Could FE go mutual?

Further education colleges lost much of their connections to community in the drive to make them more commercial. FRSAs Gill Howland and Jamie Smith believe there is now a sea change in government thinking that could herald the arrival of the mutual approach.

Colleges of further education have a long history of providing opportunities for a wide range of people to gain skills and qualifications, as well as to learn for pleasure. Key agents of social mobility, they have played an important part in improving the life chances of people of all ages, by opening the door to more life choices. Because they are rooted in local communities, very many colleges have also contributed significantly to community cohesion. They added social value to local communities through a range of activities, including evening classes, taster courses, and sporting and arts events. Local colleges often came to be considered by young and old alike as the heart and soul of the local area.

This changed when government policy and funding requirements began to drive the sector firmly in the direction of providing skills training in response to nationally and regionally determined priorities. This led to greater competition as colleges tried to secure funding from ever diminishing pots. It opened up the market to the growth of private training providers, who were often more skilled in competing for contracts on a commercial basis, and who could deliver qualifications more cheaply because they were generally not concerned with adding value to the wider community.

On a purely commercial basis the changes to funding looked like a good move. The government view was that colleges needed to provide better value for money and that there should be a public contribution to the costs of learning. Where a course was not deemed to be of economic priority, it was expected that learners would pay. Where it was leading to qualifications that employers needed, the employers were expected to contribute. This approach led to the closure of many courses, particularly in community provision. The new ‘plan and provide’ approach transformed colleges into instruments of skills delivery: efficient, lean and employer responsive organisations delivering economic success and tackling the problems of long-term unemployment, skills gaps and low levels of literacy and numeracy. Or at least, that was the idea.

That era of ‘plan and deliver’ is seems to be over. The government has changed the landscape, removing and reforming recent policy and funding direction. It now seems possible that, in an era of massive economic uncertainty and social unrest, colleges could once again take on a leading role as local hubs of learning, adding both social and economic value to the communities they serve.

However, as UK public sector organisations, including colleges, face years of austerity and real funding cuts, very different thinking will be required in order to meet the twin objectives of better services for less.  As Albert Einstein said: ‘We cannot solve our problems with the same thinking we used when we created them’.

Peter Mark’s article in the summer edition of the RSA Journal makes a persuasive case for a cooperative business model as an alternative to the traditional capitalist model. It is also clear that the Coalition’s localism agenda, and Cameron’s central narrative of the Big Society, signals a renewed national interest in models of collaborative ownership, such as the mutual. But can such an approach be applied to organisations that are in the main publicly funded, such as colleges of further education?

Mutuals are nothing new. Companies like John Lewis have been operating a type of collaborative ownership with employees for more than half a century; firms like Scott Bader whose founder ‘gifted’ the company to its staff back in 1951 have proven to be visionary in their approach. So it has taken a little over half a century for policy to catch up with their way of thinking, surely enough time to review whether the radical approach works, or whether these models impact negatively on the bottom line?

A quick scan of the John Lewis story amongst others would suggest success. According to the Cooperatives UK 2010 Impact Report and its 2009 review report, there are around 5000 or so mutuals already in the UK and they are big business, turning over in excess of £29 billion a year and collectively employing nearly a quarter of a million people. In comparison, the further education sector receives about £10bn public funding from the public purse.

Currently there are no examples of a further education mutual, although the Association of Colleges are funding a feasibility study to explore what would be required to turn a college into a mutual, and what the benefits might be.

On paper, the idea of mutualisation is quite seductive. But the road to achieving it, in the public sector at least, can be a complicated one; issues over pension liabilities, VAT, TUPE and raising capital issues can all present leaders with a significant technical challenge, albeit one that can be overcome. What is much more challenging issue – and which could be the greatest blockage to mutuality – is winning the hearts and minds of the staff who would transfer to a new mutual entity, and the thorny question of whether a college governing bodies and principals will be prepared to give up some of their power.

For college employees, many of them resident in their college locality, the opportunity to move from staff to ‘owners’ and custodians of the business they work in surely has to be a prize worth striving for. The potential benefits relating to the wider social good make this an opportunity for some really different thinking.

Gill Howland FRSA is an independent education, leadership and management adviser. She has held senior positions across the education sector and is passionate about the transformational benefits of education.

Jamie E Smith is an MBA graduate with extensive experience of leading transformational change, working with leaders in large public sector organisations. He has led national pathfinder projects exploring new models for ownership, governance and management of complex organisations.