The Swedish Association of Local Authorities and Regions (SALAR) represents all local and regional authorities in Sweden. For the last six years it has been coordinating and supporting local authorities and regions in their efforts to implement social investment as a strategic and operational tool to invest in preventative and early interventions. Starting as a quite explorative initiative, the work has evolved into a systematic approach to drive change and development in public sector organisations, particularly supporting the shift to an outcomes- focused approach.
By Tomas Bokström, Fredrik Lindencrona, Margareta Bolmgren and Elina Saxelin
Our social investment program started with the observation that public welfare services in many circumstances, regardless of high ambition, showed a clear tendency to be reactive not proactive in both providing support to vulnerable people or groups, and in moving to preventative public health measures.
Under-investment in effective and efficient preventative and early intervention can be explained by a lack of incentives. These poor incentives derive from insufficient knowledge of outcomes and practice in measuring them, in combination with budgetary silos and shortsightedness. This also implies that organisations underinvest in holistic and intersectoral capacity to manage and lead services towards improved incentives.
Gradually, the concept of social investment has been formed. It is being used to support better understanding of outcomes and to build strategic capacity in local and regional public organisations.
A network for social investment action
Currently, SALAR coordinates a network of ten local authorities and two regions to develop social investment. The participating organisations have a similar level of ambition although their models and levels of maturity vary. Agreements between each organisation and SALAR define the path to continuously improve core aspects of social investment, and the support needed from the national level. The amount of support provided by the team at SALAR depends on the capacity in each organisation, however we have found that many of the challenges are similar regardless of organisational size and capacity.
The challenges concern what we call generic competences and strategic resources. The generic competences that organisations need to improve are needs assessment, intervention design, impact evaluation, implementation, and monitoring and performance management. Furthermore, financial resources are typically tied up in silos. Therefore there is a need to reserve strategic (intersectoral) resources to finance innovation and development of new methods and practices.
Therefore, the strategy that guides our work is to support development of strategic capacity in local authorities and regions rather than to fund and support individual projects or roll-out of methods. In doing this, we emphasise the need to involve multiple competences and to include economic modelling to create the right incentives. It is too early to conclude whether our strategy is proven successful, but we see promising signs in some local authorities where the social investment model is implemented as a general methodology for prioritising, running and supporting all strategic projects in the organisation, including for instance digitalisation projects.
The case for clear incentives – using Social Outcomes Contracts (SOC) as proof
In some specific cases, we are making an exception to the rule not to initiate or support individual projects. This is in order to explore the power of clear incentive models, where risk is shared with external investors and where social outcomes are linked to financial returns for all involved partners. By involving private investors we are able to raise the bar of what it means to perform a needs assessment and to define and evaluate desired outcomes, in order to present a credible business case for the investor and public partner alike.
From our own experience and in conversation with colleagues in the UK and Finland, as well as from interviewees across public/private sector and investor/payer/provider there is agreement that the creation of a SOC can be an important step in overcoming some obstacles. A SOC is viewed as helpful for defining social and financial outcomes and metrics to measure impact, but also for deriving incentive models where all stakeholders are aligned. Pay-for-performance contracts are viewed as crucial parts of a SOCs as it enables risk sharing with service providers.
A SOC should therefore be seen as not merely, or even mainly, a funding and procurement model, but rather as ‘a change management process to encourage all partners to focus on outcomes’. Thus, the tool is well aligned with our broader social investment agenda.
SALAR has been acting as an intermediary in setting up the first Swedish SOC, an investment of €1M to improve outcomes for children in institutional care in the local authority of Norrkoping. The defined outcomes are lower costs in social services and improved school performance for the target group of 60 children and young people.
Based on the experience of the first SOC, we have now proposed a scalable model which allows larger volumes of investment and the involvement of several public organisations in one SOC. The proposed model is being applied to the challenge of reducing sick leave and occupational ill-health. This is a strategic challenge for local governments in Sweden and affects the quality of all services. Currently, we are working together with seven local authorities to set up the SOC for occupational health, in an expected investment of €10M. This will cover services to about 33,000 employees over a three year period. From analyses of sick leave patterns we have identified that 20 percent of the employees drive about 75 percent of sick leave and that this group has around 6 times higher risk of ending up in long term sick leave compared to the average employee. The proposed intervention package involves investment in internal HR resources as well as procurement by pay-for-performance of a new service for early detection and monitoring of sick leave. Payments will be triggered by lower rates of sick leave.
The impact of our work for future policy making
Several of our conclusions may help inform future policy making. We have found that:
- The main barrier for preventative and early interventions, at least in comparatively well-financed welfare states like Sweden, is a lack of incentives.
- National level actors should focus more on building local and regional capacity rather than disseminating single interventions or programs to local government (especially in decentralized systems).
- Capacity building should address both the strategic and operational level, and include support to designing, evaluating and implementing interventions/programs in the local context.
- Incentive models need to be showcased in order to inform decision makers in public sector. Social Outcomes Contracts are an important tool for doing this.
- An intersectoral perspective in local authorities and regions (both regarding policy and professions) is necessary to drive change (it is not a public health issue but a public sector issue).
 Participants are the local authorities Ale, Borlänge, Gothenburg, Malmö, Norrköping, Stockholm, Sundsvall, Uppsala, Östersund and Örebro and the regions Blekinge and Västra Götaland
 To read more on the development of Social Impact Bonds throughout the world, see http://www.socialfinance.org.uk/database/
 Quote from Toby Eccles, director and founder at Social Finance UK, Impact Investing World Forum, London, March 24 2017
 Sustainability Bond With Impact-linked Return. The concept was developed in cooperation with the European Investment Bank
About the Authors
Tomas, Elina and Margareta are in the social investment team, Fredrik is working with international collaboration at Mission Mental Health, SALAR