Transcript Document

VFM self-assessment workshop
Steve Smedley
Objective
To provide delegates with the tools
and information to meet the
regulatory requirement to publish a
VFM self-assessment.
Content
• introductions
• regulatory requirement & implications
• what might the self-assessment look like?
– stepping through the process - issues, solutions
– measuring VFM - issues, solutions
• round-up
Approach – informal & interactive – to learn
from each other
Specific requirements of smaller HAs
• all the standards apply
• expect little regulatory engagement – direct engagement
by exception in response to problem
• where developing/procuring new stock, HCA may require
additional information to assess delivery risk
• regulator will review:
– annual accounts
– auditor’s management letter (not required if accounts
are independently reviewed)
– shortened regulatory return (NROSH+)
• will not publish public judgement of compliance–vstandards (RJ)
– other HAs get RJ on governance & viability every 2-3 years including comments on
assurance obtained on VFM
The VFM standard: doing VFM
• a comprehensive approach to VFM [across
operations (people) & physical assets (property)]
– in the context of objectives
– mindful of stakeholder interests
• means being economic, efficient & effective
– robust approach to use of resource decisions –
understand business case, trade-offs, etc
– understand operational costs, what drives costs
– understand outcomes from operations and assets in
financial, social & environmental terms
– maximise outcomes
– effective performance management & scrutiny to drive
VFM
….. in other words define
value for yourself based
on your social purpose
(recognising stakeholder
interests) & max out
The VFM standard: reporting VFM
• boards self-assess VFM and make it
available to stakeholders –
assessment shall
– enable understanding of return on assets
– set out absolute & comparative costs of
specific services
– provide a backward & forward look on
VFM gains
• first VFM self-assessment due in
2013 – included in operational &
financial review (OFR) or ‘board
report’
Round-up of implications
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VFM was about services - this the whole business – all resources including
assets ………..VFM less of an ‘add on’ ?
value is tagged to your objectives not the regulator’s
but has to reflect the value perspective of stakeholders
– publicly listed businesses maximise shareholder value
– social businesses maximise stakeholder value? - tenants key but not sole
raises tension between stakeholder value perspective, eg existing v future
tenants – board/exec reconcile this
reality check – VFM & (social) business effectiveness are the same thing
can you measure the value you exist to produce?
greater emphasis on boards
• genuine engagement in strategic business planning …..
• …..a more mature and holistic debate to improve business effectiveness
opportunity for the sector:
• demonstrate its significance, maturity, avoid regulatory creep
• define value positively, in social business terms – not just about costs
The VFM standard
What do you think?
Any observations, issues?
Implications: self-assessment
• it’s your assessment
• there is no prescribed approach
• build on what you’ve got
• like OFR it’s a narrative but focuses on the value
you produce and how it’s been maximised for
stakeholders
• but not a fairy story so data/evidence is
important
• as is honesty – strengths & weaknesses
• VFM is ultimately a qualitative judgement based on
intelligent assessment of evidence
• ….. where whose value is critical. Different answers.
• who are you trying to convince? …… yourself as it’s the
business’ perspective that counts (having reconciled
stakeholder value perspectives)
• places importance on the process by which the
judgement is made – the system of assurance and
competence and honesty of those making judgement
Suggested
approach: a
narrative
backed by data
Narrative backed by data?
Implications: self-assessment
• not convinced killer financial ratios and PIs alone will do it
justice – won’t:
• capture the full story - the subtleties – eg your mission, strategies &
context
• serve as a transparency tool
Some already do this:
• or business tool
AESs, APSs, etc
• diverse info together in one place to check success?...
• facilitate corporate understanding of business & decision-making for board, exec,
staff, involved tenants
• so staff can link what they do to social mission
• the process will expose gaps in VFM assurance &
measurement
• over-promise, under-deliver – self-assessment is a key
regulatory doc
• if you are unclear about purpose, you are unclear about
value
Implications: self-assessment
• de-minimis regulatory compliance or
something more – a business tool?
What do you
think?
