Privatisation Poses New Challenges for NFPs Managing Their Workforce

As the disability and aged care sectors become increasingly privatised, not for profits face unique challenges integrating ex-government employees into their workforce, a leading not-for-profit lawyer has warned.

The rollout of the National Disability Insurance Scheme (NDIS) has led to the privatisation of some disability services, while a number of not-for-profit (NFP) providers have merged.

There has also been direct outsourcing of aged care services to third-party providers, both private and not for profit.

Prominent lawyer Luke Geary, who heads Mills Oakley’s NFP practice in Brisbane and founded social enterprise law firm Salvos Legal, told Pro Bono News that the privatisation of social work presented a new set of challenges for the NFP organisations absorbing this work.

“You have people who might have been working at a government agency for a number of years as part of the public service, being transitioned to work for a private provider… that may be a not for profit,” Geary said.

“So if you take 200 government employees and are mixing them with your existing 300 or 400 other employees, you’ll have a cohort with one particular background or experience and a cohort with a very different experience.

“You’re going to have a couple of issues. One is their attitude to the goals and mission of an organisation. There may also be more tangible issues, such as the pay and working conditions that the public service offered versus what the NFP offered.

“Also from a legal perspective, if you’re taking on employees from another employer, you’re often taking on the latent liabilities of those employees – so things such as looming worker’s compensation or a potential common law action.”

Despite these challenges, Geary said taking on government services could be “very positive” for NFPs if managed well, and added that governments were looking to fund larger organisations to “get more economies of scale”.

“So you’re going to see a lot of mergers in the NFP sector. You see it also in the aged care environment, where the model of funding has changed to make it more appealing to grow by acquiring other similar-minded businesses. So you’re going to see more merged workforces,” Geary said.

“If managed well, it could provide a well-trained, well-scaled addition to your business very quickly, so you can increase your market share and help more people. But if it’s not managed well, your existing workforce can become unsettled, unhappy and unproductive. And the workforce you acquire can also become unhappy and potentially never quite merge with the business.

“So its high gains but also high risk. It comes down to the culture, and how you manage winning the hearts and minds of employees who didn’t seek out your organisation, who were forced upon you by their existing employer or market conditions.”

Geary said there were also cultural issues that needed to be considered by NFPs when taking on government employees, with public service employees by definition secular and non-political, whereas NFPs are often faith-based or purpose driven and could take certain advocacy positions on relevant issues.

“I think it’s a bit easier in the for-profit world, where your employees understand your business is a business. In the NFP world however, people have a greater attachment to an organisation and the outcomes to stakeholders. So people tend to have a greater emotional investment, which makes changes all the more difficult,” he said.

“So winning the hearts and minds involves communication and the leadership of the organisation. But it can’t happen in isolation. It must also be represented by equal terms for all the employees from the two organisations. You can’t win people over if there’s inequality.”

He advised NFPs looking to take on government services to be well-prepared before making a move, while also taking heed of how for-profit organisations handle mergers effectively.

“You have to think about getting as much as you can done – in terms of decision making – before you pull the trigger. Because all of your employees and stakeholders are going to expect the information to flow, and if there’s a large delay in that happening, it’s going to be problematic for morale,” Geary said.

“The NFP world can learn a lot from the for-profit world, because often mergers in the for-profit world happen quite quickly, whereas NFPs have a softer approach and tend to manage change a little bit differently.

“These are complicated issues and it can’t be overstated how important it is to get legal advice at every juncture. Because by taking steps to change the control of an organisation, you might inadvertently put both organisations in breach of government funding arrangements.”