The shared services agenda seems to be picking up speed again, with a recent prime ministerial speech and increased political interest. But what challenges remain? Matthew O’Toole listens in at a round table discussion.
Last year, we reported on the children’s department becoming a customer of the huge Department for Work & Pensions (DWP) shared services centre, making the latter the biggest provider of shared back office functions in Europe. This was the first significant step forward in the shared service agenda within central government in a while, but will growing spending pressures ensure that it foreshadows a more widespread embrace of shared back office functions? And what steps do civil service leaders need to take to facilitate more progress? These issues came under discussion by a range of interested parties – some already running shared services, and others interested in getting involved – at a Civil Service World round table run with the support of technology provider HP Enterprise Services.
The very day before the event, Gordon Brown cited the DWP shared services centre – which now delivers support services to a total of 140,000 staff – as an exemplar in the area. So how is that particular service delivering for its newest customer? Hera Miah, a senior adviser at the Department for Children, Schools and Families’ (DCSF’s) data services group, said the shared scheme – which handles the bulk of the department’s finance and HR work – “seems to be going well”.
“It moved out a lot of layers of bureaucracy and administration,” he said. The transition wasn’t easy, Miah added, but it had been helped by a big internal communications effort and training to get DCSF staff up to speed with the changed systems. One reason the DCSF-DWP effort went well, said Darrell Muffitt, head of government at HP’s industry consultancy, was that DWP had learned tough lessons from its experience with another central department. “Cabinet Office was the first; it was a learning experience all round,” Muffitt said. “I think DCSF has benefited from that learning.” Responding positively to such experiences will prove “crucial” in the growth of shared services and encouraging new clients, he added.
Offering examples
The DWP offering may have become the most widely known shared service, but Fiona Spencer, the head of the Home Office’s shared services directorate, was keen to point out that it is far from the only successful example in central government. Her department uses the Ministry of Justice shared service centre for a number of back office business functions, as well as running its own smaller shared services in areas such as estate management.
Having just done an assessment of the department’s entire shared service adventures, Spencer said the cost benefits were clear: “We can demonstrate that you can reliably deliver, across the service, between about 20 and 30 per cent savings.” And no-one was in any doubt about the need for large-scale savings. Anna Hutchings, head of client development at the Valuation Office Agency, said: “We are going to have to make savings the likes of which we have never seen before. That’s what’s going to drive this agenda.”
Spencer says shared services – having been rolled out progressively since 2006 – have had a positive reception at the Home Office: “We have comments on the permanent secretary’s blog saying: ‘This is great, it’s fantastic, it’s saved me loads of time’,” she says. But Spencer admitted that kind of feedback may not be representative of the civil service’s initial response to the introduction of shared services. “Traditionally, it’s not always been a happy experience to roll out shared services in Whitehall – people hate it!”
That message was echoed by Phil Lambert, executive director for business support at the Legal Services Commission (LSC). Lambert, who has overseen transitions to shared services in both the private and public sectors, said that after roll-out, the new systems tend to “get blamed for absolutely everything”.
One major reason for this, he said, is the need to break old habits. “If you are a finance director, you see the ease of getting financial information change from being a walk to the guy next door to making a phone call, where you’ve got to get this done, got to get that done [before getting the information]. It requires a different mindset, and that’s challenging.”
Kevin Large, an HP account executive working on support services inside the Ministry of Defence, pointed out that in one wider IT-driven change project, the shared service element frequently got singled out for unwarranted criticism. “We had a very successful implementation overall, but the shared service component was blamed for things that actually had no real linkage; coincidental policy changes or whatever. It became a convenient vehicle.” Lambert agreed, and suggested that the headcount reduction associated with shared services engenders hostility, even though such job losses are often balanced out by the creation of jobs elsewhere through the introduction of enterprise resource planning (ERP) computer systems, which usually accompany and facilitate shared services.
There’s also the issue of territoriality and the fear that some organisations have of losing their autonomy when they enter a shared service scheme – especially with a larger entity in the same field. Lambert related the experience of introducing a shared service programme among the UK’s various research councils, who were suspicious of the leadership of one major research council “which said: ‘let’s do this, let’s centralise’. That really irritated a couple of the smaller councils, because there was of sense of ‘big brother’ taking over.” What ultimately convinced the smaller bodies to play ball? Central diktat, Lambert said, coming from the Treasury and the then-Department for Trade and Industry.
Guaranteeing service
Many potential users express fears that services will deteriorate as they move away from in-house provision. These concerns were helpfully personified at our round table by representatives of two regulatory bodies, who were exploring the possibility of joining shared services schemes but looking for more information. Dianne Tranmer, deputy director for policy at the Security Industry Authority, said that although “cost and efficiency” are enough to drive small bodies to look at shared services, they needed assurances on service quality before making the leap to implementation.
