UK: Achieving Success With Shared Services In The Public Sector - One For All And All For One

Last Updated: 8 December 2009
Article by Deloitte LLP

Most Read Contributor in UK, August 2017

On paper, the case for shared services is clear. It has been documented in numerous government publications, including the Gershon Efficiency Review, and forms part of the Transformational Government strategy.

However, few shared services have been successfully completed in the public sector. Why? And is there anything to learn from those who have taken the plunge and implemented shared services?/P>

AN IDEA WHOSE TIME HAS COME

There are many different estimates on the savings that could be made by the Government if it brought its total expenditure on Finance and Human Resources down to that of best-in-class organisations. With such a vast range of figures, confirming a figure which is universally agreed is a difficult challenge – but all analysts agree that the savings venture into the billions. Think of how many more hospitals, teachers and police could be funded with that sort of money.

Right now there are some 1,300 public sector bodies (including local authorities, police forces and health trusts). Most have their own support services, not just Finance and HR but also legal, customer service and so on. There is an opportunity to do this type of work differently, with one group of people providing shared services to multiple users – thereby doing them faster, better and cheaper.

In the private sector, European companies have used shared services to achieve savings of 25-40% while improving customer service levels; payback has generally between two-to-three years (Deloitte: Shared services handbook: A practical guide to implementing shared services).

But the public sector won't achieve best-in-class status on common processes with marginal or incremental change. What's needed is a giant leap forward – large scale, transformation projects that shake up the way people work and shows them a better way. Enter shared services.

But you know this. You've read it before. The question is – is there an appetite for it at the local level?

SHARED SERVICES IN THE PUBLIC SECTOR: MISSION IMPOSSIBLE?

In our experience, many public sector organisations initially view shared services with scepticism. They have concerns about a large number of perceived barriers, which range from a lack of trust to workforce issues to trying to 'sell in' such a large-scale project.

In discussions, the perceived barriers that are raised typically include:

  • Consensus driven governance: how is it possible to get the leadership and commitment needed to drive through such a large scale transformational project, given the decision-making process?
  • Risk-averse decision-making: The scope of shared services means a corresponding amount of risk. With everyone looking in the short term to focus on business-as-usual, how can you encourage a more long-term view and release the best people to progress shared services?
  • Perceived loss of autonomy: after 15 years of devolving functions from the centre to the agencies, it can look like we're asking people to reverse this trend. How can we communicate the benefits in a compelling way?
  • Less financially attractive business case: Government agencies may not have the option of sending processes offshore to low cost locations such as India, and they face high severance costs. With a less attractive business case – is it still worth it?
  • Time to implement: given all the factors above, it takes much longer to implement than in the private sector. When can we realistically expect payback?

Equally, there seems to be a disconnect between the centre – fully behind the concept – and departments, agencies and local bodies – not sure they can implement it.

In our view, this is a natural tension between 'them' (centre) and 'us'. It's similar to what we find in the private sector, where the head office becomes enthusiastic about shared services and says, "Yes, let's do it". Meanwhile, the business units are in a panic, wondering how to turn the concepts into workable ideas.

We have found that these issues are surmountable in practice. Looking at successful implementations, there are some common themes that emerge time after time – and those who walk in with their eyes open and with ideas for how to work around these challenges are in the best position to achieve their goals.

COMMON CHALLENGES

Deloitte has been helping organisations to tackle the most challenging aspects of shared services for many years. If we look at those that have successfully achieved transformational change, we see the same universal themes emerging.

So what can the public sector learn from the people who got it right? These lessons are:

Lesson 1: Avoid 'analysis paralysis'.

Lesson 2: Seek common processes and standardise.

Lesson 3: Do your best to implement a common system.

Lesson 4: Get your governance right.

Lesson 5: Your cost/benefit analysis may surprise you.

Lesson 6: Remember it's a people business.

CASE STUDY: WESTERN AUSTRALIA

Deloitte is helping the Western Australian Government to move from over 100 providers of finance, HR and procurement to 1.

