By Paul Jackson
28 January 2010
The pressure is on for public bodies to share services in order to make efficiency savings.
But there are considerable risks as well as rewards in taking this approach. Paul Jackson offers ten top tips for successful collaboration
There is common agreement that to meet the difficult years ahead, the public sector will need to consider new ways of delivering services, such as shared provision and partnership working.
Indeed, in a CIPFA survey late last year 46% of directors of finance and resources saw such models as one of the best ways to address the funding shortfalls posed by the new financial climate.
Some organisations are already forging ahead. Good examples include shared services at Staffordshire Moorlands and High Peak councils and the Buckinghamshire shared back-office Pathfinder project. Staffordshire Moorlands and High Peak examined the potential of all their council services as candidates for collaborative working. So far, starting with a shared chief executive and management team, this has allowed for a reduction in managers from 37 to 21, saving around £560,000 and an expected £600,000 annually in the next few years.
In Buckinghamshire, five public service partners – the county council, three district councils and the fire and rescue service – are working together to share back-office services. Finance, human resources, IT and facilities management, which represent approximately £45m of annual spend, are being considered. The partnership expects to make recurring savings of least £4m – around 10%.
However, authorities should not rush headlong into shared services as there can be perils as well as benefits. CIPFA’s ‘Sharing the gain’ project – a collaboration with the Society of District Council Treasurers – aims to help organisations avoid these problems. Prospective sharers would do well to follow these ten tips on how to approach such initiatives.
1) Understand the drivers for change and the role that service sharing should play
Shared services and collaborative working are not the answer to every organisational problem or opportunity. A careful assessment of the drivers for change and the options available is therefore essential. If costs are to be reduced while services to customers are maintained, organisations will need a balanced portfolio of change projects. This will involve a range of techniques (including ‘lean’ thinking, business process re-engineering and back-office rationalisation), with varying timescales for delivery.
Where service sharing is the preferred path to follow, the development of a robust business case and benefits realisation plan demands clarity on the benefits that are being sought.
This is particularly important in partnership projects, where misaligned expectations and priorities can threaten the whole collaboration.
2) Recognise the leadership and change management dimensions
Service sharing is far from a ‘technical’ exercise, particularly in local services where political parties are involved in governance and decision-making. Leadership from elected members and senior officers is critical if people across the organisations involved are to understand the rationale for change and support it.
3) Understand where you are now in cost and performance terms
The opportunity presented by shared services will depend, in part, on where each organisation now is in terms of cost and performance. This means that the baseline positions of the services being considered for sharing need to be measured and benchmarked against: (a) external best practice using current operating models; (b) the baseline positions of prospective partners; and (c) the anticipated cost and performance of the new shared arrangement. Without this information, it will be difficult to build a solid business case and get the commitments needed to make change happen.
4) Know what sort of partnership will meet your (common) needs
Depending on the change drivers and benefits sought, the type of partners will vary. For example, creating a more joined-up customer service might involve several partners working together to create a more coherent face to citizens. Where repetitive back-office services are concerned (such as processing invoices), the emphasis might be placed on working with a number of other bodies to generate volumes and achieve economies of scale.
5) Make sure the scope is right
The success of service sharing will depend as much on the tasks and processes ‘retained’ in the organisation as those that are migrated to the shared service. Activities that are of strategic importance and/or unique (such as support for policy development and executive decision-making) are best kept local, where they can be provided in a tailored and responsive way.
This is the case, for instance, for strategic financial advice, where senior management and elected members might require local support around complex technical questions.
To make the business case stack up, given the need to achieve scale economies and repay investment costs, a certain level of volume will be required. Equally, to cope with the complexity of change, the services to be shared might have to be phased in.
6) Choose a suitable vehicle
Identifying the appropriate organisational structures and legal vehicles is vital. Local Government Acts, for instance, will determine the extent to which powers can be delegated to other bodies and whether other entities than councils can be involved without establishing a new legal vehicle.
