Article

Making outcomes based investment mean something

Martin Ellender Martin Ellender

Many local government organisations say they are outcomes-driven, with careful sentences in their financial plans, but often these words don’t steer anything in practice. 

We all know that we’re here to make things better for people and places, and talk of outcomes based investment is a neat way to encapsulate that idea, but what does it really mean to reshape our daily work around outcomes?

What is outcomes based investment and what does good look like? 

There are a host of technical definitions for outcomes based investment (OBI). Essentially, it is an incremental process of concentrating resources where they will have the greatest impact on strategic goals. OBI is not an easy answer to hard problems. It requires leadership, judgement and trust, and can comfortably co-exist with other approaches. Most importantly, it can be a powerful catalyst to unleash fresh collaboration, creativity and energy in service of communities. 

The best approaches in local government are: 

Purposeful

They are built on a resonant local vision and a set of intended outcomes, as well as a financial strategy that creates headroom for investment and sets clear budgetary parameters.

Disruptive 

They encourage people to step outside service and organisational boundaries and collaborate around particular outcomes or challenges, focussing on new conversations, new connections and new ideas.

Insight-driven

Evidence, data and insight are at the heart of the process, but can become stulted if overworked. It can be easy to mine the data looking for correlations that aren’t available at the outset and will only emerge through testing, learning and iteration.

Accountable

Stepping outside familiar structures means blurring accountability, and the approach can feel like a free-for-all if it gets out of control. In the early stages, a trusting environment is needed, usually with small teams working on the basis of peer challenge.

Where the OBI magic really happens 

When we work with an organisation on OBI, one of our first steps is always to look at the organisation’s medium-term financial trajectory. To put things crudely – if a council is in an existential struggle to close an unidentified budget gap for next year, and is looking for a plan, OBI is probably not the answer. A more tactical conversation is needed about short-term survival.

If a council can see a way through the next couple of years and has some ability to invest in order to make savings over the medium-term, then a strategic conversation about investment in priority outcomes is a helpful step. With OBI, we’re seeking a common-sense conversation, based on evidence and insight, about the specific ways in which the organisation’s resources – time, people, effort, assets and money – can work harder to help create the desired change within the area. 

Getting people into a room to talk OBI

One of my favourite things to do is to get a group of people from different service lines and at different levels in a room to address an issue together. With the right stimuli and facilitation, these groups can quickly generate powerful ideas and proposals. The trick, of course, is to catch the good ideas and work with them. This often involves small, cross-service groups working to iterate and develop proposals, closely supported by finance and other corporate colleagues as required.

Inevitably, it is easier to come up with exciting new ways to spend cash than it is to release that cash from where it is currently invested. Given that councils must live within their means, new investment either means new income or savings elsewhere. This creates a tricky balancing act, requiring a steady hand from finance leads. Two different approaches tend to be used: 

1 Devolving the challenge – outcome and service leads are expected to put forward savings proposals to the value of required investment, taking into account any additional medium-term financial savings (MTFS) required

2 Twin-track – separate transformation or savings workstreams are used to create the headroom for prioritised OBI, sometimes through the use of a dedicated investment pot

The goal

The ultimate aim at this stage is to build up compelling portfolios of fresh outcome-based proposals – ranging from complex transformation to straightforward tweaks. If the process is run well, these proposals are deliverable, collectively affordable, owned by service leads, supported by a reasonable amount of due diligence and ready for corporate and democratic scrutiny and challenge. 

The OBI approach builds in responsiveness to priorities, which of course can change over time. It gets middle management used to critically evaluating the status quo, challenging the value of existing expenditure, and engaging others in a creative process of developing and bringing to life new proposals and policies. 

Done meaningfully, OBI is an entry point into an energetic, challenging and collaborative conversation about how we can use everything at our disposal to achieve our shared ambitions for communities and places.

First published in Public Finance on January 24th 2020.

To talk more about OBI, contact Martin Ellender.

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