HRD's pocket guide to... devolution

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The HRD’s pocket guide series offers an explanation of areas outside day-to-day HR that business-savvy HRDs need to have a handle on

Why do I need to know about it?

Devolution in its broadest and simplest form is moving decision-making powers from higher to lower levels. Over the past 25 years political devolution in the UK has led to the creation of new bodies such as the Scottish parliament and Northern Ireland Assembly. At a slightly lower level, cities such as Manchester, Birmingham and Sheffield have been given more power by Westminster over areas such as skills and transport.

Due to government commitment here, we may see decision-making power devolved to more cities, which could then affect businesses headquartered or operating there. In 2010 the coalition government abolished regional development agencies and established local enterprise partnerships (LEPs). Initial plans were made to devolve spending to combined authorities, and subsequent elections have bolstered political support for devolving power to major city areas. The most notable example to date is devolution of health and social care spending to the Greater Manchester Combined Authority and its mayor.

What do I need to know?

“The UK economy is made up of dozens of smaller local economies and markets. Devolution means recognising these differences and letting local areas tailor a policy response that suits their local conditions,” says Simon Jeffrey,

policy officer at think tank Centre for Cities. “The UK’s highly-centralised system has led to one-size-fits-all national policies – inadequate for some areas and unnecessary in others – or simply left local priorities completely unaddressed.”

Devolved cities would have more power to decide if and how businesses operate in their area. They may require businesses to help address pressing local issues such as unemployment, crime, and so on.

An obvious area would be “giving local authorities, and potentially combined authorities, more discretion around setting business rates and for receipts from these rates to be retained by local government

and combined authorities”, says Peter Wells, professor of public policy analysis and evaluation at Sheffield Halham University. He points to the implementation of Business Improvement Districts as a small but exciting example of this.

“The big challenge though will be devolving tax and spending policies from the Treasury; in this respect the UK trails most other advanced economies,” he adds.

Where can HR add value?

In devolved areas LEPs play a key role in influencing regional economic and employment policies, which represents an opportunity for HRDs to get involved.

“In English city-regions in particular the UK government has encouraged the local authority side to work closely with the LEPs, where business is supposed to be represented,” says Guto Ifan, researcher at Cardiff University’s Wales Governance Centre.

“From a Welsh perspective, the approach to skills policy under devolution has usually involved collaboration with the private sector via the CBI, FSB, IoD and other organisations. [So] active engagement by businesses with these representative organisations is important in order to influence policy,” he continues.

“LEPs and combined authorities will need to assure government that they have a firm understanding of the drivers of regional skills and how these affect business performance. Doing this is in part a technical task involving analysing data, but is also a task that needs to combine insights from business. This is where HRDs may have a role to play,” agrees Wells.

He adds that HRDs need to carefully consider, however, what their involvement is designed to achieve: “A challenge inevitably is who sits on these groups and whether they are there to bring their specific expertise and knowledge of a certain sector or whether they in some way try to represent the wider views of business.”

Anything else?

Power can also be devolved within individual organisations – to line managers or even frontline staff. The idea is that those nearest the coalface know customers/clients better than the executive team. Being able to respond quickly to events and trends without going through lengthy bureaucratic processes may help firms stay ahead of the competition.

But devolution may be a shock to the organisational system and it will take employees at all levels time to adjust, leading to potentially higher attrition rates in the first few months or even years. “It takes up to five years to change a culture. At first managers don’t believe they can be held responsible for results if they can’t tell anyone what to do,” warns John Timpson, CEO of ‘upside-down management business’ Timpson.

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