Dos and Don’ts from Down Under

In the late nineties, as Blair and co were rolling out the New Deals and experimenting with contestability at the edges of Jobcentre Plus, the Australians were outsourcing their Commonwealth Employment Service in its entirety. The two countries have watched each other closely ever since. With roughly similar welfare systems, we keep looking to the other for lessons on what is, and isn’t, working well. The UK persists in ignoring one fundamental lesson.

People registering as unemployed in Australia are referred, on day one, to a local Job Active provider. The contracting of these providers has swung, pendulum-like, through various iterations. In its latest, just commenced, there is a renewed focus on sustained employment outcomes – reflected in payment terms with much reduced upfront service fees and cash weighted heavily on jobs that last.

Richard has just returned from delivering a fortnight of workshops to Jobs Australia members. Jobs Australia is the umbrella body for the ‘not-for-profits’ delivering these services. Richard was talking to them about how to maximise performance, i.e. how to get more people into work and keep them there. He had the same conversation with their Department for Employment.

The new contract and payment model could be a game changer. It attaches higher outcome fees to jobseekers deemed furthest from work (because of personal conditions and/or length of unemployment). Unlike the UK’s Work Programme, the levels of these fees are fixed across all providers and do actually offer enough to incentivise extra investment in more intensive assistance.

However, many of the contractors are struggling with the transition from businesses that were about ‘cost control’ to the new ‘risk reward’ of payment for results. This new mindset may actually be particularly hard for some of the private, profit-making providers to accept. They are so stuck in business models that focused on short-term margins, just trying to control monthly costs against earnings driven by service fees. In the brave new world, they have to ask themselves where additional expense/risk will reap future return.

As the UK moves towards the second iteration of the Work Programme, we think there are some important lessons to be drawn from the latest Australian experience.

  1. Unemployed people are not just one single homogeneous mass. They have different needs, generally requiring more intensive assistance as they move further from work.
  2. The easiest way to measure (and understand) distance from employment is simply in terms of time out of work. The longer it lasts, the harder it gets.
  3. Jobcentre Plus has a vital ongoing role, servicing the vast majority of people in the first six to twelve months, and delivering exceptional performance (i.e. cost-effective job outcomes) in the process.
  4. Once someone reaches twelve months of unemployment, they are likely to be stuck. They will need more to get them shifted. However, there is a much bigger individual, social, fiscal return if you do manage to get that person back into work and keep them there.
  5. Mandating someone to undertake a period of unpaid work in return for unemployment benefit actually distracts them, and the provider, from job search. Six months of this ‘work for the dole’, every other six months, is a large part of the new Australian contracts. It just stops people getting real work.
  6. ‘Early’ unemployment services are basically a volume game, nudging vacancies and jobseekers together.
  7. Long-term unemployment services are personalized, responsive and resource hungry. It is about caseload management and there is a very simple correlation between performance and size of caseload.
  8. Good caseload management (which enables lots of long-term unemployed people into work) requires good caseload managers.
  9. Services addressing early versus long-term unemployment are different business models. Different resourcing models. Different performance assumptions. Different relationships between expenditure and income.
  10. Contracts need to be informed by this difference. In fact, it is probably easiest and most effective to have different contracts (and providers) for different groups of jobseekers. This enables greater focus and facilitates contract/performance management.

And the single, biggest, enduring lesson from observation of the Australian system over the last eighteen years?

  1. Do not compete these contracts on price (as they do in the UK and don’t Down Under). It so obviously encourages ‘gaming’, with would-be contractors over-promising and then under-delivering. It drives you to the bottom in terms of quality, and therefore performance. It demands providers respond with ‘creaming and parking’, i.e. focusing on jobseekers closest to work and ignoring those furthest. It also makes life virtually impossible for the contract manager (the Department), with no level playing field to measure and drive across. It ignores the fundamental requirement in outsourcing any service – the need to price on the basis of an understanding of roughly what it costs to achieve what impact. You can’t get a pint out of a half-pint pot.
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  1. […] review by Richard Johnson on the lessons to be learnt from (the many) Australian workfare schemes […]

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