Real-life Tales of Earning - Merlin Venture Community Enterprises

Building social capital and providing wealth beyond welfare

'So what's it like round here?' I ask the taxi-driver on the way from the station.

'Used to be rough - really rough. Now, things aren't perfect but they're well on the up. More jobs, better housing, more going on if you like.'

I'm on my way to visit Merlin Venture - a family of community enterprises on the Castle Vale estate on the south side of Birmingham. Merlin Ventures co-ordinates;

a painting and decorating service
a landscaping business
community transport schemes
a childrens' nursery
a managed labour market

all providing local jobs and essential, affordable, accessible services for Castle Vale residents.

There are two reasons why, on the face of it, Merlin does not make for a good case study on voluntary sector income generation.

As the successor body to Castle Vale Housing Action Trust, Merlin has benefited from significant capital investment.
Theirs is not an example of an existing voluntary organisation diversifying its income base through new trading activity, but rather a lively illustration of how a "not for profit" organisation can play an active and vital role in rejuvenating a local economy and its neighbourhood services.

However, it remains an engaging and unfolding story and contains several clues as to how the voluntary sector can indeed provide wealth beyond welfare.

In this case-study we find out about

Building 'social capital' through an enterprise approach
Filling a hole when the private sector pulls out
Using grants as a form of investment
The difference between 'consultation' and involvement
Using commercial contracts to cross-subsidise social goals

Origins

The planning process forced us to return to grass roots - to our core mission and values. It forced us to nail down what it is we wanted to be.

Merlin Venture was set up in 1999 as the successor body to the economic development function of Castle Vale Housing Action Trust. Housing Action Trusts were set up under the Housing Act 1988 to redevelop, refurbish and manage housing stock and to improve the physical, social and environmental conditions in their areas. The Housing Action Trust is itself a time-limited initiative that will end in 2005 - hence the need to establish a successor agency.

'But we struggled with our identity at first' says Robert Brown, acting Chief Executive. 'I think we were mistrusted because the local community wasn't sure what we were about. Also, although we were capitalised significantly by the Housing Action Trust, our own internal management was weak - our first task was to strengthen our own management accounts, administrative systems and business plan.'

'Though looking back, this was a productive period. The planning process forced us to return to grass roots - to our core mission and values. It forced us to nail down what it is we wanted to be. We realised that Merlin wouldn't work if it was to be a simple service provider - that's not what it's about. We're not here to provide subsidised services forever and a day; we're here to play a part in rebuilding this community's wealth. That means playing an enabling role, running training programmes and incubating new, sustainable initiatives that will be pump-primed by public funds but sustain themselves thereafter.'

The business today

Valescapes

If we were going to run the business, we had to run it properly or not at all.

Valescapes is a landscaping business. It was started with European Union funding and sold its services to the Housing Action Trust, providing simple gardening as a service to residents.

'But in fact', explains Robert, 'it was a poor quality service run at a high cost. Not only that, it was making Merlin look bad and undermining our community credibility - essential if we were to become successful long-term players.'

'We knew that in order for the business to be sustainable we had to secure business in the wider geographical area. Put bluntly, if we were going to run the business, we had to run it properly or not at all.'

Installing a qualified manager, the business built on its core gardening competency to diversify into landscaping. Valescapes now provides a basic maintenance service and garden 'makeovers' for local residents in addition to undertaking larger landscaping works - winning commercial contracts with a housing association as far away as Coventry and work with schools and colleges.

'It's a commercial venture and it creates real jobs - not make-jobs. There are jobs to be had - it a question of who is going to access them - the private market or our socially motivated venture?

And it's still a social venture. 35 residents pay £10 a fortnight for a thorough gardening service - that's well below market cost. We're using our successful expansion into commercial contracts to cross-subsidise other aspects of our work. We've not forgotten what this is about. In fact I'd prefer to abandon the term 'subsidy': it's not about being 'subsidised' it's about being socially prioritised.'

'You know there's nothing remarkable about what we did here' explains Robert, 'other than that we took a decision to run a business for real and identify the full range of market opportunities. It's hard to define but there used to be a kind of culture in the business that said "we're not a real business so it's OK to be second-rate." It's not. Play properly or don't play at all.'

Fresh Start

We're not anti-grants at all. We're simply looking to use them as an investment not a time-limited handout

On a similar basis, Fresh Start has developed. Fresh Start started out as a painting service for residents only, funded through the Housing Action Trust and Mercian Housing Association.