“The key thing that we are interested in is the quality of service. I’ve got to be able to go back and say we could at least maintain the standards of the services delivered to us,” Tranmer said, adding frankly: “People have a perception that when you are in shared services, the customer service element will drop. You are going to get a lower response rate, you are not going to be dealing with people who know the organisation.” People worry that shared services will be too “generic”, she added.
More than one shared service enthusiast leapt to the model’s defence. “Why have it at all?” Lambert asked rhetorically. “You only bring something in if it’s going to improve things. So I wouldn’t sit in front of you as a shared service provider and tell you: ‘The HR element will do it slower than you currently do it, and the finance will have more errors in it than currently’.” What’s more, HP’s Large said, prospective users are liable to worry about decline in services without having an accurate picture of the service they are currently receiving.
“People tell us their current service is much better than we could do, but we can show them percentage of calls answered in so many seconds by the day, by the hour – everything is measured, in an outsourced world.” He suggested a response to those concerned that moving towards shared services would result in a decline in quality: “Measure the service you are currently receiving, go to a supplier and say: ‘That’s what I’m currently receiving, and if you can beat it, we have got a discussion’.”
Commercial rigour
Large may have been speaking as a private sector supplier, but many around the table said that even relationships with shared service providers from other parts of government should operate on a commercial basis. Sham Hamid, a consultant working at the Ministry of Justice, related an experience working at another department: when an arm’s-length Ministry of Defence body began buying shared services from a private provider which charged for individual service variations, demand for such special services fell dramatically.
“A commercial relationship is definitely something that focuses the mind,” he said. However, Shamid acknowledged that operating such a commercial system in central departments might be more problematic, with government shared service providers wary of being so hard-nosed about limiting the services available.
The LSC’s Lambert argued that such a commercial approach is essential in driving out the constant requests for special treatment that can undermine the savings created by shared services. “If you want it quicker, then your service charge has got to be higher,” he said. “I’m not sure the public sector has been quite as commercial as the private sector would be in saying: ‘If you want it in red, fine, but that will cost extra’.”
However, Estelle Burns, director for people and organisational development at the Government Car & Despatch Agency – a longstanding shared service of sorts – voiced deep concern about viewing government shared service providers as equivalent to private counterparts. Her agency’s activities, for example, are subject to the whims of reshuffles, generous employment terms and political developments which “jeopardise our ability to break even”. Pointing to examples of competition with taxi providers such as Addison Lee, she said: “We are competing with one hand tied behind our back.” But private providers have to put aside money for profits, she said; public providers can concentrate on public value.
James Johns, director of strategy at HP civil government division, felt this was too simplistic a portrayal; the “idea that you can’t deliver improved cost because you make a profit is fallacious”, he said. Looking for a middle way, Fiona Spencer of the Home Office said she prefers to think of the necessary relationship between provider and recipient of shared services as “transactional”. “I think you can have a transactional relationship – my customers pay me and I have a small core budget,” Spencer said. “I agree [paying for services] makes people a lot more conscious of what they spend.”
Trading model?
Johns cited the recently-announced intention to change the DWP shared service centre to a trading fund – a government-owned entity responsible for more than 50 per cent of its own revenue, which is allowed to generate and keep its surpluses to reinvest in new developments – and asked whether this could offer an opportunity for a more commercial approach. Spencer agreed the model might provide flexibility, explaining that because her unit may not make either a profit or loss, her team need to be “very good at accounting”. She also acknowledged that the trading fund model does enable long-term investment – a problem for conventional state entities: “I can’t build up a pot of money,” she said. “There are very real issues around investment, because how do you invest new money and how do you get customers to invest?” But she added a note of caution on the potential of the trading fund model. “Does it actually change things? Sometimes I think the benefits are more presentational than real.”
Despite his commitment to commercialisation, Lambert insisted that encouraging a sense of “partnership” between user and provider is vital. To illustrate the potential problems, he gave the example of presenting plans to the various research councils. “This old dinosaur at the back said: ‘So when we are in shared services and something goes wrong, who do I sue?’” Lambert’s response, he related, had been to note how funny it is that “once you get into shared services, errors start happening and they’ve never happened before?”
Whatever the complaints, Spencer was one of the most confident on the question participants were posed at the beginning of the discussion – put simply, how can leadership help to drive forward the shared services agenda? According to her, the Home Office’s success has been in large part due to the commitment from the most senior levels in the department. “We had a very strong push from the permanent secretary,” she said. “We were at a point where we were really looking at how the department worked, and driving through shared services was a key enabler of that. It’s the corporate leadership that’s important: you need enough of the right people saying: ‘This is what we are going to do, and I don’t care if you don’t agree’.”