This document discusses the concept of economies and diseconomies of scale in public services. It presents findings from research on third sector organizations and analysis of public service user demands. The research found that: 1. Pursuing scale results in higher costs and lower quality outcomes for service users. Ruth's case study showed it cost over £86,000 more to provide her fragmented services than it would have to directly address her needs. 2. Scale thinking prioritizes internal management efficiencies over effective service delivery. It destroys social capital by loosening community bonds. Most aspiring third sector organizations cannot meet arbitrary scale thresholds. 3. There is little evidence that scale reduces costs in public services. Diseconomies of

2. Poll 1
Which sector are you from?
* Public
* Private
* Third
* None (Individual)

3. Poll 2
Do you believe that scale in
public services delivers….
* Lower costs
* Little difference
* Higher costs

4. Poll 3
Do you believe that scale in
public services delivers….
* Lower quality
* Little difference
* Higher quality

5. Diseconomy of Scale

6. Locality’s interest
• Experience of our Members over many years
• Introduction of Work Programme
• Myths about economy of scale – esp in services
“immutable law of economics”
• Lack of any real evidence base
• Encouragement from others

7. nguard Consulting Ltd
www.vanguard-method.com
Vanguard and Locality: Having a common Purpose
• An informed recognition that Public services work
poorly
• Vanguard brings its experience of working with
organisations in all sectors to transform service
delivery, reducing costs by solving peoples problems.
• An understanding, based on knowledge of these
systems, that the mantra that big services and scale
are cheaper and more effective is flawed.

8. Questions?

9. Methodology
• 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 thousands of demands
presented on the system, using
“Vanguard Method” techniques

10. nguard Consulting Ltd
www.vanguard-method.com
The Vanguard Method
• Change starts by studying, getting knowledge of the “what
and why” of performance as a system (we never start
change with a “plan”)
• It studies services end-to-end
• It understands service-user demands, following them
through the services in order to understand how and how
well the services work.
• It identifies the system conditions that hinder achievement
of purpose from the services users perspective.

11. nguard Consulting Ltd
www.vanguard-method.com
Ruth's experience
Learning the What and why from the service users
perspective :
What mattered to
Ruth:
“ I need help
with
housework ”
“ I need help
with
housework ”
“gaining access
to the first floor
of the property
“gaining access
to the first floor
of the property
“ These two things
would have such a
profound effect on mine
and the children's lives “
“ These two things
would have such a
profound effect on mine
and the children's lives “

12. nguard Consulting Ltd
www.vanguard-method.com
What Ruth received
2 anger management
courses
2 parenting
programs
Help cleaning 1
bedroom
Toilet frame, perching
stool and bath board
for a bath she could
not access
Family Intervention
program
And it took this many people to deliver it……
8 social workers
22 support workers allocated
30 referrals in core flow
16 assessments in core flow
36 teams/services
And it took this many people to deliver it……
8 social workers
22 support workers allocated
30 referrals in core flow
16 assessments in core flow
36 teams/services

13. nguard Consulting Ltd
www.vanguard-method.com
Cost of what Ruth wanted……..
• Cleaner (assume 10hrs/week for 4
years = £14,560
• Move to suitable property (current
property unsuitable for adaptation) =
£1,200
• And/or stair lift = £5,000
Total = £20,760
CostofwhatRuth
Got
£106,777
Cost of doing to, not doing
what mattered for Ruth
= £86,000.00
Cost of doing to, not doing
what mattered for Ruth
= £86,000.00

14. 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

15. Questions?

16. Poll 4
Which of the following did we
find was the most common
reason given for going for scale?
* Avoid postcode lottery
* Less hassle/management
* Less chance of failure
* Lower unit costs

17. The Drivers to Scale
1. Fear of failure
2. Fear of postcode lotteries
3. System efficiencies (QA, development costs)
4. Internal management convenience
5. Belief in economies of scale

18. 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

19. Final
Questions?

20. Final Poll
Are you convinced that scale in
public services delivers
Diseconomies?
* Yes
* Not sure
* No

21. www.locality.org.uk/our-work/
policy/diseconomies-scale/

22. Wednesday 30 April
Neighbourhood Planning: learning from the pioneers
locality.org.uk/events