Roundtable: UK Public Sector Shared Services - Where Now and Where Next?
Sharing services has risen up the agendas of the UK’s national and local governments in recent years, propelled by political and financial trends as well as by more concrete factors such as Sir Peter Gershon’s 2004-5 Efficiency Review and Sir David Varney’s report on transformational government. In an attempt to throw some light on recent developments and to examine where shared services may be headed in future, SSON convened a roundtable debate involving a group of practitioners and advisors at local and national level, chaired by SSON’s online editor Jamie Liddell. The results were, indeed, illuminating…
Warwickshire Direct Partnership
The Warwickshire Direct Partnership is an alliance comprising all six local authorities in the county of Warwickshire: North Warwickshire Borough Council; Nuneaton & Bedworth Borough Council; Rugby Borough Council; Stratford District Council; Warwick District Council; Warwickshire County Council; and three private-sector partners in Steria, MacFarlane Telesystems and Northgate Information Systems. The partnership includes a shared services programme relating to its CRM [citizen-relationship management] system. For more information see www.thewdp.org.uk
Head of Shared Services
Browne Jacobson is one of the largest law firms in the Midlands with offices in Nottingham, Birmingham and London. The firm acts for over 100 local authorities, either directly or through their insurers. It recently published its Shared Services Survey ’08, one of the most comprehensive surveys ever carried out into shared services in the UK. For more information see www.brownejacobson.com
Chief Executive Officer
Research Councils UK Shared Services Centre
Research Councils UK (RCUK) is a strategic partnership between the seven UK Research Councils. RCUK was established in 2002 to enable the Councils to work together more effectively to enhance the overall impact and effectiveness of their research, training and innovation activities, contributing to the delivery of the Government’s objectives for science and innovation. For more information on the RCUK Shared Services Centre see http://www.rcuk.ac.uk/aboutrcuk/efficiency/sharedservices
Local Government Improvement Specialist and Shared Services Author
Ray Tomkinson is the author of Shared Services in Local Government: Improving Service Delivery (Gower, 2007). Ray managed the Welland Partnership shared services project and currently operates as a consultant.
SSON: Peter, you’re at the head of one of the more prominent national shared services centres [SSCs]. Can you explain a little about the drivers behind the move in your organisation?
Peter Telford: Behind the Research Council’s business case are benefits focusing on what are seen as financial gains which will be passed back to research and the research community, but probably more importantly in the early stages is the feeling that we can secure better effectiveness in business support to that research community by aggregating the seven Research Councils’ services onto one common platform, and transforming them. The business case started with an outline about two years ago. There was a lot of work done on certain parts of the shared service model even before that, but the activity’s really come together in the last two years. The full business case was accepted by the Research Councils in line with CSR07 [Comprehensive Spending Review 2007] in August last year, and the intention at the moment is that we will go live on the platform at the beginning of next year. We already have some services live in the IT and strategic sourcing areas.
SSON: Tony, your project’s been going for rather longer than that. Would you say that the drivers behind the Warwickshire Direct Partnership are similar?
Tony Isaacs: I think ours were slightly different in that when we started off in 2002/3 the driver behind that was, basically, to capitalise on the money that was available from central government at the time. We made a bid as the Warwickshire Online Partnership, and set up that particular group specifically to bid for that money: a total of £2m. We identified a number of different projects that we would attempt to procure and implement with that money, not least of which was the joint procurement by all six authorities in Warwickshire of a CRM [citizen-relationship management] system and associated telephony systems. We got the full £2m and since then we have actually implemented it; we jointly went to procurement and we’ve ended up with the Northgate front office CRM system.
Now I don’t think the goalposts have changed, but the drivers have. I think the drivers have changed in that there is no money available now; it’s exactly the opposite insofar as before there was money splashing about, if you will, from central government, and now it’s the opposite insofar as with CSR07, with all the efficiencies and demands that there are on local authorities to save, there is an overriding need to make things more effective and more efficient, and shared services is seen as being one key method of doing that - with the consequence that we are in a position now where our chief executives, our leaders, are very keen in looking at what can be done. And based upon that – or around all this – is the whole area of the two-tier structure within Warwickshire, and the drive that the government may want to push – and seems to be pushing – with regards to unitaries. But Warwickshire is very clear that it wants to retain its two-tier organisational structure and will do so by sharing services.
