How local authorities can deliver profit with a purpose using the LATCo model

In recent years local councils have faced a number of challenges, from financial pressures to increasing service demands. With a need to balance the books and continue to deliver social value for local residents, many councils are exploring how they can engage in commercial activity to increase jobs, revenue and positive outcomes.

One way for councils to do this is to adopt a LATCo model – a local authority trading company. At a very basic level this allows local authorities to take advantage of the wider market place in terms of the services they’re already providing.

Traditionally, local councils provide a number of back office or front-line services for different areas such as highways, refuse, human resource, IT and finance Processing. By taking best practice that’s been developed in-house and offering it as a solution for other organisations, councils can turn departments into commercial entities. This model gives local councils the opportunity to generate additional revenue that can be reinvested directly into frontline services. It also means that they are not solely reliant on government funding or council tax income.

As an arm’s length, LATCos have the ability to trade outside of the constraints of the local authority. This provides real benefit to the council itself as it allows them to tap into that supply chain when it needs to adapt and be agile. Moving forward we’ll see more and more councils looking carefully at their supply chain in order to understand how it can be strategically advantageous to adopt this model.

Setting a clear vision and purpose

While there are currently several thousand LATCos across the country they haven’t all been successful and the key question to ask is: why?

For a LATCo to be really effective, it needs to have a very clear vision and purpose beyond simply generating profit. If a local council is looking to adopt this model then it needs to pinpoint the services it will look to deliver, determine the wider demand in the market place and the sectors where there is the most potential for success. Not fully understanding the competitive landscape can be problematic so it’s important to use the LATCo model as a way to bring a unique offering to the market that encompasses quality and ethical delivery – it shouldn’t just be about price.

The end result will be different in many cases and there are different forms a LATCo can take. For instance, it can be set up as a not-for-profit organisation, where all profits are poured back into the business to provide frontline or statutory services. The other end of the scale is where the LatCo trades as a limited company and delivers services back to the council and wider community. It boils down to the vision of the local authority – what do they want to achieve, and what problem are they trying to solve?

Injecting commercial experience

An important component for success lies in commercial experience. Delivering a service to an excellent level as an internal department is one skillset but delivering that same service on a wider scale, as a commercial proposition is a completely different entity.

Local authorities need to ensure that they are bringing in the right expertise to the existing department whilst holding onto the roots of the organisation. Having commercial leadership and experience is key to establishing a LATCo, giving it a foothold and allowing it to grow.

With the injection of commercial experience comes a change in culture and this is one of the biggest challenges overall. Shifting an internal department to an external one moves it away from being an unlimited resource and puts in an element of added pressure. Now teams are expected to deliver services against the contracts and agreements they have in place with their customers. This is an area that local authorities need to significantly invest in, in terms of awareness and training – not only with their employees but also as a parent organisation. Everyone needs to truly understand what that shift means.

Profit with a purpose

For a LATCo, being profitable isn’t just about driving that bottom line. It’s about delivering services effectively and ensuring that customers get a quality experience – whilst embracing the vision and principles of the local authority. Partnering with a LATCo gives organisations an opportunity to work with the public sector in a way that’s effective and not about profiteering.

A successful LATCo understands the public sector and this means it can sit in a really unique position of being able to offer professional services with an intimate insight into the challenges that the public sector faces. Through commercial success LATCos are able to invest in their people, systems, solutions and innovation which drives efficiency and ultimately gives back to the public purse.

Mark Scott is CEO at Cantium Business Solutions.