Select Committee on Works and Pensions Minutes of Evidence

Memorandum submitted by Deloitte Consulting (OP 22)



  Deloitte Consulting has been the Private and Voluntary Sector (PVS) partner delivering the Leeds and Suffolk ONE pilots since November 1999. In these two years we have, with Employment Service (ES) and Benefits Agency (BA), learned many lessons. These will be of considerable value to the Government in ensuring that Jobcentre Plus is established in the most effective and economic manner, and that the Private Sector is most effectively engaged in future delivery of the welfare-to-work policy. We are therefore pleased to have been given the opportunity to present evidence to the Select Committee on Work and Pensions and look forward to answering Members' questions and exploring with them how the lessons we present can be successfully exploited.

  To aid the Select Committee's work we have attached to this document previous submissions on these topics. The first is our letter of 18 December 2000 to Leigh Lewis, Chief Executive of the Employment Service, (Annex A) resulting from a meeting held with him on 7 December 2000, and a reply from Clare Dodgson, Employment Service Chief Operating Officer, dated 5 April 2001 (Annex B). The second submission is our letter of 15 August 2000 to the Rt Hon Tessa Jowell MP, proposing changes to ONE (Annex C). This is supported by a detailed review of the issues and problems identified up to that point (Annex D). Members will note that it contains many of the issues we describe in this paper.

  The current contracts for delivery of the Leeds and Suffolk ONE pilots expire on 31 March 2002. We have been invited to extend these contracts via local negotiations for a further 12 months. Clearly, the lessons presented in this paper are an important part of the negotiations we are currently conducting on a potential extension.


  ONE was designed to pilot new structures and ways of working aimed at achieving five strategic objectives of the Government's welfare-to-work policy. These are to:

    —  Help deliver the Government's principle of "work for those who can—security for those who cannot."

    —  Change the culture of the benefits system and the general public towards independence and work rather than payments and dependence.

    —  Increase the sustainable level of employment by getting more benefit recipients into work.

    —  Put more benefit recipients in touch with the labour market (through the intervention of their personal adviser).

    —  Ensure that more clients experience a service that is effective, efficient and tailored to their personal needs.

  As the PVS partner for ONE, we understood from the outset that the aims of our involvement were to:

    —  Engage the Private Sector as a partner in the delivery of the welfare-to-work agenda, and in particular, Deloitte Consulting's experience of implementing and operating welfare systems in other countries, notably in the USA.

    —  Harness the Private and Voluntary Sectors' experience in other welfare-to-work arenas, including innovative approaches that had proved successful, to develop a new model of supporting people in the journey to reaching sustainable employment. In particular, Voluntary Sector participation was sought to work with those most disadvantaged, bringing specialist skills and programmes, as well as ideas for new innovation. By its nature this aspect of the vision contained the potential for failure as well as success. Its key objective was to provide individuals who were at an early stage of their "journey to work" with a learning process to build personal skills, positive attitude and commitment to seeking work.

    —  Pilot processes and structures to be used in the development of future service delivery models, thus assisting derivation of the most effective operational model.

    —  Enable the Benefits Agency, Employment Service and other key stakeholders to evaluate and understand "what works" and to assess the potential advantages of Private and Voluntary Sector involvement in future service delivery models.


  How well have the aims and objectives of the ONE Pilots been achieved? It is the view of Deloitte Consulting that valuable lessons have been learnt, but the pilots have not realised their full potential value in terms of developing and testing new processes, focussing on the "journey to work" as a priority. A number of factors have constrained the ONE pilots from exploiting the opportunity for trial and evaluation of truly innovative activities. These factors are summarised:

    —  Our contractual obligation to adhere to the documented ONE process and meet process output targets, inhibited innovation in responding flexibly to the differing needs of different client groups in order to best achieve desired policy outcomes.

    —  Innovation was further inhibited because the performance management regime and funding structure for remuneration to the ONE PVS partner allowed no headroom for experimentation. This performance management regime was appropriate for a live service and made no allowance for the special circumstances of a pilot project such as ONE.

    —  The lack of an empowered single point of authority, and lack of clarity in the role and responsibilities of contract management, made it difficult for ONE to obtain timely authorisation of trials of innovative practice, or timely resolution of operational issues. Contract management also tended to give disproportionate emphasis to compliance at the expense of supporting innovation and flexibility.

