Shared services: good company

Dramatic advances in information technology over the last decade or so have
had major cost benefit implications. Using one software and hardware platform to
pool the resources of different departments, or even organisations, to reduce
costs is a very obvious example.

These ‘shared services’ account for a major percentage of efficiency saving
plans in the pubic sector. If best practice shared services were established for
human resources and finance in the UK public sector, for example, up to £40bn
could be saved over a ten year period, according to one estimate.

Many organisations, particularly in the private sector, have worked together
in areas such as transaction processing and procurement, and there is growing
evidence to indicate that significant cost savings and improved performance can
be achieved.

Advantages can include freeing up senior managers to concentrate on core
business requirements, with support staff focusing solely on the needs of
internal and external customers, and the introduction of specialist software
packages can play a key part in realising a range of benefits.

Managed in the right way, there is scope to achieve a lot more of these
benefits in the public sector, particularly as public services have a history of
working together for mutual benefit, purchasing consortia being an example. Many
public sector organisations outsource areas such as HR and payroll, finance,
ICT, legal services and facilities management. But what do public sector bosses
actually think of shared services?

A recent survey CIPFA Scotland carried out with Serco revealed a broad
acceptance of the shared service agenda among the most senior public sector
officials north of the border. Indeed, most admitted to already being involved
in shared service projects.

The endorsement was hardly ringing, however. Only around 50% thought shared
services were essentially a positive development. While two thirds acknowledged
that there were indeed cost savings to be enjoyed, the vast majority were
sceptical that serious amounts of money could be saved.

Some reports had suggested that Scotland could save £750m through shared
services. In our survey, 80% said that was unlikely. On a brighter note for free
enterprise, nine out of ten bosses also said that the private sector had a role
to play in ‘enabling’ shared services in the public sector.

Although knowledge of the potential of shared services is high, convincing
the people that matter of the immediate benefits is a significant undertaking.
Perceived loss of control is a particularly evident concern for senior managers,
with loss of jobs, issues of differing agendas, increasing bureaucracy, and
conflicting cultures following close behind.

Ultimately, there seems to be a considerable blend of objective and emotive
barriers to making shared services work. The challenge remains to identify how,
through keeping the end customer (citizen, business, other bodies) as the focus,
whether a collaborative approach will deliver improved services.

As a general rule, organisations should focus first on sharing those services
that are least likely to prove problematic. This will include those that are
process-based, staffed by competent individuals and do not cause political
controversy.

Shared services can take a variety of legal forms, depending on the amount of
control and risk that parent organisations want to retain. As with any major
initiative, organisations should consider taking a phased approach to
implementation.

This will ensure problems can be addressed as they arise. Organisations that
focus solely on cost savings will miss the chance to improve service outputs by
establishing better processes, producing quality management information and
introducing greater professionalism into corporate and transactional functions.

A shared service initiative can act as a catalyst for this kind of change. In
many cases, such improvements will deliver knock-on financial savings as well as
better quality of service.

A collaborative partnership model that holds a clearly defined and agreed end
outcome as its purpose, which offers the flexibility and control to its
participant members’ goals, can be achieved.

Where there’s a will, there’s a way.

Picture of health

In 2005 the Department of Health entered into a partnership with Xansa known
as NHS Shared Business Services, based around finance and accounting function
centres in Leeds and Bristol.

The deal has proved fruitful, but not without controversy.Many accounting
clerical jobs have moved to India, a move that caused concern among the unions.

But the NHS is predicted to make savings of £250m over 11 years, according to
the National Audit Office, some of which is ploughed back into the
trusts.Currently a quarter of NHS organisations operate within shared service
centres, processing 3.1 million transactions a year.

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Angela Scott is head of CIPFA Scotland