The challenges and opportunities of leading an Arm’s Length Body in a post-pandemic world

The challenges

There are four key factors coming together that are having a significant impact on ALBs in terms of their existing mandate, their target impact on the customers, citizens and communities they serve, and the extent to which they deliver maximum value for money:

1. The external impact of the pandemic – huge changes have happened in terms of the needs, habits and behaviours of citizens and communities and the context within which ALBs operate. What is undoubtedly true is that citizens are suddenly much more emboldened, empowered, vocal and active. Whilst this has to be seen as a force for good, it will necessitate changes in the way ALBs engage with them. There is also an increased emphasis on taking a stronger system-wide perspective for tackling challenges across many areas of public service. The challenge for leaders is to ground their organisation in the new reality of the post-pandemic world.

2. The internal impact of the pandemic – the realisation of the scale and permanence of the changes in the way employees connect with purpose, operate productively (and non-productively) and embrace agility, coupled with the increasing importance of collaboration, innovation, diversity and wellbeing.

3. The modernisation and reform agenda – the implications of the Prime Minister explicitly including ALBs within his Declaration on Government Reform as part of his drive to modernise and reform public service. Alongside this the increased pressure the Public Accounts Committee is putting on the Cabinet Office to enforce the principles within the Department and ALB Code of Good Practice through providing greater scrutiny of the performance and impact of ALBs. In response to this the Cabinet Office has launched a new and ambitious programme with senior sponsorship that is firmly centred on the ‘value for money’ and ‘citizen impact’ achieved by ALBs. This is exploring a variety of levers available to support reform, including the way ALBs are set up, the way senior appointments are made, the use of appropriate cross ALB benchmark data, the impact of department reviews and the fiscal impact of spending reviews.

4. The financial settlement – as the Comprehensive Spending Review plays out, the scale of the financial challenge will suddenly emerge, with a limited amount of time available for leaders to shape their organisation to respond to what will inevitably be an agenda of cutting costs and focusing on the things that really matter.

All of these factors require ALB leaders to ask two critical questions:

1. Given our existing mandate, are we doing the right things in the right way to maximise our impact on the citizens and communities we serve?
2. In doing this, are we delivering exceptional value for money?

The response

The necessary response by ALB leaders spans the following three areas:
1. “What does this mean for our core purpose, key services, and strategic intent?”
2. “To what extent does our business model need to adjust to respond to any such changes?”
3. “How can we make such changes at pace at a time when there are many competing priorities coupled with an unsettled, uncertain and potentially exhausted workforce?”

Focus area one – what does this mean for our core purpose, key services and strategic intend?

There are three critical considerations for ALB leaders, ie

• Your service balance – does your existing balance of services meet the emerging needs of citizens and communities? Whilst every ALB has its own unique set of services designed to respond to its own unique situation, there are likely to be common dimensions to the achievement of the optimum balance between prevention versus cure. These could include balancing ‘reactive’ and ‘proactive’ activity, and/or balancing ‘enforcement’ and ‘education’ activity. Whilst ALBs by their very nature are always making these decisions and trade-offs, the scale and nature of the current changes might require a more significant adjustment.
• Your service affordability – what is the logic by which you prioritise the relative importance of your services so you can better make the hard decisions associated with significant cost-saving measures? This affordability question needs to also expose those examples of where ALBs have taken on activity that, whilst meeting a real citizen or community need, is outside the mandate of the organisation. ALBs have a history of taking up ‘slack’ where there are gaps in service provision, and whilst backing out of these activities where there is a conflict between being ‘needs driven’ versus ‘mandate driven’ will be tricky and risky, it is something that needs confronting.
• Your strategic focus – there may also be some fairly major surgery required to existing strategic priorities, be they driven by changes to the organisations core purpose, or through a significant efficiency or effectiveness agenda. Leaders are having to not only explore the implications of a shift in strategic priorities, but also ensure the case for change is appropriately clear and compelling in order to take their organisation with them.

Focus area two – to what extent does our business model need to adjust to respond to any such changes?

Having established the scale and nature of any changes to existing purpose, services and strategic priorities, the next logical step for leaders is to determine what adjustments need to be made to the workings of the organisation to ensure it can respond to such changes. Here are some examples of some of the things that must be considered that respond to the twin ‘value for money’ and ‘citizen impact’ agenda and focus, split into four key elements of a typical ALB business model.

1. Your customers and communities:

a) How you engage with them:

• How are you exploring more cost-effective ways of engaging with your customers, citizens and communities in response to behavioural changes resulting from the pandemic? The increased confidence and habits forged during the pandemic around digital engagement certainly open up possibilities that are encouraging a much more rapid acceleration of digital capabilities.
• From a citizen impact perspective, can you test the extent to which your core design principles around, for example, impartiality, consistency, proportionality and being evidenced based are sufficiently hard wired into your business model so they appropriately influence the way you think, act and behave?

b) The impact you have on them:

• • Have you revisited your target customer experience and established a new benchmark performance level that responds to any financial challenges, now and in the future? Whilst organisations with strong connection with purpose, typified by ALBs, inevitably set high aspirations in terms of what they want to do and achieve, increasingly, financial pressure requires them to be more modest in their aspirations.
• Are you able to evidence the impact you are having in a clear and compelling way? The looming focus and scrutiny on effectiveness will require ALBs to provide clear evidence that the services they provide flow through to the target impact on citizens and communities. This is particular challenging when the services and activity are orientated around education and prevention, rather than responding to a operational or regulatory need.

