Jason Laroche 07 September 2017

The next steps for shared services

The age of austerity shows no sign of abating for local authorities and the question on the lips of many council leaders has shifted from ‘how’ public-facing services can be delivered to whether they can be maintained at all.

It comes as no surprise that this pressure has had a marked impact on attitudes to service transformation. A recent Chartered Institute of Public Finance and Accountancy (CIPFA) report revealed that 63% of senior local government executives now strongly agree the front-line will suffer if authorities don’t radically change how they structure and deliver their core functions.

Combining back-office services with other councils to free-up resource for the front-line has the potential to deliver major savings. And it’s encouraging to see that more councils are now collaborating to share a range of transactional services which vary little across authority boundaries, such as HR, payroll and revenues and benefits. Almost 500 individual shared services arrangements now exist in the UK, generating savings worth £643m a year, according to the LGA.

But this is a drop in the ocean. Most of these projects are small-scale, characterised by authorities sharing a head of service, co-locating, or joining up to share a particular function. They tend to lack the true standardisation of management, processes and technology needed to deliver the significant savings councils need to make.

Generating economies of scale

Genuine shared services agreements require transformational change to deliver substantial economies of scale, bringing each authority on to standardised technology, infrastructure and working processes.

Success or failure can depend on the commitment of just one of the participating organisations – deviating from this approach can severely impact the new efficiencies on offer and potentially derail the programme. Avoiding this pitfall is no simple task. However, there are three areas newly formed shared services partnerships can focus to make it work.

Setting up a central leadership team with the goal of understanding each party’s objectives and building a strong, compelling business case across all councils to secure involvement is the key to laying the strong foundation. It’s only natural for different councils to be concerned about their specific objectives and targets, so helping them see the bigger picture can go a long way to securing collaborative buy-in. This approach keeps each authority on the same page from the beginning and provides a central function that can steer the project, rather than spreading responsibilities across the participants.

As part of this process, the partnership needs to have clear governance and accountability. It’s critical that each authority has sufficient opportunities to express any concerns about the programme to avoid problems further down the line. And the programme authority needs to be able to step in to solve any issues between the participating councils, and any suppliers.

In addition, councils must be prevented from vetoing their involvement at a later stage. The costs and economies of scale forecasted for a particular programme can be completely undermined if an authority withdraws, producing a knock-on effect which could derail the programme and make it unsustainable for the other organisations.

Once a scheme is set-up, the authorities involved need to commit to investing up front in communicating about the benefits of the programme and training staff. Too often the focus lies with the technology and the infrastructure and not the user, and decision makers can shy away from the extra spending as it runs contrary to the immediate priorities of reducing costs. However, to maximise the benefits council employees must be up to speed quickly with the new systems and processes in place.

Collaborating through genuine shared services agreements offers significant potential to local government and in many cases, it may be the only viable solution to protect public-facing functions. But councils must be prepared to take bold steps and fully commit to changing how they operate or such schemes will never deliver their promise.

Jason Laroche, Key Account Director Local Government, CRM Solutions UK & Ireland, Arvato.

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