Risk vs. Reward: Are the Reputational Stakes Getting Higher for Government Service Providers?

Risk vs. RewardAs the UK once again enters another General Election cycle, much of the media focus will begin to shift onto 7 May 2015. The next Election, like the last one, is likely to focus on the state of public finances, with the main parties looking to win the confidence of the electorate as the most effective stewards.

The Chancellor said in his recent Budget statement that current forecasts suggest the deficit will become a £5bn surplus by 2018/19, but to achieve this, austerity would need to continue after the election (when 90% of the deficit reduction is currently planned to come from spending cuts). A clear challenge therefore for the other main political parties to either stick to the same plans or to suggest their own alternatives.

Labour Leader Ed Miliband has been campaigning for the last year on a “cost of living” platform and he is likely to come under some pressure from within his own party to ease the burden of cuts by increasing taxes (presumably on the better off as part of a “fairness” platform) rather than stick to a further schedule of only spending cuts. Shadow Chancellor Ed Balls has already tasked fellow Shadow Cabinet Minsters with finding money-saving public service reforms from within their portfolios, suggesting the hunt has already begun in a search which won’t be completed until after the election of a Labour Government.

Expectations are rising on Government contractors

A challenging climate for public finances has increased the desire within Government to contract out services to save money. A report commissioned by the Public Account Committee (and undertaken by the National Audit Office) last year suggested that contracting out services represents almost half of the £187bn the public sector spends each year.

In the short to medium term therefore, while the opportunity will remain (and new opportunities will surface), expectations on private companies offering these services to government are likely to increase, alongside tougher Cabinet Office rules to govern contracts better. Any organisation falling short will no doubt find itself subjected to an uncomfortable media glare, not to mention the inevitable parliamentary opprobrium. Consider what has befallen G4S and Serco in the last 12 months. Each has lost Board-level executives; both were prevented for a time from bidding for future UK government work; both have seen share price falls (a decline of 23% for G4S and a decrease of 53% for Serco over the last 12 months) and still find themselves under investigation by the Serious Fraud Office, creating continued uncertainty for both companies for some time to come and an inevitable impact on the bottom line.

The case has led to a number of media commentators to observe that while Government continues to consider contracting out services as a way to save money, it also allows it to share the risk of delivery failure. Government is quick to heap praise on successful delivery but is also quick to heap scorn on delivery failures, and therefore relinquishing responsibility for any perceived failure. A win-win situation?

So providing services to government can be both rewarding AND risky. Some might feel the risks are just not worth it. Others will rightly feel that there are steps they can take to at least be in the right position should they find themselves in the line of fire. Preparation is key and nowhere more than in your crisis communications planning.

Here are five simple questions to consider in your organisation:

Are we aware of issues or threats? Continuously monitoring issues and trends, as well as analyzing other organizations’ experiences is vital. This includes your owned social channels too.

Have we created clear lines of responsibility in the event of a crisis? Create and regularly update well-constructed plans which identify the crisis team and their responsibilities.

Does our crisis management team REALLY know what is expected of them? Regular training and simulations are key to ensuring crisis management becomes second nature. Design the notification system and checklists which will allow you to focus on strategy. The checklists will help you with the process.

• Have we anticipated some typical scenarios? Clearly every crisis is different but there are still some typical scenarios you can plan for. Ensure you have approved holding statements for a variety of potential situations.

• Does our organisational culture encourage problem reporting early? A truly open and transparent organisation encourages employees to flag problems before they become crises!

Darren is a Practice Director within the Corporate, Public Affairs and Technology team in London. He has spent the last 20 years in public relations and specialises in helping organisations integrate their media relations, public affairs and stakeholder relations programmes. He has worked with a diverse group of organisations from Western Europe, North America, the Middle East and Russia and has coordinated media outreach programmes for senior executives. Contact Darren at darren.young@ketchum.com.