Shared-services savings getting harder to find

Big businesses and government departments may have cut costs by consolidating business and IT functions within shared-services organisations, but they're going to have to work much harder to see additional benefits, a healthcare industry executive has warned.

Big businesses and government departments may have cut costs by consolidating business and IT functions within shared-services organisations, but they're going to have to work much harder to see additional benefits, a healthcare industry executive has warned.

"There's no such thing as low-hanging fruit now," Mark Reynolds, communications and engagement manager with New Zealand-based Health Benefits Ltd (HBL), warned attendees at a recent shared-services conference.

HBL was established in 2010 by the New Zealand government to put a broom through the existing shared-services arrangements of its 20 district health boards (DHBs), with a remit to reduce spending on non-clinical healthcare services by NZ$700 million over five years.

That task is proving to be a harder and longer-term effort than HBL's political taskmasters might appreciate, as the massive initial benefits available from introducing shared services — in commodity areas such as payroll, human resources, procurement and technical support — have already been realised.

"That low-hanging fruit has all been picked, and the stuff you pull off is pretty rotten, anyways," Reynolds explained. "The sector has done such an extraordinary job of finding savings already, and there are no easy benefits left anymore. We are now talking about the need to introduce longer-term transformational projects, and this will take some time."

That's an inconvenient truth for administrators that are under the pump to reduce expenditures in line with an overall global trend towards austerity. Those pressures are squeezing the public service for bottom-line budget savings and organisations continue to turn to shared services to help, but IT strategists need more time, because additional projects are proving to be far more complex than early wins.

This means changing short-term thinking and achieving more buy-in from individual organisations, which can be difficult, since shared-services initiatives require wresting core administrative functions away from well-entrenched interests.

HBL has been working hard to familiarise itself with the intimate workings of the country's healthcare operations. But this has not always been intuitive; with 20 boards of directors, 20 CEOs and 20 management teams to engage with, it hasn't been easy to get stakeholders to the table and keep them there. "It took us a while to appreciate the number of moving parts in the industry," Reynolds said. "It's like the staircases at Hogwarts [Harry Potter's school], which are always moving."

HBL is winning ground by working with DHBs to identify areas where they wish they had more functionality. Many boards, for example, have lamented their lack of clear reporting on business activities. A shared-services operation could consolidate operational data and improve reporting with rich business analytics tools.

Yet, while top-down shared-services projects driven by these stakeholders initially delivered great benefits, Reynolds said, efforts to identify additional benefits involve other sensitivities. Staff are naturally nervous that many of shared services' savings come from forced redundancies, so its advocates need to proactively engage staff to get and keep them on-board.

One productive strategy has been to take a bottom-up approach that identifies real issues affecting workers in their daily lives and work with them to develop and promote potential solutions.

Brainstorming sessions run with major suppliers and national unions, for example, have proved fruitful in identifying issues and collaborating on technology-assisted solutions. Those solutions can then be rolled together and presented to management as part of far-reaching projects.

"Initially, we were mainly talking with chief executives and board members to get decisions made on business cases and investment upfront," Reynolds said. "But now, the best ideas for operational savings are actually coming from the shop floor."

"Workers are working with us at the concept stages within some of the business cases we're pulling together, to come up with feasible ideas that can be sold upwards and taken downwards as well. Good stakeholder management is essential, and it is important to know the destination of the organisation early on."

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