• flying under HCA radar - let’s be frank
about the risks – their current focus: de minimis
– the too-big-to-fail – playing %/#s
– diversity threat/safeguarding social
assets – living wills, for-profits
– bumping against covenants/iffy
financing models – iffy finance, Cosmo
– known risks – vulnerable/complex
business models, iffy governance
Does this sound like you?
with bells on
Telling the story – ‘template’ overview
• a definition of VFM in context of the
organisation’s purpose & objectives
• the strategic approach to VFM and use
of resources
• arrangements to deliver VFM –
performance management and
governance
• what has been achieved
• plans for next year
• board assurance on the VFM selfassessment
Remember you
don’t have to do
it like this at all
STEPPING THROUGH THE PROCESS
Step 1. What VFM means to us: our
VFM definition
• briefly assert the social mission, vision and objectives unpacking what the key ‘value streams’ are, ie new homes,
great services, community well-being, care, support, etc.
• draw on your USP – assert your unique brand of value with
pride – strong sense of place, strong focus on client group,
intimate relationship, etc
• identify key stakeholders – what do they value? Explain that in
making use of resource and VFM judgements their interests are
considered/reconciled in the round.
• based on above assert a short VFM definition (which in effect
will be about maximising the identified value streams)
your value (arguably)is the social value that flows
from your mission. Ultimately this is about wellbeing delivered via key value streams (or outcomes)….
Value streams?: working through a
real case
•
Unpacking this (with help from the corporate plan) we have value
Your mission
streams:
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•
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new homes
•
– new homes for those in need
– enjoyment of the home & neighbourhood through great
services, support & regeneration
– improved life chances & a better quality of life through
community-based work, eg employment & training
All staff & board contribute to the value the HA is in business to
produce by achieving corporate objectives, including back office
staff & those working on commercial activities.
What the HA does is pretty amazing – it makes a difference.
VFM is about making a bigger difference: more homes, better
services, more lives improved
Need metrics that map to this value to measure outcomes
Your value
Your objectives
Your outcomes
improved lives
•
Anonymous HA is a real organisation with social purpose – it exists
to create social value.
Its mission sums up the value it produces: to make a positive
difference in the lives of people, creating vibrant thriving
communities
home & neighbourhood
•
Example
Our definition of VFM is simple – we want to produce as much value as
possible for the money and resources we have available OR VFM
means the delivery of our social objectives in the most cost effective
way possible.
The value we produce is directly related to our social purpose – our
mission is to make a difference to people’s lives by:
• providing quality homes
• providing a range of outstanding services
• improving the physical and social sustainability of estates and
communities
For us, therefore, achieving VFM is about making a bigger difference
by providing the most quality homes, the best services and best
neighbourhoods we possibly can with the resources available. We will
do this mindful of the legitimate and sometimes competing interests of
our key stakeholders: tenants, local community, local partner
organisations, taxpayer and funders.
Issues? Solutions?
Step 2. Our strategic approach to VFM
and use of resources
• set out key principles of VFM strategy and a
one/two-liner to provide assurance that it is a
considered strategy, eg noting any recent
changes, how it links to other key strategies ie
risk, asset, people, procurement etc.
• to show grip on VFM as a strategic issue.
• no VFM strategy ? - consider how the business
strategy drives business effectiveness/VFM.
Example
Our VFM strategy may be summarised as:



being clear about what we do - our purpose, objectives and the value we
produce
recognising how our operating context influences what we do
o the needs & aspirations of our stakeholders, particularly the profile of our
customers and stock
o local and national context
ensuring the system of value production is optimised:
o do the right things – a business strategy that focuses resources on the right
activities by making informed choices to achieve our corporate priorities
o ensure we have the right physical and human assets for the right cost
o do things right – efficient and effective delivery
o the right tools to evaluate success and apply learning – to check we have
delivered the right outcomes, including making a surplus/efficiency gains for
reinvestment in our social objectives
Step 2. Our strategic approach to VFM
and use of resources
What can you say about how your HA
ensures the right amount of money is spent
on the right things?:
o rigour of business/corporate planning process
o use of robust business cases - based on
evidence/data (and not historical costs)
o quality of debate and challenge
Issues? Solutions?
