The notion of sharing has become fundamental to the UK Government’s strategy to cut costs. While shared services is far from a new concept in both the public and private sectors, the past few years have seen new momentum and lateral thinking at all levels of government.
The recently extended One Public Estate programme, for example, is exploring opportunities for institutions - from blue light organisations to local authorities - to slash the costs associated with their property estates by sharing offices. While in central government, the Cabinet Office’s far-reaching Next Generation Shared Services (NGSS) strategy aims to achieve up to £600m of savings per year by establishing independent back-office shared service centres.
There are encouraging signs at a local level, too. Research conducted earlier this year by business software company UNIT4 found that 63% of local government managers identified shared services as a priority for reducing costs.
Perhaps the reason that this figure isn’t closer to 100% comes down to the fact that there are still some considerable political barriers to getting these kinds of partnerships off the ground.
While many councils are involved in some form of sharing agreement – 96% according to the LGA’s estimate – the majority are often small-scale projects.
What might be holding back the formation of larger partnerships is the question: which authority will effectively ‘own’ the service and where it will be based? Shared services normally involve the pooling of staff into one central location. Naturally, any geographical movement of jobs arising from the establishment of a shared resource can be very contentious, particularly in the case of smaller authorities where the council might be a significant local employer. This can lead to a lack of political will for projects to go ahead, leaving some authorities at an impasse.
However, budget pressures remain a key concern and ultimately local authorities have to reduce costs while at the same time protecting and improving public-facing services.
Back office services like HR, payroll and finance are an obvious place to look for efficiencies through synergies with other organisations.
One solution lies in virtual shared services, where councils use technology to enable two or more authorities to virtually combine service delivery from different locations. That way efficiencies can be realised through standardised systems and processes, without the need to relocate employees.
It is an attractive model as the jobs can remain where they are, while the councils achieve the combined buying power to invest in their own technology solution or to outsource the service to a private sector partner.
This enhanced buying power can enable smaller district authorities, which would otherwise struggle to benefit from an outsourcing agreement due to their lack of scale, to access new expertise and benefit from economies of scale.
However, the formation of a shared service alone should not be seen as a panacea. They have to be backed by a commitment to transformation –with all parties willing to challenge their organisational structures and established processes and to genuinely collaborate and invest in technology.
The objectives and common aims have to be clear from the outset and genuine cultural change is often required if shared services are to realise efficiencies and maximise the benefits of collaboration.
What should aid the take-up of virtual shared services is the fact we’re already seeing more local authorities working closely from a management and leadership point of view.
The growing trend for joint chief executives and combined management boards are conducive to more practical collaboration when it comes to service delivery, as they foster more joined-up decision making.
What’s clear is that collaboration is firmly on the agenda for local authorities and, as a result, we are likely to see new models emerge as back office efficiencies continue to be a valuable route to protecting front line services.
John Wybrant is key account director, public sector at arvato.
