Saving money by doing the right thing


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The presentation was from a fringe event at Evolve 2014: the annual event for the voluntary sector in London on Monday 16 June 2014.

This presentation highlighted why 'local by default' must replace 'diseconomies of scale'.

Find out more about the Evolve Conference from NCVO:

Published in: Health & Medicine, Business
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Saving money by doing the right thing

  1. 1. Economies of Scale Features • Separation into different specialised elements • Standardisation • Scale through systems – automation (manufacturing) or management (services) • Reassemble elements back into a whole at the end of the process
  2. 2. Diseconomy of Scale A LAC Averagecostofgoods(£) Total output Long-Run Average Cost (LAC) Curve Diseconomies of Scale
  3. 3. Professor John Seddon Vanguard Consulting “Cost is in flow, not transactions” Economies of Flow “Standardisation should be avoided. It drives up costs and worsens service”
  4. 4. Economies of Scope Features • Keeps elements as a whole system but delivers at much lower/more local level • Avoids standardisation, embraces difference • Savings – avoid duplication of activities and functions • Join-up is built-in rather than retrospective
  5. 5. Our Research
  6. 6. • Third sector experience o Financial data from 139 VCS organisations aspiring to deliver public services o Survey responses from 96 VCS organisations o Follow up depth interviews with 9 cases • End-user experience o Analysis of hundreds of thousands of demands presented on the system, using “Vanguard Method” techniques
  7. 7. What we found
  8. 8. Some other numbers • Police 67% of people labelled as “vulnerable” were simply logged and filed. 87% of those vulnerable people represented to the police on average of 17 times • Health 8 people with drug or alcohol dependency presented to GPs a total of 124 times – the “system” carried out 4,300 activities, creating 800 documents – only 10% of activities actually related to helping them
  9. 9. What else we found • Scale thinking is rife 71.2% of aspiring VCS orgs fail the 25% “rule” • Scale thinking is destroying social capital Loosening of bonds and multipliers – local SW case study Organisations going bust due to unit-cost squeeze • Scale takes vast resource away from the front line Mega-contracts typically 35-55% management costs • Potential savings are massive estimated £16bn worth of diseconomies
  10. 10. What we’re doing next
  11. 11. Call to Action Efficiency comes from Effective services, so these must: • Be “Local by Default” • Help people to help themselves • Focus on purpose, not outcomes • Manage value, not cost
  12. 12. Call to Action We will: • Seek further evidence – encourage more research and find more case studies • Work with central government to change policy and practice • Support our members to work with their local authorities to build understanding and better practice
  13. 13. policy/diseconomies-scale/