Shared services to pull public sector through tough times
Comment: Get ready to save
Shared IT services can reduce costs and improve efficiency - music to the ears of public sector organisations in tough times. The National Outsourcing Association's Martyn Hart offers some advice on how to make it work.
In the current economic climate, spending of any kind is now under the microscope. The pressure to cut back is even more intensified in the public sector - and is leading to more government officials looking at share IT services.
A great example of this type is the police authorities in the East Midlands, where the chief constables and chairs of Derbyshire, Leicestershire, Lincolnshire, Northamptonshire and Nottinghamshire Police have jointly published a three-year collaboration plan to work together to increase productivity and improve future performance.
This same framework can be applied to many different areas of public sector work. The public sector is rife with duplication of roles and unnecessary bureaucracy. Why have five different HR teams looking after five councils, all with the same requirements? Why not merge the different teams, operate out of a single centre and streamline the HR processes? Taking a step back and recognising the opportunities for collaboration would reveal a host of cost-saving advantages.
Shared services have been a viable economical option for many private businesses for some time. Local government departments are now starting to take advantage of this tactic and public sector managers are realising the benefits associated with shared services. South Tyneside, Charnwood and Rushcliffe councils have all recently signed shared services agreements, adding to the growing understanding that the consolidation of repeated processes may be the way forward.
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Outsourcing shared services is another option. This allows organisations to gain greater cost savings, however, when using a third party, control can be an issue. Establishing clear, measurable SLAs and well thought-out metrics is vital to the success of a contract, especially within the intricate bureaucracy of the public sector.
Despite the obvious cost savings, shared services have not been without their problems. For example, recent research from consultancy Alsbridge has shown that some shared service centre (SSC) managers feel that they have encountered significant challenges with their SSCs - and only half the managers surveyed said they had definitive service level agreements (SLAs) in place. It is imperative that shared service centres are set up and are run with tight controls.
Boundaries must be in place to make sure all parties are working to the same standards for council managers to feel comfortable with relinquishing day-to-day control of their systems. The SSCs must work to the same regulatory compliance and adhere to the same objectives as the organisations they are providing services for.
A continuous review of standards and good communication between the centre and the organisation is imperative.
The politics behind public shared services appears then to be the biggest problem. Not just external government intervention, which will be a problem if a council changes colour, but internal politics. Trying to combine differing terms and conditions, as well as staff working practices can be the first significant hurdle.
Then comes the establishment of SLAs, again a difficult process without the backing of a legal contract. In cases where a legally binding agreement was not included, service was found not to be enforceable and the penalties for failure were slight. It is therefore essential that a legal contract is drawn up which clearly outlines the SLAs and states the penalties that may be faced if the agreed service is not provided.
Possibly then, shared services need to be seen as a stepping stone to considering an external service provider. After all, the main concern organisations have when entering into a shared services contract is about their employees and the political, economic and business disruption caused by redundancies. These concerns are real and need serious consideration.
Consolidating services into one centre will usually mean a reduction in staff, as the duplication of roles will be inevitable. It is crucial that organisations carefully examine redeployment opportunities and initiate early dialogue with union officials.
Ultimately sharing services does mean that investment is shared. It may also mean redundancies. However because of the savings incurred the overall impact is still likely to be a positive.
A shared services strategy has the potential to greatly improve government spending and increase efficiency, however all parties entering into a shared services contract must ensure they know the reasons and benefits for doing so.
All parties must agree with the operation model and must be fully aware of any consequences that may arise, such as job losses or the consequences of one organisation removing themselves from the shared service setup.
Shared services have been tried and tested in the private sector. Quantifiable benefits are seen when processes are correctly implemented. The public sector, with all its duplication of roles, procedure and effort, will benefit greatly from shared services. It is now up to managers to examine how best to implement a strategy and to undertake any initiative with a firm understanding of what they expect to achieve.
Martyn Hart is chairman of the National Outsourcing Association.