Embed Size (px)
Citation preview
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-upApproach – 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–v- standards (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• 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 standardWhat 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?OFRs too
• 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• or business tool
• 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
Some already do this: AESs, APSs,
etc
Implications: self-assessment• de-minimis regulatory compliance or
something more – a business tool? • flying under HCA radar - let’s be
frank about the risks – their current focus:– 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 governanceDoes this sound like you?
What do you think?
de minimis with bells on
• 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 self-
assessment
Telling the story – ‘template’ overview
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 well-being delivered via key value streams (or outcomes)….
Your mission
Your value
Your objectives
Your outcomes
• 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
• Unpacking this (with help from the corporate plan) we have value streams:
– 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
Value streams?: working through a real case
new
hom
es
hom
e &
nei
ghbo
urho
od
impr
oved
live
s
ExampleOur 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.
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 doo the needs & aspirations of our stakeholders, particularly the profile of our
customers and stocko 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 prioritieso ensure we have the right physical and human assets for the right costo 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
Example
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 • 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 • 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
Issues? Solutions?
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 planso 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
Track record: what’s the story?
Assets Operations
Procurement
Treasury Management
Surplus
financial benefit -savings,
income, etc
costs –v- service outcomes, social & economic benefits, environmental benefits
Borrowing capacity
looking ahead – even more social value
It’s all social value!
financial benefit -savings,
income, etc
Narrative backed by
data
Track record: data sources
Assets Operations
Procurement
Treasury Management
Surplus
Borrowing capacity
benchmarking/HCA regression analysisinternal scorecard
local offer performance
tenant scrutiny workaccreditation, service review, internal audit, etc
satisfaction
key asset management decisions – cost/benefit
key procurement items – cost/benefit
VFM register
Financial returns
impact assessments, SROI, etc
Step 5. Improvement Plans for next year – where we need to be smarter
Issues? Solutions?
• 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).
Step 6. Board assurance
Issues? Solutions?
is the Board assured of the robustness of this self-assessment, 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
Over to you…..Any other ideas for improving the approach?
MEASURING VFM
Producing & measuring value: theory
Social mission
Kind of value
Kind of objectives
Kind of measures
Why are we here? What difference are we trying to make?
Did we make a difference (value)? Did we succeed? What did we get for our money? Did we make a bigger difference (VFM)?
What are the kinds of outcomes we are looking for that flow from our mission?
What are the kind of corporate objectives we need to deliver our mission and value? Metrics need to
map 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
Mapping existing metrics to value
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)
+
Nicking good practice from the accountants - a ‘total VFM’ dashboard?......OFR+?
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+
SAP?...other
environmental?
Socio-economic
measures?
More on service
outcomes, local
offers?
New homes?
Homes
improved?
assetROI?
Your mix, your business
What kind of metrics are we talking about……
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 produceb) how much effort you want to put in
Business healthsource: 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 rateClearly lots more to choose from but what do you think are the key metrics?
Business processessource: local PIs, SPBM, HouseMark
• % 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?
Peoplesource: local PIs, SPBM, HouseMark
• 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?
Customer
Community & LA
Regulator & government
• Net increase in stockV1
Average SAP rating* V2/4
Satisfaction with neighbourhood as a place to live* V2/4
Percentage of tenants who are satisfied that views are listened to and acted upon* (co-reg) V2
Satisfaction outcome of ASB case* handling V2/4
Satisfaction with quality of new home* V1% homes failing Decent Homes Standard* V2Average time to complete a repair* (days) V2Satisfaction with maintenance* V2Satisfaction with overall services provided* V2% jobs right first time V2Net promoter* V2% tenants who think rent/service charge is good VFM V2Satisfaction with outcome of complaint V2% satisfied with complaint handling V2% satisfied staff were able to deal with their problem V2
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 activityCan also include satisfaction with interventionAlso:• £x invested of own money• £y leveraged
• Include any key local promise PIs in accordance with consumer regulation V2
Your key Care & support PIs (v3) could be included here too eg QAF.
Valuesource: local PIs,
SPBM, HouseMarkComplement metrics with reference to any key impact studies