Ensuring the collaboration has a firm legal basis is particularly important where there are plans to trade services or work with a commercial partner.
7) Involve your procurement and legal people early on
Early involvement of legal and procurement professionals will help to identify the routes that must be followed (particularly around procurement), as well as to understand any legal duties and barriers.
Procurement and legal people will also be helpful in providing an informed view of the cost and timescales involved in different project options, which will be vital in developing a robust business case for change.
8) Pay due attention to ‘retained’ people and processes
It is important to get the balance right between what is kept in-house and what is moved to the shared service. But this doesn’t mean that what is retained is unchanged – quite the contrary. In many cases, processes will be redesigned as part of the change, involving new tasks, systems and technologies.
These will often demand new skills on the part of retained staff. In the finance context, for example, sharing might be driven by a desire to relieve retained staff of routine, transactional activities and enable them to concentrate on value-added, ‘business partnering’ work. In addition, staff will also have a ‘client-side’ role to undertake, monitoring contracts and the provision of services against the main performance indicators and service level agreements.
Suitable training programmes might be needed for this work to be performed effectively.
9) Simplify and standardise before you implement
One main principle in service collaborations is the need to simplify and standardise processes before they are migrated to the shared environment. This will also typically involve migrating to a shared technology platform (such as a common finance and accounting system). In most cases, processes should be redesigned on an end-to-end basis, to ensure that waste is minimised and the service is focused on adding value to customers.
10) Underpin the arrangement with a suitable structure and culture
One of the incentives for shared services is the opportunity to create a management structure that involves clear targets and service level agreements, backed up by a new customer-centric culture.
This will involve more than just putting in place the right systems and structures, but also careful recruitment, training and management of the staff involved.
Paul Jackson is a performance improvement adviser at CIPFA. Sharing the gain: collaborating for cost-effectiveness, was launched in Parliament on January 20. To download a free copy, visit
www.cipfa.org/sharingthegain
28 January 2010
The pressure is on for public bodies to share services in order to make efficiency savings.
But there are considerable risks as well as rewards in taking this approach. Paul Jackson offers ten top tips for successful collaboration
There is common agreement that to meet the difficult years ahead, the public sector will need to consider new ways of delivering services, such as shared provision and partnership working.
Indeed, in a CIPFA survey late last year 46% of directors of finance and resources saw such models as one of the best ways to address the funding shortfalls posed by the new financial climate.
Some organisations are already forging ahead. Good examples include shared services at Staffordshire Moorlands and High Peak councils and the Buckinghamshire shared back-office Pathfinder project. Staffordshire Moorlands and High Peak examined the potential of all their council services as candidates for collaborative working. So far, starting with a shared chief executive and management team, this has allowed for a reduction in managers from 37 to 21, saving around £560,000 and an expected £600,000 annually in the next few years.
In Buckinghamshire, five public service partners – the county council, three district councils and the fire and rescue service – are working together to share back-office services. Finance, human resources, IT and facilities management, which represent approximately £45m of annual spend, are being considered. The partnership expects to make recurring savings of least £4m – around 10%.
However, authorities should not rush headlong into shared services as there can be perils as well as benefits. CIPFA’s ‘Sharing the gain’ project – a collaboration with the Society of District Council Treasurers – aims to help organisations avoid these problems. Prospective sharers would do well to follow these ten tips on how to approach such initiatives.
1) Understand the drivers for change and the role that service sharing should play
Shared services and collaborative working are not the answer to every organisational problem or opportunity. A careful assessment of the drivers for change and the options available is therefore essential. If costs are to be reduced while services to customers are maintained, organisations will need a balanced portfolio of change projects. This will involve a range of techniques (including ‘lean’ thinking, business process re-engineering and back-office rationalisation), with varying timescales for delivery.
Where service sharing is the preferred path to follow, the development of a robust business case and benefits realisation plan demands clarity on the benefits that are being sought.
