Inside Acivico: A new way to look at austerity

01 March 2016 -

Austerity in the public sector is a bad thing, right? It means slashed budgets and reduced services. Well, not always. Here’s the inside story of Birmingham’s local authority services company Acivico, which went from mismanagement to a byword for the future of public service delivery

Charles Orton-Jones

Local politics has a reputation for being dull. Not in Birmingham.

Birmingham City Council (BCC) hit the headlines in 2014 when a series of problems triggered a wholesale enquiry into its performance. The Kerslake review in December 2014 gave BCC a dressing down over everything from the bin service to the overall lack of vision.

One example of the malaise appeared to be Acivico. This is the privatised entity formed in 2011 to provide umpteen services to the council, such as building schools, maintaining housing stock, catering and refurbishing offices.

Pronounced a-see-vee-co (as in ‘a civic company’), Acivico is a local authority trading company, so a private entity, but with a public-service ethos and ownership.

It’s part of a trend, as councils try to deal with austerity.

Essex Council set up ECL in 2009, and Dorset, Bournemouth and Poole have Tricuro. The panjandrums of Birmingham felt they also needed a sharp dose of private enterprise to transform the service.

At first, things did not go well. A report published in February 2014 revealed a long list of problems at Acivico.

A new accounting system costing £800,000 was still offline, causing late payments to contractors. Key performance indicators (KPIs) were suspended “due to ongoing poor performance”.

The helpdesk was failing to deal with 35% of calls a month.

There were problems with Acivico’s relationship with Contract West Midlands (CWM), a council partnership to deliver new buildings. It warned of “a number of areas where Acivico does not appear to have effectively managed the performance of CWM contracts”.

The report called for a “culture change” to get Acivico back on track. The local press had a field day.

Challenging days

And then, curiously, the entire issue went away. The bad news just stopped.

When the Kerslake review appeared, it made no mention of Acivico at all. It seems what Birmingham had on its hands was a genuine case of a taxpayer-owned body executing a remarkable turnaround. Today, Acivico is green on all KPIs, and in the black.

So what went right? And what can we learn?

Acivico’s head of commercial, Michael Gregson CMgr, is itching to explain.

We meet at 1 Lancaster Circus in central Birmingham, where Acivico shares an office with BCC. The ties are still that close.

We start back in the gloomy days when it looked as if the project was in trouble.

“They were challenging days,” recalls Gregson. “The staff felt complicit with critics. There was no fightback.”

Astonishingly, the strongest criticism was coming from not just the press, but the council. “Middle management at the council felt threatened. So our job was to communicate that we were there to help them, not to be a threat.”

Gregson is keen to stress that senior management at the council was and is uniformly supportive. There was also strong backing from politicians across the political spectrum, and from the board. But many in the lower tiers at the council actively wanted to see Acivico suffer.

Through malice or blundering, the early incarnation of Acivico was set up to fail.

Take those KPIs, which got such a drubbing from the interim report.

“We had a huge number of KPIs, something like 70 to 80,” says Gregson with a rueful shake of the head. “There was a cottage industry putting them together. The problem was that the council still owned the data behind those KPIs – it was hoarding all the valuable information and hiding it.

“Every six weeks we got a report with just a red indicator on whether we met or failed each KPI. There was no supporting data to tell us why. They just delivered it and then came at us and challenged us as to why we hadn’t performed.”

The leap from public sector to private had been made with no reforms.

“We were just local authority departments with different name badges on. Acivico was never going to work from day one because there had been no preliminary work. There was complete naivety about what was required for a business to operate.”

Much of Acivico’s activities still involved the old council bureaucracy. HR and legal enquiries were handled through the council’s offices.

“We are moving away from that now and have started to recruit our own professionals,” says Gregson. “If you ring up a BCC operative and ask for a departmental view on an issue, they give a public-sector answer. We, however, are a commercial organisation, and our thinking is different.”