Deloitte has been the key adviser to the Western Australian Government on its Corporate Services Reform Project since 2003. The Government is establishing shared services for finance and Human Resources (HR) for over 100 agencies. It is expected to go live in mid-2006, and realise savings of 20% or AUS$50m (Ł21.2 m) per year.

Ideal Candidate For Shared Services

The Western Australian Government had a fragmented structure, which made it an ideal candidate for shared services. Beyond the core services of education, health, police and justice, there were a large number of smaller agencies, statutory authorities, commissions and boards, each of which ran their own corporate services processes and systems.

"Each agency was fairly autonomous, with its own support staff," explains Ron Mance, Executive Director of the Office of Shared Services, Western Australia. "This meant there were 22 different finance systems, 19 HR systems and a similar number of document management systems. So shared services seemed an ideal way to eliminate duplication, achieve economies of scale and drive efficiency improvements."

Lessons Learned

One of the many lessons learned was the power of benchmarking. "The time we devoted to benchmarking each process against best practice and other agencies really paid off," explains Paul Klein, Deloitte. A lot of scepticism went away after the internal benchmarking. It showed people they could do better, that others in their sector already were – and that the proposed changes were realistic."

Another lesson was to allow enough time for the lengthy procurement process. An ERP (Enterprise Resource Planning) system was chosen so that one platform could support all services – finance, HR and also procurement, but the selection process took longer than expected. Practical matters such as a state election in the middle of the IT procurement process added delays to an already time-consuming process.

"Finding the right balance between internal and external resources during implementation is something each project team will need to determine for itself," comments Ron Mance. The Western Australian Government decided to staff the implementation primarily with Government employees from across the sector, with Deloitte playing an advisory role and Oracle contracted to deliver the ERP. This was in response to public perceptions about the need for Government ownership and concerns about expenditure on consultants.

"The ideal project structure would be one where senior project roles were held by experienced project managers. Large scale, transformational programmes require strong project management skills to keep timescales and budgets under control. While internal staff possess excellent functional skills in Finance and HR, they rarely have project-based experience of running complex projects that encompass IT systems, functions across the business and change management.

The final lesson learned centred on standardisation, an area where consultation and internal communications proved vital. "The agencies were moving from a position of complete control to perceived loss of control," comments Ron Mance. "We tried to be sensitive to that, and worked through the change management issues with them."

To design standardised processes, whole-of-government workshops were held to discuss the issues and lower customisation requests to the absolute minimum. This process involved a large cross-section of agency representatives from across the sector – over 1000 public servants have been involved in some way since the design began. In the recent detailed design of the Oracle solution, the process required any proposed customisations to be approved by a Design Council, based on a rigorous cost justification. Only those changes that would benefit the majority of the sector were approved.

As the Office of Shared Services prepares to start operations in mid- 2006 for a small number of pilot agencies, it clearly recognises the need to build and sustain a customer service ethos. Client liaison roles, a contact centre and strong governance through Client Management Councils representing the agencies will all help to support a customer service orientation. "In the public sector, it's as much about improving customer service as cutting costs," agrees Paul Klein.

LESSON 1: AVOID 'ANALYSIS PARALYSIS'

Robust decision-making should be supported by an appropriate level of detail. However, in building and documenting the business case, organisations must avoid the trap of 'analysis paralysis'. This is where an organisation spends so much time analysing where it is at and where it wants to be that it misses the opportunity. This trait is not confined to the public sector – though it may be more prevalent.

"...you always need to bear in mind what data you are gathering and the purpose it will serve. We took the approach that until we made a firm decision that shared services was the right direction of travel high level top down data would provide us with enough evidence for the options appraisal process. If we had taken a more traditional approach, detailed business case and analysis for every option we were considering, we might still have been wading through the data today instead of moving into the implementation phase of our shared services programme.."

