package of service, that neither one of us couldve done individually. Senior Manager, Regional Learning Provider 9.12 However, if there was too much overlap in terms of expertise and services provided by organisations some respondents felt they were less likely to be successful because there was less opportunity to add value: I would see that there is certainly a feeling within the employability forum that we could do some joint work together and put in bids together. Its never actually come to anything and some of the people in the forum actually tried it and it didn't work...because we were more or less doing the same thing, we werent bringing different things. Senior Manager, Equalities FG 9.13 Complementarity in terms of expertise and service provision did not always ensure that organisations were compatible in terms of their more subtle organisational cultures. However, this can be overcome as in this example of where cultural differences in staff attitudes between two potential partners had to be addressed before the partnership could progress: The cultural differences I think are really interesting. We did some work with [X organisation] setting up placements for people from one of our projects. We had to go in a do a huge amount of prep work with [Xs] staff before anything could take off...their attitude, between colleagues, to the general public, people with disabilities was appalling [and] we had to go in and run bullying workshops ...in order to create an environment where we were comfortable with placing vulnerable people...its not because any of the people within [Xs] was being deliberately negative about the people with disabilities most of them were horrified when that kind of thing was fed back to them, it was just the culture. Senior Manager, National Health and Social Care Provider 9.14 Finding organisations that complement each other sufficiently to take forward in partnership is not easy as this respondent describes. She feels that while local authorities promote partnership they are less clear about what this means and

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this may partly explain why partnership in the third sector is not more extensive: There are local authorities that are very keen on partnership, they arent necessarily very clear on what they mean by it. There are a whole load of voluntary organisations, we bid for things in tender together but it is very complicated. Some other voluntary organisations I know are talking to each other and if their pay rates are compatible, if their ethos are compatible, if theyve got complimentary strengths and skills they're exploring it but its not something you can magic out of a hat. Manager, National Health and Social Care Provider Equality 9.15 Too much disparity in power, resources, and terms and conditions of staff between partners can create significant challenges to building a successful partnership. This is perhaps more likely between TSOs and larger public sector providers with vastly different resources as well as different perceptions of professionalism: 9.16 After three years of intensive work, the partnership between this third sector organisation and the NHS was finally working successfully to deliver services. This respondent describes some of the challenges they faced along the way in terms of the clash of cultures and the clear disparity in power between the two partners. There were differences in perceptions of professionalism, with NHS staff feeling themselves superior to the TSO staff. There was also inequity in employment terms and conditions and staff security. One area of tension (that had not been anticipated) was around health and safety, with the NHS perceived as having very rigid, inflexible requirements that were inappropriate to the TSO. However, she identified that sticking with it and buy-in at senior level ultimately helped to overcome these issues. [There was] a definite feeling that the NHS were the experts on how you deliver [the] service whereas we felt that we also had quite a lot to offer in terms of how you would support somebody ...and it was just a clash of cultures or a rubbing of cultures. However the good thing about that was that we now have actually achieved that and its working really well....the NHS staff were deeply superior to our staff and actually treated them like you know fairly low skilled support workers and didn't see them as equal partners so it was very difficult.... I think also (there were) differentstaff security, terms and conditions... holidays, pensions , pay, everything...One of the big tensions also came with health and safety. I mean we have an absolute platinum standard of health and safety at [name of TSO], but it was nothing compared to the NHS.... Senior Manager, National Health and Social Care Provider 9.17 Relations with local authorities have occasionally been characterised by a sense of inequality and of being perceived to be the junior partner. A senior manager described how the treatment of TSOs by some local authorities was unlikely to foster a sense of partnership due to the perception that TSOs were

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charitable organisations who were more open to pressure and persuasion than their counterparts in the private sector. A senior TSO manager described how there was an arrogance within local authorities and government over the way they treat the third sector; that they (the third sector) will always find a way to survive even to the point where we have been told that we should sell buildings like this or that we should use our benefactors money and fundraising to support front line services which is not the case. Trust and Reciprocity 9.18 In order for partnerships to become established and maintained a number of respondents felt that there needs to be trust and sharing between the organisations. Some felt that some organisations were reluctant to share resources or give up some of the control that was necessary for effective partnership: [In relation to a particular Consortium] - That's about joint working. It didn't really take off. Too many organisations were too reluctant to actually devolve and to actually have shared responsibility. Senior Manager, Local Employability Provider 9.19 Too much overlap in the services provided by two organisations was thought to lead to competition which was not conducive to building a trust relationship also see Partnerships vs. Competition 9.30. The competition that I am aware of is in the childcare sector. Because we are all social enterprises, it is quite difficult to get neighbouring organisations to work in partnership because you are competitors. Senior Manager, Local Learning Provider 9.20 Some felt that while the current financial climate might encourage more partnership working between voluntary organisations, smaller TSOs sometimes perceived large TSOs as a threat. One larger third sector organisation had a deliberate policy of not going into direct competition with a local provider until there had been discussions. However, there was a concern that a partner organisation might exploit anothers expertise for their own gain: I think its very difficult because if youre going for partnership working in a procurement environment, highly competitive, youre effectively showing all your washing and crown jewels to somebody that then could compete against you somewhere else which is exactly what happened in the partnership arrangement that we did have so its hard. Senior Manager, National Health and Social Care Provider Commitment 9.21 Commitment to the partnership within the organisations was also perceived by some to be important in order to facilitate effective working. However, there were different perspectives on who within an organisation was more crucial. 71

