Employment implications of the outsourcing of public services to voluntary, not-for-profit organisations

Citation

Baines, D. and Cunningham, I. (2011), "Employment implications of the outsourcing of public services to voluntary, not-for-profit organisations", International Journal of Public Sector Management, Vol. 24 No. 7. https://doi.org/10.1108/ijpsm.2011.04224gaa.001

Employment implications of the outsourcing of public services to voluntary, not-for-profit organisations

Article Type: Guest editorial From: International Journal of Public Sector Management, Volume 24, Issue 7

Outsourcing public services to voluntary, not-for-profit, organisations has constituted an important part of public sector reform during the last three decades across most industrialised countries (Evans et al., 2005; Banting, 2000). This gives the voluntary sector a greater role in public service delivery inevitably and means that the nature of its relationship with government is undergoing a process of change.

In the UK, for example, outsourcing was pursued by successive Conservative governments during the period 1979-1997 and its usage has remained a key feature of the post-1997 Labour governments, leading to radical market-related changes to the sector’s income security and management practices, as well as significant growth in its workforce (Wilding et al., 2004). A similar pattern of development can also be seen in Australia, where the 1990s saw the third sector subjected to intensifying competition and cuts in funding from the state (Onyx and Maclean, 1996). Evidence across industrialised countries reveals familiar themes of competition, funding insecurity, cost cutting and the adoption of the New Public Management Agenda (NPM) in the sector (Baines, 2004a, b). NPM assumes that management in organisations whether profit, or non-profit should be essentially the same. The underpinning characteristics of NPM encourage professional management, continuous improvement and efficiencies, and the development of a labour force disciplined to improve productivity in the provision of public services (Pollit, 1995). These pressures have been further heightened by the onset of the credit crunch and recession as governments struggle to make savings in public expenditure.

Despite these changes, limited attention has centred on the implications that these policy shifts have had, and will have, on the employment practices and policies of voluntary organisations. This lack of attention is surprising given the labour-intensive nature of both public service and voluntary sector work. The uniqueness of the voluntary sector, moreover, requires researchers to ask different kinds of questions and to focus their studies in different ways than typical of those undertaken in the private and the public sectors. “People management” in the voluntary sector has been highlighted as relatively unsophisticated (Kellock Hay et al., 2001), a feature that sits uncomfortably alongside increased scrutiny and regulation from public sector funders. Government regulators require service providers to conform to commercial private sector practices as their management. Voluntary organisations are expected to demonstrate that they are “business-like” in order to maintain funding and in order to be invited to participate in the policy arena, a priority area for many voluntary agencies with missions of social care and inclusion. This raises questions with regard to how far the closer relationship with the state is transforming people management towards a more sophisticated, professional and more businesslike model.

Research in this area also needs to provide a greater understanding of the way that employees’ commitment to agency missions shapes employment relationships in the sector, much more than in other sectors (Cunningham, 2008; Nickson et al., 2008; Van Til, 2000). The shared values base and commitment to mission is thought to traditionally manifest itself in the way work is organised, opportunities for staff participation in decision-making, harmonious management-employee relations, and a work culture that reflects mutual respect and caring. Sacrifices by staff, working for low pay, undertaking unpaid overtime, subsidising services with their own goods and supplies and working through breaks are common features of employment relationships in the sector (Baines, 2004a; Evans et al., 2005).

In an era characterised by NPM and heightened public sector austerity, the degree to which the elasticity of workers’ tolerances for these sacrifices stretch remains uncertain. This is further complicated by the highly gendered workforce, where women’s sensibilities are built around notions of self sacrifice, putting others needs ahead of their own in favour of caring relationships (Charlesworth, 2010; Baines, 2004a). This leaves us with questions relating to how far NPM and other performance-based models undercut the characteristics of work in the voluntary sector where managers increasingly follow business plans rather than the altruistic values of the sector Another important set of questions revolves around the impact of these tensions on employee working lives, workplace culture, morale and service quality.

Commentators further highlight how these tensions lead to a difficult balancing act for voluntary organisations in managing paid staff as they feel compelled to introduce policies and practices that fit with their values and mission, while simultaneously complying with diverse and contradictory external funding and regulatory pressures (Ridder and McCandless, 2008). To successfully balance these tensions, voluntary organisations will have to develop the capacity to retain autonomy and resist cost pressures by providing highly sought after services in the care market, building strong interpersonal links between themselves and funders, and lessening their resource dependency on single sources of income (Blois, 2002; Grimshaw and Rubery, 2005). At the same time, their ability to build these capacities will likely diminish in the face of the stark changes soon to be introduced to the sector in light on ongoing government “belt-tightening”, deep cuts in social funding, and associated shifts in surrounding market conditions. All these factors undermine the voluntary sector’s capacity to resist change over time. Chief among these changing market conditions is the era of austerity where funders will increasingly be demanding “more for less” from services outsourced to the sector.

