What the corporation’s new efficiency index means for you

Some people bristled at this, accusing us of being simplistic and failing to recognise the wider In Business for Neighbourhoods agenda.

But the reality is that the corporation has been publishing performance indicator data for some years now (indeed, we have received quite a few plaudits for its usefulness). The efficiency index is a logical next step.

The idea at the heart of the new index is simple but not simplistic. Our consultant, Indepen, analysed the statistics, looking for significant cost drivers. As well as the obvious things, such as regional wage rates, they identified other factors that appear to explain variations in costs – such as whether an RSL was recently created in a transfer and the proportion of supported housing. The model uses these factors to predict the operating costs of an individual organisation.

All other things being equal, RSLs with reported operating costs below the predicted figure appear to be more efficient than expected, those with costs above the prediction to be less so. But of course, all other things are not equal. There may be other underlying cost drivers on which we do not collect data, such as the stock’s age.

The report we have just published uses 2003 data for a sample of the largest RSLs, to illustrate the analysis and explain the approach. We plan to refine and update the information to produce an index for all RSLs with more than 250 homes. It will be based on, and published with, our 2004 performance indicator data.

There are potentially many reasons why some RSLs may appear to have worse performance than others. We believe our index will help them focus on the right issues.

A spur for this activity is the expectation in the recent comprehensive spending review that RSLs should demonstrate that they are progressively improving their efficiency.

We see a major part of our role as helping RSLs to improve their own performance – collecting and feeding back good-quality information and analysis to help them do it.

In the coming year we will be asking RSLs a series of questions, which can become more pointed as we and they become more familiar with the system. This will almost certainly include producing supplementary indices, for example around development efficiency.

There have been some comments about the reliability of the model’s data. The data is taken directly from performance indicators produced by RSLs, so one could say that if RSLs are concerned about the data, it’s in their hands to improve them. But in fact the corporation has been working on this: we have a programme to improve data, including the introduction of external validation.

We may well find that there are differences in the way RSLs record key information. But while we need to be thoughtful about the way we use this index, simply picking holes in it without constructive alternatives is not a sensible way to proceed. This agenda is not going to go away. It is in all our interests to work on it together.

The most fruitful areas to follow up would be to link these figures, which are solely based on cost, with measures of quality and satisfaction. My guess would be that some of those who appear more expensive are actually producing a better product – but there will also be some who are not.

As we refine this approach, we intend to step up our regulation of those whose costs remain high without any recognisable justification. We shall also have to ask ourselves if we can justify investment in RSLs that appear expensive to us, taking into account quality, durability and cost.

We won’t base our decisions solely on indicators. But they will be one of the factors that help build up an overall picture.