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Russell Webster

Russell Webster

Criminal Justice & substance misuse expert and author of this blog.

The 6th Commandment of Payment by Results: Profit shall not be thy God

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One of the most controversial aspects of payment by results in the UK has been the way the funding model has been used to outsource public services and open the market up to private providers, typically the sort of global companies who deliver the Work Programme. Many people are opposed in principle to the idea of public services generating profit for multinationals. On the other side of the argument are those that see the introduction of business sense and commercial acumen as a key way of reducing cost and driving innovation. But is financial profit the only measure of success?
This is the sixth in my series of 10 commandments for payment by results.

Profit shall not be thy God

One of the most controversial aspects of payment by results in the UK has been the way the funding model has been used to outsource public services and open the market up to private providers, typically the sort of global companies who deliver the Work Programme.

Many people are opposed in principle to the idea of public services generating profit for multinationals.

On the other side of the argument are those that see the introduction of business sense and commercial acumen as a key way of reducing cost and driving innovation.

It is certainly true that profit has been a key and obvious driver for private companies expanding into the public sector.

It is of course the legal duty of such companies to generate profits for their shareholders.

Few frontline workers are motivated by money

However, the picture becomes more interesting when we look at the front line staff delivering these services.

Payment by results is typically used to try to tackle entrenched social problems such as reoffending, worklessness and homelessness.

Most people working in these areas have chosen to do so because of a sense of vocation rather than any desire to earn as much money as possible.

Payment by results is a very new approach to commissioning and it has been a somewhat uncomfortable transition process for many staff who were hitherto relatively unconcerned about targets at the individual service user level.

 

http://www.socialissuesphotography.co.uk/
http://www.socialissuesphotography.co.uk/

 

There was an interesting article earlier this year in the Guardian about a young woman working for a voluntary sector Work Programme provider who had become unsettled working within a PbR culture:

She said she felt morally torn between meeting the targets that allowed the charity to be paid and serving the often intensive needs of the young people. She disliked the way providers fought each other to claim they had been responsible for getting someone a job. She felt pressure to cherry-pick teenagers who were most “job ready” to maximise the financial returns. Most profoundly, she said she felt unhappy that people were being dehumanised (her description) by the process. She had a particular distaste for the way people were being treated as commodities and she hated the way some in the welfare-to-work world referred to their clients as “stock”.

One of the advantages of PbR is that it forces providers to keep a close focus on outcomes.

One of the disadvantages is that some staff resent this focus if it is seen as predominantly profit-driven.

Typically the most effective staff working in social care are those with a strong personal commitment, who are non-judgmental, able to engage with their service users and treat them as individual human beings.

Profit is not the only incentive

PbR can work in this settings if it is seen as a way of trying to achieve success – getting people a job and helping them sustain it, rather than merely completing an action plan to claim that they are “job ready”.

But PbR could be more effective still if the incentive for achieving better outcomes was not a dividend for the organisation but a surplus for reinvestment in better services, driving up outcomes further still.

This is the payment by results model in both the justice reinvestment pilots and in the West Yorkshire reducing youth custody initiative.

In this last case, the local Youth Offending Teams were incredibly successful – they reduced the use of youth custody by one third in two years.

They attributed their success to three key factors:

  1. They believed in the outcome they were set (see the 2nd Commandment)
  2. It was very quick and easy to measure this outcome and develop a sense of momentum that they were improving services (see the 3rd Commandment)
  3. The money saved by reducing the use of custody was available for local YOTs to reinvest in services for young offenders

Rewarding success in other ways

So, payment by results schemes may be more effective when the goals of organisations and individual workers are aligned.

I’m in favour of contracts that reward successful organisations by awarding them a continuation of their contract without having to compete for it.

I also think much of the opposition to PbR from workers in the social care field would evaporate if “profits” were split – half going to the government as savings and half going to the provider to reinvest in services and improve outcomes further.

 

The next post in this series will look at the 7th Commandment of Payment by Results:

“Thou shalt promote innovation.”

 

Browse my comprehensive resource pack on Payment by Results.

Check out my Marmite Infographic for simple explanation of key PbR jargon.

 

Related posts you might like:

Attributing outcomes in payment by results contracts

When outcomes are the basis for payment, it is important that the provider receiving the payments is responsible for achieving the outcomes. Targets should not be unduly influenced by external factors (such as the state of the economy for Work Programme type schemes) or by the work of other agencies who are not receiving payment from the contract.

Read More »

Understanding the market for payment by results

commissioners are urged to consider whether potential providers have sufficient financial resources to bid for a contract which requires considerable initial investment and where payments are delayed until the achievement of outcome measures has been verified.

Read More »
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