On the one hand, this respondent identified the importance of commitment from senior managers within the organisation in order to make a particular partnership work: ...Sticking with it, senior buy in, and the interesting thing there was that at the senior stakeholder level there was huge amount of common understanding and I think everybody left their egos at the door is probably the right way of putting that. Senior Manager, National Health and Social Care Provider 9.22 However, others felt that it was actually operational staff working directly with each other that made all the difference to developing and maintaining a good partnership: As with so many of these things, its because of the people on the ground.... And you quite often have excellent operational relationships that are going really well and if a person moves on, that just disappears. Senior Manager, Regional Learning Provider Challenges in Partnership Working 9.23 Partnership working potentially also presented many challenges for organisations. In this section, we examine some of the challenges (and opportunities) presented by partnership working. Firstly, on a practical level, the resources required for effective partnerships could make this difficult for some organisations to pursue. Secondly, some questioned the effectiveness of formal partnerships and felt that often informal partnerships could be at least as if not more effective. Finally, some felt that the tendering system discouraged partnership working. Investing in Partnership 9.24 For some organisations establishing and maintaining partnerships represented the investment of a lot of time and work. For instance, we have seen above examples of the work done in order to ensure successful partnership roles, including clearly defining roles, building relationships at different levels, addressing disparities and so on. 9.25 This respondent describes the importance of investing time and energy into partnerships: Youve got to work out what is different about our service and then work out how...can organisations come together in a partnership. But that means people giving up things as well and that's a really hard thing to do. You need time and energy as well to actually make it work. Senior Manager, Equalities FG 9.26 There was also a feeling amongst some that funders did not recognise the work required to form partnerships or understand some of the difficulties in establishing effective ones. 72

Formal versus Informal Partnership Working 9.27 Organisations were engaged in a range of different partnerships including some that were formalised and others that were informal. A number of respondents felt that often informal partnerships were a valuable way of sharing information: We have a range of relationships. Some of them are quite formal and others are ad-hoc. We have a very good working relationship with the library for example. That is very much an ad- hoc informal thing where they send people to us and us to them. We have an exchange of information about the activities and events going on. At the other end of the scale we are very much a part of things like [X and Y]. That involves going along to more structured meetings. Senior Manager, Local Learning Provider 9.28 Some respondents were cynical about the effectiveness of formal partnerships. Having a relationship formalised through a partnership agreement did not ensure that partners would or could work together: We talk about it and were all great pals and we sign partnership agreements that dont actually mean anything because theres nothing that really bonds the two organisations. Senior Manager, National Health and Social Care Provider 9.29 This Senior Manager believes that informal partnerships can be just as effective, if not more so, than formal partnerships in her experience. She explains that she thinks a key factor in making partnerships work is the motivation and commitment of partners to make it work as well as an open attitude (e.g. lack of defensiveness) rather than having anything formalised on paper. She comments that informal partnerships are based on partners recognising mutual benefits whereas those linked by formal agreements may not have this perspective: It doesnt matter what youve got written down formally some place. Theres got to be this will and this commitment to partnership working, and this understanding that you cant do it all yourself. From our perspective there is more than enough work for all of us and funded work out there for all of us. But there are organisations who think we can deliver it all. You cant. But when you come out of that perspective, you are not going to look at anything else in any meaningful way. Thats probably why informal partnerships are more successful because people arent bound by this sort of formal agreement. They are doing it because they see the benefits of doing it. Senior Manager, Regional Learning Provider Partnership versus Competition 9.30 A number of respondents expressed the view that the tendering process had encouraged more competition between third sector (and public) organisations rather than encouraging partnership working. This was not a universally held view however, with one respondent feeling it had not made any difference and 73

another feeling that this had always been the same in that there had always been competition between TSOs that was not necessarily anything to do with the current tendering systems. However, nobody expressed the view that the tendering process had encouraged or facilitated partnership working although one organisation was very positive about the role that Community Planning Partnerships had in helping them engage more in partnership working through the contacts they provided. 9.31 Some felt that there was conflict in the policy environment with the dual focus on competition to get tenders and the encouragement to work in partnership with other TSOs. Some felt that the two were not always compatible. In one example, the development of a forum was meant to encourage partnership working between third sector organisations in helping to get clients job ready and then find them employment. However, the TSOs had been effectively put into competition with each other because of the performance targets they had to meet. 9.32 This perceived tendency to encourage competition may intensify as a tight funding environment may make organisations more defensive about working with each other because of fears of gaining competitive advantage by sharing ideas. But of course, as funding starts to tighten up, people start to redefine themselves to chase the funding again. Thats a real challenge. Everybody starts to pull in their defences. They close themselves out, because again people worry about if I share some of our thoughts on what we want to do, somebody else is going to pick up on that and they are going to do it. And thats a terrible way to think, but unfortunately, its happening. Senior Manager, Regional Learning Provider 9.33 This potential for increased competition between organisations to be able to provide complete services rather than working with other partners could disadvantage clients: The impact runs back into funding again because one person representing the third sector says oh, this organisation does that because (theyll say theyll do everything), so instead of organisations working together which was of benefit to the individual, it is now one organisation that wants to take a bigger whack of money to do it all, so the individual suffers. Officer, Regional Learning Provider 9.34 In particular, some felt that a tight funding environment may also make public sector organisations less likely to work with the third sector in order to protect jobs in their own sector: There is also a big issue about defending their own jobs in the public sector and how thats going to square with partnership working with the voluntary sector and I think thats going to be quite a challenge environment for going forward. Senior Manager, Equalities FG 74

