Before 1987 the unused Royal Palaces were maintained by a combination of different government departments. In 1987, when there was a major fire in a wing of Hampton Court Palace, a complete review was undertaken of the management of the Palaces, culminating in the decision to create a single government agency responsible for them. The experience of the Historic Royal Palaces (HRP) is an example of a successful devolution from a collection of organisations to a single combined agency. This model was developed in response to a strategic wish to scale up output and impact for the Palaces, and the new governance structure has enabled the growth of HRP as an organisation in response to its market.
The key impacts of HRP's devolution have been:
- the development of a focused and businesslike organisation that has a clear sense of charitable purpose and is market responsive and centred around user delivery
- increased national and international public access to five significant and socially important historic palaces
- the removal of cost to the taxpayer of sustaining five nationally important historic palaces
- wide-ranging education and outreach programmes
- award-winning new developments.
Becoming a charitable organisation
HRP's Chief Executive, Michael Day, says “HRP's journey from government agency to the very different charitable organisation we are today has been an extraordinary one. Many factors have contributed but chief among them is HRP's tremendous professional team and our dedicated Trustees and volunteers. Working together, their combined achievement has transformed the palaces for millions of people today to enjoy and ensured the long term conservation of these great buildings and their contents for generations to come.”
The key consideration was that with greater freedom - in particular from government restrictions around budget spending - the Palaces could reinvest earned revenue strategically over time. Through doing this they could sustain steady and planned development. It was also believed that an independent charity would operate more commercially, to advantage.
In 1998 Historic Royal Palaces became a fully independent charitable Trust, with constitutional status as a public corporation granted by Royal Charter. In addition to the Board’s full range of governance responsibilities, HRP sees it as a trusted group of advisors who bring key expertise to a partnership relationship.
The business model
Its constitutional status (as an entirely independent arm’s length body) enabled HRP to create what is, for a national level organisation, an unusually independent business model. There were two organisational factors considered essential in maintaining financial sustainability over time. One was that despite the TUPE transfer of staff from a civil service scheme, all new staff were contracted to new terms and conditions, ensuring the model became increasingly cost effective in the long term. The other factor was that control over the assets of the five palaces and the considerable expenses involved in maintaining them was transferred completely to the Trust. This enabled it to plan an organisational business model around full exploitation of the market value of the assets.
Like any model that is entirely self-sustaining, there are of course market fragilities that it needs to be prepared to defend against. In response to this, Michael Day states, “A degree of financial flex, a spread of income sources and the opportunity to build reserves all need to be built into the financial model to enable independent or devolved organisations to survive such crises with grace.”
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