Back office (corporate) functions such as Human Resources (HR), payroll, and financial management systems are logical candidates for a cross-government shared services approach. A wider set of functions that could also be considered include Enterprise Asset Management, Information Technology (IT) Service Management, procurement and Health and Safety.
A shared services approach can support: significant time and cost-saving opportunities for individual agencies; the alignment and/or standardization of processes (i.e. process models); the promulgation of good practice across government agencies; the sharing of scarce specialized (back office) capacity and capability; and use of a consistent learning and development frameworks to support ongoing improvement.
At the cross-government level, such a consistent approach can reduce aggregate administrative burden and create opportunities for government wide (scaled) benefits. This can include cross government human resource planning, integrated and uniform remuneration systems, risk management of critical assets, and intelligent 'real time' oversight of government finances. Importantly, such a standardized approach to these back-office functions also reduces opportunity costs for government agencies. This allows them to focus their limited resources on more complex digital transformation and the bespoke needs of their mission (i.e. and not on standarised back office functions).
However, when developing options for government efficiencies centralization can frequently be raised as a preferred choice because of the allure of stronger management control over resources and outputs. This is because centralization is often a reaction to perceived or real de-centralized dysfunction and shared services can be seen as an unsatisfactory 'halfway' option that does not go far enough. The shared services model however does have advantages over the full centralization of services. These include:
Greater motivation to control costs and drive ongoing competitiveness
Shared services are usually undertaken in a 'user pays' model within a context where there may be other choices available to customers. This creates an imperative for the shared service to be efficiently managed and competitively priced. This also necessitates a culture of continuous improvement to ensure the offering maintains its efficiencies in the delivery of the service.
In a centralized model, people, processes and technology are consolidated to deliver cost savings. This may work initially, but overheads are frequently then shifted incrementally towards a model based upon maintaining the (centralized) function rather than transaction volumes. This removes the connection with the (paying) customer and hence the incentive to keep the costs of the service competitive.
Better expectation setting with the business
Shared services utilize service-level agreements (SLAs) to establish and respond to customers’ expectations and hold to accountabilities. The SLA contains prices for service that may include premiums when standard levels of volume or customization are exceeded. This serves to guide customer behavior by dissuading low-value, non-standard requests from and helps focus effort and resource on critical offerings.
This compares to the centralized services model which prioritizes the consolidation of work with less attention to the actual needs of users. Consequently, centralization can increasingly widen the gap between the service offering and user needs. The survival of the function then becomes a more overwhelming focus and result in less ability to re-orient back to the user.
Agility towards changing business needs
A customer-oriented vision can enable shared services to have a better understanding and response to changes in customer requirements. By adopting a proactive stance, shared services can identify opportunities to scale resources up or down to meet changing service needs. This also allows services to a be provided to a wider set of possible customers and achieve lower service costs through the economies of scale. The management ethos required for a shared service
This compares to centralized service teams who frequently adopt a rigid managerial alignment to head-office that inhibits sensitivity to customer or business needs. While a centralized approach can arguably adapt to new customer needs, it usually takes longer while organizational barriers are overcome.
Case study of a national shared services function
The Government of Ireland has made shared services a key component of public service reform over the last decade with the National Shared Services Office (NSSO) established in 2014. The intent was to improve services, standardize delivery, enhance access to information for planning and decision-making, and ensure more efficient use of taxpayer resources. Since then the NSSO has grown to over 800 permanent staff based in seven offices.
The NSSO provides corporate (back office) business services to Public Service Bodies with a specific focus on modernizing human resources, payroll and financial management. As well as driving better value for money and enhancing service delivery, it is also seeking to coordinate and integrate separate functions onto a single enterprise view.
The NSSO provides two backoffice functions, Human Resources (HR) and Payroll via a single services division. The NSSO then partners with Government departments and some Public Service Bodies (50+) to provide HR and pension administration services to 38,388 Civil Servants, and payroll and related services to 144,266 Public Servants (including 60,000 retirees).
The NSSO also provides support to other public service sectors such as Health, Education and Local Government in progressing their shared services programmes.