    —  High staff turnover—due to use of temporary staff and the continual attrition of ES and BA secondees by their home agencies without replacements Cconstrained performance and prevented the development of the broad range of expertise and knowledge which individual staff require to perform the ONE processes effectively.

    —  Accommodation in unsuitable premises damaged staff morale and productivity and raised health and safety issues.

  We consider the lessons learned in relation to each of these points in more detail as follows:


  The current contract regime under which ONE is required to operate is not conducive to determining the most appropriate way to deliver to different groups of clients the key policy objective—or outcome—of "work for those who can and security for those who cannot." The opportunities that have existed for innovation, and flexible response to changing circumstances and emerging evidence, have largely been missed due to this constraint. The current contract management and performance monitoring regimes are not well suited to the piloting of new structures and processes to gain understanding of the optimal performance model and the costs associated with it. They are better suited to a stable, well-defined service model, in that they focus on how the service is delivered, and whether the contracted volume of outputs (eg events such as interviews) have been delivered. They are also constructed on the assumption that there will be little need for change during the pilot. This is inconsistent with the aim of creating an environment to support the trial and piloting of innovative practice.

  Ongoing ONE evaluation has revealed a number of aspects of the core ONE process where the ability to respond flexibly to needs of different client groups could be beneficial, for example: job placements and interview targets.

Job Placements

  In the area of job placements, it has been explicitly mandated by the Contract Authority that ONE pilots will be expected to deliver a defined percentage of Employment Service's APA targets. This directs operational focus and contractual discussions to a single aspect of service delivery. However, over the life of the pilot, it has become apparent that clients expect benefit issues to be resolved before work prospects are discussed. It is difficult for advisers to reorientate a client who is focussed on immediate financial need towards employment issues. Areas where greater flexibility could be beneficial include:

    —  Current service obligations expect completion of the benefit process for job ready applicants ahead of the work component of the process. A "lessons learned" paper has been issued by ONE Performance Monitoring Unit (OPMU) suggesting process changes that can be adopted to give more flexibility and increase performance. Its impact on service delivery ands pilot staffing is still being assessed, though how benefits processing will be separated from work-focussed interviews is still not finalised.

    —  Contractual obligations drive staff to deliver a standard service to individuals with diverse circumstances. Notably, the standard process does not recognise the amount of effort required to deal with many non-JSA clients who are beginning the "journey to work" and face many barriers to accomplishing it successfully. Such clients require levels of support and persistence that are not accommodated by the service or financial model mandated for ONE.

Interview Targets

  Interview targets, to be met by the pilots, produce a standard and sub-optimal service. An example is the "three-day interview target" (lately altered to a four-day measure and no longer a basis for remuneration). Such a target is based on the premise that a rapid service is a good service. Clearly, a timely service is important for clients. But the current performance has at its heart a conviction that output measures are the appropriate way to assess and remunerate performance. This militates directly against providing freedoms to undertake the activities necessary to achieve the key outcome sought: a return to sustainable employment. In some cases achieving this outcome requires a longer period of time to assist clients make sufficient progress on their "journey to work" and ensure that they are truly ready to attend job interviews.

Requirements for Outcome Focussed Partnership

  The rigidity of the contractual regime has also militated directly against the partnership ideal. Many of the constraints that have arisen could be eased by implementing a performance and compliance regime that focuses on delivery of the pilots' objectives and recognises the need for agility in responding to opportunity for improved performance. In such a model, based upon an open book financial regime, levels of mutual trust and co-operation could be established that would ensure the maximum opportunity for success.

  Going forward and looking for lessons applicable to the implementation of Jobcentre Plus, we believe that although an overall definition of scope, and a framework for its delivery is important, three key requirements are:

    —  To provide freedom of action to tailor the service to the individual client's needs and expectations. Where security is paramount benefits processing needs the highest priority. Where return to work is the client's immediate focus this should be responded to as the highest priority.

    —  To recognise that the "journey to work" is different across the client base, so that ONE and Jobcentre Plus put in place a means of supporting that journey. Very often this will not be amenable to a standardised process with a finite number of encounters or actions.

    —  Customer satisfaction is the key to a successful service, and a measure of this should be a key feature of the performance management regime.


  The members of the public we serve in Leeds and Suffolk are entitled to receive a level of service at least comparable to that they would receive if they resided in a part of the country not served by a ONE pilot. Indeed, residing in a ONE pilot area should result in a superior and more innovative service, particularly for the journey back to work. Our staff have received numerous letters from clients demonstrating that the service we deliver exceeds some clients' expectations. However, operating ONE under the same performance regime as non-pilot areas fails to recognise and remunerate the improved client service delivered by ONE. From a pilot management perspective our remuneration, and thus our behaviours, are driven by the live service processes and targets.

  We believe that the current output-based performance measures militate against a truly client-focussed service. They require management of the pilots to meet core Agency performance targets rather than encouraging PVS Partners to satisfy client needs in an innovative way. Absence of any customer satisfaction measure in the performance regime means there is no counterweight to this tendency.

  Adoption of truly innovative practices on a "learning" basis is also inhibited, as their implementation brings the risk of some initial shortfall against the output-based performance targets. This is because the ONE pilots have been treated as part of the live operation of benefits processing and job placing, in terms of both the performance targets for Output Related Incentivised Funding (ORIF) and the activities and the remuneration basis for innovations. Continuation of the ONE pilots must be based upon clear objectives and an operational and financial model to support them.

Funding Structure

  A funding structure that allows operational costs to be recovered with security, whilst providing incentives for innovative and outcome-based actions will enable Private Sector partners to pursue the original vision of ONE. However, experience has shown that the current ONE funding structure imposes a punitive payment regime. The Guaranteed Funding is insufficient to meet the operational costs of the pilots. This applies to both Leeds and Suffolk. The regime for the latter is particularly onerous as there is a large diseconomy of scale in providing the ONE service in 12 offices across a large rural area.

  The PVS Partner is reliant upon the ORIF funding to make a significant contribution to income (though even at 100 per cent realisation it is not, in Suffolk, sufficient to enable operating costs to be covered). However, in neither pilot has full earning of the ORIF funding proved to be achievable, regardless of the close management focus placed upon it.

  Innovation funding has proved problematical to access, due to difficulty in agreeing activities acceptable to the Contract Authority. Delivery of innovation activities as a learning process has been inhibited by the Authority's decision to make access to 20 per cent of innovation funds dependent upon output-related performance.

  This approach to funding has inhibited significantly our willingness to implement change due to the potential to incur increased losses. It has also changed the use of innovation funding from learning activities into further pursuit of output targets, particularly job placings.

  We suggest the following future approach would be effective and beneficial for a partnership between the Authority and any PVS Partner.

    —  Establishment of an "open book" financial regime with a Balanced Scorecard approach to performance management. This would provide assurance that no unacceptable profit was being made in the pilots, whilst protecting the PVS Partner from unmanageable and onerous risk. This would allow an open and proactive approach to change to be adopted. It would also allow open and full metrics to be derived. This would enable insights into the cost and productivity bases of the pilot, factored for changes in process and flexibilities in operation. Assurance on value for money could be obtained by the measure of "delivered service hours." Adopting these ideas would give considerable benefit in scaling the Jobcentre Plus service, and provide data on which to base expected productivity levels against differing client volumes.

    —  Agreement, from the outset of any contractual period, of the innovation activities to be commissioned, their funding and their evaluation methods. As part of this, agreement should be reached on how innovation activity and funding would be continued although inevitably some innovation activities would need to be discontinued and replaced by others of greater perceived value. Where major benefits are obtained from innovation, the degree of freedom to implement change derived from the proposed future approach to funding would enable their prompt incorporation into the overall service offering.


  The governance model has been less effective than desirable. The absence of a clear governance structure, with an empowered single point of authority to speak on behalf of all affected client-side parties, has prevented timely and effective actions in a number of cases. It has also prevented ready agreement of unified service requirements and provision of facilities to enable their delivery.

  Local Authorities do not have an explicit contract covering ONE. Pre-existing service level agreements with the Benefits Agency have been used as a proxy. This has caused difficulties in such areas as office lease arrangements, whereby for example Leeds City Council have sought direct contractual discussions with the PVS Partner. Additionally, we have been required to sign and observe a range of service level agreements reflecting the many client-side parties' specific standards. For example, the large range of affected parties, each requiring individual discussions and agreements, has been instrumental in the failure to be able to introduce web-based electronic claim forms in an acceptable timeframe and cost.

  The division of responsibility and boundaries of authority between the local signatories and their contract management teams and the central teams in Sheffield (eg OPMU, CPD, ONE Expert Domain, etc.) and other parties, is unclear. Although we now understand that the central team sets policy and local teams deal with operational aspects, this varies depending on circumstances. This has been evidenced during negotiations on innovation funding and structuring; decisions that contractually defined innovation monies will be withheld by the Authority to provide innovation infrastructure support; and views on what services qualify for output related funding. Indeed, decisions that we have understood to be local responsibilities have been subsequently transferred to the central team and thence to other teams with whom PVS Partner has neither contractual nor operational relationships.

  To achieve the stated goal of partnership it will be necessary to provide within the Contract Authority an empowered single point of authority. This will enable the PVS Partner to interact effectively and focus continually on optimum outcomes and the actions necessary for their realisation.

  To overcome such difficulties, which give rise to frustration and misunderstandings on both sides, for similar pilots in the future we strongly recommend a single point of contact and authority in both the PVS Partner and the Contract Authority, both of whom are empowered to negotiate on behalf of, and to commit their respective organisations. These commitment authorisations should encompass contractual, service, performance and financial matters. By this mechanism a clear, committed and shared agenda to ensure optimum outcomes can be established.

Contract Management

  Although local contract management functions have been established their effectiveness is reduced, firstly by the lack of clarity and focus in the overall governance arrangements, and secondly by the ostensible perception by the teams of their role.

  A clear definition of the role and responsibilities of contract management in relation to the overall governance structure will assist efficient performance. Lack of such clarity has led to confusion and operational difficulties. Non-delivery of estate accommodation and facilities, commensurate with contractual agreements and the pilots' needs, is an example.

  From a PVS Partner perspective contract management appears to be concerned with audit and verification of process observance, documentation production and output results scrutiny. Whilst we understand the need to ensure probity, our experience has been that these activities have been given a disproportionate emphasis when measured against the need to innovate and react quickly. These activities absorb continual pilot management resources and reduce focus on the value-added areas sought from ONE: client service and innovation.

  We understand and accept the need to account for the expenditure of public monies. We also believe it is important that contract management serves the wider agenda of developing the Welfare-to-Work regime. Looking to the future we suggest that, should the Private Sector be involved in this area, then the "mechanistic" elements of contract management be defined closely and agreed between the parties. This would enable repeatable, defensible and auditable performance measurement to be achieved. Statistically valid sampling against understood and unequivocal criteria would ensure rapid, economic agreement of Key Performance Indicators and measurement against them. This would allow the Authority and the PVS Partner to focus on delivery of value services and working in partnership to ensure most effective use of resources.


  Staffing of the pilots has been achieved through a mix of ES and BA secondees and temporary staff acquired in the labour market. Staffing has been volatile, regardless of the source. Although many ES and BA staff have decided to return to their home agency to take up promotion, others have returned to avoid a perceived risk of "missing out" as the new Agency has formed. This reflects a growing feeling that ONE is becoming increasingly distant from the creation of Jobcentre Plus and is de facto a "business as usual" operation to be subsumed into or overtaken by the new service at some future unknown date.

  The proportion of temporary staff has had a deleterious effect on service delivery. By the nature of their employment basis many of these staff have been transient. This, allied to their lack of background in Benefits Agency and Employment Service functions, has resulted in a large training overhead and a consequent lack of productivity and performance. This issue has now been recognised in the pilot areas and action taken, particularly in Suffolk, though the amount of time remaining to the end of the current contracted service period prevents the full benefit from being gained.

  Our staffing and performance records demonstrate there is a clear correlation between the stability of the staff and the productivity of the service and the number of job placings achieved. There is also a clear correlation between the amount of staff dedicated exclusively to work placement activities and the number of placements achieved. Our records also show there is a distinct time-lag between the introduction of the staff and the focus on activities before the benefits emerge.

  It is also clear that the ONE service model is onerous for staff. It requires that all front-line staff (the vast preponderance of ONE staff) have solid knowledge of all benefit types, up-to-date knowledge of all legislation and conditions affecting client status, and sound knowledge of the work and training programmes and schemes available. In addition advisers are required to deal with the general public for the majority of their working day. These onerous requirements are a major factor in the high levels of staff turnover we have experienced in the pilots.

  We believe the lesson has been learned here. Jobcentre Plus is, we understand, being developed on the basis of segregation of duties and areas of specialisation. We believe that should the ONE pilots continue under PVS Partner management the same principle should be applied. We also believe that ES and BA staff within the pilots should be actively encouraged by their home agencies to stay, this being promoted as a sound career choice, of benefit to the employee as well as the new Agency. ONE pilots in future should be viewed as vehicles to facilitate the emergence of Jobcentre Plus sites, not "business as usual" operations.

  Further, at some point the Authority will assume operational responsibility for the work currently undertaken in the ONE pilots. It is therefore important that transition plans are agreed and executed so that the pilots transition into the Jobcentre Plus organisation and operation with minimum disruption. Stable staffing is a pre-requisite for this.


  It was originally intended that ONE would be delivered from offices specifically allocated to the pilots and equipped accordingly, including access to those agency systems that would prove most beneficial to delivering a superior service. The reality has been different. ONE has been accommodated, especially in the Suffolk pilot, in premises unsuitable for the purpose. This has damaged morale and productivity, as well as raising health & safety issues.

  ONE has been accommodated in those estates that could be made available rather than in facilities specifically designed and fitted out for the purpose. It has sometimes resulted in an intrusive environment for staff and clients, whereby conversations have taken place in a mainly public environment with no opportunity to meaningfully take off-line support activities for advisers or for clients to wait in privacy, with facilities helpful to those disadvantaged, for example lone parents.

  Inability to access the Authority's legacy IT systems has meant that ONE lacked the basis for an integrated office system for caseload management, claims processing and vacancy searches. Such facilities would have been instrumental in raising pilot performance.

  In Leeds, Great George Street is recognised as a flagship site irrespective of the lack of BA and ES colleagues. In contrast, in Suffolk a "flagship" Benefits Agency site, Rishton House in Lowestoft, was planned to be available to ONE early in the pilot—to address branding and productivity issues. This site is now becoming available, two years after the pilot commenced and eighteen months after it was formally promised to be operational.

  Additionally, in many locations ONE facilities are located on upper floors of buildings, with poor signage and difficult access. Clients often enter the Employment Services premises initially, leading to confusion and, on occasions, immediate submission for jobs, thus affecting the results expected from ONE in terms of submissions and placements. This has led to tensions between ONE and Employment Service, not least over responsibilities to clients and apportionment of credit for outcomes achieved.

  These lessons seem to have been learned as is evidenced by the offices and services being provided now for Jobcentre Plus. In the short term an urgent priority for continuance of the ONE service must be provision of an environment more suited to both client and staff needs.


  ONE is now approaching the end of its originally contracted duration; 31 March 2002. Deloitte Consulting has been invited to extend the period of service. We are in discussions with the Contract Authority over such an extension.

  In taking the ONE pilots forward we believe that two key objectives need to be addressed in parallel: to continue providing the maximum value through adherence to the ONE vision, and the transition of the ONE pilots to the Jobcentre Plus model, thus allowing their easy assimilation at the end of the contract.

  We therefore recommend that any future delivery of the ONE service be managed against performance indicators that measure quality and value as well as outputs. These indicators should be client focussed rather than Agency process focussed. In this, client satisfaction and quality of advice and support should be paramount. They should also measure progress over a period of time, ie the journey towards work for disadvantaged clients, and behaviour changes towards jobseeking and employment, rather than "hard" event-based measures.

  Simultaneously, we would recommend the establishment of an innovation agenda jointly with the Contract Authority, including its objectives and performance indicators. Again, we would recommend these address behavioural and social factors rather than being surrogates to achieve Agency target-driven outcomes.

  In pursuing both these agendas there should be recognition of the changes Jobcentre Plus will bring, and the ONE pilots should continually modify the service delivery to align with the emerging processes. This will necessitate flexibility of staff, process and change of focus on activities. Under such a regime "hard" event-driven output targets would be inappropriate and would in fact inhibit the ultimate goal: pilot operations that can be made ready to be subsumed by Job Centre Plus with minimal further transition.

  Finally, we would recommend these are delivered from estates that have been upgraded to redress the shortcomings identified and to serve as a further means of transitioning to Jobcentre Plus.

Andrew Waldie


4 December 2001

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