How can housing associations build on the Summer Budget?
September 30, 2015
The scale of the challenge laid down for housing associations by the 2015 Summer Budget is significant, but not insurmountable. There will be variation across the housing sector but the emerging rule of thumb seems to be a reduction of around £16 million for every£100 million of social rental income reported for the last financial year. While there is no shortcut to sustainability and little doubt that housing associations need to undergo fundamental change, there are some short term measures housing associations can consider to begin to address immediate challenges.
Our recent Talking Point, The housing association of 2020: Distinctive by design sets out the steps which we believe every housing association needs to consider to deal with the next five years of change in housing policy, economics and delivery. The art over the next six months is to find the right balance between achieving efficiencies which will have a short and medium term impact, without losing sight of the bigger picture and longer term future of the organisation. The risk to avoid is the dangerous cycle of cost cutting without being able to demonstrate real savings, but, reducing service quality, affecting customer satisfaction and employee morale, and putting a strain on core operations.
These mistakes can be avoided by addressing costs strategically. Being ready to deliver efficiently requires three questions to be answered:
- What are our outcomes and what do we need to deliver them?
- How do we deliver efficiently and get better at it over time?
- Who would it help us to be ‘in delivery’ with?
These questions cannot and should not be answered too quickly but neither can they be ignored. Most of the organisations that we work with will have at least refreshed their answers to these questions by the end of 2015.
Here is our list of actions to think about now which will help you tease out the answers to the questions above:
How do your suppliers contribute to your outcomes? How well do you understand your third party procurement spend, who you spend it with, how much and when? We find many large organisations still have relatively little basic data on procurement spend. Until you understand your spending patterns it is really difficult to make an assessment of how to use your third party spend to your advantage to become more efficient and effective. Applying the basic principles of a category management approach enables you to get spending under control and make effective choices about future spend.
Partnering structures and relationships: A quick review in many Housing Associations will show how value or cash is leaking out of company and group structures. For example, more effective management and employment models can save around £1M out of every £10M of repairs and maintenance expenditure without altering the quality or nature of the service. Similarly the opportunities for housing associations to share back office services offers some significant benefits in terms of efficiency and can also add resilience to in-house expertise in important areas such as HR and legal services. Establishing some clear principles about a few areas where you are keen to explore new ways of working can pave the way for possible new models for organising the business as a whole.
Establishment control: Are the resources in your business effectively aligned to your key objectives and priorities? Do you understand the full extent of spend on staff which is either off-establishment, from self-employed contractor or through temporary staff? Often hidden in non-staff budgets or the accounts payable system, the direct costs of spend of this nature and the potential liabilities that it exposes the organisation to can be significantly underestimated. Putting temporary staff usage under a stricter controls framework with an approved list of appropriately tendered contracts can have a major direct impact on the bottom line within weeks but more importantly it provides a valuable insight into the additional delivery resource used by the business, the pressure points and the hard to recruit areas.
Productivity and effectiveness: Metrics around the effectiveness of teams in the front, middle and back offices can be hard to quantify. Our experience shows that through working with operational managers in a continuous coaching environment it is possible to help teams improve their own effectiveness by a factor of up to 30% in a way which is owned by them and sustainable. The impact on performance, satisfaction and morale in times such as these can be vital.
These ideas are not a substitute for the fundamental work around strategy and design that is required, but considering these points can allow housing associations to begin to address immediate efficiency challenges while taking the time necessary to think through the larger opportunities and prizes potentially on offer.