The NSSO is currently also leading the Financial Management Shared Services Programme (The Programme) which is a priority for the Government of Ireland. When the Finance Shared Services is operational it will provide finance shared services to the Department of Finance, Department of Public Expenditure and Reform, and other key central government agencies.
The wider purpose of this programme is the integration central Government accounting, payment processing, and the Exchequer system itself into a single, standardized Financial Management System. This will be used by all Government Departments to allow better financial intelligence and coordination of public expenditure data/information.
Why aren't more back-office functions delivered through a shared services model?
The question persists as to why more governments don't pursue a cross agency shared services approach - particularly in functions such as Human Resources (HR), payroll, and financial management systems?
Fyfe (2006) noted some possible reasons why implementing shared services in the public sector is especially challenging. These include (1) a lack of “up-front investment” that can cause the project to be underfunded. This can significantly hinder shared services efforts and hurt staff morale (2) Public sector organizations sometimes lacking “commitment to long-term change.” This can be caused by election cycles and shifting political agendas, and (3) the need to shift the philosophy to 'demand based' (that is, one where a service is purchased at an agreed upon fee, volume, and standard) rather than a 'supply-driven' service culture (which can be hard to implement within a governmental entity).
This suggests that strong political sponsorship/leadership is particularly important for cross government shared services so that the project gets adequate funding and support upfront. The opportunity needs to be seen as a long term and delivering benefits beyond the immediate time and cost savings promised. Multi-year Roadmaps beyond consolidated functional service delivery should be considered that take advantage of the emergent opportunities with cloud, big data, and Artificial Intelligence (AI).
It is also evident that successful government shared services need to be imbued with a deep sense of customer centricity. This cannot be merely a standard and somewhat trite by-line used by the shared service - but a rigorous culture of continuous improvement that assumes the 'demand driven' existence of the shared service is at stake. Anything less than this and the shared service risks becoming like any other government service and could fail to deliver upon its promises.
Burns and Yeaton (2008) also note five key success factors for shared services include: strong project management skills; senior-level support; effective communication; strong change management; and a phased approach to implementation. They stress the necessity of 'staying the course' despite challenges with the implementation of shared services technology or dissention from employees or other stakeholders. Flexibility is inevitably needed, but planners should not get dissuaded and keep an eye on the long-term benefits.
Conclusion
Back office (corporate) functions are candidates for a cross-government shared services approach. This can support time and cost-savings, the alignment and/or standardization of processes, good practice across government agencies, the sharing of capabilities, and ongoing development.
At the cross-government level, this can reduce aggregate administrative burden and enable wider benefits. As well as allowing a new level of functional coordination and collaboration across government, this provides an opportunity for government agencies to focus limited resources on their core mission.
Shared services have advantages over the more rigid centralization (of services option). This is because shared services create a stronger incentive to control costs and drive ongoing competitiveness, have better expectation setting with the business, and maintain agility towards actual business needs.
Scaled shared services models such as the National Shared Services Office (NSSO) that the Government of Ireland has developed is worth monitoring. While it has had its challenges, the NSSO is an example of an approach that provides short, medium, and long term opportunities to the Government of Ireland. Other governments could learn lessons from the NSSO.
Governments wanting to reap the short to long term benefits of cross government shared services need to ensure the project has strong political sponsorship/leadership. This will mean the project gets the appropriate funding and support upfront and individual agencies are directed to engage with it. It is also evident that successful government shared services need a heavy dose of customer centricity and the understanding that their perpetual existence is not a given if they do not perform.
References
The National Shared Service Office (NSSO). www.nsso.gov.ie
Bergeron, B. (2002). Essentials of shared services (Vol. 26). John Wiley & Sons
Burns, T. J., & Yeaton, K. G. (2008). Success factors for implementing shared services in government. Washington, DC: IBM Center for the Business of Government.
Fyfe, T. (February 2006) “Finetuning Shared Services: It’s a different road in the public sector,” www. itworldcanada.com (accessed October 10, 2007).
Jansen, Marijn, Joha, Anton. (2006). Motives for establishing shared service centers in public administrations - ScienceDirect
Tomkinson, R. (2017). Shared services in local government: improving service delivery. Routledge.
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