Dominic Swift: Tony, I just want to follow something through on that, because it’s a theme that emerged when we did our research on shared services [Browne Jacobson’s Shared Services Survey ‘08] that certainly efficiency savings and improvements in the way services are delivered are key drivers, but what you’ve identified as a lack of money was one of the real inhibitors, because in order to deliver shared services there is a considerable cost: You’ve already mentioned telephony which was obviously put in as part of the grant, and one of the problems that people seemed to face was the immediate increase in costs to deliver a shared services stream before any efficiency savings could actually be delivered.
Tony Isaacs: You’re absolutely right insofar as there’s a need to spend in order to deliver efficiencies, and what we’re seeking to do is to build up good, strong, powerful business cases that maybe looking over a five-year spread, so that while there is a recognition that to begin with you may need to spend money, over the period following that it’s anticipated that there will be savings. And Warwickshire may be different, but we don’t necessarily regard it just as pounds saved: it could be efficiencies. So it’s non-financial benefits as well as financial ones.
SSON: Ray, do you see many differences between the drivers for local and national shared services?
Ray Tomkinson: Yes I think there’s one big difference, which is the issue of government compulsion, as it were. There’s no doubt about it: central government departments recognise that they really don’t have much alternative at the moment to creating some element of shared services - because the Treasury makes sure that they do, because the Treasury controls the purse strings. It’s less clear that in local government every council is going to have to go down the shared services road.
As was being made abundantly clear a minute or two ago, local authorities have different ways of approaching their financial restrictions or their political considerations, one of which is the unitary agenda – or the two-tier agenda in other councils. So some councils are going to have to go down the shared services route because it’s the only way organisationally that they’re going to function. Other councils don’t have that imperative at the moment and I’m working with one group of four councils which are looking at sharing services but not because of financial pressures. They’re looking at it because they want to make service improvements, to improve resilience of services, and also give opportunities to create new services. So it’s a very different agenda between the two.
SSON: Peter, from a national perspective are you seeing an increased pressure from government to implement?
Peter Telford: Yes. Historically I’ve been in shared services in the private sector, local authority and now central government so I suppose I can absolutely empathise with the previous comments. I think the compulsion from central government is largely fiscal although there is a feeling that the transformational agenda that sits behind it is also very prominent. I think the other difference in central government is it is easier to identify and reach a critical mass where you can actually effect a transformation and deliver efficiency and effectiveness. At the local government level, it is more difficult to create critical mass - which then makes the funding routes and the benefits probably more difficult to determine in the early stages.
SSON: OK. There’s been a lot of talk about what advantages other than cost savings can be delivered through shared services. And this brings us on to the issue of benchmarking. When it comes to savings you can obviously benchmark against what you’re saving and how much you’ve saved against previous budgets, for example. But when it comes to service-delivery, how can one establish exactly what you’re benchmarking, and against what and against whom? Is there a common thread here in terms of where you go for benchmarking?
Dominic Swift: I think benchmarking’s so different, for different projects, is the long and the short of it. What we’ve seen through our research is that there’s a very wide range of different projects – we’ve already talked about the drivers, and it really depends on what you want out of your project. One of the frustrations that we heard at the national launches that we did of our review, was that there wasn’t enough benchmarking of the actual outcomes. And a lot of people said to me "how do we judge whether this has been a success?"
One of the problems is that if you produce a much more efficient service, which is more attractive to the general public (if it is a front-facing service, which more and more are) is that it will actually be used more. And as a result you’re getting better value, in terms of hits, but the cost of the service may actually go up. So it is quite a complicated job to benchmark and I think it requires some very clear outputs to be identified at the outset, and to look for comparable projects.
SSON: Tony, you’ve got a wide variety of services you need to benchmark…
Tony Isaacs: Yes, that’s right. I can concentrate really around the CRM system, because all the information we’ve got is via customer services, and improvements we’ve made to that around the CRM system. What we’ve done is take benchmarking as a very serious exercise in its own right, and what we’ve sought to do is to get customer insight by using different databases, information from the CRM, information from MacFarlane - the telephony system – and pool all that information among all the partners. And what we’ve done then is to say "ok, concentrate on the areas that we want to concentrate on" and to make sure that we do improve the services that we are seeking to improve. We have got what we call an Improvement Forum, which is a relatively recent creation and which is proving to be very successful as well. And that’s looking at the way in which the CRM in particular can add value to the whole process of improving customer services.
