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Private discipline in the public sector

CAN THE PUBLIC SECTOR perform like a private sector business? Should it? Must it? These questions mean different things to different people. I truly didn’t understand the difference in approach or the opportunity for change until I became the group director of finance and resources at Hadlow College.

Colleges were set free from Local Authority control in 1992 to be more entrepreneurial, but public funding remains the primary revenue stream for most further education institutions. This is a paradox, but it can be changed.

When I joined, there were significant challenges. Management information, profit and return, fiscal policy, sustainable investment, public relations and marketing simply didn’t exist. Dependency on public cash was 85%.

There was no cash or external credibility and bankruptcy looked certain. But the core business of teaching was intact, a reflection of the commitment of the staff during that time.

I spent much of my career advising business to improve and identify ways to be more profitable. My view was to keep it simple, be open and engage the entire business.

Hadlow was seen as an educator meeting the needs of the land-based sector, but not as a business. Staff commitment was exceptional. Put simply, we needed to harness that goodwill and channel it to develop a corporate culture, without undermining our principles.

A risk-positive approach is crucial. In the early years, this involved large investment in capital assets, staffing and development with a weak balance sheet. If you take innovative and consistent high risks and communicate this effectively, the business starts to change. Confidence becomes infectious. Walk the floor to empower staff. At the top, it is crucial to act as one even if there are differences of opinion. Credible leadership in the public sector makes a difference, but it must be strong enough to move through the entire business.

A board of directors open to change is important. A balanced board of private sector people creates an entrepreneurial approach.

Transparent finances with bottom-up budgeting transformed how the staff perceived finance. Ten years of profitability is planned. Having a set of budget holders financially empowered is far better than working with 25 policies on expenditure. We removed the barriers to getting things done. Staff wanted to think outside the box, but were chained by poor systems. There are outstanding individuals in public organisations hindered by bureaucratic systems – not being afraid to change this empowers individuals.

I made the finance function integral to the organisation and learned what the business did. Credibility and understanding yield trust and motivation. At budget meetings, the global position was presented as well as divisional performance. Managers saw how their contribution affected the whole business.

An area equally misunderstood is the role of public relations. Public organisations deliver this to varying levels. We need quality product with clear brand principles. We are a business, and our business is high-quality teaching, learning and commercial development to support the rural sector. Changing a logo is not brand valuation.

Often, the public sector suffers from risk aversion due to accountability of taxpayers’ funds. Hadlow derives public income and demonstrates value. You can have both. In 2006, we applied a fiscal rule to be spread over three sectors of further education, higher education and commercial development. This year, 34% of the business is commercial and the organisation has invested more than £28m since 2003, deriving only £6m from funding council grants. The group has not lost money in ten years and grown from £4m to £17m. ?

 

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