Devolution: Why ‘3+1’ is the magic number to create effective employment and skills ecosystems

The employment and skills landscape is shifting beneath our feet with new legislation and radically different approaches to addressing the productivity challenge we face. One of the biggest changes is regional devolution, which presents commissioners and providers with the challenge of focusing services at a local level to create sustainable ecosystems of skills and employment.

Examining the changing landscape and new requirements in more detail, and taking lessons from the vanguard of regional devolution in healthcare, we believe we’ve found the formula necessary for success.

This blog takes a look at the formula, which we first shared at conference Developing, Attracting and Retaining Skills for the Northern Powerhouse, organised by Inside Government on 15th June, 2016.

The last major review of employment and skills systems integration was conducted by the UK Commission for Employment and Skills (UKCES) in 2010. It set out four areas for action:

1. Improving local provision performance and participation, through better information about, and increased awareness of, the needs of individuals and employers.
2. Facilitating local flexibility, through stronger partnership arrangements and better collaboration.
3. Tackling local priorities effectively, through increased customer focus and better community engagement.
4. Combining all of these to focus on supporting individuals to move out of low-paid work and progress into higher skilled jobs.

Six years later, devolution makes the local focus more urgent than ever and presents a real opportunity to implement the recommendations.

The old employment and skills system is characterised by a number of fault lines which hinder the achievement of local focus and delivery:

• Lack of data-sharing protocols, and different measurement systems across government departments, prevent the creation and sharing of coherent information.
• Different funding mechanisms and incentives prevent the development of fair and inclusive partnership arrangements.
• A one-size-fits-all approach to employers and local priorities precludes communities from having a voice to influence and engage effectively.

Most of the challenges commissioners and providers face in maximising the benefits of devolved employment and skills are the same as in devolved healthcare: a challenging financial situation; complex and difficult needs to meet, and a need to collaborate across a diverse and as yet unconnected system.

Having tackled and overcome many of these challenges in the vanguard of devolved healthcare in the northwest, what lessons have we learned that can be applied to employment and skills? Is there a formula for success?

We believe the magic formula: 3 + 1. Three alignments you must get right for it to work at all, and one more alignment you should aspire to, to bring wider value.

The first alignment is locality.

The type of activity you do must be appropriate for the region. Commissioners and providers must align their requirements and how they are delivered to the needs of their "patch”. In health, we’ve seen a lot of large-scale transformation in cancer and dementia care in Greater Manchester, along with local improvements, and innovations down to the level of local GP practices. Research we recently published in the Health Service Journal showed that commissioners must work in partnerships to provide holistic, locally-focussed systems which respond to local needs: everyone coming together to serve the needs of the local health economy.

In employment and skills, area review of Colleges and 6th forms as well as commissioning of services to get people back into work via the Work & Health programme can drive this forward.

The second alignment is incentives.

Are the different organisations all pulling in the same direction? Are commissioners designing local systems so that success for each individual part means that it works overall too? If you add up all the different bits of work being done, do they achieve the large scale change you need?

Take healthcare: hospitals (as we all know from the headlines) are in severe financial difficulties and are 70% in deficit. At the same time, clinical commissioning groups (CCGs) have historically been in surplus, because they prioritise financial performance. So different drivers lead to conflict and a dysfunctional system. The answer has to be to move to a situation of incentives that are aligned and maximise the impact of the public sector investment both sides are responsible for. Failing to do that will lead to consequences about being able to supply the right services in the right areas because the money is in the ‘wrong place’.

The final alignment is accountability.

All the players must feel accountable for the overall system, not just looking after their own organisation. Devolution is pushing this forward. As an example CCGs are starting to think in a more partnership-oriented way and designing accountable care systems now coming alive across the Greater Manchester health economy. The key to solving this is finding the ‘system architect’ to design and shape delivery at the system level. In this example, the CCGs do that at a local level and this is repeated in other parts of the system.

This is the alignment which is furthest from being solved in employment and skills. Devolution presents the challenge and the opportunity, as devolved authorities can and must step up to the system architect role. We’ve already seen this in Leeds City Region for example. There is a system wide approach there to commissioning of employment and skills services for young people and long term unemployed.

Three alignments: three basic building blocks. These are the things which a devolved system must get right to have a chance of success. The crucial ingredient is the "plus one": alignment to Public Sector Reform.

No one has got this final element completely right yet. Fantastic progress is being made in Greater Manchester, building on the experience of over 20 years of collaboration.

Our experience of working in that health economy, to deliver system reform, points to specific considerations. Do you understand what your role is in wider public sector reform? For example, are health, care, education, skills and employment organisations all working towards the same broader outcomes, helping people become physically, mentally, socially and financially independent and active. That's how you really add value to the region - and ultimately, a stronger local economy means more success for everyone in the future.

That’s why 3 + 1 is the magic number.