9.35 A Senior Manager with a large employability TSO described how partnership and collaboration with other TSOs and private organisations was initially considered to be incompatible with competitive tendering. When I joined [name of TSO] we were isolationist and working away on our own in a sense. Competitive tendering maybe pushed us a bit in that direction but it was also about the attitude of some of the staff at that time Senior Manager, National Employability Provider 9.36 However, latterly within this TSO, there was a realisation that partnership working did not weaken the competitive strength of the organisation, and they had become more engaged in partnerships again: And I think its much better now that we are working in partnership because that is the right thing to do. What we have tried to do is to position ourselves in the third sector by being more participative, rejoining SCVO, taking an active role in the coalition, getting more involved in employers organisations and also looking at ways in which we can work with other TSOsI think the future is about shared services, about contracting with each other. Senior Manager, National Employability Provider 9.37 The Task Group wants to improve partnership working with the third sector by identifying a clearer understanding of how shared services can work between different types of partners and to create clearer pathways for authorities and organisations seeking to work in partnership and collaboration51. The onus is on the voluntary sector to clarify what added value they bring to any decisionmaking and policy-forming partnership [and]what the third sector expects in return (Joint Statement52). However, there is still some way to go given some of the challenges that have been identified. The Importance of Partnerships in Facing Future Challenges 9.38 As was highlighted earlier, partnership to provide shared services or joined-up services are advocated in order to produce efficiencies as well as synergies (Task Group), and could be an important strategy for meeting the challenges of a tight funding environment. There was also a perception that local authorities were encouraging partnerships for service delivery, and for joined up working. This potentially could make the provision of services more cost effective by using resources more effectively and avoiding duplication: I think theyre trying to encourage people to work in partnership more, and I think it's a difficult thing to do. I think it is the way to go in the sense that they don't have a finite amount of resources and they've got to work in a smarter way. And I can see that I think diversitys important but I also think that sometimes, yeah, I think some organisations can look at some duplication of
http://microsites.scvo.org.uk/taskgroup/Home/ViewInformationItem.aspx?i=912; 3.5 and 3.6 Joint Statement on the relationship at Local level between Government and the Third Sector September 2009 Scottish Government, Solace Scotland, COSLA, SCVO Point 38
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services. I could almost see it in other organisations and also my own, I can see it within some of the services in my area...you could have 2 organisations maybe sharing some of the work or working together and it would cost less. And I can see why local authorities would see that obviously as a way forward. Senior Manager, Equalities FG 9.39 A number of respondents agreed that partnerships would be more important in the future. This included building and maintaining relationships with funders as well as working in partnership for service delivery: I think theres room for us all to an extent but at the moment we are seeing contracting expenditure theres less and less likely to be room for us all you probably heard the statistic that 1,000 charities closed last year, theres going to be more, so we do have to as a sector, not be too precious about this is what we do and this is what you do and we are more and more trying to work in partnership with people. Senior Manager, National Health and Social Care Provider 9.40 Some felt that this also had the potential to be beneficial for the client in terms of providing joined-up services providing services that meet the needs of clients at different stages. Although some organisations already worked in partnership to provide this kind of service better joined-up working was supported by a number of respondents as a better way to provide services to clients: I do think that councils, the local authorities and whatever have a much greater focus on...join all this up We fund something here, a bit there, and a bit everywhere, lets get it all together and have something that is much more cohesive for people and much more seamless. [For instance]...if someone comes out of hospital into support accommodation and then comes out of day service and then requires something thats a wee bit more structured and focused and then leading on to employment and then perhaps out at the other end. Senior Manager, National Health and Social Care Provider Summary 9.41 Most participants had experience of successful partnership working. However, the extent of partnership within the sector and with other sectors may have the potential to increase in the future. 9.42 A number of factors were identified that contributed to successful partnership working for service delivery. These included: Shared Goals/Ethos and Clearly Defined Aims having a shared vision and ethos and having clearly defined and identified shared aims.

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Complementarity The extent that organisations complement each other in terms of expertise, specialisms and organisational cultures Equality Where organisations are roughly equal in terms of power, resources and terms and conditions of staff. Trust and Reciprocity Trust and sharing of resources between organisations Commitment The commitment of individuals at different levels within organisations to the partnership

9.43 Partnership working presented a number of challenges for some organisations. These included: The ability of organisations to invest time and resources into partnerships Some respondents felt that informal partnerships were at least as important, if not more so, than formal ones and questioned the effectiveness of some formalised partnerships. There was a perception that the tendering process, whilst purporting to encourage partnership, actually increased competition between organisations to the detriment of partnership working. There was some concern that this tendency would intensify in a tight funding environment.

9.44 Developing partnership working to a greater extent was perceived to be important in order to meet the financial challenges ahead. In particular more extensive participation in joined up working could also be beneficial for clients.

