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Shared Services in the Public Sector
How shared services can contributeto cost reduction in the Public Sector
Annual Shared Services and Business
Process Outsourcing Conference
Four Seasons Hotel, Dublin, Ireland
13-14 October 2010
Roelant Reijmerink
Werner Mullink
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Contents
Introduction 3
Trends in the public sector 5
Differences between public and private sector 9
Case study 13
How can Shared Services contribute to cost
reduction in the Public Sector 15
Summary 17
How shared services can contribute to cost reduction in the Public Sector
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Introduction
Whilst the private sector has been adopting the concept of shared services since the
early 1980s, the public sector has viewed the concept with skepticism.
It wasnt until the mid 1990s that governments and other public sector organisations
began to look at shared services as a remedy for redundancies in their corporate
services (such as finance, HR, IT, facilities).
Today the public sector is widely adopting shared services as a solution to reduce
costs and increase the quality of corporate services.
There are differences between the public and private sector:o Several independent organisations form a SSO
o Multiple decision makers involved
o Political and public interest context
o Money is often not the key driver
This context results in a growing importance of trust and relationship: you are not
just dealing with yourself:o Citizens demand transparency and efficiency
o There is an emphasis on added (public) value
o Accountability is key
How shared services can contribute to cost reduction in the Public Sector
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Trends in thePublic Sector
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Why do Public Sector organisations adopt shared services now?
There is an economic downturn: this calls for substantial cost reductions
Growing expectations that public-sector organisations need to be moreaccountable to stakeholders and deliver better public services, has left
governments struggling to provide more citizen-focused services with less
funding
Labour shortages at crucial points in the organisation as an agingworkforce retires means many governments will find it difficult to retain the
knowledge workers needed to run their operations.
The demand for more and easieraccess to services grows.For many smaller governmental organisations the costs for the
development and implementation of these new services is too high.
Governments face the challenge of needing to accomplishseemingly endless objectives with limited resources
How shared services can contribute to cost reduction in the Public Sector
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Typical drivers for shared services in the public sector can be divided into
both cost savings and qualitative benefits
Cost savings
Consolidation effects
Economies of scale
Greater specialisation
Increased spans of control
Wage rate differentials Standardisation effects
Reduced operational costs
Re-engineering effects
Reduction in cost of quality
Greater automation
Qualitative benefits
Release of management time
Increased business flexibility and
scalability
Better information
Greater accountability Better audit and control
More customer and service
focused
Easier technology /
training rollouts
Improved staff morale
How shared services can contribute to cost reduction in the Public Sector
Shared services helps public sector organisations to be more client-centered, outcome-oriented
and accountable, by allowing governments to focus on their core responsibilities and to operate
more efficiently. Ultimately, shared services can increase public-sector valuethe return
government gets on its investmentsby decreasing administrative costs and freeing up human
resources to be redirected to citizen facing front-office programs.
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What activities can be shared?
How shared services can contribute to cost reduction in the Public Sector
What processes are in your organisations SSCs?
82%
67%
57%
38%
32%
Increase # of
Transactional processesIncrease # of Internal
locations served
Increase # of advisory
processes
Increase # of processes
offshored
Increase # of externalorganizations served
82%
67%
57%
38%
32%
Increase # of
Transactional processesIncrease # of Internal
locations served
Increase # of advisory
processes
Increase # of processes
offshored
Increase # of externalorganizations served
What direction is your organisation pursuing regarding itsuse of Shared Services?
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Differences betweenpublic and private sector
How shared services can contribute to cost reduction in the Public Sector
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What makes shared services in the public sector different from the private
sector?
Legal status of employees
Multiple parties
Multiple stakeholders
Legislation and other terms
Drivers for shared services
Political context and decision making
How shared services can contribute to cost reduction in the Public Sector
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Decision-making in the Public Sector: who make the decision?
There are many people who
have to decide on the SSO.There are some issues
however:
Who decides for what reason a
SSO is formed?
Who decides what services will
be placed in a SSO?
The decision maker seldom
have a proper insight in and
knowledge of the issue at hand
The horizon is short: many
decision makers are in their
position for a limited amount of
time: the business case needsto take this into account.
Who can you trust and who do
you know?
How shared services can contribute to cost reduction in the Public Sector
Organisation 1:
Council Board
Organisation 1:
Council Board
Organisation 1:
Council
Board
Organisation 1:
Council
Board
Services provided Services provided
Services providedServices provided
SSO
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How can you face the challenges regarding the decision-making process?
Let everyone involved stick to their role: who is responsible for what?
Make sure you have all necessary knowledge and experience available:
Make sure you have a structure in place where all key players are in place and use thisstructure
Create a governance contract with decision makers with clear roles and responsibilities
Plan your journey from start to finish: this journey needs to be clear and with explicit
go/no go moments. From each of those moments there is no way back.
Build a business case that meets all requirements. This means:
a focus on money as well as other criteria (quality, agility),
with a politically acceptable timeframe,
with insight in the consequences for all individual participating organisations (not a general business case that
sums up the consolidated results)
with realistic assumptions (knowing the political context) and a clear strategy and plan
Take decision-makers by the hand: many of them dont know what they are getting into
Invest in relationship and trust before, during and after your journey
How shared services can contribute to cost reduction in the Public Sector
Even an enthusiastic leader will not be able to push the change through
without the fundamental skills to do it.
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Case study
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Case study
How shared services can contribute to cost reduction in the Public Sector
How to realise cost reduction in the Public Sector?
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How can shared servicescontribute to cost reductionin the Public Sector
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How to realise benefits from your SSO?
Benefits are driven by: Increased process efficiency & effectiveness
Better quality of services (first time right) Increased flexibility & continuity of services
Transparency of costs and roles and responsibilities
Better process control and faster/easier compliance
Potential savings on future investments
How shared services can contribute to cost reduction in the Public Sector
The implementation of shared services can bring significant benefits for the processes
that are located in the SSO.
Shared services also has a positive impact on the retained organisation. Since
management attention is no longer required for support processes, more effort can be
spent on the primary process.
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Summary
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Summary, some common challenges for all shared service centers
If we look at successfully achieved shared services in the Public
Sector, we see the same universal themes emerging:
1. Avoid analysis paralysis
2. Seek common processes and standardise
3. Do your best to implement a standard solution
4. Get your governance right
5. Your cost / benefit analysis may surprise you
6. Remember its a people business
7. Clear roles and responsibilities
8. Trust among stakeholders9. Drive continuous improvement
How shared services can contribute to cost reduction in the Public Sector
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