The ones they leave behind

"We were ringing up other councils who'd applied for arm's-length management and asking them what they were doing. Most of the time they said, 'I don't know, what are you doing?'" Peter Woolley, assistant director of community services at Cheltenham council, had to rally the housing department after it moved its landlord services to an ALMO, Cheltenham Borough Homes, in April.

His story is not unusual among the 21 councils that have successfully bid for ALMO funding. The new organisations can consult government guidance but for their parent councils, the road ahead is less clearly signposted. And even though councils forming ALMOs in rounds three and four will have the benefit of their predecessors' experience, the chances are they'll still end up braving uncharted territory.

As the fledgling ALMOs strike out of their own, they are often buoyed by a sense of renewed purpose and swifter decision making, and promote a rebranded identity to tenants and their former colleagues.

Back at the council, though, what's left of the department must regroup around heavily depleted resources, a conspicuous space in the office and adapt to a new, largely strategic, role.

Cheltenham council transferred 200 staff to its ALMO three months ago. The new manager believes it can bring its 5100 homes up to the decent homes standard by 2010 if it secures the two-star rating it needs to win £23m of extra government investment.

The council, though, was left with just nine people covering homelessness and liaison work and wrestled with government guidance stating that responsibility for homelessness should stay with the council. This had never been a standalone service. "The biggest issue was creating a dedicated homeless persons team in-house," says Woolley. "It was part of front-line housing management before."

Should it stay or should it go?
"We were fairly stripped of all these central administration functions that you don't think about on a day-to-day basis," says Bernadette O'Shea, director of housing strategy and services at Hounslow council. It moved 750 of its staff and 15,000 homes to ALMO Hounslow Homes in April 2002. "As a unified department, we had a personnel team, a training budget, finance staff; it all had to be unpicked."

Hounslow's housing department shrunk to 180 people covering technical services, homelessness, allocations and small teams working on the private sector, regeneration, Supporting People, housing policy and performance monitoring. It was left with two accountants – one of them a trainee who later moved to Hounslow Homes – and now buys in personnel and training services from the chief executive's directorate.

The decision on which services stay and which go varies depending on council priorities. The most complicated part is working out which services are funded by the housing revenue account, into which rents are paid, and deciding how much of this money must be retained to fund these services. Only services funded by the HRA may join the ALMO.

The government initially exercised strict controls on ALMOs' remit, as Hounslow found when it tried to move all housing services to the new organisation. Six months before the start date, the Office of the Deputy Prime Minister ruled that the council had to retain allocations, homelessness and housing advice and technical services – confusing staff who had already received their TUPE letters.

Although O'Shea agrees that the ALMO should be structured differently from the old housing department, she says retaining technical services has not been ideal. "The architects, quantity surveyors and engineers do the majority of their work with Hounslow Homes. It's left me in a quandary, because I both manage their services and have client-side responsibilities. There are nagging conflicts of interest," she explains.

As a department, we had a personnel team, a training budget, finance staff; it all had to be unpicked 

Bernadette O’Shea, Hounslow council

Stockton-on-Tees council's head of housing, Julie Allport, warns other councils not to underestimate the work that will still need to be done in-house. "When you do a transfer, the department transfers and that's it. With ALMO, there's a very deep-seated relationship," she says. "You've got to negotiate fees, monitor performance, the ALMO's spending and progress on decent homes. It's another service area in itself for you to manage, and there's still an awful lot of obligations on the council's behalf, with the housing investment programme and housing policy to produce."

When Stockton set up Tristar Homes in April 2002, it hung on to 158 of its 558 staff and more of its old services than did Hounslow and Cheltenham. As well as homelessness and housing advice, these included housing benefit, Supporting People and control of private-sector housing.

To ease its strategic workload, Stockton took on an extra officer. Hounslow also created a new role, head of finance, to keep an eye on the housing revenue account, and Cheltenham now has a full-time employee to monitor best value.

More change to come?
But it's not as if post-ALMO councils can adapt to the change and then relax; there is always the threat of further upheaval. The ALMO is encouraged to exercise its right to stop buying services, such as legal advice, IT and use of a one-stop reception shop, from the council if it finds better value elsewhere. Hounslow Homes buys £2m-worth of administrative services from the council and a further £2m from the technical support team each year so, as O'Shea admits, the consequences of it taking its business elsewhere could be devastating. "It's very widely spread – a bit of legal, a bit of payroll. Losing millions from the local authority budget is causing quite a lot of worry."

Musical desks
Services aside, setting up an ALMO also involves a sizeable logistical challenge.

None of the extra investment for arm's-length managers can be spent on new premises, so a physical move will require council investment. Of course, a move is also a crucial part of marking the change.

For some councils, the move is less of an upheaval than it is for others: Hounslow's housing department was already split over two premises at the civic centre and an office in Feltham, so giving the new organisation some space wasn't too difficult – although 70 people had to move offices.

Cheltenham has not been so fortunate and is still organising its move. It hopes to achieve the split within a year. Meanwhile, staff are in the same places they were before it was set up, give or take a few desk swaps. "Nobody's actually moved, which makes it very slightly surreal," admits Peter Woolley. "We know they're a separate company, and have had to brand them in our minds. We did a lot of publicity beforehand and had a phenomenal vote in favour. But now that it's actually up and running and the hoo-haa has died down, people are not exactly sure what the independent company is."

Separate yet together
It may be a shock when colleagues move, but it can be a catalyst for positive change at the council. The government's main reason for embracing arm's-length management is to separate management from overarching strategy, and there is evidence that councils develop a broader perspective when the day-to-day chores are removed from their "to do" list.