We are concentrating as well on a variety of different access channels, so we’ve got the CRM system, we’ve got telephone contact obviously, face-to-face via our one-stop-shops – we’ve got eight of them at the moment, with another eight planned for next year. We’ve got kiosks as well. But also I think most significantly, in the next few months or so what we’re looking to do is drive ourselves forward with web self-serve, and look to try to move people more towards that means of accessing services. And I think that will be a double win because the customer will benefit greatly from that in terms of speed of service, but also we will, because we’ll drive down the unit costs, and that quite clearly is a key method of making savings.
SSON: In the private sector a great deal of benchmarking goes on between individual companies and organisations, and as a result you have the idea of world-class et cetera. Is it a pipedream to suggest you might be able to get similar systems set up in the public sector, in which every region and every locality has its own pressures?
Peter Telford: I don’t think it is and I think the benefit of the public sector is, by and large we’re not competing with each other, and therefore people are much more willing to share information and the assumptions that sit under that information to try to help each other along. And I’m quite heartened by that kind of culture. I think the difficulty with the private sector is that it’s usually wrapped in commercial connotations and costings as well, which makes it very difficult to unpick to ensure you are comparing like with like. Albeit that said, the difference is that there is much more evidence when you can find it and it’s much more prescriptive in terms of service levels than I would suggest you would find in the public sector.
Dominic Swift: I’m very interested to see whether there can be some sort of worldwide benching or benchmarking which really does define the success of projects. I’d be very interested in understanding more of what Tony’s doing and how the measurement takes place, capture of information and then the dissemination of that, to actually judge how that service is being delivered and where the successes are - and where perhaps the challenges are. And also what sort of services you’re comparing that with. Because as I see it, shared services range across such a vast array of the different public sector areas – we were talking earlier on about this being local authorities but clearly it goes to health and other public sector bodies as well - and from that point of view the real problem you’ll have it seems to me is comparing apples with apples.
Tony Isaacs: I can give you a fairly high-level description of what we’re doing, and that is that we’re using some software you may be familiar with - Mosaic Data - and we’ve populated a lot of databases according to the information that we’ve gleaned from there, and that’s proving to be very much the benchmarking process that we’re going to go through. And there are certain authorities out of the partnership that are leading on this.
For each of the projects that we have, we have lead authorities who volunteer to lead on particular projects. We’ve got Nuneaton for example to lead on one, as well as the county, and the county has information that it uses from its observatory, and there’s a pooling of information, and there’s an agreement via the Improvement Forum for example whereby they do concentrate on specific areas with the data they’ve accumulated - whether it’s county-wide or just individual authority-wide. But basically they work together as best they can to provide these benchmarking criteria. It’s not a quick process by any means. But over time we build up that data and then we can use it from year to year to do comparisons to see how things are improving.
In addition to that I don’t know if you’re familiar with NI14, the latest government key indicator which has just come out, which is to do with avoidable contact with clients – customers – with local authorities. And we’ll be using the CRM to glean quite a lot of information via the CRM system. But it is a corporate-wide key indicator, so you will have other services, other departments, feeding in this information as well. That information is supposed to be started in October of this year and it will be used year-on-year to gauge how we’re doing, in terms of avoiding avoidable contact, and looking to improve that.
Peter Telford: I think it’s fair to say whilst we have not yet built the longevity of data that Tony describes - and I absolutely agree with him that building a profile and a trajectory is invaluable as a benchmark - we haven’t really got to the point yet where we are able to benchmark our service delivery over a period of time; what we are doing is assessing our performance as we transfer services. We’ve got a baseline against some services from the Research Councils and from my own experience and from talking with others in the public sector we will then aggregate what we believe will be appropriate targets for the Research Councils against their baseline. But I’m with Dominic: initially it is very difficult to compare apples with apples and ensure you’ve got a representative benchmark.
