Shared Services – Drivers, Challenges and Options
The term “shared services” is one which is capable of as many different interpretations as such old favourites as “partnership” and “strategy”. It is increasingly being used in the context of local authorities and health bodies to refer to collaboration between different autonomous public sector organisations which is designed to improve efficiency/reduce costs/fight off enforced restructuring.
It is also often used in the context of authorities collaborating with each other in order to procure a private sector partner for the provision of some services through outsourcing or the delivery of asset schemes. To this extent the term “shared services” overlaps substantially with outsourcing/procurement (the subject of a further Alert in this series).
This particular paper will concentrate on the collaboration between bodies in the public sector to deliver services more effectively. These can include front line services to the public but also (and frequently) refer to the sharing of back office functions such as the provision of payroll services, HR advice and support, facilities management, ICT and finance systems. Indeed in the health sector, the term “shared services” is almost exclusively used to describe arrangements for these back office type services.
A number of the drivers which will be the catalyst for organisations exploring shared services are applicable across all parts of the public sector. These include:
The Operational Efficiency Programme sets out the clear objective that by 2013/14 there will have been £4.1billion savings on back office operations across the public sector and £3.2billion savings in ICT alone. The extended collaborative procurement (which involves the working together of public sector bodies to buy goods and services more effectively with the private sector or with each other) is aimed to achieve an additional £6.1billion worth of savings.
The identification of specific anticipated sums which the public sector is seen as capable of achieving, coupled with the huge pressures on the incoming government (of whatever political complexion) to work towards balancing the books, makes it inevitable that revenue and capital settlements to public sector bodies will be predicated on these savings being delivered. There will be no alternative but to exhaust all potential collaborative arrangements as a contributor to achieving the likely new financial target.
The increasing pressures on organisations to deliver services cost effectively and to deal with decreasing budgets, mean that organisations will have to be slick, efficient, continue to employ staff of high calibre to deal with this challenging agenda and have the critical mass to deal with the challenging agenda. This represents a challenge particularly to small district councils and to small health bodies and acts as a driver to bring together groups of specialists and systems to cope more easily across a number of organisations.
In addition to generic drivers which are forcing organisations to review collaboration across boundaries, there are a number of sector specific initiatives/requirements which will impact on health and local government respectively.
In the health sector, Transforming Community Services (TCS) means that many PCTs will be reducing their core activity to commissioning only. A number of PCTs are presently host organisations for shared service agencies and different ways of delivering may have to be found to deal with these changes.
In addition, the involvement of Foundation Trusts in shared services agencies raises some issues of governance/delegation powers which will need to be addressed. The “necessity not nicety” policy is also bringing greater pressure to bear on competing for back office services which traditionally Trusts have effectively treated as an in-house service albeit provided through a shared service agency.
In local government, the Pathfinder two tier projects in a number of areas in England have concentrated on collaboration across County/District boundaries. In addition, the increasing formalisation of local area agreements and local strategic partnerships mean that authorities have to collaborate to sign off on agreed objectives and priorities across their area. The introduction of multi-area agreements across two or more top tier or unitary councils, their partners in government, means that sharing services on a sub regional basis is also moving ahead at pace.
Examples are also developing of shared services across different parts of the public sector including active exploration of integration of local authority and health services in certain areas with joint Chief Executive appointments in co-terminous local authorities and PCTs.
The types of service area which lend themselves to shared service arrangements (and on which Bevan Brittan are currently advising) include:
Public sector organisations working together to provide and deliver services more effectively seems, at one level, a principle which will readily and easily be embraced and delivered. However, there are inevitably a range of challenges to the success of such projects and our work across many such schemes has highlighted a number of these, including:
Having set out some of the challenges and potential barriers to shared services / collaboration, it is certainly the case that many of these are more perceived than real and with the determination to achieve all the benefits which may flow from a shared services project, many of these can be overcome.
One of the key issues for early consideration is the type of shared service which is being considered and the complexity/formality of any proposed solution. There are a range of types of joint working which come under the generic title of “shared services”, such as:
Effective operation of shared services across public bodies requires careful consideration of the best model/vehicle to deliver the designed aim and advice on the issues and considerations which need addressing in order to achieve what clearly can be huge advantages in service delivery and cost.