Features: July 18th, 2008

By Dominic Swift

Public bodies that have adopted shared services have made substantial gains in efficiency. This success has reinforced the drive from the Treasury for greater efficiency savings from sharing. So if this is a way to cut costs why are organisations slow to get involved? The answers appear to be a lack of resources, workforce opposition and risk-averse organisational cultures. The author suggests a way forward tap into the many opportunities for taking forward the shared services agenda.

The business case for public service organisations sharing services packs a powerful punch. According to the Chief Information Officer Council corporate shared services within the private sector can deliver efficiencies of between 20 and 50 per cent. So it comes as little surprise that the Government has been keen to emulate this success within the public sector.

In 2004 Sir Peter Gershon undertook a review of public services recommending annual efficiency savings of 2.5 per cent for 2005-8, rising to 3 per cent for 2008-11. The Gershon review, along with the Lyons report on local government finance, focused on the opportunity to realise improvements by joining up back office functions. Sir David Varney, Senior Advisor on Service Transformation, shifted the focus further by recommending in 2006 that efforts should be made to save government, citizen and business time and money by integrating frontline public service delivery.

So four years on from Gershon’s Review, how successful has shared services been? According to the latest statistics the Government states that up to £23bn in savings had been achieved since 2004, surpassing a target of £21.5 billion. In May this year The Treasury launched a further 12-month efficiency drive with the aim of saving up to £5 billion of public money in addition to the £30 billion already planned for the current spending review.

Barriers to shared services

However a major report by law firm Browne Jacobson sheds new light on the level of savings that can realistically be achieved and reveals a series of critical barriers preventing public sector bodies in seeking to reap the full benefits of shared service initiatives. These include a lack of available resources, workforce opposition and risk-averse organisational cultures.

The Shared Services Survey 08 is the result of research carried out among 178 senior public sector managers in the health, local authority, social care, education and fire service sectors. Of those surveyed 63 per cent were senior managers and 37 per cent were middle managers. A number of the key findings were positive with an overwhelming majority of organisations confirming that they are taking part in shared services, and 88 per cent supporting the agenda. However the report also identified a plethora of barriers to implementing shared services with two thirds of public sector managers, 65 per cent, citing a lack of financial resources, while 59 per cent identified insufficient manpower as key.

Defining shared services

When asked to define shared services, the responses elicited an array of definitions. Examples included:

* “where a number of organisations agree to form a consortium to provide common services , normally back office functions”
* “local authority departments working together for their mutual benefit to provide a service which will reduce costs to a tax payer”

The vast majority talked about ‘sharing, collaboration and the pooling of resources’. Surprisingly only one in four public sector managers, 26 per cent, referred to cost savings and end benefits. The shared services agenda has two overarching aims: to drive cost efficiencies and improve public service delivery. This raises an interesting anomaly identified by the research in that managers appeared far less optimistic about the level of savings possible compared to government estimates. This is especially true when financial input of the upfront investment in IT and resources to implement the changes are considered. According to the study senior managers in local authorities believe a total of 12 per cent of their organisation’s budgets could be saved by sharing services over time. This dropped to 3 per cent for those working in the health sector.

Who is driving shared services?

The research also suggests that front line staff and the public themselves represent only a marginal influence on its development. When quizzed on who they believe is the driving force behind shared services, public sector managers principally identified senior management and central government. Over three quarters, 77 per cent, pointed to senior management, and over half, 52 per cent Whitehall civil servants.

Front line workers are seen as a driver of shared services by just 13 per cent of managers, the public by just 10 per cent. This may shed light on the back office emphasis when it comes to shared services. Whilst more than seven out of ten managers regard back office functions as prime candidates for shared services, less than half saw the potential for front line services according to Browne Jacobson’s study.
It is also clear that the momentum behind shared services is being generated internally –and from the top. However, implementing shared services effectively by mandate can be very difficult. It is therefore critical that front line staff are equally engaged in the process right from the beginning. According to Browne Jacobson’s research less than a quarter, 23 per cent, of the workforce are active supporters of shared projects, while more than a third, 36 per cent actually oppose them.

The way forward

The risks and barriers highlighted by the research perhaps go some way to explaining why Government targets aren’t being achieved despite the overall positive views towards the agenda.
Managers need to be aware that in implementing shared services a series of challenges will inevitable arise which are not insurmountable and need to be addressed before the long term benefits can be fully realised. Buy-in from all stakeholders is key. Clear consultation and communication with employees, unions and local representatives is essential if public bodies are to overcome cultural hurdles and internal opposition, and develop trusting partnerships.
To maintain momentum, an approach must be developed for the consolidation of front line services and to develop initiatives which cross geographical or public sector boundaries. Embracing partnerships with the private and voluntary sector could also offer further opportunities and expertise, as well as helping to gain funding which is so vital to set up.
With such ambitious government efficiency targets in place for the coming years shared services will remain high on the strategic agenda for public sector leaders. It also means the pressure on those tasked with delivering cost efficiencies at a national and local level has never been greater.

The shared services agenda would appear to have had a relatively successful infancy but Browne Jacobson’s research suggests that many untapped opportunities exist. A bolder approach, and greater focus on the front line and the demands of citizens, may be required as we move into the next phase of the public sector efficiency drive.

To access a full copy of the report go to: http://www.brownejacobson.com/sharedservices

Dominic Swift is Head of the Shared Services Team, Browne Jacobson