Step 3. Our arrangements to ensure
delivery of VFM as part of the day job
• summarise governance & performance management
arrangements associated with planning, delivery and
evaluating VFM :
– roles of board, exec, other staff, tenants, eg
• board’s role in leading on VFM and actively holding the executive to
account for VFM performance
• promotion of VFM by the board
• tenant involvement in VFM, eg agreeing priorities (and efficiencies),
shaping services and scrutinising service performance and VFM
– assurance (and reporting) framework for VFM eg
• coherent VFM governance structures, clear roles and responsibilities
• the system of VFM measurement
– extent to which VFM is embedded in performance management, eg
appraisals, 121s, team meetings (business culture) eg
• any other key evidence of VFM being embedded?
Issues? Solutions?
Step 4. Our track record – what we have
achieved over the past year
A narrative that features key available evidence. Essential components:
a) assets
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What’s your assessment of the VFM of key asset management decisions over
the past year? What did they cost and what did you get for your money –
expressed in terms of social, financial and environment gain.
strengths and weaknesses
highlight key VFM initiatives and benefits, eg from VFM register
b) operations
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•
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SPBM/HouseMark benchmarking should serve as the focal point for this
narrative, complemented by any local offer/customer promise data . A brief walk
through headline unit cost and performance indicators (clearly satisfaction is
key) should suffice. To ensure regulatory compliance assert costs as compared
to others, explaining high costs and associated drivers
strengths and weaknesses
highlight key VFM initiatives and benefits, eg from VFM register
Step 4. Our track record – what we have
achieved over the past year
c) key procurement gains not already covered at a) or b)
d) treasury management
 brief ref to the cost of capital, debt management strategy and any evidence
of savings from active debt management. How does the cost of capital
compare?
 use made of physical assets raise the finance required to deliver desired
outcomes (leverage). This could include brief reference to:
o board’s agreed approach to risk and future business plans
o current borrowing capacity in the context of:
 borrowing constraints – headroom, loan covenants
 access to affordable finance
 NB this is about managing HCA expectations as much as reporting VFM
e) state surplus & how gains/surpluses will be used to produce more VFM going
forward - the point of VFM
Issues? Solutions?
Track record: what’s the story?
Narrative
backed by
data
costs –v- service outcomes, social &
economic benefits, environmental benefits
Assets
Operations
It’s all social
value!
Procurement
financial
benefit savings,
income, etc
Treasury
Management
financial
benefit savings,
income, etc
Surplus
Borrowing
capacity
looking ahead – even
more social value
Track record: data sources
key asset management
decisions – cost/benefit
benchmarking/HCA regression analysis
internal scorecard
local offer performance
Assets
key procurement items
– cost/benefit
Operations
Procurement
Treasury
Management
Financial returns
Surplus
Borrowing
capacity
impact assessments,
SROI, etc
satisfaction
tenant scrutiny work
accreditation, service review, internal
audit, etc
VFM register
Step 5. Improvement Plans for next year
– where we need to be smarter
• what weaknesses identified in section 4 will be
addressed in the coming year and what is the
estimated benefit in financial, social and environmental
terms (future VFM gains).
Issues? Solutions?
Step 6. Board assurance
 is the Board assured of the robustness of this selfassessment, eg the evidence and the process (sign off
and challenge)? If the self-assessment is to be
transparent it should flag the limitations of underpinning
evidence and assurance.
 does the Board have any concerns around the
organisation’s ability to deliver VFM going forward?
 invite and set out how you have or intend to seek
challenge and critical review by stakeholders
Issues? Solutions?
Over to you…..
Any other ideas for improving
the approach?
MEASURING VFM
Producing & measuring value: theory
Social mission
Why are we here? What difference are we trying to make?
Kind of value
What are the kinds of outcomes we are looking for that
flow from our mission?
