Corporate governance and the impact of Client Instigated Services models

By Matthew Pringle - March 14, 2017

As the full roll out of the NDIS rapidly approaches, and moves in other health and aged care sectors begin to follow a similar client instigated service model, many traditional service providers are finding themselves poorly equipped to manage and understand the impact of these changes on their service delivery models.

Our experience is that existing board and management structures, and the skills they possess and experience they represent as compared to the skills and experience required in this new and shifting landscape, aren’t being adequately reviewed or adapted in advance of the coming changes.

Existing businesses and service delivery methods built on the current push model aren’t appropriate in a client driven pull model. Boards and senior management need to re-skill and be open to entirely new delivery methods and strategy or they may struggle to survive. As funding moves from a government-to-service provider model to a government-to-client user model, service providers that don’t adapt quickly to market competition will fail.

Competition for client / consumer acceptance of one service provider in preference to a directed provider will, for many in the sector, require a very different form of management.

Service delivery costs and costings require a complete review and overhaul and the information provided to, and by, management to the board requires a careful reassessment.

What were appropriate methods of monitoring performance historically won’t necessarily provide a solid basis going forward, as the financial and analytical / clinical cost structures and revenue streams change.

Governance structures are a fundamental starting point for this review.

The board sets strategy, tone and influences organisational culture. If a board comprises skills based only on past industry experience, and doesn’t have the skills required to adapt and be able to see and understand the strategic issues this change in paradigm creates, it may be unable to comprehend and critically assess the revised business models being presented by management, or identify where existing managements skills might need strengthening and support.

An area where our clients tell us they are experiencing difficulty and are requiring significant support is in their understanding of service delivery costing, and the changes required to internal reporting frameworks. We have also seen a renewed focus by Boards on succession planning at both board and senior executive levels, particularly based on revisions to required skills.

These reviews have often been based on board self-assessment surveys and business strategic reviews driven by the increasing awareness of the changes impacting their sector. For many, this reflection and identification of future needs has been difficult and challenging. One of the most difficult aspects has been assessing the impact on organisational culture as business models necessarily move from a service delivery to service sales focus, and key decision makers move from government to agents or individual clients.

We have worked with a significant number of our clients, helping to prepare them for these significant changes to their respective sectors. We strongly encourage all organisations in the health and aged care services sectors, be they for profit or not-for-profit, to critically analyse the impact these changes will have on their organisation and how truly well prepared they are for this changing paradigm.

Matthew Pringle is a Business Assurance and Advisory Partner at Pitcher Partners Melbourne.

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