Dominic Swift: Peter, it’s very interesting from my point of view. I quite agree with you about the "apples with apples" thing. I think what’s been said about the public sector is very true: it’s much more transparent, there’s much more desire to learn from each other. One of the things I’m doing tomorrow actually is go down to sit in in Kettering where they’ve been running a shared services project for many years – well, well before Gershon and Varney and the rest. And that’s very interesting because people are open about what’s happening in shared services and happy to learn from each other. The difficulty seems to be that they range over such a wide area, the danger is that unless people come to some common terminology about what outputs are going to be defined for particular services it may be possible to benchmark over time as Tony’s doing, but actually benchmarking across different projects will be very difficult.
Ray Tomkinson: I think that’s very valid. One of the issues is that there is no commonality across authorities as to what constitutes a service. So what you tend to find is that people dive for a process - and even when they dive for a process it doesn’t tell you an awful lot about the service that you’re trying to share. And there’s often a real difficulty in stopping trying to find the trees when you’re trying to fight your way through the forest. So from that point of view I think benchmarking has on occasion got a very bad name because people use it as an excuse for not doing anything; and it’s only in the past couple of years where I think people have been much more prepared to be open about the fact they need to consider sharing as an option and sometimes benchmarking isn’t used as a blockage.
SSON: Let’s move on from benchmarking. We were talking a little about the private sector a minute ago - are we of the opinion that the private sector is an absolute necessity within UK public sector shared services, and to what extent is it a foregone conclusion that this is going to result in a degree of privatisation of services?
Dominic Swift: This is a question we asked in our survey: the sort of view that we had was that of course the private sector is an important potential partner in shared services, but there were just as many opportunities for the public sector to work together without the private sector. So, yes, it’s part of the picture but it certainly isn’t necessarily the whole of it. And I don’t think that privatisation is an inevitability from shared services: where we saw the private sector coming in, and the survey really highlighted this, links back to the funding issues we discussed earlier on.
Where you needed some sort of IT facility and commonality across a number of authorities and participants, quite often the private sector partner was someone who could deliver that in order to relieve some of the initial cost difficulties of setting up a shared service which frankly couldn’t be borne by some of the participating authorities.
SSON: Tony, that’s certainly what you were saying about the initial start-up of Warwickshire, isn’t it?
Tony Isaacs: Yes certainly: and it’s ongoing because we’ve just finished the renewal of the CRM contract and the telephony contract, so from the beginning of next year we will actually be embarking on new five-year contracts replacing the existing ones. And that’s the position of the CRM, the telephony, the ICT systems around it – so yes, it’s inevitable that we have to go down that route. We’ve had good – very good – negotiations with the private sector on this and I’d like to think that all of us have come to a very good, fair new contract.
Ray Tomkinson: I think actually the point that was made about investment is a very good one. There is actually no reason why local authorities can’t do sharing on their own without the private sector, and there are lots of examples around now where groups of councils are trying to do public-public partnerships. But I do agree: where there is a real need for investment – particularly around IT – then that’s where the problems start for local authorities, and that’s why they often do resort to the private sector.
But I do think that it’s worthwhile pointing out that as much as there are needs for investment, particularly in IT, there are lots of services which do not need that investment, and I’m thinking of professional services like planning, or building controls are another good example, or environmental health is another good example, where simply you’re dealing with people. One of the problems though that local authorities do find in that area is the scarcity of professional planners, environmental health officers, building control officers. And often they have to partner with the private sector simply for that reason.
Peter Telford: We need to get back to the point that I think Dominic made earlier which is in analysing what you’re trying to achieve with your SSC you then start to look at how you’re going to do it. And how you’re going to do it may or may not include the private sector. If you do seek investment from the private sector, they will seek a return on that investment; you just have to recognise that. They may indeed want a profit which may erode the efficiency savings you seek to make.
I think another thing that the private sector brings is experience and expertise in the sorts of change and benchmarking data which you may need. That said, I think the blend of public and private sector in trying to get to a shared service centre is the right one and the transfer of risk to the private sector through doing this is always pretty key in terms of what you want to get out against your project.
Tony Isaacs: I was just going to pick up on the point that if you can go for joint procurement as opposed to individual authority procurement, you can really reap the benefits, and the bottom line will be that you do make considerable savings - not so much a profit will result, but it will produce efficiencies in savings. We found that with our negotiations latterly with Northgate and MacFarlane, and also more significantly during the course of the contract that we’ve just had, when we as a partnership stuck together and wanted to get individual things out of Northgate, and/or MacFarlane, by standing firm we could really apply the screws to them, and they were forthcoming; so we could really achieve quite significant savings on different aspects of procurement that we did during the course of the four years we’ve had the system.
