What would you do if your business was coasting along nicely, but operating in a sector where 90% of providers were about to disappear due to changes in government policy?
If recent UK experience is a guide, this is about to happen in the community services sector, specifically with providers of disability support services. It could equally be any sector involved in delivering services as an outsourced quasi-government provider.
For many very good reasons, the National Disability Insurance Scheme has been a hot topic at the seminars I’ve attended recently. It’s a rule changer as well as a gamechanger.
As long as the new federal government doesn’t cut the implementation too drastically, the NDIS is going to have a massive impact on providers as well as on consumers.
Existing providers are likely to be subject to:
- The need to deliver more for less;
- Having to deliver ‘outcomes’ rather than ‘programs’ or ‘services’.
- A cashflow crisis as funding shifts from programs (in advance) to outcomes (in arrears);
In metropolitan centers as well as regional areas like Bendigo and Geelong, many smaller providers will either go under or be forced into mergers and acquisitions.
According to Toby O’Conner, CEO of St Laurence in Geelong, the intro of the NDIS will bring about the biggest social change since Gough Whitlam introduced Medibank in 1972. In terms of business impact, Toby (speaking at a recent Geelong Chamber of Commerce breakfast) likened the impact of the change to the privatization of employment services, which resulted in the dismantling of the CES and the birth of thousands of new small businesses. This involved a similar shift (largely from government sector service delivery to outcomes-based delivery by a myriad of private providers and NFPs.)
I was a part of that change at the service delivery end as I managed a small regional service for VECCI, in the first round of the outsourcing of federally-funded employment services. It was an interesting time as we attempted to ‘break in’ to the citadel of the Commonwealth Employment Service (CES) and convince a whole range of parties that change was not only inevitable but that it was happening now! While there were some supporters, there was much resistance. This tendency to resist change has been noted much earlier!
“There is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old institution and merely lukewarm defenders in those who would gain by the new ones.” Machiavelli, The Prince, 1513.
Toby O’Conner was also involved in the privatisation of federal employment services, though at the policy end of it rather than the delivery end – so he’s seen it from ‘above’. He says this move to NDIS is similar and will mean a massive paradigm shift from clients to consumers. It will be “…survival of the fittest, with the ultimate outcome being “…not as many players as now” and with an influx of International service providers coming in.
It reminded me of a piece from a work I read years back.
“The critical strategic requirement is not to devise the most ingenious and well-coordinated plan but to build the most viable and flexible strategic process; the key organizational task is not to design the most elegant structure but to capture individual capabilities and motivate the entire organization to respond cooperatively to a complicated and dynamic environment.” Bartlett and Ghoshal, 1990, Building structure in Managers’ Minds
Toby O’Conner pointed to lots of opportunities in the midst of this change process, with new needs becoming apparent only as it unfolds. There are opportunities for tracking systems, software, strategic planning services and more in the shift to the ‘outcomes’ focus.
What does an organisation currently delivering services in this field do?
- Get strategic;
- Get flexible;
- Form alliances, explore partnerships and mergers/acquisitions;
- Get some reserves in place to survive the cashflow crisis;
- Ideally, all of the above.
Small players may be nimble, and that is an advantage, but the systems to handle compliance and cashflow requirements under the new order will be beyond many. Get busy now.