This is particularly important in partnership projects, where misaligned expectations and priorities can threaten the whole collaboration.
2) Recognise the leadership and change management dimensions
Service sharing is far from a ‘technical’ exercise, particularly in local services where political parties are involved in governance and decision-making. Leadership from elected members and senior officers is critical if people across the organisations involved are to understand the rationale for change and support it.
3) Understand where you are now in cost and performance terms
The opportunity presented by shared services will depend, in part, on where each organisation now is in terms of cost and performance. This means that the baseline positions of the services being considered for sharing need to be measured and benchmarked against: (a) external best practice using current operating models; (b) the baseline positions of prospective partners; and (c) the anticipated cost and performance of the new shared arrangement. Without this information, it will be difficult to build a solid business case and get the commitments needed to make change happen.
4) Know what sort of partnership will meet your (common) needs
Depending on the change drivers and benefits sought, the type of partners will vary. For example, creating a more joined-up customer service might involve several partners working together to create a more coherent face to citizens. Where repetitive back-office services are concerned (such as processing invoices), the emphasis might be placed on working with a number of other bodies to generate volumes and achieve economies of scale.
5) Make sure the scope is right
The success of service sharing will depend as much on the tasks and processes ‘retained’ in the organisation as those that are migrated to the shared service. Activities that are of strategic importance and/or unique (such as support for policy development and executive decision-making) are best kept local, where they can be provided in a tailored and responsive way.
This is the case, for instance, for strategic financial advice, where senior management and elected members might require local support around complex technical questions.
To make the business case stack up, given the need to achieve scale economies and repay investment costs, a certain level of volume will be required. Equally, to cope with the complexity of change, the services to be shared might have to be phased in.
6) Choose a suitable vehicle
Identifying the appropriate organisational structures and legal vehicles is vital. Local Government Acts, for instance, will determine the extent to which powers can be delegated to other bodies and whether other entities than councils can be involved without establishing a new legal vehicle.
Ensuring the collaboration has a firm legal basis is particularly important where there are plans to trade services or work with a commercial partner.
7) Involve your procurement and legal people early on
Early involvement of legal and procurement professionals will help to identify the routes that must be followed (particularly around procurement), as well as to understand any legal duties and barriers.
Procurement and legal people will also be helpful in providing an informed view of the cost and timescales involved in different project options, which will be vital in developing a robust business case for change.
8) Pay due attention to ‘retained’ people and processes
It is important to get the balance right between what is kept in-house and what is moved to the shared service. But this doesn’t mean that what is retained is unchanged – quite the contrary. In many cases, processes will be redesigned as part of the change, involving new tasks, systems and technologies.
These will often demand new skills on the part of retained staff. In the finance context, for example, sharing might be driven by a desire to relieve retained staff of routine, transactional activities and enable them to concentrate on value-added, ‘business partnering’ work. In addition, staff will also have a ‘client-side’ role to undertake, monitoring contracts and the provision of services against the main performance indicators and service level agreements.
Suitable training programmes might be needed for this work to be performed effectively.
9) Simplify and standardise before you implement
One main principle in service collaborations is the need to simplify and standardise processes before they are migrated to the shared environment. This will also typically involve migrating to a shared technology platform (such as a common finance and accounting system). In most cases, processes should be redesigned on an end-to-end basis, to ensure that waste is minimised and the service is focused on adding value to customers.
10) Underpin the arrangement with a suitable structure and culture
One of the incentives for shared services is the opportunity to create a management structure that involves clear targets and service level agreements, backed up by a new customer-centric culture.
This will involve more than just putting in place the right systems and structures, but also careful recruitment, training and management of the staff involved.
Paul Jackson is a performance improvement adviser at CIPFA. Sharing the gain: collaborating for cost-effectiveness, was launched in Parliament on January 20. To download a free copy, visit
www.cipfa.org/sharingthegain