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10

PLACE AND RURAL ISSUES

10.1 The research sought to identify how place and rural issues impacted on third sector provision of services. A number of organisations were selected for participation in the research because they operated in rural or semi-urban areas. These consisted of local projects usually operating from an urban or semi-urban base but covering a large rural area as well as national organisations who operated some projects within rural communities. 10.2 Some TSOs stated that there were additional costs associated with providing services in rural areas. This was because of the dispersed geography and additional travel required as well as limited access to public transport. In addition, it was difficult to achieve economies of scale for (usually) relative small local services. For instance, this national social care and health organisation provided some services within rural areas and outlined the difficulties around transport for workers and service users: I mean the obvious ones are around transport and that's in terms of workers having to cover a considerable area but also in terms of supporting service users to become more independent in terms of how they manage things. Transports a difficulty for anybody in a rural area if youre managing on public transport. Manager, National Health and Social Care Provider 10.3 It was also reported that economies of scale were also not available to small rural services in the same way as larger services in urban areas: In terms of the area that I manage, operationally there are a lot of challenges. Typically although were a big organisation individual services are quite small so theres no economies of scale within those because obviously you don't subsidise across areas - services have to stand within their own budgets. In a lot of areas over time that means...if there havent been costs of living increases and things like that service budgets have got tighter and tighter. Manager, National Health and Social Care Provider 10.4 These factors presented challenges for organisations maintaining and operating services in rural areas. Funding cuts had resulted in a reduced service being provided in one remote rural area because of the high additional costs associated with providing the service in full. When the council wanted us to make some cuts....we said we cant do low level support in out lying areas because it costs us far too much to get there...I do worry for service users in some areas. Senior Manager, National Health and Social Care Provider 10.5 Respondents felt it was important for funders to recognise the practicalities and costs associated with providing services in rural areas compared to 78

operating services in urban areas. For one respondent having staff based in the local community providing services helped to manage some of the rural difficulties associated with transport: But in terms of a recovery focused model weve been encouraging people to find their own ways to manage those things but then you run into the whole transport issues that people have got in rural areas...if you want to look at the winter weve just had for example staff getting stuck, people being able to make it out to service users. I feel that as a service that's still locally based with local staff we were still able to manage that quite well. For some agencies that won some contracts and maybe their staff are coming from further out that can be really problematic when you get that kind of weather. Manager, National Health and Social Care Provider 10.6 In one of the focus groups, place was felt to be very important for service delivery as providers cannot operate the blanket roll out of strategies as they need to be tailored to the individual needs of communities. Across Scotland the cultural, social and physical landscape varies. There may be nostalgic assumptions that rural communities will support individuals but the service providers find that very often this is lacking. Moreover, in rural areas, unlike cities, because of lack of funding there might not be a strong network of TSOs to support all peoples needs and as a result individuals might become even more isolated. 10.7 A particular issue was raised by one TSO concerning the provision of services in rural areas, relating to their demographics which tend to be less affluent than urban areas. In these circumstances, the end of the Working of Families fund for mainstream Social Care access meant that several families in near poverty fully rely on TSOs for the service. This situation was described as manageable in the short-term for large TSOs, but unlikely to be feasible for smaller ones. Also, even while transnational TSOs may be able to lever funds from more affluent areas, they would struggle to make local connections: The big charities, trans-nationals and even international charities have obviously much more capacity for fundraising, PR and large scale campaigns. They are able to play the heart strings with individual donors, but their work does not fit as well at the middle level, say at a village or community level, like so many places are in the Highlands. This is where smaller voluntary groups can build an identity with their client group. Senior Manager, Health and Social Care FG 10.8 The theme of relationship-building with communities and practitioners throughout the changes in policy and government is taken up by another organisation in relation to the Highland context: Despite changes such as the Highland Careers Scotland changing to Skills Development Scotland or different Councils, it is relationships with the people working there that count, and they are still the same. It is crucial to have these to be flexible and work in a local way, especially when youre working in an

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area which is massive, and also mainly rural in its geography. Since SDS and [name of TSO] are person-centred, we adapt to who were working with. Senior Manager, Local Health and Social Care Provider 10.9 One TSO adapted to the geographic spread of the Highlands by having Job Coaches who operate as remote staff. Most are full members of their local community, job-sharing their position as Job Coach for the TSOs with another occupation, most often self-employment. This allows the TSO to have a direct relationship with the local communities, and also saving on infrastructure and office usage. Summary 10.10 There were additional costs associated with providing services in rural areas. This was because of the dispersed geography and additional travel required as well as limited access to public transport. In addition, it was difficult to achieve economies of scale for (usually) relative small local services. Funding cuts had already resulted in one organisation providing a reduced service in a rural area. 10.11 Due to the withdrawal of major public funding some families near poverty had become solely reliant on TSOs. This created additional pressures, particularly for the smaller TSOs. 10.12 The benefits of developing direct personal relationships between staff in TSOs and the local communities they serve was highlighted.

