How 4Children avoided emulating Kids Company

Early action and a contingency plan helped the smooth transfer of services and jobs

4Children's Fairfield Nursery, Stockton
4Children's Fairfield Nursery, Stockton

This summer almost saw a rerun of the collapse of Kids Company when 4Children, one of the UK's biggest providers of childcare services, closed on 1 September. The charity had an income of almost £29.5m in the year to 31 March 2015 and almost 45,000 children were registered with its children's centres.

But despite the potential for catastrophe, only 45 of 4Children's more than 1,050 staff were made redundant, and only two of the 150 sites operated by the charity are at risk of closure. Action for Children took 676 of 4Children's employees, with a number of local authorities and other charities also taking on services.

Adam Stephens, a director at Smith & Williamson, which is the lead joint administrator of 4Children, concedes that the charity had the potential to be a "Kids Company Mark 2" and that, although the charity still owes its creditors thousands of pounds, the reality could have been much worse, with wholesale redundancies, closed services and multimillion-pound claims against the charity.

Stephens attributes 4Children's collapse to changes in the way children's services were being commissioned, the way it was dependent on a small number of major contracts and the limited reserves, making it vulnerable when it lost a major contract.

He says that 4Children's decision to alert its lawyers and accountants as soon as they realised there was a problem enabled it to put in place a contingency plan that ultimately saved jobs and services.

Emma Horne, operational director at Action for Children, says keeping existing services open and delivering to families was "the best outcome anyone could have hoped for". But despite 4Children's quick action, there was still relatively little time to arrange such a significant transfer of staff and services, and a lot of work had to be done on all sides before the transfer could be completed.

Stephens says that one of the biggest challenges in such situations is deciding when to let stakeholders know what is going on, especially staff. The risk is that if they know too early they can withdraw their support for the charity, causing it to "collapse like a house of cards".

As a result, many 4Children staff were not informed until the day before the transfer took place, says Horne. Consequently, much of the normal process of welcoming transferring staff was impossible. Instead, Action for Children provided all the relevant information and welcome packs on the day of the announcement, which Horne says managed to help reassure many staff about the future.

Regional managers were also transferred to Action for Children and were involved in the implementation team, which maintained a sense of "business as usual". Overall, Horne says, the response from staff has been positive.

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"People have got on with their day-to-day work," she says. "We have been very clear that the critical thing and the point of working in the way we did with 4Children is to deliver services to children and families. That was the priority. The message has been very clear - business as usual."

The former 4Children services taken over by Action for Children will eventually be aligned with its policies, but Horne says this will be done in conjunction with staff and beneficiaries.

"We have huge respect for the work that people have done before and we don't assume that we know better," she says. "But we will do what any sensible business would do: look really carefully at how things are done, the way they're done and how to improve those and move it forwards. But that will be done with the staff and the families."

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