Some of the staff at Acivico weren’t sure what was going on.

“People didn’t understand their roles or responsibilities,” says Gregson. “So there was low accountability and responsibility.”

No wonder it struggled.

The turnaround

Today it is clear that Acivico is a success. It posted a £600,000 profit on £33m revenue, and is set to increase revenue to £42m this year. It is entering the private sector.

The May end-of-year report by the deputy chief executive of BCC cited strength in all areas. Building regulations were on time 99% of the time. Application decisions were on metric 96% of the time, way over target. Customer satisfaction was 80%, equivalent to “good or very good”.

Four big things stand out. First, those damned KPIs got sorted.

Acivico took them in-house. It now uses an independent consultancy to confirm the data (so no shenanigans), and managers get to see all the underlying data.

Second, the company discovered that being privatised really can be good for morale.

“There is a feeling of loyalty to the brand,” says Gregson. “People are now in charge of their own destinies, rather than being taken along for a ride. They see what is happening in the council, and feel they can contribute to their own futures.

“We did a survey and found 80% of staff want Acivico to stay private. There is not much appetite to go back.”

Third, and a big reason for that leap in morale, is the list of private-sector contract wins.

A big motivation for BCC to create Acivico was to chase income in the private sector. Norfolk Council did this when it privatised its facilities services 10 years ago with Norse.

Today, Norse is a giant, employing 8,000-plus staff across the country with sales in excess of £250m. If Acivico did the same, ran the logic, Birmingham’s chronic budget shortfalls could be alleviated.

There has been good progress.

Acivico has done building and consultancy work for M&S, Lidl and Aldi. Virgin Trains is a client on the facilities management side. Private developers use the architects and, interestingly, other public bodies are using Acivico’s services, including NHS Heartlands and other neighbouring local authorities.

“The goal is to get to 20% of sales from the private-sector,” says Gregson. “At that point we can talk to the council about other opportunities for bringing in further income from outside. The private-sector work means that Acivico can hand over £600,000 to BCC this year. There’s nothing like handing over a fat cheque to silence critics.”

The final factor is training. CMI has played a big role in helping senior staff get a grip on issues and helping younger staff mature into their new roles.

Empowering staff

Acivico is a member of the Chartered Manager Apprenticeship Degree Trailblazer group.

“It’s about professionalising the manager role,” says Gregson. “What happened in the past is that people wanted to get to the next pay grade, so they wanted a promotion, but they ended up in a managerial position when their skills were technical. We called it the ‘accidental manager’.

“The apprenticeship helps them learn to become a manager. I can clearly see the difference between someone who has been through formalised training, and those who haven’t. So we are wholeheartedly supporting the Apprenticeship Degree.”

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Gregson is a Chartered Fellow (CMgr FCMI).

“It has stood me in good stead,” he says, “in two ways in particular: engagement and performance management. You empower staff to take control and feel confident. You show them the standards you expect, and give pointers and coaching. Sometimes you need to challenge them when something isn’t being done or deadlines aren’t met.

“We need to improve on local authority behaviour.”

Acivico is now in good nick. The council’s chief executive, Mark Rogers, is vocally supportive. And soon Acivico will move out of Lancaster Circus and be a fully-fledged independent enterprise.

The local press are purring.

Neil Elkes is the local government correspondent at the Birmingham Post, and is well known for his exposés of incompetence.

“Acivico has got a grip,” says Elkes. “It is now behaving like a business, not like a dysfunctional council department.”

Birmingham has bright prospects. HSBC is moving its head office from London to the city. The first sod of turf for High Speed Rail 2 will soon be cut. There’s a £500m regeneration of the Paradise Forum district. The Bullring shopping centre is flourishing.

Acivico can really thrive here.

Gregson’s advice for other councils thinking of doing something similar?

“Do it! But don’t strangle it. Because it does create innovative thinking about how to operate.” Oh, and watch out for KPIs!

Photography by Tony French