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11

CONCLUSIONS

11.1 The third sector in Scotland plays a key role in delivering public services that are high quality, continually improving, efficient and responsive to local peoples needs. The sector has a number of opportunities afforded by the policy context, such as the Enterprising Third Sector Action Plan and competitive tendering. However, it also faces a series of challenges relating to devolved funding, being involved in the policy process, managing in a competitive environment, and, increasingly, budget constraints imposed on public services. 11.2 This research, which forms the first phase of a three year longitudinal study, has explored a wide range of opportunities and challenges based on case studies and focus groups with 20 TSOs in Scotland. The research found that the third sector has a unique and distinctive contribution to make to service delivery. TSOs tend to work with vulnerable, disadvantaged and hard-to-reach groups, engaging in preventative work and filling gaps in statutory services. Their focus is on the client and the provision of quality services and they are characterised as operating in a more flexible, responsive way than the public sector because they are leaner and possibly less bound by regulations. The sector is also very diverse covering many different types of services and clients as well as being different in size, function and geographical spread. 11.3 The policy environment had created a number of challenges and opportunities for TSOs in Scotland. Whilst the principle of the 2007 Concordat was often supported and many felt that it had positive results, the impact on TSOs in practice had been more problematic, particularly for some national organisations working in more than one area who are required to negotiate with individual local authorities and CPPs separately, navigating occasionally unclear and varied policy priorities and seeing the bigger picture when the focus was on local needs. 11.4 New third sector interfaces in each Community Planning area across Scotland are being developed and will become the key mechanism by which the third sector interfaces with the government. In the interim many TSOs perceived CPPs to be the main mechanism for the third sector to be involved in community planning. TSOs found challenges to being individually involved in CPPs such as practical issues of being able to participate and perceptions of their usefulness was limited in terms of effectiveness and representation. Some TSOs felt they were able to influence policy more effectively through other means such as through partnerships with the private sector and other forums. Future waves of this study will examine the perceptions and impact of the new third sector interfaces. 11.5 Many TSOs reported that they had experienced real term funding cuts because funding had often not kept pace with inflation. Many TSOs feared future significant spending cuts. While some perceived this to be an opportunity to 81

reduce dependency on public sector funding, many were concerned about the impact on vulnerable client groups and the loss of some third sector organisations and with them skills, knowledge and service capacity. 11.6 Competitive tendering and high levels of public spending had facilitated an expansion of the third sector over the last decade, but it also presented a number of challenges for TSOs. Short-term, one year contracts appeared to be increasingly common and caused problems of increased bureaucracy and long-term planning as well as lack of continuity for clients. Difficulties were also experienced around slow notification of funding decisions and the lack of opportunity for dialogue with funders and there was concern that costs were being emphasised at the expense of quality. The tendering process also had implications for organisations in terms of organisational planning and staffing, security of employment for employees, staff morale and staff skills requirements. 11.7 Many TSOs had responded positively to the challenges faced by the changing policy and funding environments. Many had adapted their services in order to comply with changing policy priorities, in particular, the employability agenda. Others were diversifying (or planning to diversify) their funding base by seeking alternative funding streams, fundraising and developing social enterprise. A number of organisations had taken major action to reduce their cost base and maintain their competitiveness by restructuring their organisations. However, some challenges still remained including concerns that there would be less funding for core organisational running costs in the future and there were already reports that some funders were unwilling to cover these costs. Some third sector respondents perceived that the sector was not able to compete on an equal basis for contacts because of a lack of parity of esteem with other providers. 11.8 TSOs were asked about performance and outcome measures imposed by funders as well as ones used internally. There was considerable variation in approaches to monitoring and evaluation of services by TSOs across local authorities and TSOs felt that funders were often too focused on measuring hard outcomes which did not capture the full range of added value of TSOs. Much of the work carried out by TSOs was often with clients who were hard-toreach and/or who had complex issues, focused on prevention and had wider social impacts that were less easily measured. Most organisations were keen to evidence the full extent of the work they undertook in order to show the value they added, and although some used other tools to do this, few had engaged with the SROI model. 11.9 Most participants had experience of successful partnership working. However, the extent of partnership within the sector and with other sectors may have the potential to increase in the future. Certain factors such as a shared ethos and clearly defined goals, complementarity and equality between organisations, trust and reciprocity and commitment at different levels were identified as contributing to successful partnership working for service delivery. Partnership working also presented challenges such as having adequate time and resources and some questioned the effectiveness of some formalised 82

partnerships. The tendering process may increase competition between organisations to the detriment of partnership working. However, developing partnership working to a greater extent was perceived to be important in order to meet the financial challenges ahead, in particular more extensive participation in joined up working could also be beneficial for clients. 11.10 There were additional costs associated with providing services in rural areas because of the dispersed geography and additional travel required as well as limited access to public transport. In addition, it was difficult to achieve economies of scale for (usually) relatively small local services. 11.11Policy makers and government have already identified some of the above challenges for TSOs in Scotland through policy documents such as the Enterprising Third Sector Action Plan and through the Third Sector Task Group and the Joint Statement on the relationship at local level between Government and the third sector. Some of these recommendations and policy objectives have yet to have an impact on the TSOs who participated in the research. 11.12This research will be followed up in the forthcoming iterations of this longitudinal study. There are a number of important issues which will be tracked over this time, for instance, identifying if policies have had more of an impact over time, and what the impacts of anticipated budget cuts will actually be. The next phase of research will explore if and how organisations are adapting and developing in innovative ways to manage these challenges enabling them to continue to deliver essential services to the same high quality.

