out of hyding

As statements of intent go, the recruitment of Elaine Bailey as chief executive of Hyde Group in May last year was a powerful one.

Eyebrows were raised when headhunters were hired to fill the top job at the 50,000-home London housing association from outside the sector. But it was the identity of the private sector organisation Ms Bailey was poached from that really made heads turn: Serco.

To many housing professionals, the London-listed outsourcing giant, which reported revenues of £3.96bn last year, is the antithesis of a not-for-profit housing charity. The company is often painted as a shadowy corporation driving the stealth privatisation of public services ranging from prisons and schools to military weapons. Its reputation took a battering after it was embroiled in an overcharging scandal last year. And Serco’s forays into housing have done little to dispel the suspicion that it values profits over service standards: the company was slammed by the National Audit Office in January last year over its housing of asylum seekers, and providers involved in the government’s much maligned £5bn Work Programme have been frustrated working on barely viable sub-contracts under Serco.

If hiring the managing director of Serco’s home affairs division left anyone in the sector in doubt about Hyde’s commercial direction of travel, then the next big hire certainly put paid to that. In December, Hyde announced that Mark Sebba, former chief executive of luxury online store Net-a-Porter, would take over from Julie Hollyman as chair. Bringing such a high-profile retail expert to the table was a coup – but once again represented a rejection of established housing sector thinking, in favour of new ideas.

So how is Hyde set to change under the leadership of Ms Bailey and Mr Sebba – one with a background in prisons and the other in high-end fashion? And what do they make of the organisation, and of the sector they have entered?

Despite having been in place for a year and six months respectively, neither have given any clues. There have been no interviews, and Ms Bailey remains a mystery to most housing bosses outside of the G15 group of London’s largest associations. All that is about to change as they finally agree to meet Inside Housing at Hyde’s Borough Market office in London.

On the down-low

Ms Bailey has a warm manner - open, but measured. Her keen blue gaze is unflinching as she sets out her stall.

‘I have kept a low profile for this first 12 months,’ she admits. ‘Because when I speak, I want to speak with some authority, and not just shoot off and present my first thoughts on things.’

“It’s almost like we haven’t been perceived as anything.”

Elaine Bailey, chief executive, Hyde Group

Ms Bailey does speak with authority – in nuance, with the assuredness of a chief executive with a decade rather than a year under her belt. She has more relevant experience than some may have given her credit for. At Serco, she gained considerable experience dealing with major public contracts – but previously she worked in the construction industry for 15 years as a civil and structural engineer. Having completed an MBA at Imperial College in London, she joined Her Majesty’s Prison Service as head of construction services.

Her self-imposed year of silence, though shrewd, must have taken some restraint, because Ms Bailey expresses bold views on how Hyde, and the rest of the housing sector, should change.

‘When I did my research before I started, some of the feedback I got was that for its size, Hyde had been very quiet for a few years,’ she explains. ‘And they had just stayed under the radar.’

There was good reason for this. Ms Bailey’s predecessor, Steve White, also came from outside the sector – he worked in insurance and law - and stepped up to turn around what he describes as an ‘ailing’ organisation in 2011. Two senior directors had quit in the wake of rows about group strategy, and the then chief executive David Eastgate suddenly departed months later in December 2010. Mr White was tasked with getting Hyde back on track after an Audit Commission report criticised the group’s customer care.

Structural change

The consensus appears to be that he did a good job of this, collapsing the group’s federalised structure and centralising operations. ‘They [Hyde] had lost their way big-time. They were expensive, they had lost social purpose and geographically they didn’t know what they were,’ says one G15 chief executive. ‘Steve really shook the organisation up and got things back on the right track.’

In the wake of Mr White’s departure in May last year, Ms Bailey sees her task as being to build on this ‘massive structural change’ to create a new sense of ‘identity’ for Hyde.

“Service delivery has come under enormous pressure and has seen a significant deterioration in performance during the first few months.”

Hyde’s 2014 financial statement

‘It’s almost like we haven’t been perceived as anything,’ she says.

What will Hyde look like in five years’ time? Ms Bailey answers without hesitation: ‘The one to beat.’

Her ambitions are for Hyde to be known as a sector leader – ‘a model for delivery of services to a whole range of tenures in a really up-to-date way’.

‘When government needs an inside view on something, I’d like them to come to us. I’d like local authorities, when we come into their boroughs to do some development, to say, “That’s great – we like what you do.” I want us to be thought of as thoughtful as well.’

The difficulty is Hyde’s performance is not yet meeting this vision.  

Before Ms Bailey’s arrival, Hyde retendered £400m of contracts, slashing the number of contractors in order to save £50m over 10 years. This transition has not been smooth. Indeed, Hyde’s 2014 financial statement acknowledges that ‘service delivery has come under enormous pressure and has seen a significant deterioration in performance during the first few months’. A recovery plan is underway to turn the situation around ‘during the second half of 2014/15’, but the presence of an angry group of 500 residents on Facebook suggests this process has some way to go.

