Shared Services for Improved
Financial Performance
The 2004 Gershon Report marked the start of a UK-wide drive to improve the efficiency of the public sector at all levels from central government and local authorities to NDPBs (i.e. Quangos) and the education sector. The Scottish Executive’s paper "Efficient Government Plan”, published later that year, set out the strategy for improving the efficiency of the Scottish public sector.
Poor experiences of out-sourced services and failed IT projects are now causing chief executives in many public bodies to look for alternative ways of improving efficiency and over-coming funding gaps. Public-sector shared services arrangements are now seen as an approach that might address past failings.
The UK Cabinet Office defines shared services as processes, facilities, maintenance contracts, management effort and other activities that are likely to be duplicated across different departments or organisations. These could be organised more effectively, either locally or nationally, freeing resources for reinvestment in citizen-focused activities and the improvement of services.
The results of a recent Scottish consultation on public-sector shared services indicated an appetite to widen traditional internal support functions to include front line service delivery. The Scottish Government is now looking at central government, NDPBs, agencies, further and higher education, health services, local authorities and police and fire and rescue services for innovative ideas for improving front line services.
Shared service models vary widely but generally cover combinations of estates, business activities, skills pools and ICT. At the simplest level, sharing common buildings with greater space utilisation is the easiest kind of shared service arrangement to create. Cost-efficiency gains are likely to be limited as is the impact on the quality of service delivery. More complex shared-service models, such as grants administration or financial services, produce greater savings and improvements in service delivery. Complex shared service models are likely to involve all four categories resulting in longer implementation timetables, significant capital investments and longer payback periods for both financial and service quality gains.
Successful shared-services arrangements will have to overcome the following barriers:
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The application of irrecoverable VAT for
shared services acts as a major disincentive
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A sound understanding of EU public procurement rules relating to both buyers and sellers is required when setting up new shared service entities
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Identifying the cultural and governance differences between sharing organisations, overcoming the resistance to change and implementing a sound change programme for
both of the partner organisation and the new business entity
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The process for transferring staff to any new shared service organisation,
including consideration of TUPE regulations
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Identifying a suitable funding model, the capital investment programme to effect planned changes, and the Realisable Benefits is essential to underpin the Business Case
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Differences in job grading for similar jobs between the parties to a shared-service arrangement demands time and management effort to resolve
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Sharing organisations are likely to want to retain their own branding on public-facing services such as web sites, forms and correspondence requiring changes in IT systems
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In the education sector, institutions will wish to protect their independence
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Where shared services includes the introduction of common IT systems, the sharing organisations may require significant financial investment in their legacy applications and skills upgrades
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Establishing benchmarks, baseline data and metrics for measuring realised benefits
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Agreement on the arrangements for sharing benefits fairly between the sharing parties
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The larger the scope of the shared services project the greater the likelihood of failure
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Larger shared-services projects requiring public funding will have to demonstrate that the Business Case complies with HM Treasury Green Book rules
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Looking forward, there is no doubt that shared services will be an important route towards improvements in efficiency
in the public sector. Today, back-office shared service models are reasonably well understood. However, the shared delivery of front-line services is still in its infancy and presents significant opportunities for publicly-funded organisations.
At 4-consulting, we have experience of creating shared services models in the
public sector in “back office” and IT as well as front-line
services. Our consultants have worked on
business process engineering and organisational change for
public sector organisations, and on shared IT services and cost-sharing models in the private sector. We use our Benefits Realisation ™ tool to demonstrate how benefits will exceed costs and the payback for the project.
If you would like more information about setting up shared service arrangements, Ralph Leishman will be delighted to help.
You can contact him
by emailing him at
Ralph.Leishman@4-consulting.com
Ralph is a director of 4-consulting,
click here to view his
profile.
