Shared Services and the Public Spending Squeeze
Whatever the outcome of the general election, financial pressures over the coming years will force most public sector organisations to consider all options in balancing budgets while trying to protect frontline services.
In some cases this may mean real cuts (particularly in discretionary services) and changes to eligibility criteria. Approaches that are more palatable will focus on eliminating waste, reducing costs and improving productivity.
Over the past year CIPFA (Chartered Institute of Public Finance and Accountancy) has been working on advice for organisations looking into the role of collaboration and shared services. With support from the Department of Communities, we have produced a range of free tools and guidance that organisations can download from the CIPFA website (see www.cipfa.org.uk/sharingthegain ).
The centrepiece of this work is the report, Sharing the Gain: Collaborating for Cost-Effectiveness, which was launched in the Houses of Parliament in January. The report provides a hands-on guide to dealing with the full lifecycle of shared service issues, from creating a vision for change and building the business case for it, to handling procurement and managing shared operations.
The Roads to Collaborative Working
The project revealed the various routes that public bodies are taking in forming partnerships and shared delivery models. In some cases, joint-working has started with a shared chief executive or management team, with change happening from the top down. This approach has a number of benefits. Sharing officers is a relatively straightforward action, which can deliver quick gains. In addition, by working across organisations, the officers are better placed to spot where shared service opportunities may lie.
A shared management team has further benefits in terms of seeing that change is implemented. Thanks to greater visibility and contact with staff across the partner bodies, the managers concerned should be better placed to provide the leadership needed to build collaborative staff relations.
West Oxfordshire and Cotswold District Councils in the UK are currently following this approach. Starting with a joint chief executive, these councils have now created a number of shared posts. This is expected to deliver savings of around £331,000 per annum across the councils, and will be followed by an initial phase of service sharing, which is set to save a further £390,000.
Similarly, High Peak and Staffordshire Moorlands District Councils have embarked on a strategic partnership that has examined all council services as candidates for collaborative working. Starting with a shared chief executive and management team, this has allowed for a reduction from 37 to 21 managers, with savings of around £560,000. Other operational savings that build on these changes are expected to deliver a further £600,000 of annual savings in the next few years.
Hereford Council, NHS Herefordshire and Hereford Hospitals Trust have adopted a more radical approach. Starting with a chief executive shared between the council and NHS Herefordshire, the partners are now looking at joint provision of a range of support services, including IT, finance, procurement, HR, payroll, communications, audit, legal and estates. Recurring savings of £700,000 are expected by 2010. Once complete, annual savings of £5.4m are anticipated.
Not all shared service projects demand collaborating with other bodies. At Oxfordshire Country Council, for instance, a shared service arrangement has been established to consolidate the operational aspects of the council’s financial services, finance and management accounting and HR in one place. The initial programme was completed in May 2008 with the objectives of savings £4.5m per annum and delivering a better and more consistent set of service across all areas. In April 2009, a number of additional teams were also transferred to the shared arrangement, including cleaning, occupational health and staff care services. Such developments point to the momentum that initial sharing can generate and how it can become a new model for service delivery. In Oxfordshire’s case, this is backed up by an extensive performance management system and a continuous improvement programme aimed at driving up standards.
Getting Started on the Shared Services Journey
Organisations like these, that began their journey before the recent financial crisis, will in most cases be better placed in coping with the fiscal tightening that lies ahead. For others, there are also some simple steps that can be made in the short-term to gain early benefits from greater collaboration.
Short of sharing full services, or even people, public bodies can also look to greater cooperation about the use of assets. On the technology front, for example, many modern IT systems and data centres will allow for multi-party access – one council ‘piggy-packing’ on top of another’s system and helping to share hardware and license costs.
Likewise, there may also be opportunities to share office accommodation. Where backed up by flexible and mobile working, this can also help to improve the utilisation of assets, allowing property portfolios to be trimmed and more productive use made of those remaining. Moreover, when contact centres are shared between partners, this can help in providing easier access to services for customers.
Some organisation will favour pooled procurement initiatives, including shared purchasing bodies. This can help in enabling a more professional approach to buying and commissioning, as well as generating more purchasing power when negotiating prices and contracts.
Whichever approach is adopted, the pressures on public bodies mean that all options will need evaluating. Where sharing does take place, a range of models and solutions will be used, reflecting the needs and preferences of local partners and citizens. Nevertheless, even where it does happen, it will have to be complemented by other cost-saving measures.
Shared services and collaborative working are certainly not a panacea, nor are they right for everybody. However, for many organisations, they will be an important part of the efficiency and improvement mix, and we can expect to hear a lot more about them in the days to come.
Sharing the Gain: Collaborating for Cost-Effectiveness is available free to download from www.cipfa.org.uk/sharingthegain
Dr Paul Jackson can be contacted via email@example.com