Robert continues

'Look, we're honest about the fact that we still use public grants. But we're levering those grants to access new wealth not simply running resources down. There's nothing wrong with grants. Community businesses operating beyond the transaction costs and inclination of the private market do have significant social costs. We're not anti-grants at all. We're simply looking to use them as an investment not a time-limited handout.'

Initially, the service only took on painting work. But this precluded the business from taking on any big commercial contracts, which required a wider set of decorating services. Again we thought we could develop this further. So we invested in recruiting a supervisor who could guarantee quality. Then we rolled out. The four new members of staff were not trained as decorators - one's a butcher, another's a bingo caller. But that doesn't matter.

With a quality guarantee we're able to diversify and thereby sustain our work. We're also training our staff formally on a day release scheme.

The 12-month target was achieved in 9 months (painting 130 residences for elderly or disabled tenants). Fresh Start has won the National Housing Federation's West Midlands Regeneration Award for Economic Development and is now working with HomeZone Housing Association in Lichfield to help develop a similar service there: Merlin is providing consultancy.'

Valley Travel

When the private sector pulls out, the voluntary sector can plug the gap

Another initiative incubated by Merlin is Valley Travel - a good example of a voluntary organisation plugging the gap left when the private sector pulls out. Valley Travel was set up, again with European money, to provide intra-estate hopper busses and out of hours transport to shift workers in Castle Vale.

But when Travel West Midlands withdrew the link to the Fort Shopping Centre, the residents of Castle Vale were deprived of an essential service. Valley Travel stepped into fill the breach, taking over the 695 route and increasing passenger numbers by 70% in the first 6 months of operation. Plans are now afoot to take on additional bus routes, linking with Solihull and integrating routes with job centres to further boost local employment chances. We've been able to identify the hotspots of economic growth and take our business to them.

'It's extending the range of an essential service, diversifying the income base and facilitating knock-on advantages such as easing access to employment.'

The Managed Labour Market

There are talented people here perfectly able to re-enter the labour market. All that is required is tailored support

Easing access to employment is a key theme. And in addition to the businesses incubated by Merlin Venture, Merlin itself also facilitates a Managed Labour Market (MLM), a bridge to employment consisting of supported training and employment for up to six months, soft skills development and job search.

The MLM stared off as little more than a subsidised work programme. Within twelve months it was clear that it was not financially viable in the medium term. Not only that, initially the scheme was promoted to companies who had vacancies but to whom the training and development aspects of aspects of the scheme were not promoted. As a result although clients received pre-work training, in-work training was rare. Making companies who came later to the scheme fully aware of the importance of training within the workplace, and working with them from the outset to plan for it bore clear dividends - underlining the importance of post-employment development as well as pre-work training.

'The problem was that initially the scheme was, effectively, focussed on artificially creating jobs, not creating a bridge to real employment - it was focussed on what the community didn't have, not what it did. By that I mean that there are talented people here perfectly able to re-enter the labour market - all that is required is tailored support. 70% of participants have now found sustainable employment at an average cost of £3300 per outcome. This scheme is all about people but let's not forget that's outstanding value for money!'

Paul, a local employee who has participated in the scheme agrees, pointing out that, 'Merlin Venture did for me what no one else had managed in four years of trying. The Managed Labour Market programme gave me a chance of proving to my employer that in spite of the fact that I had been unemployed for four years I was still capable of doing the job.' Paul's employer explains that, ' the recruitment process was made very simple for us and was risk free and cost effective. And now we have an excellent employee, well suited to our needs because Merlin is willing and, as a socially grounded initiative, able to take the time to match people and opportunities sensitively and sensibly - and provide mentoring and support to the new employee. Everybody's won as far as I can see.'

'I'd like to point out too' Robert interjects, 'that we've developed the scheme on the basis of thorough market research - we undertook in depth household surveys to build up an effective picture of local jobs and skills. The scheme is all about people - but it's rooted in robust data analysis too. You've got to know the market.'

As well as local business, the Managed Labour Market works with local voluntary organisations to provide work experience, simultaneously strengthening individual skills and benefiting the organisation. And, of course, with Merlin's own businesses, Valescapes and Fresh Start.