Michael Herron, Department for Transport

What we've learned is that the most important thing to focus on is setting a baseline for costs. The cost and quality of the current back office processes can be assessed through internal and external benchmarking (see our case study on Western Australia). This enables you to understand current processes, who is performing them and what they cost. In most cases, this information is not readily available and will need to be gathered, collated and analysed, based on agreed data definitions. This process must be well managed to obtain trustworthy data and to avoid time slippages.

LESSON 2: SEEK TO STANDARDISE

The business case for shared services depends on getting people to do the same job the same way. Maximum economies of scale will be gained from implementing standard processes both within the SSC and in the user organisations. But variations often exist in different departments.

What we have learned is that much of this customisation is unnecessary and many of the processes can be standardised. The trick is to find where there is already commonality – and where there could be commonality (more often than people will admit initially).

Naturally, there is resistance to standardising the way work is done. People would prefer to continue as they are. So as you change the processes, you must work to change people's attitudes – and get them to join in the change. Those who encourage employees to view the project as an opportunity to change their working environments for the better and come up with new solutions for the way they work are much more likely to succeed.

"To get consensus over process definition an approach was taken to consult with as many existing staff as possible to gain input and support for the new ways of working. The processes aimed to bring consistency and ensure good practice was followed within the IT function. Workshops illustrated best practice, and any constraints that had to be taken into account, before asking all participants to contribute to the design. This approach ensured that buy-in and awareness were raised across the business and was documented for other people that might be affected."

Roy Godfrey, IT Shared Services Project Director,
Department for Constitutional Affairs

LESSON 3: DO YOUR BEST TO IMPLEMENT A COMMON SYSTEM

The ideal is to migrate all services to a single Enterprise Resource Planning (ERP) system, such as Oracle or SAP. Yes, it's difficult and yes, there are hiccups. But almost without exception, organisations that have undergone this transition have found the benefits far outweighed the pain. Many shared services practitioners regard it as a critical success factor.

"TUI Northern Europe comprises a number of different businesses acquired or developed over the years. Each of these had different technology platforms and separate back-office operations. The move to a shared services centre has not only enabled us to centralise these back-office operations into a single, far more efficient site, it has also facilitated our move to a common, standard Enterprise Resource Planning configuration. This gives us additional savings and far better management information."

Will Waggott, Chief Financial Officer, TUI Northern Europe*

But legacy systems present an almighty challenge to the issue of standardising technology. While organisations could keep their existing systems within a shared services environment, it compromises the benefits they can achieve.

LESSON 4: GET YOUR GOVERNANCE RIGHT

Large-scale change programmes such as shared services cannot succeed without clear leadership and commitment from the top. This is something that successful organisations understand and consistently get right.

In the public sector, there can be much less clarity about leadership, decision-making and governance than in the private sector. Worse, projects such as shared services that cross organisational lines can provoke internal politics and turf wars. Without a mandate from the top, your project could be sacrificed to internal politics as people avoid what they perceive may be career damaging moves.

"The need for senior management commitment always comes number one or two in the lists you see of key success factors for major change programmes. There is a good reason for this – it is a vital prerequisite. We are currently in the midst of transforming our back office globally. As Global SSC Leader it is essential that I spend a good portion of my time ensuring all key stakeholders are signed up to the vision and that everyone sees my clear support for the programme and confidence in its success."

Grant Findlay, Global SSC leader, NCR*

So how can you get departments, agencies and the wider public sector to join without such a mandate? Public sector organisations must find internal champions for the project – and invest time and money in addressing their more significant change management issues. Given the wide range of stakeholders, from unions to different departments to Permanent Secretaries, more must be done to communicate, persuade and reinforce the key messages. There is a pressing need to establish clear reporting lines and develop effective communications strategies. Good governance – involving the right people at the right times – can also help to resolve these issues before they become liabilities and maintain the project's momentum.

LESSON 5: YOUR COST/BENEFIT ANALYSIS MAY SURPRISE YOU

Will the sums work out in the end? What kind of payback period can be expected?

It is here that differences between the private and public sectors have a direct impact on the business case. Shared services projects may take longer and therefore, potentially, cost more in the public sector.