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APPENDIX A: AIMS AND OBJECTIVES OF THE RESEARCH

The aim of the work is to track the opportunities and challenges that third sector organisations are facing with a changing public services landscape in Scotland between 2009 and 2014. The objectives are to:

Measure the extent to which third sector organisations perceive the Concordat (and other policies such as Scrutiny Improvement, changes to budgets and, in time, BV2) have impacted upon their organisation and contributed to business decisions around business planning, workload and emphasis, organisational structure, staffing, behavioural changes within the organisation etc. Determine the extent to which third sector organisations feel they have an outcome focus and whether this is aligned to the National Performance Framework and how this changes over time; Identify the ways in which third sector organisations are building collaborations across the sector and with local and central government and other service providers and funders; Assess the level of involvement of third sector organisations in CPPs and the extent to which they feel they are engaged in decision making and how this changes over time; Understand the ways in which local finance and funding decisions by public sector partners and funding/resources generated by third sector organisations themselves are impacting upon third sector organisations over time and whether they are contributing to offering good value for money; Assess the extent to which third sector organisation feel they are delivering high quality, efficient and responsive public services and how this has changed over time; Determine whether changes to the scrutiny landscape have been realised by third sector organisations and track this over time; Identify any other perceived challenges of the changing public services landscape on third sector organisations over time; Identify good practices from across the third sector where organisations are making the most of opportunities provided by the changing public services landscape; Make any recommendations for improvement to ensure third sector organisations deliver high quality public services that are continually improving, efficient and responsive to local peoples needs.

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APPENDIX B: PARTICIPANTS IN THE CASE STUDIES

Case Studies National Health and Social Care Provider Participants in Case Studies* Fieldwork took part in May 2010. Interviews were carried out with: Senior Manager x 3 Manager x 3

National Health and Fieldwork took part in June 2010. Interviews were carried out with: Social Care Provider Senior Manager x 2 National Employability Fieldwork for a pilot case study took part in January 2010. Provider Interviews were carried out with: Senior Manager x 4 Manager x 5 Local Employability Fieldwork took part in April 2010. Interviews were carried out with: Provider Senior Manager x 3 Manager National Health and Fieldwork took part in March 2010. Social Care Provider with: Senior Manager x 4 Regional Provider Interviews were carried out

Local Provider

Learning Fieldwork took part in March 2010. Interviews were carried out with: Senior Manager Officer Manager A focus group was carried out with 8 Officers and one manager. Learning Fieldwork for a pilot case study took part in December 2009/January 2010. Interviews were carried out with: Senior Manager Manager x 5

Local Health and A case study was carried out over 4 days, including face-to-face Social Care Provider and follow-up telephone interviews with the following: Senior Manager x 2 Manager x 7
*Generic role references are used in order to protect the identify of individuals

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APPENDIX C: ORGANISATIONAL PROFILES

Case Studies Field of Voluntary Activity Geographical Coverage Number of Staff/Annual Income (2008/09 unless otherwise stated) 22,424,000 Over 800 staff 29,276,426 Proportion of Income from Public Funding/social enterprise 85% from LAs and SG N/A

National Health and Social Care Provider National Health and Social Care Provider National Employability Provider

Mental Disability Support

homelessness and addictions

health, Across Scotland Across Scotland

Local Employability Provider National Health Disability and Social Care Support Care, Provider Education, Health & Employment support to disabled people Disability Regional Support Learning Provider

Employability, regeneration and social economy Mental health

Scotland and more than 400 N/A North East staff 16,923,623 England (2007/08) Edinburgh 1,431,703.00 N/A 29,719,000 Delivers services people from 29 LAs 86%, is generated by funding from local authorities

8 LAs Scotland

in 562,793 16 staff

93% funding N/A N/A

public

Local Learning Learning and North Glasgow 1,307,888.00 Provider childcare provider 725,566 Local Health and Social care and Scottish Highlands Social Care sustained employment Provider services Focus Groups GROUP 1 HEALTH/SOCIAL CARE Health and Community Aberdeen N/A Social Care FG services Health and Disability/young Central Belt, 43,300,000 Social Care FG people Glasgow & Highlands

N/A 81% from LAs

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Health and Learning Social Care FG disabilities & mental health Health and Childcare and Social Care FG learning support GROUP 2 EMPLOYABILITY Employability FG Employability Employability FG Employability FG Employability FG

5 LAs in the 240 staff West of 4M Scotland N/A Highlands, Moray, Argyll and Bute 1,846,820 9,794,000 2,698,338 N/A approximately 24 staff 316,460 10 staff N/A 2,057,605

Mostly from LAs N/A

Dundee, Glasgow and Edinburgh Criminal justice 25 LAs in services Scotland adult learning Most LAs in Scotland Employability Dundee

statutory sector (46%) SG and 91% N/A N/A LAs

GROUP 3 - EQUALITIES Equalities FG Young people Edinburgh and Health Equalities FG Learning Edinburgh disability Equalities FG Lone parents National Advice service & projects in 6 LAs Equalities FG Gender and Edinburgh employability

Public 92% NA

sector

N/A

National 45% from public funding Local 72% from public funding N/A

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APPENDIX D: FLEXIBLE INTERVIEW SCHEDULE FOR CASE STUDIES (2010)

Notes to researcher 1) Interview schedule can be adapted/questions excluded or included depending on TSO stakeholder being interviewed. 2) Ensure that, where possible, data/documents have been provided on: size and make-up of workforce a) in general; b) in the specific policy area providing the focus for this research; turnover, current annual budget and projected three-year budget a) in general; b) in the specific policy area providing the focus for this research; role of public sector grants, contracts, other public sector finance in TSOs operational budget a) in general; b) in the specific policy area providing the focus for this research; spatial focus/distribution of resources for TSOs work in delivering/managing public services a) in general; b) in the specific policy area providing the focus for this research; management, funding and governance structures that define TSOs work in delivering/managing public services; which national and local government bodies, CPPs, etc. the TSO is delivering services for; area of policy/types of services; funding model and legal basis for each relationships; after initial contact ask only if there have been changes in the above.