And now the scheme is exploring the idea of developing into a recruitment business to generate income and absorb the social costs of providing such an intensive people-centred scheme. 'Combining our knowledge of the local labour market, credibility and social understanding of unemployment means we think we can provide local business with 'bespoke employees' beyond the boundaries of the Managed Labour Market. Naturally, that's better for the employee and better for the business - which should mean repeat business for us. And of course good employees mean strong local businesses, which is good for everybody.

Indeed, many businesses we have worked with in the MLM now approach us first when they need new employees so we're building on existing credibility and service efficiency. In fact throughout the first phase of the MLM we generated £64,000 from participant companies - proving that if we provide an efficient service supplying quality personnel companies are willing to pay. This is somewhat different from many Intermediate Labour Market schemes, which simply offer the soft option of paying a wage subsidy direct to companies.

It's about looking continually for these ever increasing circles of interest that can feed into and off one another.'

Lessons Learnt

You can be careful and ambitious at the same time

Before visiting Tiggywinkles Nursery I'm taken to have coffee with Robert's colleagues at Merlin. I ask them what they see as the key points in Merlin's journey.

'You know, it was totally demoralising at first. We had two desks in the Housing Action Trust and there was no impetus. We had to move out and establish our independence for this to take off. You can't be a bit-part player.'

'I worked in commercial retail for 10 years and there if you don't do something today forget it. I couldn't believe how slow things could be. In the end we just got on and did it - you can't sit around in endless committee meetings. Act!

'And yet in many ways the challenges are just the same - it's all about people and detail.'

'On the detail question, you can be careful and ambitious at the same time. As we have grown the constituent functions of Merlin Ventures we have been able to devolve the running of the businesses to the individual function managers whilst achieving economies of scale by having a central hub to provide generic administration and quality systems. It sounds trite but have in place information and management systems from the start.

And if you can't compete on quality, forget it. Being a 'social' enterprise isn't good enough on its own - the market will find you out and vote with its feet. Forget good intentions, it's what we deliver that matters. People must see quality more than anything else.'

The function managers are not experienced business managers but with a strong centre they can be well supported. It also becomes easier to incubate new businesses on the back of an existing successful track record. 'It's about developing your skill base then properly exploiting it.'

And so work on the detail feeds into the approach to people. Devolving power to the front line of operations is a key to running this family of businesses. It has to be clear who is responsible - and responsibility holders need to be given freedom within a framework.

More widely on the people front, the challenge now that we've put in good administrative and accounting systems is to get the community buy-in. People here, like many regeneration areas I guess, are over-consulted and also perhaps have a fear of joining committees. We set up a Community Advisory Board and one person attended. We need to think about involvement beyond the conventional consult-and-committee approach.'

'We also needed to expand our market beyond Castle Vale in order to grow. As a successor body we had to move culturally from being an agency that spent money to one that made it. That isn't a cheap slogan - it's a question of mindset and culture and ignore those at your peril!

Merlin is pump-primed by public money but it operates in an open market. So we've got to be constantly trying to lift our horizons - not in a reckless way but by being actively open to new opportunities. Take the bus routes - we've gone from a small fleet of mini-busses to a bus company by being aware of what's around us in terms of commercial opportunity and also by looking to work in partnerships and integrate our service into others with the links to the job centres. Be prepared to market a programme in its entirety.'

If you can't compete on quality, forget it

Tiggywinkles

The final (for now) business in Merlin's portfolio is the Tiggywinkles Nursery. And it makes for a neat illustration what can happen when public, private and voluntary sectors work in tandem.

Tiggywinkles was formerly a private nursery, run on a shoestring by three partners. Adjacent to a primary school, it was able to provide 20 places in one large classroom previously for 6-7 year olds. When the school required additional space, the nursery was threatened with closure and the loss of work for the 17 parents who relied on the essential childcare Tiggywinkles provided.

Using public grant money and business support from Merlin, the nursery was able to relocate to four classrooms in another school and now provides 55 nursery places. Further expansion is planned under the Neighbourhood Nurseries initiative and the business will be marketed across the Merlin businesses. Longer-term plans may include exploiting Tiggywinkles in-house expertise by establishing a nursery nurse temping agency to address national and local shortage.

There's so much here - in terms of activity, energy, ideas and lessons for learning.

They have succeeded by continually communicating with the market, and developing new markets on the basis of existing core competencies, as well as devolving power to the operational front line, and above all being clear as to their organisational mission and values.

Merlin Ventures are clear and committed, and are an inspiring example of how to marry social goals to commercial realities.