This is due to the need to spend more on change management, higher people costs and slower decision making (e.g. government procurement processes). Payback periods of two-to-three years in the private sector are more likely to be four-to-seven years in the public sector.

"If you are going to convince people that shared services will work, it is essential to prepare a robust business case. This will clearly show what shared services will look like and what the costs and benefits will be."

Paul Gibson, Finance Director, Cedar Enterprise Solutions*

However, there are many non-financial benefits that are important to the public sector – so shared services may well be worthwhile even if the costs are equal to the financial benefits. Shared services can be the impetus for cultural change. Prime amongst these so-called 'soft' benefits is building a service orientation. Investment in training the business as managers will ensure delivery of timely and accurate data that will positively influence decision making capabilities. The use of performance metrics, Service Level Agreements and physically removing people from departments that lack a customer focus – these actions can in and of themselves create cultural change.

Soft benefits aside, the next Spending review is just around the corner with the budget belt undoubtedly set to tighten. Unless a shared services programme is initiated now, the ability to meet the next round of efficiencies will be severely jeopardised.

LESSON 6: REMEMBER THIS IS A PEOPLE BUSINESS

The people who operate the shared services centre (SSC) are the key to achieving and sustaining change and creating a service culture. Investment in their training and orientation to new ways of working plays a vital role in building customer focus and professionalism. Training and education should focus on developing the new skills and behaviours that are needed (including skills such as customer service and team building as well as training in new processes and systems).

While those transferring to shared services are important, don't overlook the people in the 'retained organisation', i.e. the organisation post-shared services. Those in the retained organisation need to understand the impact of shared services, how they might be structured and what capabilities their people will need to support the business once the SSC is up and running. The goal is to enable all employees to operate effectively in their new environment.

Service Level Agreements are one of the most tangible elements of a service ethos. They help to define the relationship between the SSC and its internal customers. They also represent an ideal opportunity for all parties to sit down together, clarify expectations and make joint decisions.

Some of the questions that need to be answered are: How will organisations be charged for using the SSC? How will performance be measured and reported back? What happens if agreed service levels are not met? How will the SSC prove it remains value for money? Working together to answer these questions helps to build trust from the beginning, and will help the relationship withstand any hiccups or 'teething' problems in the first months.

We are also seeing many organisations establish customer liaison functions and customer boards to support this new service ethos. Helping government to become intelligent buyers of services is a good investment, as it completes the circle by instilling new behaviours in both the provider and buyer of shared services.

"Remember that a shared services centre (SSC) is a people business, not a processing factory. If you want to create a team in your SSC that is totally customer and quality focused, you need to spend time with them helping to develop those skills. They must be given the opportunity to physically meet with their internal customers to ensure both sides understand each others' responsibilities and develop a good level of trust."

Nora Whalley, Former SSC Manager, Owens Corning*

CONCLUSION

It is time for the public sector to be bold. The case for shared services has been made at the highest level – it is time for a detailed look into shared services, to determine which services might be appropriate to share and who to share them with.

This is not a small task – shared services projects demand vision and commitment. However, they are capable of delivering transformational change.

In the UK and globally, Deloitte is helping a number of government organisations and private sector companies to take their first steps to shared services. We have assisted over 250 organisations to successfully implement shared services programmes.

As a firm, we have worked across the public sector, including the Ministry of Defence, Cabinet Office, Department of Work & Pensions, Department of Environment Food and Rural Affairs, Department of Trade & Industry, Department for Education and Skills, Department for Transport, Department for Constitutional Affairs, Department for International Development, Home Office, HM Revenue and Customs and Department of Health. Our clients also include a large number of public bodies such as Transport for London, London Underground, British Broadcasting Corporation and Royal Mail.

Others have taken on the challenges of shared services and succeeded – it is up to you to benefit from their experiences, both the pitfalls and the lessons learned.

Footnote

* Quote taken from Deloitte's Shared services handbook: A practical guide to implementing shared services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.