In terms of profit, I’m not sure whether profit’s the right word as I just mentioned; what we’re looking for are savings and efficiencies and I choose to use those terms rather than profit. In essence we can justify what we’re doing now: adding value, making sure we are getting the market rate or better, and we can quite happily and justifiably tell our chief officers and members based on the business cases that we’ve produced that we are getting best value, we are making savings and efficiencies on the basis of this joint procurement exercise.
SSON: Moving on: the future form and structure of shared services in the UK is, it appears, going to be determined in large part by competition between authorities, in a lot of areas. How do you see local shared services existing in the UK in, say, two or three governments’ time?
Ray Tomkinson: Two or three governments’ time, that’s interesting. So that’ll be two Conservative and one Labour… I suppose my thinking goes like this: I think that in 15 to 20 years’ time you will see a patchwork quilt across – certainly the local government sector; I’m not quite so sure about the central government sector. And what I mean by that is you will have a group of statutory authorities that are all geographically based – whether that’s a county or a district – there will be differences across the country.
Secondly they will have different types of shared services in different areas. There will be some that will be public-public; some that will be public-private; and some that will be public-public in terms of different sectors: health will have joined in; the police will have joined in. Because the pressures of the CAA regime coming from the Audit Commission mean that all public sector organisations in geographical areas have got to think whether it’s better to work together than to work separately. And as a result of that I think you’ll get a really different appreciation across, and in some areas there will be very heavy private involvement and in other areas probably none.
Dominic Swift: Basically I think it’ll depend a little bit on the nature of the shared service, to be honest. Sorry – I keep coming back to that point really. It struck us during the course of the work we did that there are two different forms of shared service: the ones which perhaps have been more prevalent to date, which have been the sort of back-office, IT function – ICT-reliant functions – and then the front-office function. Now they have very different possibilities in terms of partners. If you look at the front office it is a locally-delivered service and therefore your partners are chosen by geography, and geography alone: they can’t be chosen by much else, other than if you go to some sort of call-centre arrangement. But the other services can actually be amalgamated a lot more and with less sensitivity to geography.
So I think there are going to be some quite different groupings and possibly some legal authorities who particularly drive the delivery of a good service who perhaps sell to a very wide range of local authorities: health, via police, all of these are potential customers for them. And then on the local basis it’s going to be a lot more down to politics and the dynamics between the politicians as to how well their shared services are going to be run, and I think some of the political difficulties we have in Nottinghamshire, where I’m based, may make it quite challenging to get some of those local shared services off the ground.
SSON: Tony, I know this is something you’ve been thinking about, and obviously as quite a successful service provider it must be on the agenda. So let’s put you on the spot: do you think you will be at the forefront of a successful selling of services in the next couple of years?
Tony Isaacs: Yes I think I do in the next couple of years, but if you’re talking longer-term than that I think – and I hasten to add that this is my own personal view - the likelihood is that there will be an increase in unitaries. And there could well be in Warwickshire as well. I can put forward a very rosy picture in some ways – but at the same time you’ve got nagging at the back of your mind all the time the difficulty that there is in actually creating successful shared services - and I think that’s from a political point of view as well as the straightforward business-case point of view.
I think there will be more and more unitary authorities, to be honest. And I wouldn’t be surprised if even Warwickshire eventually ended up with two unitary authorities rather than the six authorities we’ve got now. I think it’s almost inevitable, and I think the government will continue to apply the screws, demand more and more savings year upon year, and the consequences will be that it’ll almost be inevitable that there will be more.
Peter Telford: I think this is too early in our development path to consider and I think building a stable service with reference-ability is key before we could go there. The wider central government agenda is pretty clear in terms of convergence of effort and activity onto some of the core shared services in the bigger departments. That’s already starting to come because of the requirements laid down by the Cabinet Office. And you can see the agenda already moving to: how do you ensure that there’s a commonality of solution and agreement on service levels that are given to customers? How do you allocate customer benefit across a broader-based shared service? How do you prioritise how you would offer services to customers? Those are debates which I think are becoming more prevalent and therefore indicative of activities and departments coming together on shared service platforms.
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