We do not fully address all these themes in this Special Issue, but the papers presented engage closely with many of them. The principle focus of this volume is to examine how aspects of voluntary sector employment are being affected by its engagement with the growing trend of towards the state sponsored market-based outsourcing of the delivery of public services. The papers for this Special Issue were drawn from a Conference Stream run by the Guest Editors from the April 2009 International Labour Process Conference in Edinburgh.

Two papers look at the outsourcing phenomenon in the UK context. The first written by Steve Davies of Cardiff University explores how outsourcing to the third sector was a focal point for New Labour’s public sector reform agenda, expanding the sector’s influence in areas such as social and health care, education and housing. This expansion, he argues, has also changed the character of the state-voluntary sector relationship. A significant part of this change involves the move from grant funding to target-driven contracts, leading to significant cost pressures on the sector. These cost pressures are further accentuated by increased competition from the private sector. Consequently, many voluntary organisations are forced to cut back on their advocacy and campaigning roles to survive or are forced into mergers or consortiums in order to secure income. The paper also observes that these trends will continue and even sharpen in the UK under the present coalition government in the current climate of public sector austerity.

The next paper by Claire Kelliher and Emma Parry from Cranfield University uses data from the 2004 Workplace Employee Relations Survey (WERS) to explore how this relationship has impacted employment policies. Specifically, Kelliher and Parry look at state influence on certain HR policies, standards and practices in the voluntary sector and evidence to suggest that the competitive tendering for the provision of services may create pressures for voluntary agencies to reduce costs and take on new private sector influenced human resource management practices. The authors undertake a comparison of public, private, and voluntary sector organisations from the WERS data set. The paper finds that HR in the UK voluntary sector is in a process of transformation from what earlier literature described as an “unsophisticated approach” to people management to one that reflects private and traditional public sector influences. The data also reveals that NPM-inspired policies focusing on performance management are common in both the public and voluntary sectors, though in the voluntary sector these polices operate alongside more traditional welfare-orientated policies characteristic of the sector prior to the introduction of NPM. The article concludes that public sector influence is moving HR in the voluntary sector towards a more pro-market orientation.

The third paper written by Ian Cunningham and Dennis Nickson has direct interest to the journal’s international audience and addresses the issues of the voluntary sector coping with changing market conditions and the implications for its workforce. Using data from the Scottish voluntary sector, the article evaluates the impact of retendering on employment in non-profit organisations, a process driven by the EU procurement directive. The article also discusses some of the ways that EU legislation governing the Transfer of Undertakings provides protection for employees’ terms and conditions of employment. Overall, the paper suggests a “gathering storm” for voluntary sector employers and their workforce as retendering focuses overwhelmingly on cost. For employers, this involves a move away from previously cooperative relations with other sector providers to a more ruthless private sector competitive culture. For employees, the drive for cost savings in the retendering process threatens their terms and conditions of employment as the protection offered through EU Acquired Rights Directive only offer limited protection. The authors also raise concern over the impact of this context on employee morale and commitment. They conclude with some broader reflections on the tensions between the goal of free market liberalisation and the Social Aspect of the EU project.

The next paper is of further interest to the journal’s international audience as Sara Charlesworth and Helen Marshall look at the use of specific policies to resolve the recruitment and retention crisis brought about by low wages in the Australian community services sector - a policy known as salary-sacrificing. The findings reveal the limited impact of salary sacrificing on retention of employees, as workers are leaving the sector in high numbers, threatening service quality and increasing recruitment, training and retention costs. Explanations for this failure link to continuing and pivotal debates about the ways that outsourcing contributes to the view of care as domestic work undertaken outside the home and “fit for women” regardless of terms and conditions. The article concludes by calling on policy makers to develop funding and service models that do not depend on a predominantly female workforce to accept sacrifices in pay and conditions.

The final paper by Professor Phil James draws together themes from the papers and assesses prospects for employment in non-profit organisations in the era of NPM, retendering and outsourcing. In doing so, the paper highlights positive trends in employment policies such as the introduction of more performance orientated HR policies into the sector. On the negative side the article notes that the drive to encourage market forces is creating ever more “lean” employment regimes in the voluntary sector, encouraging job insecurity, deteriorating terms and conditions, and the intensification of work. These trends, James argues, exacerbate existing gender inequalities, threatening worker morale and service quality. He concludes by calling for regulatory-based action to link voluntary sector terms and conditions with those of the public sector, and to ensure that services are funded at an adequate level to ensure these standards can be met.

These papers largely highlight how a combination of NPM-inspired policies and the “credit crunch” threaten the missions of voluntary sector organisations, as well as workforce morale, retention and the work this sector undertakes with some of society’s most socially excluded citizens. Overall, in their haste to make cuts and savings in government expenditures by contracting-out human services and providing an incentive for voluntary agencies to reduce employment costs and undermine working conditions, those promoting service privatisation may be sacrificing the very attributes that attracted the dedicated workforce to the voluntary sector in the first place, thus unintentionally reducing or removing their capacity to provide quality public services.

Donna Baines, Ian Cunningham