The Government's latest Spending Review cuts to council spending, condemned by the Local Government Association, look set to boost the number of staff-led spin-outs from local government.

As recently as a year ago, few councils claimed to be planning – or even thinking about –employee mutuals.

Now, with mounting pressures to find alternative forms of service delivery, councils have mutuals on their radar as never before.  It is not difficult to see why.

Evidence from the 80 or so public service mutuals (PSMs) now in business shows that they are highly innovative, do cut costs for authorities and generally improve services.

The so-called ‘John Lewis effect' appears to be at work in local government.

Already, around £1.2bn in public sector contracts, across a range of services, are delivered by these enterprises where staff own at least a significant part of the business.

For most councils, the pressing question now is about how to make a success of spinning out staff mutuals.

The risks, after all, are not negligible.  Service users may be nervous, councillors may need convincing, staff may lack commercial skills, and like any business, a mutual can fail.

One reason why the London tri-borough councils opted for a mutual joint venture for schools services, with Prospects as their the selected partner, was to lower the risks involved.

New research by Prospects for the Cabinet Office reveals the vital steps councils can take to ensure mutuals deliver what the parent authority and its staff owners need.

Based on interviews with both commissioners and staff leaders, the study looked at five potential mutuals at various stages of development, in services across the UK ranging from libraries to social work, and adult learning to social care.

Collaboration turned out to be the first imperative.

Most interviewees stressed that forming a mutual is not a matter of throwing the ball to staff and letting them run with it.

In most cases, some kind of joint project team had been formed to oversee the demanding process of testing viability, constructing a business plan and weighing up options.

Senior involvement on the commissioning side has the handy side effect of demonstrating to occasionally sceptical support officers that the potential mutual – even if it is heading for the exit – does require their help on issues like budgeting and legal technicalities.

With a spin-out however, collaboration can only go so far.

Eventually, commissioners' and mutuals' interests are going to go their separate ways as each begins to need different results from contract and other negotiations.

The project plan needs to factor this separation in, along with an acceptance that as spin-out gets nearer, the ‘parties' move further apart.

The single most repeated lesson cited by interviewees was the need to give the spin-out process the time it needs, and expect to do a lot of work.  As one interviewee put it: ‘It will take longer than you think, but that may not be a bad thing because you've got to carry people with you and they need time to mentally adjust.'

One of the most time-consuming, but also most essential spin-out ingredients is constant communication with people affected by the change.  The list can be long.

Councillors, senior officers, staff themselves, users of the service, unions – all of these are ‘stakeholders' and need to know what's going on and why, as well as having a chance to air their views.

Communication, it is worth stressing, should not be limited to when something has ‘happened'.

More than one interviewee pointed out that those most affected – staff and service users especially – need a constant flow of information whether there is ‘hard news' or not.

Rumours and fears flourish when things go quiet;  frequent bulletins and face-to-face briefings, Q&A and so on, will help keep the project on track.

Several councils and staff leaders we talked to pointed to the free advice available and the value of getting it as early in the process as possible.

The Cabinet Office's £10m mutual support programme – which has funded legal, commercial and other expert help for around 35 mutuals to-date – is only one of the options.

Talking to councils and mutuals who have been through the spin-out process before can also be invaluable.

The Employee Ownership Association and Co-operatives UK are authoritative and respected sources of help.

Last, but not least, on the spin-out to-do list is the ‘vision thing'.

Spinning off a mutual may originate in the need to save the council money.  But, treating the challenge as a piece of process engineering is a mistake, our interviewees warned.

Like most big change programmes, creating a new business and a service that councillors, staff and users can be proud of, calls for a genuinely inspiring vision – with passionate advocates on both the commissioning and employee sides.

Patrick Burns is director of mutuals development at Prospects and mutuals ambassador at the Cabinet Office