Great quality, low prices and good pay…..it must be Aldi?!

I love the current Aldi TV advert where an elderly woman tells us that her husband not only likes PG Tips but that he also likes the much cheaper Aldi own label tea……..whilst she likes neither….preferring gin!

Aldi wins dozens of awards for the quality of its products (have a look here if you don’t believe me), sells many items at much lower prices than other supermarkets…..and pays the highest wages to its staff (who enjoy some of the best terms and conditions in the industry). Aldi seem to be able to combine low prices, great quality and good pay. How could we learn from them?

In her recent Blog, ‘Race to the bottom’, Vic Rayner, CEO of Sitra reflects on the impact that competitive tendering for housing related support (HRS) has had on hourly rates – with prices driven down from as much as £25 an hour in 2003 to as little as £13 an hour now. She asks whether this is a result of commissioners abandoning quality considerations in favour of making decisions based largely on price. Vic notes that there is growing evidence that in order to deliver services at these prices providers are slashing wages and introducing poorer terms and conditions for employees.

How did we get here asks Vic? What do we need to do as a sector to ensure that quality doesn’t suffer and that the real losers aren’t the vulnerable people who rely on HRS services?

I am sure Vic’s diagnosis is right. Customers of current HRS services tend to be very satisfied with the quality of support they receive with satisfaction ratings often at 90% plus. Compare this with the findings of the recent Equality and Human Rights Commission report into the care that 500,000 older people receive at home. Only 50% were satisfied with their care, with the other 50% receiving care that was judged to be “poor or very poor”. Lady Greengross, the commissioner responsible for the report, warned that too often care workers were restricted by a “task-oriented” system, in which they are allocated no more than 15 minutes for a visit – ticking off pre-arranged “tasks” in an approach that displayed “chronic disregard” for their dignity.

There is a real risk of HRS going the same way as care with providers having to make grandiose promises about quality which everyone knows an increasingly low paid, untrained and demoralised work force will not be able to deliver.

We certainly aren’t there yet but we can all see it looming. Bromford Support has walked away from a number of tenders recently (and failed to win others despite being told our submissions were “exemplary”) because the council would not pay more than £13-14 an hour.

So how can we prevent this race to the bottom?

Does it have to be a choice between quality and price?

The problem is that the Supporting People era generally, and the commissioning of HRS in particular, has focussed almost exclusively on inputs – commissioners invariably commission X hours of HRS or ask how many hours could be provided for Y pounds. HRS has essentially become a commodity where commissioners set the specification, state how many hours they want to buy and let those providers who meet the specification compete on price.

The sector needs to move away from this focus on inputs and start focussing on the value of HRS – the impact that services have on the lives of vulnerable people; the goals that services help customers reach; the problems services help customers solve. It is only by a shift to the commissioning of outcomes and payment by results that we will see the start of real innovation in the HRS sector.

At the moment a commissioner will state that they want 100 hours of HRS a week. If a provider thinks they could achieve certain outcomes for their customers using only 80 hours – but using support workers who are more highly trained, better paid and using more sophisticated technology to help them – well they would just get paid 20% less, because the commissioner would not be getting the number of hours they asked for!

If we had a payment by results model then providers would want to invest in understanding which service model was the most effective; they would want the best people and they would want to pay them well and offer them good terms and conditions so they could be retained; because only by doing this would they achieve the results needed to ensure they got paid by the commissioner. As they got better and better at these things providers would need fewer support workers; they would know which things they should do less of (or stop doing altogether) because they are less effective; and generally find ways to take non value adding cost out of their service offer – so they could deliver better outcomes at a lower cost. In short they would be able to offer better prices to commissioners; deliver great quality outcomes for customers; and all whilst offering a great reward package to their people. Sound familiar?

‘Payment by results’ seems to be a dirty word in the sector at the moment but it could just be our salvation

Update 3rd March 2012

Rhiannon Bury from Inside Housing has picked up on some of the points I’ve raised here in her own blog. Here is a link:  

http://www.insidehousing.co.uk/who-cares?/6517507.bloglead

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4 responses to “Great quality, low prices and good pay…..it must be Aldi?!

  1. Excellent post. I run courses for many front-line HRS staff up and down the country, and also work with a number of elderly care organisations. In my experience the ‘Aldi effect’ in HRS is already catching up fast with the ‘minimum wage, minimum training’ culture in residential and nursing home care.
    But I’m also fortunate to have long-standing relationships with organisations who pay reasonable wages, hire high quality staff and place an emphasis on training well beyond the tick-box or ‘because CQC wanted us to do it.’ In my experience (which as a trainer is admittedly third-party but wide ranging) the ‘Aldi’ approach to housing and support brings about far more positive outcomes for service users/tenants. On the other hand there are also providers out there who leave me with very real concerns about how they ever got a contract to support vulnerable people, and whose further requests for training are politely declined. These are generally organisations with ‘stack ’em high, sell it cheap’ approaches to recruitment and retention, minimal staff training and often quite hair-raising approaches to the support of vulnerable (and sometimes difficult) tenants. The two worst examples were, interestingly, run by business people with no background in care or support.
    Great blog, and hope this issue gets the attention it deserves.

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    • Thanks Connor. Really encouraging comments. I want to get our colleague development guys in touch with you. I think we share the same philosophy and I think they’ll love your blog and twitter postings!

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  2. We often hear about how good Aldi are in respect of staff pay and conditions. Staff who get their heads down and work hard have always been able to do well at Aldi. I’ve done it myself hundreds of times.

    However…

    Recently, Aldi have significantly lowered the wages for new starters. This has resulted in hours being taken from existing staff who are now a few quid per hour more expensive the the newbies.

    It’s a clear attempt to put the existing, well paid staff in to a position were they have to find a new job so the overall cost of the work force can be reduced.

    It would appear that Aldi are just the same as all the other low rent businesses that think it’s OK to squeeze sweat and blood and put the business risk firmly on the shoulders of the struggling staff.

    It’s time to change tack on Aldi and time to change our story.

    Beware the Jabberwoky.

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    • That’s a real shame Brian. I hadn’t read that anywhere. Thanks for the tip off. Their ‘old model’ was so good. I’m sure they will regret the change. Penny wise pound foolish.

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