1) General background [Note to researcher: after first round of interviews, ask only if there have been any changes to respondents role, position, etc.] 1.1 Title and position of research participant.

1.2 Provide an overview of your TSOs work in delivering/managing public services: a) in general; b) in the specific policy area providing the focus for this research. Describe partners/funders; policies/programmes involved in; funding regimes. 1.3 Describe: a) your role within the TSO; b) your role in the TSOs delivery of public services. 1.4 Describe any changes in the above issues since last contact (or if first contact, over the preceding three years). 1.5 What have been the key opportunities and challenges faced by your TSO in relation to its work in public services in this past year?

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1.6 year?

What key opportunities and challenges do you think you will face in the next

2) The changing policy context and your organisation 2.1 Describe how your TSO manages and delivers services in the specific policy area providing the focus for this research. For example, in your view Briefly describe the roles and practice of a) staff and/or b) managers. Briefly describe staff expertise, skill-sets and qualifications. 2.2 What is the balance of activity within your TSO between the delivery of different types of public services, delivering other services, campaigning/representing interest groups, fund-raising and other activities? 2.3 Describe any changes in the above issues since last contact (or if first contact, over the preceding three years). 2.4 Describe any more general changes since last contact (or if first contact, over the preceding three years) in the general culture, focus, priorities of your TSO. 2.5 What have been the key drivers of any changes identified above? Probe in relation to: drivers of change from within your TSO; in response to specific funding calls or policy agendas; in response to changing institutional environments/resource issues; in response to emerging issues or evidence; from within communities/groups that you represent? 3) Challenges of the Public Service Reform Agenda 3.1 To what extent are your TSOs priorities, activities, practices and management/organisation shaped by the need to achieve specific outcomes for public services? Describe.

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 How has your TSO arrived at these outcome targets (e.g. unilaterally; imposed by funders; agreed in partnership with government and other stakeholders)? 3.2 From your perspective, how does the Scottish Government National Performance Framework influence your TSOs priorities, activities, practices and management/organisation? For example, has it influenced overall themes/priorities for your work? How? Do you deliver public services in accordance with specific National Performance Framework objectives, outcomes and indicators? Describe. From your perspective, does the National Performance Framework add value to: a) the public services reform agenda; b) your work? How? 3.3 How have any shifts in a) Scottish Government, b) local government budget priorities affected your TSOs priorities, activities, practices and management/organisation? Probe regarding pros and cons of post-ring-fenced funding. 3.4 How have any shifts in a) Scottish Government, b) local government budget limitations affected your TSOs priorities, activities, practices and management/organisation? 3.5 How has your TSO positioned itself to take account of any changes in budget priorities? (e.g. offering different types of services) 3.6 Describe the external arrangements (i.e. led by Government or funders) for evaluation, scrutiny, performance management, measuring best value and auditing that impact on your TSOs delivery of public services. Have these arrangements affected thinking and practice within your TSO? How? How has your TSO arrived at these measures (e.g. unilaterally; imposed by funders; agreed in partnership with government and other stakeholders)? 90

3.7

Describe

any

additional

internal

evaluation/performance

management

arrangements that your TSOs uses. To what extent do these complement/add value to external arrangements? 3.8 From your perspective, how a) appropriate and b) proportionate are external arrangements for evaluation, scrutiny, performance management, measuring best value and auditing that impact on your TSOs delivery of public services? Do these arrangements inform/add value to your work? How? What changes to should be made to these arrangements? 3.9 From your perspective, have new ways of measuring public benefit (e.g. social return on investment) influenced your TSOs priorities, activities, practices and management/organisation? How?

3.11

Describe any changes in the above issues since last contact (or if first contact, over the preceding three years). What have been the key drivers of any changes identified above?

4) Relationships with local government 4.1 4.2 Describe your TSOs role in CPPs and/or development/delivery of SOAs. How effectively is your TSO able to contribute to decision-making in CPPs and/or development/delivery of SOAs? Provide example(s) of your TSOs positive role/contribution? What are the barriers/limitations on your TSOs contribution? 4.3 What role do CVSs play in facilitating relationships with CPPs/local How could/should their contribution be improved/further developed? 4.4 What changes, if any, are needed to enable your TSO to more effectively contribute to decision-making in CPPs and/or development/delivery of SOAs? 91

government?

4.5

Describe any changes in the above issues since last contact (or if first contact, over the preceding three years). What have been the key drivers of any changes identified above?

5) Principles of effective partnership-working 5.1 To what extent is your TSO involved with umbrella organisations promoting collaboration and campaigning across the sector? 5.2 How does your TSO ensure that the groups and communities that it represents have a voice and sense of ownership in your work? How effectively? What are the challenges/opportunities in being required to balance different roles (e.g. representing communities/groups while acting as a public service deliverer)? 5.3 Describe any changes in the above issues since last contact (or if first contact, over the preceding three years). What have been the key drivers of any changes identified above? 5.4 Please give an example of a partnership arrangement that you have with a public sector organisation that you consider to have worked well. Please explain: play? 5.5 What are the objectives of the partnership? Where does the funding come from? What factors made the partnership a success? Do you think the partnership added value to service delivery? How? Who the partnership was with: type of organisation(s); location etc. How/Why was the partnership formed? What role does each partner

Have you encountered any difficulties or disincentives to forming (a) partnerships generally, and (b) specific partnerships? What were the issues? 92

6) Other 6.1 What are the main barriers/challenges that your TSO faces in improving its performance in its public service delivery role? How does your TSO plan to address these challenges? What would help your TSO to address these challenges? 6.2 What do a) national government; b) local government(s); c) other public sector stakeholders; d) third sector organisations/stakeholders need to do to maximise impact of TSOs in public service delivery? 6.3 Are there any other issues that you would like to raise?