2. Your activities and assets:

a) The activities you need to be really, really good at – have you tested and challenged those critical activities needed to deliver your mandate and target impact? This could include:

• Relationship with host department – the degree to which honesty, trust and transparency enable the right conversations to take place around mandate, focus, performance and funding.
• Governance – the extent to which you make decisions, sets priorities and allocate resources in a way that is totally aligned with ‘citizen impact’ and ‘value for money’ imperatives.
• Resource management – recognising the importance of getting the right people doing the right work to ensure everyone is maximising their productivity and impact. There have been significant improvements made in the way organisations can measure such productivity and respond appropriately to what this insight provides. Equally the pandemic has taught us much about the capacity people have to respond quickly and decisively to shifting priorities and needs when the situation demands and tapping into this opportunity is pivotal to increasing productivity levels.
• Leadership – acknowledging the significant shift in leadership style required to enable staff to be healthy and productive in a hybrid working environment and acting decisively to develop and embed these new leadership capabilities.

b) Maximising your key assets – have you reviewed the extent to which you are maximising the productivity gains from your key assets such as your data and technology? Digitalisation has for a long time been seen as the ‘silver bullet’ to many of the challenges facing the public sector. The current set of challenges are requiring leaders to ask searching questions around the extent to which their technology and data assets are doing as much as they could and should to contribute to both cost efficiencies and citizen impact.

3. Your wider eco-system and strategic partnerships

There is renewed focus on how to best take a system-wide view to delivering public service in a way that maximises the impact but in a sustainable and affordable way. Have you maximised one of the great strengths and opportunities ALBs have in often being part of a wider public service eco-system? Can you look to this as a vehicle to drive improvements in both citizen impact and value for money? We know that these opportunities are hard won and require strong leadership, imagination, exceptional stakeholder management and tenacity. It is for this reason that ALBs are quite rightly looking to further strengthen their system leadership skills, capability and capacity.

4. Your funding and costs:

a) Your existing and future funding streams – is there clarity on the existing and potential future funding streams required to deliver your ambitions? Do you have assets and expertise you can use to stimulate additional funding streams?

b) The way you manage your costs – are you reviewing the key elements associated with the cost dynamics of your organisation, including:
a. Profile –  to what extent are the existing cost categories within your organisation appropriately aligned with your strategic priorities, and where are the opportunities to improve this alignment?

b. Benchmarking – how does the cost of your key activities compare with your peers and/or best practice, and what does this comparison tell you regarding cost saving opportunities? There is a strong appetite to further develop pan-ALB benchmarking statistics, as well as encouraging ALBs to seek meaningful comparisons beyond their own natural boundaries.

c. Cost reduction – what are the scale of your costs saving opportunities across your organisation, eg:
i. Service redesign – have you explored more cost-effective ways of conducting all of your key activities? Options may include either taking a bold and radical re-look at the way services are designed and delivered across the entire organisation, or introducing highly creative and imaginative thinking to individual service areas.
ii. Remodelling – have you ensured that you have the right people with the right expertise and cost deployed on the right activities to maximise value for money? Whilst many ALBs have embraced the principles of remodelling, there remains strong evidence that there are far too many examples of specialised, and by implication expensive, staff spending too much of their time on ‘rules-based’ activity. Furthermore, the shift towards bringing together such rules-based activity is an essential step in the journey to explore greater automation.
iii. Demand management – have you removed or reduced inappropriate demand outside your mandate and changed the profile of demand that is within your mandate? Does your team fully understand the drivers of demand and how they can be influenced? Have you fully embraced a ‘digital by default’ mentality to increase your efficiencies? Again, great strides have been made in recent years on what strong demand management looks like, and this continues to be a vital source of efficiency and effectiveness gains.

Focus area three – how can we make such changes at pace at a time when there are many competing priorities coupled with an unsettled, uncertain and potentially exhausted workforce?

In considering the challenges and opportunities of implementing these changes at the required pace and with the required impact, during a period of potentially high levels of anxiety and uncertainty, there are five critical factors that need to be considered:

1. The style of change – there is much talk at the moment about the value of ‘quiet change’ as well as the power of ‘nudge thinking’. Both are strong options for ALB leaders faced with the need to achieve something significant during a period of high levels of uncertainty, unsettlement and staff exhaustion.

2. The power of focus and certainty – the combination of establishing an appropriate degree of certainty in a turbulent situation, and then ensuring that the organisation and people within it know what to focus upon are the best antidotes to current exhaustion and unsettlement

3. The timing and sequencing of change – critical decisions around, for example, whether to embark on a large-scale change initiative now, or to have a much more focused and modest change agenda to span the period until when things are clearer and the organisation is more stable and settled.

4. The human journey – how to support your people as they navigate through a journey from ‘awareness’ and ‘commitment’ through to ‘ready’ and ‘performing’, where ultimately they are fully contributing to the necessary changes and flourishing in the new world.

5. The change management conditions for success – putting in place those critical ingredients that will enable the change to land well and fully deliver the target impact and benefits at the scale and pace you require (see diagram below). In these circumstances, strong leadership, and an exceptionally clear and compelling case for change and a high degree of resilience and resourcefulness are certainly required.

6. Internal change capability – establishing the right degree of internal capability and capacity to drive the change forward, ranging from expertise to design and shape the change agenda, through to leaders on the ground inspiring people to respond to the change. The nature of this expertise will shift and change at different stages of a change journey, as set out with some examples below: