Examination of Witness (Questions 93-99)
MR KEITH
FAULKNER
WEDNESDAY 8 MAY 2002
Chairman
93. Good morning, ladies and gentlemen. May
I call the Committee to order? This morning we are engaged in
taking evidence from witnesses in the Committee's current inquiry
into the Government's employment strategy. We welcome this morning
Mr Keith Faulkner, who is the Managing Director of Working Links.
Thank you very much for your written memorandum which is very
helpful. It would be useful if you could just spend a moment or
two saying a little about the organisation, its structure, how
it is funded and a bit about its scale. Then we have three or
four areas of questions, none of which will come as a surprise
to you but we should really like to pursue them with you to elucidate
what you have already said in your written submission.
(Mr Faulkner) The fundamental principle
behind Working Links is a concern about what appears sometimes
to be an attempt to distinguish and categorise public and private
sector services. The fundamental belief behind Working Links is
that the most effective forms of delivery in any policy area—and
we work particularly in the field of tackling unemployment—is
to integrate public and private. We think there are some new ways
of tackling that and Working Links grew out of a determination
to demonstrate that you could do it in different ways. What it
may be valuable to explain, because it does probably show through
in my submission, is how the three shareholders came together
in Working Links because it is a company which is owned in equal
shares by Manpower—
94. So it is a company limited by guarantee
or by shares.
(Mr Faulkner) It is a normal, in effect private, company
in which an equal number of shares is held by Manpower, the recruitment
business with whom I have been associated for more than 30 years
now, Cap Gemini Ernst and Young—just Ernst and Young when
we first began this programme—and what was then the Employment
Service and is now Jobcentre Plus. One third of the shares in
the company are held in effect on behalf of the Secretary of State.
The principles of the operation of the board are that all major
business decisions require unanimity. It is therefore impossible
for either the public or the private sector shareholders to act
independently of the others.
95. Do the articles of association make it a
not-for-profit company or does it actually generate profit?
(Mr Faulkner) One of the important principles which
we believe delivers sustainability in performance is a for-profit
company. The board has subsequently established the principle
that we will set a threshold for profit, which is currently set
at five per cent of revenue, as a return to the shareholders for
the original risk taken in setting up the business and that all
profit beyond that—50 per cent at present—is returned
by way of grants into the local communities where we operate.
It is a for-profit company because we need to continue to invest
in the development of the concept and we believe it is important
that we do work on that basis. There is also a return into the
communities to limit that.
96. All of that is clear in your annual accounts
and report. That is all transparent?
(Mr Faulkner) Yes; entirely. The origins of the three
companies coming together was that my original company, Manpower,
committed to the New Deal when it was originally first announced
and provided consultancy in both the design and delivery of New
Deal and in the marketing of New Deal. We were closely associated
with that and formed a strong relationship with the Employment
Service through that activity. Ernst and Young, in the days of
compulsory competitive tendering, had established the principle
of not supporting private organisations bidding under those terms,
but of supporting in-house teams. If you will forgive me, these
figures may not be exact, but in broad terms they submitted some
22 bids on behalf of in-house teams and won 21 of them. In evidence
I gave to an earlier inquiry into the future of the Employment
Service, Manpower is on record as believing that we should have
a strong public service and indeed that it should be developed
further. The intention in forming Working Links was to take Ernst
and Young, who were acting as consultants on the modernisation
of the Employment Service and had a commitment to public service,
Manpower, who had similar commitments, and the Employment Service
led by Leigh Lewis and try to find a new way of delivering employment
zones. The announcement of 15 employment zones for which we originally
bid was the spur to it. That is the background.
97. Are you unique? Do you think this model
is special to you? Are you aware of any other similar organisations
to the one you have just described to us?
(Mr Faulkner) No, we are not aware of any other organisation
in which the Government actually had an active shareholding in
a full risk profit-making venture of this type.
98. What do you bring to the party which Jobcentre
Plus does not?
(Mr Faulkner) This is a question we are always asked.
One of the important principles is that it is not that we bring
different things, it is essentially the combination of the three
organisations and the inherent strengths. If I may sidestep the
question briefly to illustrate what we are achieving, a number
of our zone directors operating the original employment zone contracts
are Employment Service staff on secondment to Working Links. We
are achieving results through a management team where probably
at that mid-management level, two thirds of our managers are public
service employees on secondment to us. The results we are achieving
are not therefore being achieved through introducing private sector
managers with a different background and a different training;
they are being achieved through providing certain freedoms and
certain structural advantages to allow people, in the case for
instance of Plymouth who had already had 25 years experience in
the public service, to suddenly outperform anything they had done
before. This is an issue of synergy rather than saying here is
something distinct that the public and the private sectors bring.
I believe that in the setting up of the business, however, were
we to make any distinction, the Employment Service, as then was,
more than anything brought the close understanding of our client
group, the long-term unemployed people, which is not a group that
Manpower had particular experience of and it is not a group Ernst
and Young brought particular experience of, other than through
their consultancy to the Employment Service. They brought the
close understanding of what makes the difference as far as the
long-term unemployed person getting back into work is concerned.
Ernst and Young brought the financial and planning capability,
because after winning the bid we had to set a viable commercial
operation up from scratch, set up premises and build a management
team in something like four months. It required considerable expertise
to structure that properly and effectively. Ernst and Young brought
that. I guess in the original set-up Manpower brought marketing
and management expertise; some new ways of putting management
teams together, a more consultative approach, a way of exploiting
some of the freedoms the employment zones allowed us, which the
Employment Service did not have.
99. If you were to think about scaling up what
it is you do, because it is quite an impressive record looking
at the success rates compared to other systems, would you do that
by including lots of little clones of Working Links as it is established
here or would you scale up your own operation and just have one
big Granddaddy operation covering the whole of the United Kingdom?
(Mr Faulkner) The instincts are to scale up the existing
operations. There are certain policy implications about that.
We are not endeavouring to create a vehicle which becomes a dominant
or a monopoly influence in this area. We are very happy that the
model should be taken and used by other people. In as far as we
are invited to do so, we should be very willing to scale up our
operations and indeed we are already responding to an inquiry
from the Spanish Government to establish a similar model in Spain.
It has some significance outside the UK and we are perfectly willing
to make that sort of level of investment. So yes, we are fairly
ambitious in that respect, but we recognise the potential risks
and limitations.
Chairman: It might be easier to get people to
go and work in Spain.
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