While she accepts this, Ms Bailey is adamant that Hyde is back on track to be in the ‘top quartile’ or the ‘top decile’ among her G15 peers for service delivery. Both she and Mr Sebba are at pains to emphasise the importance of service standards for social tenants who are unable to choose to live elsewhere. Here, Ms Bailey points to her past: ‘Even where people can’t choose - and part of my background before coming here was about housing people who didn’t choose to come to us - that doesn’t mean you provide poor service.’

The service users she is referring to are people in prison. Prison and also ‘administrative detention with asylum seekers’. While the comparison is valid, it is also awkward. Perhaps aware of this, she adds: ‘I am not saying there are parallels with our residents as prison types at all, but quite a few of our social tenants do have some deficits in life. We can help make their lives better.’

In general, she argues that the association has now ‘sorted itself out’ and is ready to take a more vocal role in the sector. But what will Hyde say with its new-found voice?

The need for landlords to pull their weight and to build more homes is one of Ms Bailey’s core messages.

“At Serco, government was paying us with taxpayers’ money - therefore, it was incumbent on us to be able to evidence we were using that money wisely.”

Elaine Bailey, chief exective, Hyde Group

‘There is such a pressing need for homes I think housing associations have a duty to try and close that [supply and demand] balance. I think it’s all housing associations - not some. We all have a lot of valuable assets. Some of us choose to leverage those assets quite strongly, but I don’t think all do.’

In-house skills

Herein lies opportunity for Hyde - as both a development partner, and as a contractor. Ms Bailey notes that while some landlords have balance sheet capacity limits holding back their development ambitions, others lack the in-house skills. She is keen to form joint ventures with local authorities that have land and borrowing, but not the development capabilities. Indeed, last Christmas, Hyde launched an offer document, pitching its development services to councils in a series of ‘flexible solutions’. Ms Bailey says this has received ‘a lot of interest’ and potential deals on the cards with one council in London and one outside London.

But, most intriguingly, Ms Bailey sees opportunity within the housing association sector doing the same thing. ‘We have great development skills, we have great Treasury skills, our income team is really good - we could provide that service to other housing associations.’

Becoming a Serco-style outsourcing company to other associations will certainly get Hyde noticed. However, how she plans to use her voice to engage with government may also. It is striking, for instance, that Ms Bailey expects Whitehall to attach strings to much of Hyde’s income, because it comes through housing benefit.

“Serco have a terrible reputation; that the [Hyde] board would appoint some like that speaks volumes.”

A chief executive

‘At Serco, government was paying us with taxpayers’ money - therefore, it was incumbent on us to be able to evidence we were using that money wisely,’ she reasons. This means demonstrating value and ‘selling what we do in a more positive, reasoned way’.

‘I am fairly pragmatic,’ she adds. ‘I’d rather try and be inside the camp. I think it’s important we try to find consensus within the industry instead of everyone going off in different directions.’ 

So far Ms Bailey’s G15 colleagues are impressed. Brian Johnson, chief executive of Metropolitan, praises her determination to question how everything is being done. Another G15 chief executive welcomes her commercial experience at Serco and argues that the timing is perfect for her to make a splash.

But to some outside London, Ms Bailey’s appointment represents the prioritisation of commerciality over social values.

‘Serco have a terrible reputation; that the [Hyde] board would appoint someone like that speaks volumes,’ complains one chief executive (who is yet to meet her).

Asked whether she is concerned about perceptions, she anticipates the end of the question before it is complete: ‘…that all I care about is the bottom line?’

‘To some extent I do care about the bottom line,’ she asserts. But Ms Bailey doesn’t accept that her focus on the bottom line - or her ‘business head’ - detracts from delivering social outcomes - her ‘social heart’.

Indeed, she says accepting the Hyde job was an ‘easy decision to make’ on the grounds that it ‘carried over from the work I had been doing’ at Serco.

‘We were helping society, people and communities. That is very satisfying.’

Retail lessons

When Mark Sebba’s appointment was announced last December, a Hyde tenant disparagingly referred to him as a ‘frock salesman’. If this is the case, then he is one of the most successful frock salesmen ever.

When he joined Net-a-Porter in 2003, it was an £6m-a-year online fashion start-up. By 2009 it was selling £120m of goods a year.

Furthermore, a video of his surprise leaving party went viral on YouTube and describes him as ‘the world’s most loved boss’. Crisply suited and elegantly spoken, Mr Sebba comes across as a rather formal, earnest man who is very serious about his new housing role.

The former investment banker remains a non-executive director at Net-a-Porter and is a trustee of the Victoria and Albert Museum. He passionately insists that quality affordable housing is a right.

Mr Sebba describes his key strength as improving ‘how you interact with your customers’. This, he explains, is about examining ‘the other side of the KPI [key performance indicator] - the failures. One of the reasons I get on well with Elaine is she thinks the same way’.

Mr Sebba denies he was hired with a mandate to expand Hyde like he did Net-a-Porter. However, he adds: ‘It is probably evident that over a 10-year period there are probably going to be fewer rather than more housing associations. And to the extent that we are well positioned, then it would be sensible of us if we looked at opportunities.’