Outsource Magazine

Public sector organisations are being challenged by the coalition government "to cut senior officials’ pay and share back-office functions with other authorities rather than cutting frontline services in the wake of government-ordered spending cuts" (Eric Pickles).

How realistic is the prospect of council, universities and police forces reducing their back-office costs (in the areas of finance transactions, procurement, HR, payroll, property management etc) by 20% by adopting some form of shared services and then delivering the savings within the lifetime of this government?

Listed below are findings from Praktis Solutions (a consultancy specialising in the delivery of shared services within the public sector over the past ten years)...

Central Government

• has invested around £1 billion in new shared service organisations and supporting IT systems including a heavy investment in Enterprise Resource Planning (ERP) solutions.
• over the last three years larger Central Government departments have established what the Cabinet Office now call ‘Super Shared Service Centres': DWP ( spent £160m+), MOJ, Home Office, NHS.
• NHS is the most mature model which after seven years of operational activity is now reporting real savings (referred to as profits for the Joint Venture partnership).

Local Government

• has not received any ‘central’ investment as outlined above in Central Government.
• under pressure in 2011 to create partnerships e.g. East Midlands Shared Service but lacks the senior leadership and internal shared service expertise to develop beyond the business-case stage.
• is having to reduce front-line services because back-office savings take time to deliver.

Police

• the aborted Home Office plans in 2005 to merge police forces were expected to lead to the creation of regional shared service centres.
• in 2011 police forces are looking to share common IT platforms and adopt ERP applications at much reduced costs. Little evidence of any shared service centre activity.
• the proposed creation of a police force for Scotland is likely to look at the creation of a single shared service organisation.

Universities

• the large ‘red brick’ universities have invested in new IT systems and ERP applications but at this stage are not focused on sharing their investments or developing regional shared service centres for Further Education, for example in the Greater Manchester area which has six large universities/colleges.

How can the government stimulate activities to deliver the back-office savings?

1. Recognise the current approach to developing shared services is not working and requires a co-ordinated strategy led by the Cabinet Office.
2. Provide guidance and support to senior leadership teams within the large public sector bodies in how to build strategic partnership with neighbouring councils, police forces or universities.
3. Encourage the develop of Joint Venture arrangements as achieved in the NHS to inject private sector expertise, especially in Local Government.
4. Provide the funds to invest in the activities required to initiate, build and implement shared service organisations.
5. Build cross-government teams with experts from the public and private sector to oversee the development of shared service centres to ensure they deliver on time within budget and are capable of delivering the business case savings by client organisation.
6. If the above fails to deliver the required back office savings of around 20% from shared services then the government should create regional or sector shared service centres and then top-slice budgets of councils , police forces etc to ensure the back-office functions are managed more efficiently. This is the model successfully deployed in large multi-nationals over the past twenty years.

There has never been a better time to deliver back-office savings via a shared services model but the barriers to change are still significant. Sadly, the reality is that councils are cutting front-line services for children and the elderly today not back-office costs.

About the Author

Colin Grace has spent the past ten years working across the public sector to promote and implement shared service centres (SSCs). From his days working with the Liverpool City Council and BT joint venture in 2000 through to his work with the NHS, DWP, Home Office and Research Councils  he is well placed to assess the progress to date in achieving service improvements and cost savings. Colin is a director at Praktis (www.praktis.com).