Kind of objectives
Kind of measures
What are the kind of corporate objectives we
need to deliver our mission and value?
Metrics need to
map to value
Did we make a difference (value)? Did we
succeed? What did we get for our money? Did
we make a bigger difference (VFM)?
Mapping existing metrics to value
• not beyond wit of most HAs to map
existing metrics to the value they
produce, identify gaps and look to
close them – a ‘total VFM’
dashboard?
not just about metrics, other
qualitative ways of judging
value/success
Nicking good practice from the accountants - a
‘total VFM’ dashboard?......OFR+?
OFR ratios
& PIs
….gets you so far
with financial health
& efficiency but
doesn’t nail the value
you exist to produce
+
Wider
perspective
on value
.... additional data on
outputs, outcomes &
impact (value)
What kind of metrics are we talking about……
Your mix, your
business
Financial:
• operating margin
• EBITDA interest cover
• gearing
• growth in turnover
• management cost p/u
• maintenance cost p/u
PIs:
• % vacant dwellings
• average re-let time
• % arrears/rent roll
• rent loss
• overall satisfaction
• satisfaction views
taken a/c
• satisfaction with
repairs
+
?
Insert your additional
value metrics here
So what kind of PIs might be included?
Don’t panic!!!!!
I’m not suggesting you use all of the following metrics
– simply pick the best that work for you depending on:
a) the nature of your business and the value you
produce
b) how much effort you want to put in
Business health
source: accounts, SPBM, HouseMark
• business growth
–
–
–
–
growth in turnover
growth in assets
net increase in stock
new biz income
• debt servicing & use of
assets
– net leverage/gearing
– debt per unit
– EBITDA MRI interest
cover
– return on assets
• operating efficiency &
profitability
– margin eg
• operating margin
• EBITDA MRI margin
– operating cost per unit
• management cost
• maintenance cost
– income protection
•
•
•
•
arrears as % rent due
FTA as % rent due
void loss as % rent due
bad debt/write off
– effective interest rate
Clearly lots more to choose from but what do you think are the key metrics?
Business processes
source: local PIs, SPBM, HouseMark
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•
•
•
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% rent collected
% service charge collected
% repairs completed in target time
% units vacant & available
% units vacant & unavailable
average re-let time
tenancy turnover
other key processes where effectiveness matters,
eg gas safety, ASB case handling, budget
achievement?
Clearly lots more to choose from but what do you think are the key metrics?
People
source: local PIs, SPBM, HouseMark
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•
•
•
average days lost to sickness
staff turnover
staff/board satisfaction
could consider:
– customer service accreditation
– local measures associated with training and
developing staff
Clearly lots more to choose from but what do you think are the key metrics?
Value
source: local
PIs, SPBM,
HouseMark
Complement
metrics with
reference to any
key impact studies
Customer
Satisfaction with quality of new home* V1
% homes failing Decent Homes Standard* V2
Average time to complete a repair* (days) V2
Satisfaction with maintenance* V2
Satisfaction with overall services provided* V2
% jobs right first time V2
Net promoter* V2
% tenants who think rent/service charge is good VFM V2
Satisfaction with outcome of complaint V2
% satisfied with complaint handling V2
% satisfied staff were able to deal with their problem V2
Average SAP rating* V2/4
Your key Care &
support PIs (v3)
could be included
here too eg QAF.
Satisfaction outcome of ASB case* handling V2/4
Satisfaction with neighbourhood as a
place to live* V2/4
Typically the most frequently used measures are #
beneficiaries of a given intervention, eg
• # tenants provided with financial advice
• # tenants helped into sustainable work
• # tenants completing vocational training course
• # tenants completing skills training
• # apprenticeships created
• # kids attending diversionary activity
Can also include satisfaction with intervention
Also:
• £x invested of own money
• £y leveraged
Community
& LA
Percentage of tenants who are satisfied that
views are listened to and acted upon* (co-reg) V2
• Include any key local promise PIs in accordance
with consumer regulation V2
• Net increase in stockV1
Regulator &
government
ROUND-UP & FINAL ISSUES
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