5 steps to tap into a cost-efficiency strategy that’s saving local government close to £500m a year

By Allan Watton on

shared servicesWhatever your personal political leaning may be towards the subject of austerity, in post-election Britain, if you work for a public sector body, significant adaptations still need to be made.

Belts that may have seemed already uncomfortably tight after years of austerity-led strategising will need to have a few more holes punched in them to handle the even leaner times ahead promised by our new Conservative-only government.

But, just when it feels as though there is simply nothing more to give, new evidence on an old idea surfaces that might just help support you with the mechanism for thrifty change – ‘Shared Services’.

We have all acknowledged for some years now that the way forward for efficient government relationships is for there to be more collaboration and peer engagement, whether you are on the provider or service user side, hence our (mild…) obsession in these articles to focus on ‘lessons learned’ from evidence of good practice in other organisations that we see.

We are all familiar with the principle that shared service relationships, in the right circumstances, can be a flexible and effective form of collaborative working. They have the potential to not only generate substantial savings, through methods that would make MPs of any political persuasion proud, but also offer the opportunity for pooled learning and significant added value to be achieved in both capital projects and in service delivery.

A simple overview of shared services

Essentially, you know that shared services are usually the consolidation of transactional business operations – such as procurement, ICT, back office, HR, printing, legal and finance to name but a few. These services are used by multiple teams, departments or organisations under a single shared resource – or using a private sector supplier – in some instances, multiple best-of-breed suppliers. These are often achieved through various means:

  • One in-house or neighbouring department/organisation may supply services to multiple others
  • An existing supplier which offers excellent value is shared with others for the economies of scale and the simplification of processes
  • Multiple teams, departments or organisations club together to maximise their negotiation power to reduce costs and bring standardisation to common processes across organisations/departments.

The goals of a shared services relationship differ depending on the parties and their expected outcomes, but they will typically consist of one or more of the following – cost savings, process and/or systems standardisation, increased efficiencies, improved scalability, negotiation leverage, skills and knowledge transfer, stability and innovation.

Shared services savings growing year-on-year

While some might consider it a mere drop in the ocean compared with the national debt the government has promised to repay, the latest figures from Local Government Association (LGA) report that shared service arrangements have saved local authorities £462m over the last 12 months. An impressive figure, made all the more impressive by the fact that it has increased by almost 30% over last year. Again, another example where local government leads the way for innovative practices.

With over 400 reported shared service relationships spread throughout the country, its popularity and proof of its cost-saving benefits are growing all the time.

In an era when we should all be maximising the benefits of a connected society, local government has done well to collaborate more and share ideas so all can learn from the successes and failures of others for greater efficiency all round.

However, shared service arrangements are not a clear-cut route to cost savings. Collaborative working brings its own set of complexities that need to be addressed. Key among them is an increased need for clarity and openness, as ambiguity often creates an environment for conflict and errors. Where these organisations are trying to share knowledge and good practice, misunderstandings over expectations can escalate issues far further and faster than previously, running contrary to the mission of efficiency maximisation and potentially undermining the strong collaborative relationships you’ve developed.

5 challenge-busting steps to successful shared services

In recognition of the added complexities of shared service relationships, we have put together the key 5 steps we see evidence of that help you face these challenges head on.

1. Understand why you are looking to share services

Teams, departments or organisations that are looking to share services (or strategic providers) need to clearly appreciate what they are looking to achieve through this new relationship.

Shared aspirations and expectations that have been agreed by everyone at the outset will ensure a higher likelihood of success and will minimise the likelihood of misunderstandings later on down the line. Essentially what needs to be established is:

– Where is your current strategy not achieving the outcomes you really want?

– What does good look like? What are you looking to achieve and how do you expect to do so through a shared services arrangement? The ability to quantify what this means is important, as this clarity will guide all parties throughout the lifecycle of the relationship.

2. Build trusting relationships

True understanding of your partners in this process cannot come from just one or two meetings – strong collaborative links need to be created and nurtured between you.

In much the same way as an Intelligent Client Function (ICF) team works between a client and supplier, liaison staff need to be established to work between all parties to ensure that any issues can be recognised, resolved quickly and dealt with without undue escalation.

Trust can be achieved through two actions:

(a) clarity at all times – requiring a clearly communicated and fair contractual agreement, and through living up to your responsibilities in the relationship – by recognising the challenges as well as the opportunities of working together.

(b) by doing what you say you are going to do, when you say you are going to do it.

3. Quantify your expectations

As we’ve mentioned, clarity is an important cornerstone of any successful strategic relationship, doubly so with collaborative ones. Therefore, objectives and milestones need to be clearly quantified and communicated so everyone understands what they are shooting for and what their responsibilities are in the process.

Shared service agreements will stretch the ultimate service provider – whether that is an in-house department or a private sector supplier. Therefore it is important to provide clear aspirations and timelines so that adequate resources can be put in place to service the key agreed needs from all parties.

Innovation should be an integral part of any strategic relationship’s aspirations, the ability of the shared service partner to address inefficiencies and drive change to increase value in any service delivery should not be diminished due to multiple clients sharing the same service provider.

4. Share the love, errr, vision…

This step escalates the last – ‘quantify your expectations’ – to the next level. For once you have identified what all of the recipients of the shared service are hoping to achieve, it’s important to not only communicate this to your shared service provider, but to also make sure that everyone fully understands them. The strongest commitment will come from those who share your vision, understand your expectations and aspire to achieve the best working relationships.

The way you structure your written contract (or heads of terms/service level agreement if an in-house or related organisation), and create smart KPIs that drive the right behaviour between everyone, will be a starting point for an environment that fosters the right outcomes and guides parties towards shared goals.

5. Gain stakeholder buy-in

It may be a poor turn of phrase but it is so true in these circumstances that I’ll excuse myself for using it, but just double-check that everyone is pulling in the same direction.

Once objectives are established, communicated and understood it’s just as important to seek on-going consensus from all those who have a say in the relationship. Genuine agreement and shared commitment will allow those in a shared services arrangement to reap far greater rewards. But priorities between partners in these relationships change over time, so please be mindful that later challenges from one or more partners are not necessarily an indication of them being awkward – it’s more than likely something has changed internally for them. Try to explore what it is and address it sooner rather than later.

So, rather than only looking for ways in which your current processes can be better streamlined in-house, it pays to look to collaborative working with others to achieve potentially significant cost-saving and value-maximising results.

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