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APPENDIX E: AGENDA FOR FOCUS GROUPS

1) Background The Scottish Government is committed to promoting public services that are high quality, continually improving, efficient and responsive to local peoples needs and has acknowledged that third sector organisations have a key role to play. In order to inform future partnership-working with the third sector, the Scottish Government has commissioned the University of Edinburgh and Edinburgh Napier University to conduct a major new three-year research project. The research will follow 20 third sector organisations over a period of three years from 2010. We wish to convene a number of focus groups of third sector representatives, which will meet regularly to discuss responses to the changing public services landscape. Each focus group will involve representatives of four organisations. We hope that focus groups will meet twice a year in 2010, 2011 and 2012.

2) General discussion topics The agenda for group discussions will be flexible and driven by the participants. However, the following are among the issues that we would like participants to consider. Topic 1 What do you think is distinctive about what the third sector/your organisation can offer to the delivery of public services? What opportunities and challenges has your organisation encountered in engaging in public service delivery? What added value do third sector organisations bring to public services? How can this added value be evidenced, facilitated and enhanced? Topic 2 What changes have there been/do you see emerging in the policy environment that have/are going to change how your organisation delivers public services? What are the drivers of these changes? How will your organisation respond?

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Topic 3 What changes have there been/do you see in the funding environment that have/are going to change how your organisation delivers public services? What is/will drive these changes? How will you respond? Topic 4 How appropriate are current public sector arrangements around procurement, performance management, outcome measurement, evaluation and measuring best value? How do these arrangements affect how your organisation operates and the decisions it makes about public services provision? What needs to be done to ensure that the public benefit delivered by the third sector is evidenced and rewarded? Topic 5 What are the key dimensions of your organisations relationship with local authorities and CPPs? How and why is this changing? How does this affect how your organisation operates? Topic 6 What role does partnership-working within the third sector play in your organisations role in public services delivery? What are the drivers behind partnership-working? How do current public sector funding arrangements affect relationships between third sector organisations? What factors facilitate effective partnership-working across the third sector, and between the third and public sectors? Topic 7 To what extent does place matter? What are the particular challenges for the third sector in delivering public services across a range of geographical contexts (e.g. disadvantaged urban neighbourhoods; remote rural areas)? Topic 8 What opportunities and challenges will your organisation encounter in engaging in public service delivery over the next 12-18 months? What do a) national government; b) local government(s); c) other public sector stakeholders; d) third sector organisations/stakeholders need to do to maximise impact of TSOs in public service delivery?

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GLOSSARY
BME Black and Minority Ethnic groups BV and BV2 - Best Value is a non-statutory duty on public service organisations Best Value Audits 2 (BV2) is currently being developed and tested in order to supersede Best Value Also see Background and Context CPPs Community Planning Partnerships Community Planning Also see Background and Context COSLA Convention of Local Government Authorities is the representative voice of Scottish local government and also acts as the employers association on behalf of all Scottish councils. ESF European Social Fund LA Local Authorities HMIE Her Majestys Inspectorate of Education HGIOCL2 How Good is our community learning and Development is selfevaluation tool to using quality measures. http://www.hmie.gov.uk/documents/publication/cldfull.pdf HR - human resources NHS National Health Service NPF National Performance Framework Set of national performance targets for Scotland set up by the Scottish Government. http://www.scotland.gov.uk/About/scotPerforms NFF New Futures Fund was a fund which aimed to assist the most disadvantaged target client groups, furthest removed from the labour market, to develop the skills, knowledge, attitudes and attributes they need to acquire to be more employable. From April 2006, future responsibility for developing and delivering New Futures Fund (NFF) type services were transferred from Scottish Enterprise to local Community Planning Partnerships. Rickter Scale - a complete assessment and action planning process based around a hand-held interactive board, which is designed specifically to measure soft indicators and distance travelled. http://www.rickterscale.com/what-we-do/the-rickter-scale SCVO Scottish Council for Voluntary Organisations Single Outcome Agreements (SOAs)

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SOLACE (Scotland) Scottish Branch of Society of Local Authority Chief Executives & Senior Managers http://www.solacescotland.org.uk/ SME Small to medium sized enterprise SROI Social Return on Investment see background TSO Third Sector Organisation Weavers Triange - The 'Weaver's Triangle' is a personal development tool aimed at helping clients set out what they want to achieve and the activities that they need to do to bring these about. http://www.scotland.gov.uk/Publications/2003/12/18681/30965

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Social Research series ISSN 2045-6964 ISBN 978-0-7559-9976-7 web only publication www.scotland.gov.uk/socialresearch
APS Group Scotland DPPAS11213 (01/11)

ISBN 978-0-7559-9976-7

9 780755 999767